<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 20, 1997
REGISTRATION NO. 333-36657
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
POST-EFFECTIVE
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
ABIOMED, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 04-2743260
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
33 CHERRY HILL DRIVE
DANVERS, MASSACHUSETTS 01923
(978) 777-5410
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
DR. DAVID M. LEDERMAN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ABIOMED, INC.
33 CHERRY HILL DRIVE
DANVERS, MASSACHUSETTS 01923
(978) 777-5410
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
---------------
COPIES TO:
PHILIP J. FLINK, ESQUIRE STEVEN C. BROWNE, ESQUIRE
BROWN, RUDNICK, FREED & GESMER TESTA, HURWITZ & THIBEAULT, LLP
ONE FINANCIAL CENTER 125 HIGH STREET
BOSTON, MASSACHUSETTS 02111 BOSTON, MASSACHUSETTS 02110
(617) 856-8200 (617) 248-7000
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, check the following
box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED NOVEMBER 20, 1997
LOGO
290,000 SHARES
COMMON STOCK
All of the 290,000 shares of Common Stock offered hereby are being sold on an
any or all basis by ABIOMED, Inc. ("ABIOMED" or the "Company") in a directed
public offering principally to selected institutional investors. BancAmerica
Robertson Stephens and UBS Securities LLC (the "Placement Agents") have been
retained to act, on a reasonable efforts basis, as the exclusive placement
agents in connection with the offering. On November 19, 1997, the last reported
sale price of the Company's Common Stock, as reported on the Nasdaq National
Market, was $17.938 per share. See "Price Range of Common Stock." The Company's
Common Stock is traded on the Nasdaq National Market under the symbol "ABMD."
-----------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 6.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO PLACEMENT AGENT PROCEEDS TO
PUBLIC FEE(1) COMPANY(2)
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<S> <C> <C> <C>
Per Share................
- -----------------------------------------------------------------------------
Total (2)................
</TABLE>
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(1) The Company has agreed to pay the Placement Agents a fee in connection with
the offering and to indemnify them against certain liabilities, including
liabilities under the Securities Act of 1933, as amended (the "Securities
Act"). See "Plan of Distribution."
(2) Before deducting expenses, payable by the Company, estimated at $400,000.
-----------
There can be no assurance that the Company will be successful in selling any
or all of the shares of Common Stock offered hereby. The Company has not fixed
a minimum number of shares of Common Stock to be sold pursuant to this
offering. Therefore, the Company may sell less than all of the shares of Common
Stock offered hereby, which may significantly reduce the amount of proceeds
received by the Company. No arrangements have been made to escrow any proceeds
of the offering.
The shares of Common Stock offered hereby are being issued and sold directly
by the Company. It is expected that payment for the shares of Common Stock sold
pursuant hereto will be made against delivery of certificates representing such
shares at the offices of BancAmerica Robertson Stephens on or about November ,
1997.
BANCAMERICA ROBERTSON STEPHENS UBS SECURITIES
The date of this Prospectus is , 1997
<PAGE>
BVS-5000(R) BI-VENTRICULAR ASSIST SYSTEM
THE BVS-5000 PNEUMATIC
CONSOLE WITH TWO SINGLE-USE
BVS BLOOD PUMPS MOUNTED ON A
BEDSIDE STAND. THE BVS-5000
PROVIDES A PATIENT'S FAILING
HEART WITH FULL CIRCULATORY
ASSISTANCE WHILE ALLOWING THE
HEART TO REST, HEAL AND
RECOVER ITS FUNCTION.
<PAGE>
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY PLACEMENT AGENT. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES OR AN
OFFER TO, OR A SOLICITATION OF, ANY PERSON IN ANY JURISDICTION IN WHICH SUCH
AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary............................................................... 4
Risk Factors.......................................................... 6
Use of Proceeds....................................................... 17
Dividend Policy....................................................... 17
Price Range of Common Stock........................................... 18
Capitalization........................................................ 19
Selected Consolidated Financial Data.................................. 20
Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................ 21
Business.............................................................. 26
Management............................................................ 40
Certain Transactions.................................................. 43
Principal Stockholders................................................ 44
Description of Capital Stock.......................................... 45
Plan of Distribution.................................................. 48
Legal Matters......................................................... 49
Experts............................................................... 49
Available Information................................................. 49
Incorporation of Certain Documents by Reference....................... 50
Index to Consolidated Financial Statements............................ F-1
</TABLE>
----------------
ABIOMED(R), ABIODENT(R) and the ABIOMED logo are registered service marks of
the Company. BVS(R), BVS-5000(R) and PerioTemp(R) are registered trademarks of
the Company. Angioflex(TM) and Heart Booster(TM) are trademarks of the
Company. Halimeter(R) is a registered trademark of Interscan Corporation. This
Prospectus also includes trademarks of companies other than the Company.
As used herein, the term "ABIOMED" or the "Company" includes the Company and
its consolidated subsidiaries.
References to "Common Stock" include "Rights" issuable pursuant to that
certain Rights Agreement entered into in August 1997 providing for the
delivery of a Right along with each share of Common Stock issued by the
Company. See "Description of Capital Stock."
3
<PAGE>
SUMMARY
This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth under "Risk Factors" and elsewhere in this
Prospectus.
The following summary is qualified in its entirety by, and should be read in
conjunction with, the detailed information and the Consolidated Financial
Statements and Notes thereto appearing elsewhere in this Prospectus.
THE COMPANY
ABIOMED, Inc. ("ABIOMED" or the "Company") is a leader in the research and
development of cardiac assist and heart replacement technology. The Company
developed, manufactures and sells the BVS-5000 ("BVS"), a temporary cardiac
assist device designed to provide a patient's failing heart with full
circulatory assistance while allowing the heart to rest, heal and recover its
function. The BVS is most frequently used in patients whose hearts fail to
immediately recover function following heart surgery. The BVS is the only
device that can provide full circulatory assistance approved by the United
States Food and Drug Administration ("FDA") as a bridge-to-recovery device for
the treatment of patients with reversible heart failure.
The Company is developing a battery-powered totally implantable artificial
heart ("TAH") intended as a permanent replacement device to assume the full
pumping function of both the left and right ventricles of the heart. The TAH is
designed for use by patients with irreparably damaged hearts and at risk of
death due to acute myocardial infarction ("AMI"), chronic ischemic disease or
some form of end-stage congestive heart failure, but whose vital organs
otherwise remain viable. Among these combined groups, the Company believes that
approximately 60,000 patients per year could benefit from a heart replacement
device. The Company is devoting significant resources to accelerate the
development of the TAH with the goal to initiate clinical trials of the TAH by
the end of the year 2000. There can be no assurance that the Company will be
able to successfully complete pre-clinical testing of the TAH and receive FDA
approval to begin clinical trials of the TAH in a timely manner, if at all, or
that any market will develop for the TAH.
The Company sells the BVS in the United States through direct sales and
clinical support teams. Its sales force focuses on sales to new customers,
while its clinical support group focuses on training and educating existing
customers in order to improve clinical outcomes and increase BVS blood pump
usage. The BVS is intended for use in any hospital performing open-chest
cardiac surgery, of which there are more than 900 in the United States. As of
September 30, 1997, the BVS had been purchased by over 275 medical centers in
the United States including many of the largest centers. The Company believes
that its installed base of customers provides an opportunity for reorders of
the single-use BVS blood pumps as well as a reference base to assist in selling
to new accounts.
The Company's goal is to be a leader in the development, manufacture and
marketing of mechanical cardiac assist and heart replacement devices that
address the varying needs of a wide range of patients. The Company is pursuing
a variety of strategies to pursue this objective, including accelerating the
development of the TAH, increasing market penetration of the BVS, maintaining
and enhancing its technological leadership and pursuing strategic relationships
to support its research and commercialization efforts.
Since the Company's inception, United States government agencies,
particularly the National Heart, Lung and Blood Institute ("NHLBI"), have
provided significant support to the Company's product development efforts. The
Company seeks funding from third parties to support its research and
development programs and generally limits the use of its own funds until the
scientific risk is reduced. In addition, the Company intends to pursue
collaborative relationships to develop and commercialize the Company's non-
cardiac assist technologies.
The Company is a Delaware corporation. The Company's principal offices are
located at 33 Cherry Hill Drive, Danvers, Massachusetts 01923. The Company's
telephone number is (978) 777-5410 and its fax number is (978) 777-8411.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered by the Company............ 290,000 shares
Common Stock Outstanding after the Offering.... 8,554,556 shares (1)
Use of Proceeds................................ For research and development,
expansion of manufacturing
capabilities and other general
corporate purposes. See "Use of
Proceeds."
Nasdaq National Market Symbol.................. ABMD
</TABLE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED MARCH 31, SEPTEMBER 30,
----------------------------------------- --------------
1993 1994 1995 1996 1997 1996 1997
------- ------- ------ ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues:
Products.............. $ 1,709 $ 4,648 $6,893 $9,725 $12,311 $5,760 $ 9,324
Contracts............. 1,736 2,027 2,337 3,118 4,151 1,754 3,680
------- ------- ------ ------ ------- ------ -------
Total revenues...... 3,445 6,675 9,230 12,843 16,462 7,514 13,004
Costs and expenses:
Cost of products...... 2,042 2,211 3,289 3,921 5,361 2,123 3,438
Research and
development (2)...... 2,097 2,431 2,464 3,218 3,833 1,781 3,654
Selling, general and
administrative....... 3,803 4,553 4,278 5,741 7,068 3,229 4,970
------- ------- ------ ------ ------- ------ -------
Total costs and
expenses........... 7,942 9,195 10,031 12,880 16,262 7,133 12,062
------- ------- ------ ------ ------- ------ -------
Income (loss) from
operations............. (4,497) (2,520) (801) (37) 200 381 942
Interest and other
income................. 604 537 449 528 535 256 417
------- ------- ------ ------ ------- ------ -------
Net income (loss)....... $(3,893) $(1,983) $ (352) $ 491 $ 735 $ 637 $ 1,359
======= ======= ====== ====== ======= ====== =======
Net income (loss) per
share.................. $ (0.60) $ (0.31) $(0.05) $ 0.07 $ 0.10 $ 0.09 $ 0.17
======= ======= ====== ====== ======= ====== =======
Weighted average number
of shares outstanding.. 6,441 6,461 6,512 6,995 7,162 7,196 7,869
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
------------------------
ACTUAL AS ADJUSTED (3)
------- ----------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term marketable
securities.......................................... $24,312 $ 28,830
Working capital...................................... 29,109 33,627
Total assets......................................... 36,348 40,867
Total stockholders' investment....................... 32,648 37,167
</TABLE>
- --------
(1) Based on the number of shares outstanding as of September 30, 1997.
Excludes 964,410 shares of Common Stock reserved for issuance upon the
exercise of stock options outstanding as of September 30, 1997 at a
weighted average exercise price of $10.81 per share. See Note 6 to
Consolidated Financial Statements.
(2) Research and development expenses include certain contract costs. See Note
1(e) to Consolidated Financial Statements.
(3) Adjusted to reflect the sale of 290,000 shares of Common Stock offered by
the Company hereby at an assumed public offering price of $17.938 per share
and the application of the net proceeds therefrom after deducting the
estimated underwriting discounts and commissions and offering expenses
payable by the Company. See "Use of Proceeds" and "Capitalization."
5
<PAGE>
RISK FACTORS
This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain
factors, including those set forth in the following risk factors and elsewhere
in this Prospectus.
In addition to the other information in this Prospectus, the following risk
factors should be considered carefully in evaluating the Company and its
business before purchasing shares of the Common Stock offered hereby.
DEPENDENCE ON BVS PRODUCT LINE; EARLY STAGE OF BVS MARKET DEVELOPMENT
In the six months ended September 30, 1997 and the fiscal year ended March
31, 1997, sales of the BVS and related products and services represented 94%
and 88%, respectively, of the Company's product revenues. The Company believes
that its dependence on the BVS product line is likely to continue for at least
the next several years, unless and until the Company successfully develops,
obtains regulatory approvals for and sells new products.
The market for the BVS continues to be in the early stage of development.
The Company has initially focused its marketing efforts on larger medical
centers and hospitals. The commercial success of the BVS will be dependent
upon both the Company's ability to sell the BVS to smaller hospitals and
medical centers, which generally have more limited financial resources, and
the increase of the use of the BVS at those medical centers and hospitals
which have purchased the systems. There can be no assurance that the Company
will be successful in marketing the BVS. Advances in medical technology,
biotechnology and pharmaceuticals may reduce the size of the potential markets
for the Company's products or render those products obsolete. Failure of the
Company to expand the market for and use of the BVS would have a material
adverse effect on its business, financial condition and results of operations.
See "Business--Marketing and Sales."
UNCERTAINTY OF PRODUCT DEVELOPMENT AND CLINICAL TRIALS
The Company has developed and markets a limited number of products and
believes that its future success will in large part be dependent upon its
ability to develop and market innovative new products, such as the TAH. The
successful development of these products presents enormous challenges. The
Company must demonstrate that the TAH, which is being designed to assume the
full pumping function of both the left and right ventricles of the heart, can
operate effectively and reliably within a patient over an extended period. For
many years, the Company and others have been attempting to develop products
that meet these criteria and have not yet been successful. Before obtaining
regulatory approvals for the commercial sale of any of its products under
development, the Company must demonstrate through pre-clinical studies and
clinical trials that the product is safe and effective. Initial pre-clinical
testing of the TAH and other products being developed by the Company will be
conducted in simulated environments and animal models to demonstrate safety
and effectiveness over an extended period of time before they are permitted to
be clinically tested in humans. There can be no assurance that the Company
will be able to successfully complete pre-clinical testing of the TAH or other
products being developed by the Company and receive FDA approval to initiate
clinical trials of such products in a timely manner, if at all. Moreover, pre-
clinical trials may not be predictive of results that will be obtained in
clinical trials. Any significant delays in, or termination of, pre-clinical
trials of the Company's products under development would have a material
adverse effect on the Company's business, financial condition and results of
operations.
Clinical trials for the Company's cardiac assist and heart replacement
products will be conducted with patients who are critically ill. During the
course of treatment, these patients may die or suffer other adverse medical
effects for reasons that may not be related to the product being tested but
which can nevertheless affect clinical trial results. A number of companies in
the medical device industry have suffered significant
6
<PAGE>
setbacks in advanced clinical trials, even after promising results in earlier
trials. Clinical trials of the Company's TAH and other products under
development may be delayed or terminated as a result of many factors, and
there can be no assurance that such delays or terminations will not occur. One
such factor is the rate of enrollment of patients, which generally varies
throughout the course of a clinical trial and which depends on the size of the
potential patient population, the number of clinical trial sites, the
proximity of the patients to clinical trial sites, the eligibility criteria
for the trial and the existence of competitive clinical trials. The Company
cannot control the rate at which patients present themselves for enrollment,
and there can be no assurance that the rate of patient enrollment will be
consistent with the Company's expectations or be sufficient to enable clinical
trials of the Company's products under development to be completed in a timely
manner, if at all. Any significant delays in, or termination of, clinical
trials of the Company's products under development would have a material
adverse effect on the Company's business, financial condition and results of
operations.
In addition, the Company's product development will be subject to numerous
other risks associated with new product development, including unanticipated
delays, expenses, technical problems or other difficulties that could result
in the abandonment or substantial change in the design, development and
commercialization of these new products. Given the uncertainties inherent with
product development and introduction, there can be no assurance that any of
the Company's products under development will demonstrate sufficient safety
and efficacy to obtain the requisite regulatory approvals, on a timely basis
and within budget, if at all, or that any of these products will be
commercially successful if such approvals are obtained. See "Business--ABIOMED
Products and Products under Development."
ANTICIPATED FUTURE LOSSES
The Company plans to use its own resources to fund the further development
of the TAH in amounts significantly in excess of the funding provided under
the Company's development contract for the TAH with the NHLBI ("TAH
Contract"). The Company estimates that the development of the TAH, including
conducting pre-clinical and clinical studies and obtaining regulatory
approvals, will require substantial funds. Its spending under the TAH Contract
in the quarter ended September 30, 1997 exceeded the amount which the
government has currently appropriated for that contract, and the original
government appropriation schedule calls for no further appropriations for the
TAH Contract until October 1998. There can be no assurance that the government
will appropriate any additional amounts under the TAH Contract or any of the
Company's other government contracts on a timely basis, if at all. Even if and
when additional amounts are appropriated under the TAH Contract, the Company
believes that its total expenses to complete the development of the TAH will
significantly exceed the remaining TAH Contract amount. As a result, the
Company believes that it is likely that the Company will incur losses,
potentially as soon as the quarter ending December 31, 1997. The amount and
duration of these losses will depend upon a number of factors, including the
Company's ability to increase sales and profitability of its present products,
to develop and obtain regulatory approvals for new products and product
enhancements, and to successfully manufacture and market these new products
and enhancements, as well as the timing and extent of the Company's spending
related to product development and the timing of government appropriations
related to the Company's NHLBI contracts. See "Use of Proceeds" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
COMPLEX MANUFACTURING; HIGH-QUALITY REQUIREMENTS
The nature of the Company's products requires high-quality manufacturing.
The Company's manufacturing and quality testing processes and procedures are
highly dependent on the diligence and experience of the Company's personnel.
To the extent that the Company's manufacturing volumes expand or the Company
begins the manufacture of new products, this dependence on personnel will
likely increase. In addition, the manufacture of the blood contacting surfaces
of the Company's products requires a high degree of precision. These surfaces
are manufactured from polyurethane-based materials. The quality and
composition of polyurethane-based products can vary significantly based on
numerous factors including
7
<PAGE>
humidity, temperature, material content and air flow during the manufacturing
process. The Company's products also incorporate plastic components for non-
blood contacting surfaces. The Company relies on third-party vendors to
provide these components to the Company's specifications. The Company is not
able to fully inspect the quality of all vendor supplied components and,
therefore, relies on its vendors with respect to the quality of these
components. Once the plastic-based components of the Company's products have
been assembled, accessibility for inspection is limited. If a defect is
detected in as few as one of the Company's products, or in one component of a
Company product, it can result in the recall or restriction on sale of
products. Once assembled, in most cases, the Company's blood contacting
components cannot be reworked for human use. The manufacturing lead times for
parts and assemblies, particularly the polyurethane-based components, can take
many weeks from the date that all materials and components are received by the
Company. In addition, vendor lead times for materials and components of the
Company's products vary significantly, with lead times for certain materials
and components exceeding six months.
The Company is planning to expand its manufacturing facility for the BVS
during the next twelve months. There can be no assurance that the products
manufactured in the expanded facility will be manufactured at the same cost
and quality as the BVS is currently being manufactured. In addition, to the
extent that the Company's products under development have been manufactured,
they have been manufactured as prototypes with, at most, pilot-scale
production. The Company's products under development are likely to involve
additional manufacturing complexities and high quality requirements. There can
be no assurance that the Company will be able to increase production of the
BVS or manufacture future products, if developed and approved, in commercial
quantities on a consistent and timely basis, with acceptable cost and quality.
The inability to manufacture current and future products in sufficient
quantities in a timely manner, and with acceptable cost and quality, would
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Business--Manufacturing."
RISK OF MARKET WITHDRAWAL OR PRODUCT RECALL
Complex medical devices, such as the BVS and other of the Company's products
under development, can experience performance problems that require review and
possible corrective action by the manufacturer. Similar to many other medical
device manufacturers, the Company periodically received reports from users of
its products relating to performance difficulties they have encountered. The
Company expects that it will continue to receive customer reports regarding
the performance and use of the BVS. There can be no assurance that component
failures, manufacturing errors or design defects that could result in an
unsafe condition or injury to the patient will not occur. Certain of these
failures or defects have been deemed sufficiently serious by the Company to
result in recalls of products associated with certain manufacturing lots or
containing certain components, including a recall of certain BVS blood pumps
initiated in late 1996. Not all of the products subject to this recall have
been returned to the Company. Any product problems could result in market
withdrawals or recalls of products, voluntarily or required, which could have
a material adverse effect on the Company's business, financial condition and
results of operations. In addition, there can be no assurance that a product
recall will result in the recovery of all defective products or prevent
customers from using these products. The use of a defective product could
result in injury to a patient and significant liability to the Company which
could have a material adverse effect on its business, financial condition and
results of operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
FLUCTUATIONS AND UNPREDICTABILITY OF OPERATING RESULTS
The Company's annual and quarterly operating results have fluctuated and the
Company expects these fluctuations to continue. Significant annual and
quarterly fluctuations in the Company's results of operations may be caused
by, among other factors, the overall state of health care and cost containment
efforts, economic conditions in the Company's markets, the expense and timing
of the Company's development efforts for a particular product or product
enhancement, the timing of regulatory actions, the potential need to recall or
rework products from time to time, timing of government appropriations related
to the Company's research
8
<PAGE>
contracts and grants, the timing of or changes in third-party reimbursement
policies for the Company's products, the timing of expenditures in
anticipation of future sales, variations in the Company's product mix and
component costs, the availability of components, the timing of customer
orders, adjustments of delivery schedules to accommodate customers, inventory
levels of products at customers (including inventory at distributors), changes
in the government's funding policies under the Company's existing contracts,
pricing and other competitive conditions, and the timing of the announcement,
introduction and delivery of new products and product enhancements by the
Company and its competitors. Customers may also cancel or reschedule
shipments, and production difficulties could delay shipments. The price for
the BVS console is significantly higher than for the single-use blood pumps.
As a result, variations in the number and timing of consoles sold have a
disproportionate effect on the Company's revenues and results of operations.
The Company also believes that BVS sales may be somewhat seasonal, with
reduced sales in the summer months, reflecting hospital personnel and
physician vacation schedules. Beginning in fiscal 1998, the Company
anticipates potentially significant annual and quarterly fluctuations in
contract revenues and research and development costs associated with the
development of the TAH due to the need for additional government
appropriations under the TAH Contract and to increased levels of Company
spending. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
MARKETS FOR PRODUCTS UNDER DEVELOPMENT UNPROVEN
Most of the Company's products under development, including the TAH, are
targeting new and unproven markets. There can be no assurance that the TAH or
other products under development by the Company will gain any degree of market
acceptance among physicians, medical centers and third party payors, including
managed care organizations, even if necessary regulatory approvals and
reimbursement are obtained. As a result, it is likely that the Company's
evaluation of the potential markets for these products will materially vary
with time. In addition, the effective use of these products will likely
require development of new surgical techniques by well-trained physicians,
which will initially limit the market for the Company's products. Physicians,
patients and society as a whole may have ethical concerns or be reluctant to
accept medical devices designed to replace the heart. The timing and amount of
reimbursement, if any, by third-party payors for the use of these products, if
developed, will also have a significant impact on the market for these
products. Other companies may also introduce products or technologies which
will compete with these products, reduce the market for these products, or
render these products obsolete. There can be no assurance that the Company
will be able to market successfully any of its products under development, if
and when these products are developed. Failure to do so would have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business--Marketing and Sales."
DEPENDENCE ON KEY PERSONNEL; RISKS ASSOCIATED WITH GROWING NUMBER OF EMPLOYEES
The Company is highly dependent on the principal members of its scientific,
sales, and management staff, the loss of whose services could have a material
adverse effect on the Company's business, financial condition and results of
operations. Competition among medical device companies for highly skilled
scientific, sales and management personnel is intense. There can be no
assurance that the Company will be able to attract and retain all personnel
necessary for the development of its business. Failure to do so could have a
material adverse effect on its business, financial condition and results of
operations.
The Company has recently experienced a significant increase in the number of
its full-time employees, from 79 at April 1, 1996 to 166 at September 30,
1997. Moreover, the Company intends to continue to add a significant
additional number of employees to support its development and expanding
manufacturing, marketing and sales efforts. The expansion of the Company's
personnel has placed additional demands upon, and may significantly strain,
the Company's management, financial systems and other resources. There can be
no assurance that the Company will be able to successfully manage its growing
number of employees. Failure to do so would have a material adverse effect on
the Company's business, financial condition and results of operations.
9
<PAGE>
COMPETITION AND TECHNOLOGICAL CHANGE
Competition in the cardiac assist market is intense and subject to rapid
technological change and evolving industry requirements and standards. Many of
the companies developing or marketing cardiac assist products have
substantially greater financial, product development, sales and marketing
resources and experience than the Company. These competitors may develop
superior products or products of similar quality at the same or lower prices.
Moreover, there can be no assurance that improvements in current or new
technologies will not make them technically equivalent or superior to the
Company's products in addition to providing cost or other advantages. Other
advances in medical technology, biotechnology and pharmaceuticals may reduce
the size of the potential markets for the Company's products or render those
products obsolete.
The BVS is the only device that can provide full circulatory assistance
approved by the FDA as a bridge-to-recovery device for the treatment of
patients with reversible heart failure. However, the Company is aware of at
least one other company, Thoratec Laboratories Corporation, seeking approval
of a temporary cardiac assist device to address this market. Approval by the
FDA of products that compete directly with the BVS would increase competitive
pricing and other pressures and could have a material adverse effect on the
Company's business, financial condition and results of operations.
The Company is aware of other artificial heart development efforts in the
United States, Canada, Europe and Japan. A team comprised of Pennsylvania
State University and 3M Corporation, Inc. has been developing a heart
replacement device for many years with significant NHLBI support. There are a
number of companies, including Thermo Cardiosystems, Inc. and Novacor, a
division of Baxter International, Inc., which are developing permanent cardiac
assist products, including implantable left ventricular assist devices
("LVADs") and miniaturized rotary ventricular assist devices, that may address
markets that overlap with those targeted by the Company's TAH.
The Company's customers frequently have limited budgets. As a result, the
Company's products compete against the broad range of medical devices for
these limited funds. The Company's success will depend in large part upon its
ability to enhance its existing products and to develop new products to meet
regulatory and customer requirements and to achieve market acceptance. The
Company believes that important competitive factors with respect to the
development and commercialization of its products include the relative speed
with which it can develop products, establish clinical utility, complete
clinical testing and regulatory approval processes, obtain reimbursement and
supply commercial quantities of the product to the market. There can be no
assurance that the Company will be able to compete successfully or that
competition will not have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business--Competition."
GOVERNMENT REGULATION
Clinical testing, manufacture and sale of the Company's products and
products under development, including the BVS and the TAH, are or will be
subject to regulation by the FDA and corresponding state and foreign
regulatory agencies. Noncompliance with applicable requirements can result in,
among other things, fines, injunctions, civil penalties, recall or seizure of
products, total or partial suspension of production, failure of the government
to grant pre-market clearance or pre-market approval for devices, withdrawal
of marketing approvals and criminal prosecution. The FDA also has the
authority to request repair, replacement or refund of the cost of any device
manufactured or distributed by the Company.
Any devices, including the BVS, that are manufactured or distributed by the
Company pursuant to FDA clearances or approvals are subject to pervasive and
continuing regulation by the FDA and certain state agencies. Manufacturers of
medical devices for marketing in the United States are required to adhere to
the FDA's Quality System Regulation and must also comply with Medical Devices
Reporting requirements that a firm report to the FDA any incident in which its
product may have caused or contributed to a death or serious injury, or in
which its product malfunctioned and, if the malfunction were to recur, it
would be likely to cause or contribute to a death or serious injury. Labeling
and promotional activities are subject to scrutiny by the
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<PAGE>
FDA and, in certain circumstances, by the Federal Trade Commission. Current
FDA enforcement policy prohibits the marketing of approved medical devices for
unapproved uses. The Company is subject to routine inspection by the FDA and
certain state agencies for compliance with the Quality System Regulation and
Medical Device Reporting requirements, as well as other applicable
regulations.
In addition, the FDA requires that manufacturers of certain devices,
including the BVS, conduct postmarket surveillance studies after receiving
approval of a Pre-Market Approval ("PMA") application. The primary purpose of
required postmarket surveillance is to provide an early warning system to
alert the health care community to any potential problems with a device within
a reasonable time of the initial marketing of the device. Postmarket
surveillance provides clinical monitoring of the early experiences with the
device once it is distributed in the general population under actual
conditions of use.
The Company is also subject to regulation in each of the foreign countries
in which it sells its products. Many of the regulations applicable to the
Company's products in these counties are similar to those of the FDA. The
Company believes that foreign regulations relating to the manufacture and sale
of medical devices are becoming more stringent. The European Union has adopted
regulations requiring that medical devices comply with the Medical Device
Directive by June 15, 1998, which includes ISO-9001 and CE certification. The
Company's BVS currently has German MedGV approval but is not yet certified for
ISO-9001 compliance. The Company is working to obtain ISO-9001 and independent
CE certification for its BVS facility. There can be no assurance that the
Company will obtain such certification in a timely manner, if at all. Unless
ISO and CE certification are obtained, the Company's sale of the BVS into the
European Union may be restricted. Many manufacturers of medical devices,
including the Company, have often relied on foreign markets for the initial
commercial introduction of their products. The more stringent foreign
regulatory environment could make it more difficult, costly and time consuming
for the Company to pursue this strategy for new products.
Any FDA, foreign or state regulatory approvals or clearances, once obtained,
can be withdrawn or modified. Delay in the Company obtaining, or inability of
the Company to obtain and maintain, any necessary United States or foreign
clearances or approvals for new or existing products or product enhancements,
or cost overruns resulting from these regulatory requirements, would have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business--Government Regulation."
RELIANCE ON GOVERNMENT CONTRACTS
The Company generally relies on external funding for its basic research and
development, primarily through government research contracts and grants. Such
funding has been obtained for the initial development of most of the Company's
current products and products under development. In particular, in September
1996, the Company was awarded by the NHLBI a four-year $8.5 million extension
to its TAH Contract, and in September 1995 the Company was awarded a five-year
$4.3 million contract from the NHLBI for the development of the Company's
Heart Booster. As of September 30, 1997, the Company's total backlog of
government contracts and grants was $8.7 million. Such contracts and grants
are not expected to be sufficient to commercialize the underlying products,
and for certain products, including the TAH, the cost of product development
in excess of the contract value is expected to be significant. The Company's
strategy is to continue to seek government contracts and grants to support
development efforts. Funding for the Company's government research and
development contracts is subject to government appropriation, and all of these
contracts contain provisions which make them terminable at the convenience of
the government. There can be no assurance that the government will not
terminate or reduce or delay the funding for any of the Company's contracts.
In addition, there can be no assurance that the Company will be successful in
obtaining any new government contracts or further extensions to existing
contracts. A significant delay or reduction of funding under the Company's
government contracts could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Management's
Discussion and Analysis of Financial Conditions and Results of Operations" and
"Business--ABIOMED Products and Products under Development" and "--Strategic
Relationships."
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<PAGE>
DEPENDENCE ON LIMITED SOURCES OF SUPPLY
The Company relies on outside vendors to supply certain components used in
the BVS and in its products under development. Certain of the components of
the BVS are supplied by sole source vendors or are custom made for the
Company. From time to time, suppliers of certain components of the BVS have
indicated that they intend to discontinue, or have discontinued, making such
components. In addition, certain of these components are supplied from single
sources due to quality considerations, costs or constraints imposed by
regulatory authorities. There are relatively few additional sources of supply
for such components and establishing additional or replacement suppliers for
such components cannot be accomplished quickly and may require FDA approval.
In the past, certain suppliers have announced that, due to government
regulation or in an effort to reduce potential product liability exposure,
they intend to limit or terminate sales of certain products to the medical
industry. There can be no assurance that, if such an interruption were to
occur, the Company would be able to find suitable alternative supplies at
reasonable prices or would be able to obtain requisite regulatory approvals in
a timely manner, if at all. Similarly, when and if the Company reaches the
clinical testing stage of its products under development, it may find that
certain components become more difficult to source from outside vendors due to
the product liability risk perceived by those vendors. The Company's inability
to obtain acceptable components in a timely manner or to find suitable
replacements at an acceptable cost would have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business--Manufacturing."
FUTURE CAPITAL NEEDS AND UNCERTAINTY OF ADDITIONAL FUNDING
The Company is working on the research and development of several long-term
projects and is placing increased emphasis on development of the TAH, which
will result in significantly increased internally funded research and
development expenditures. These costs include costs of pre-clinical trials and
regulatory approvals. The Company estimates that the cost of developing the
TAH and other products will be significant. These costs may include costs
related to pre-clinical and clinical trials and regulatory approvals. The
Company estimates that it will require significant additional funds in order
to complete the development and achieve regulatory approvals of the TAH and
other products under development. Generally, estimates of long-term project
costs are extremely imprecise and cost overruns are common. As a result, there
can be no assurance that the Company will not require significantly more
resources to complete the development of the TAH and its other products. The
Company plans to fund this effort through a combination of the TAH Contract,
proceeds from the offering, existing resources, the possible sales of
additional securities and cash flow from sales of its existing products. Even
if the Company does not experience cost overruns, there can be no assurance
that the Company will be able to obtain sufficient funds to complete the
development of the TAH and other products. Moreover, the Company may require
additional funds to commence the manufacture and marketing of the TAH or any
of the Company's other products under development in commercial quantities, if
and when approved or cleared by the regulatory authorities. Failure of the
Company to obtain any required additional funding could delay product
development and otherwise materially and adversely affect the business of the
Company. There can be no assurance that the Company will be able to obtain
additional funding on favorable terms, if at all. See "Use of Proceeds" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
DEPENDENCE ON THIRD-PARTY REIMBURSEMENT
The Company's BVS product is, and most of its products under development are
intended to be, sold to medical institutions. Medical institutions and their
physicians typically seek reimbursement for the use of these products from
third-party payors, including Medicare, Medicaid, private health insurers and
managed care organizations. As a result, market acceptance of the Company's
current and proposed products may depend in large part on the extent to which
reimbursement is available to medical institutions and their physicians for
use of the Company's products.
The level of reimbursement provided by United States and foreign third-party
payors varies according to a number of factors, including the medical
procedure category, payor, location, outcome and cost. In the
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<PAGE>
United States, many private health care insurance carriers follow the
recommendations of the Health Care Finance Administration ("HCFA"), which
establishes guidelines for the reimbursement of health care providers treating
Medicare and Medicaid patients. Internationally, medical reimbursement systems
vary significantly. In certain countries, medical center budgets are fixed
regardless of levels of patient treatment. In other countries, such as Japan,
reimbursement from government or third party payors must be applied for and
approved. As of the date of this Prospectus, under HCFA guidelines, Medicare
reimburses medical institutions for Medicare patients based on the category of
surgical procedures in which the BVS is used and incrementally reimburses
physicians for the use of the BVS. Medicare does not, however, currently
reimburse medical institutions for the incremental cost of using the BVS above
the amount allowed for the reimbursement category of the surgical procedure.
Certain private health insurers and managed care providers provide incremental
reimbursement to both the medical institutions and their physicians. The
Company is currently petitioning HCFA to assign a higher paying reimbursement
category whenever the BVS is used. In October 1995, HCFA established a special
"ICD-9" code for the BVS in an effort to more clearly track and evaluate
hospital and physician costs associated specifically with the BVS compared to
current reimbursement levels, so that HCFA can determine the appropriate
category and level of reimbursement. There can be no assurance that HCFA will
reassign the BVS to a higher paying category in a timely manner, if at all.
No reimbursement levels have been established for the Company's products
under development, including the TAH. Prior to approving coverage for new
medical devices, most third-party payors require evidence that the product has
received FDA approval or clearance for marketing, is safe and effective and
not
experimental or investigational, and is medically necessary and appropriate
for the specific patient for whom the product is being used. Increasing
numbers of third-party payors require evidence that the procedures in which
the products are used, as well as the products themselves are cost-effective.
There can be no assurance that the Company's products under development will
meet these criteria, that third-party payors will reimburse physicians and
medical institutions for the use of the products or that the level of
reimbursement will be sufficient to support the widespread use of the
products. Furthermore, there can be no assurance that third-party payors will
continue to provide reimbursement for the use of BVS or that such payors will
not reduce the current level of reimbursement for the product. Failure to
achieve adequate reimbursement for its current or proposed products would have
a material adverse effect on the Company's business, financial condition and
results of operations.
POTENTIAL INADEQUACY OF PRODUCT LIABILITY INSURANCE
The Company's business involves the risk of product liability claims
inherent in the manufacture and marketing of life support systems. There are
many factors beyond the control of the Company that could result in the
failure of the BVS to sustain the life of a patient, the most important of
which is the condition of the patient prior to the use of the product. As a
result, many of the patients using the BVS do not survive. In addition, the
effectiveness of the Company's products could be adversely affected by the
reliability of the physicians, nurses and technicians using and monitoring the
use of the product, and the maintenance of the product by the Company's
customers. The failure of the BVS or any other life support system under
development by the Company to save a life could give rise to product liability
claims and result in negative publicity that could have a material adverse
effect on the Company's business, financial condition and results of
operations. The Company currently maintains product liability insurance,
subject to certain deductibles and exclusions. There can be no assurance that
this insurance will be sufficient to protect the Company from product
liability claims, or that product liability insurance will continue to be
available to the Company at a reasonable cost, if at all.
The risk of product liability claims against the Company may increase as the
Company introduces new products under development, particularly products such
as the TAH intended for permanent life support. The TAH will have a finite
life and could cause unintended complications to other organs. The eventual
failure of the TAH could give rise to product liability claims, regardless of
whether the TAH has extended or improved the quality of the patient's life
beyond that expected without the use of the TAH. As a result of the additional
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<PAGE>
product liability risks that will be associated with the TAH and other
products under development by the Company, there can be no assurance that the
Company will be able to secure product liability insurance for these products,
when and if developed, or that such insurance will be sufficient to protect
the Company at an acceptable cost. The failure of the Company to be able to
obtain adequate product liability insurance, if any, for these products could
have a material adverse effect on its business, financial condition and
results of operations.
DEPENDENCE ON PATENTS AND PROPRIETARY RIGHTS
The Company's business depends significantly upon its proprietary
technology. The Company relies on a combination of trade secret laws, patents,
copyrights, trademarks and confidentiality agreements and other contractual
provisions to establish, maintain and protect its proprietary rights, all of
which afford only limited protection. There can be no assurance that others
will not independently develop substantially equivalent proprietary
information and techniques or otherwise gain access to the Company's trade
secrets or disclose such technology or that the Company can meaningfully
protect its trade secrets.
The Company has been issued or allowed 22 patents and has pending three
patent applications in the United States. The Company has obtained or applied
for corresponding patents for certain of these patents and patent applications
in a limited number of foreign countries. These patents relate to the BVS and
certain of its products under development including the TAH. The Company's
United States patents expire at various times from 2003 to 2016. There can be
no assurance that the Company's pending patent applications or any future
applications will be approved, that any patents will provide the Company with
competitive advantages or will not be challenged by third parties, or that the
patents of others will not render the Company's patents obsolete or otherwise
have an adverse effect on the Company's ability to conduct business. Because
foreign patents may afford less protection under foreign law than is available
under United States patent law, there can be no assurance that any such
patents issued to the Company will adequately protect the Company's
proprietary information. Others may have filed and may file patent
applications in the future that are similar or identical to those of the
Company. To determine the priority of inventions, the Company may have to
participate in interference proceedings declared by the United States Patent
and Trademark Office or opposition proceedings before a foreign patent office
that could result in substantial cost to the Company. No assurance can be
given that any such interfering patent or patent application will not have
priority over patent applications filed on behalf of the Company or that the
Company will prevail in any opposition proceeding.
The medical device industry is characterized by a large number of patents
and by frequent and substantial intellectual property litigation. There can be
no assurance that the Company's products and technologies do not infringe or
violate any patents or proprietary rights of third parties. The Company has in
the past and may in the future be notified that it may be infringing or
violating proprietary rights possessed by others. Any intellectual property
litigation would be costly and could divert the efforts and attention of the
Company's management and technical personnel, which could have a material
adverse effect on the Company's business, financial condition and results of
operations. There can be no assurance that infringement or other claims will
not be asserted in the future or such assertions, if proven to be true, will
not prevent the Company from selling its products or materially and adversely
affect the Company's business, financial condition and results of operations.
If any such claims are asserted against the Company's proprietary rights, it
may seek to enter into a royalty or licensing arrangement. There can be no
assurance, however, that a license will be available on reasonable terms, or
at all. The Company could decide, in the alternative, to resort to litigation
to challenge such claims or to design around the patented or otherwise
proprietary technology. Such actions could be costly and would divert the
efforts and attention of the Company's management and technical personnel,
which would materially and adversely affect the Company's business, financial
condition and results of operations.
The Company has recently received letters from a third party alleging that
certain technology incorporated into the transcutaneous energy transmission
system component of the Company's TAH may infringe or violate the patent or
other proprietary rights of that party. There can be no assurance that the
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Company would prevail in the defense of any infringement or other claim, if
made. If infringement or violation of the patent or other proprietary rights
of the third party were determined to exist, the Company would either be
required to use or develop alternative technology or to seek a license of the
technology. There can be no assurance that the Company could obtain a license
of this technology on a timely basis or on reasonable terms, if at all. In
addition, there can be no assurance that the Company could develop or license
alternative technology on a timely basis, if at all. As a result, a
determination of infringement or violation could have a material adverse
effect on the Company's development of the TAH and on its business, financial
condition and results of operations. Any patent or intellectual property
dispute or litigation could result in product development delays, would be
costly, could divert the efforts and attention of the Company's management and
technical personnel and could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business--
Patents and Proprietary Rights."
CONTROL BY MANAGEMENT
Upon completion of this offering, the Company's directors, officers and
their affiliates will beneficially own approximately 35.0% of the outstanding
Common Stock of the Company (as determined in accordance with the rules of the
Securities and Exchange Commission). As a result, these stockholders will be
able to exert substantial influence over actions requiring stockholder
approval, including the election of directors, amendments to the Company's
Restated Certificate of Incorporation, mergers, sales of assets or other
business acquisitions or dispositions. See "Principal Stockholders."
ANTI-TAKEOVER PROVISIONS; RIGHTS AGREEMENT; ISSUANCE OF PREFERRED STOCK
The Company's Restated Certificate of Incorporation ("Certificate of
Incorporation") and Amended and Restated By-laws ("By-laws") contain certain
provisions that could have the effect of deterring certain mergers, tender
offers, proxy contests or other future takeover attempts which holders of some
or even a majority of the outstanding stock believe to be in their best
interest, and may make removal of management more difficult even if such
removal would be deemed to be beneficial to stockholders generally. These
provisions could limit the price that certain investors might be willing to
pay in the future for shares of the Company's Common Stock. In addition, the
Company has adopted a Rights Agreement, pursuant to which the Company has
distributed to its stockholders rights to purchase shares of junior
participating preferred stock ("Rights Agreement"). Upon certain triggering
events, such rights become exercisable to purchase the Company's Common Stock
at a price substantially discounted from the then applicable market price of
the Company's Common Stock. The Rights Agreement could generally discourage a
merger or tender offer involving the securities of the Company that is not
approved by the Company's Board of Directors by increasing the cost of
effecting any such transaction and, accordingly, could have an adverse impact
on stockholders who might want to vote in favor of such merger or participate
in such tender offer. In addition, shares of the Company's Class B Preferred
Stock ("Preferred Stock") may be issued in the future without further
stockholder approval and upon such terms and conditions, and having such
rights, privileges and preferences, as the Board of Directors may determine.
The rights of the holders of Common Stock will be subject to, and may be
adversely affected by, the rights of any holders of Preferred Stock that may
be issued in the future. The issuance of Preferred Stock, while providing
desirable flexibility in connection with possible acquisitions and other
corporate purposes, could have the effect of making it more difficult for a
third party to acquire, or of discouraging a third party from acquiring, a
majority of the outstanding voting stock of the Company. The Company has no
present plans to issue any shares of Preferred Stock. The Certificate of
Incorporation and By-laws impose various procedural and other requirements
that could make it more difficult for stockholders to effect certain corporate
actions. See "Description of Capital Stock--Anti-takeover Effect of Provisions
of the Certificate of Incorporation and By-laws, Rights Distribution and
Delaware Law."
POSSIBLE VOLATILITY OF SHARE PRICE
There has been a history of significant volatility in the market price for
shares of the Common Stock and shares of other companies in the medical
products and biomedical technology fields. Factors such as the announcement of
new products and the achievement of developmental and regulatory milestones by
the
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Company or its competitors have caused and could cause the price of the Common
Stock to fluctuate significantly. Moreover, although there has been a public
trading market for the Common Stock since 1987, there have been periods of
limited trading activity resulting in further volatility of the stock price.
Additionally, the spread between the ask and bid prices for the Common Stock
on the Nasdaq National Market System has been relatively wide, potentially
discouraging investor trades in the Common Stock. Further, in the event that
in some future fiscal quarter the Company's revenues were below the
expectations of public market analysts and investors, the price of the Common
Stock could be materially adversely affected. In addition, stock markets have
experienced extreme price and volume trading volatility in recent years. This
volatility has had a substantial effect on market prices of securities of many
medical technology companies for reasons frequently unrelated or
disproportionate to the operating performance of the specific companies. These
broad market fluctuations may adversely affect the market price of the Common
Stock. See "Price Range of Common Stock."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of a substantial number of shares of Common Stock in the public market
following this offering (pursuant to Rule 144 or otherwise), as well as sales
of shares issued upon exercise of employee stock options, could adversely
affect the prevailing market price of the Common Stock and impair the
Company's ability to raise additional capital through the sale of equity
securities. Of the approximately 8,264,556 shares of Common Stock outstanding
at September 30, 1997, approximately 5,391,682 shares are eligible for resale
in the public market without restriction and approximately 1,474,318 shares
are eligible for resale subject to the provisions of Rule 144. The remaining
1,398,556 shares of Common Stock are "restricted securities" within the
meaning of Rule 144, of which 2,000 shares and 1,396,556 shares will not be
eligible for resale until January and July 1998, respectively, the expiration
of the one-year holding period under Rule 144, and then only in accordance
therewith. In addition, there are 964,410 shares subject to outstanding
options, which shares have been registered on Form S-8 and will therefore be
subject to resale in the public market either without restriction or subject
to the provisions of Rule 144. The holders of 1,396,556 shares of Common Stock
have certain registration rights, commencing on July 14, 1998. See "Certain
Transactions."
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USE OF PROCEEDS
The net proceeds to the Company from the sale of the 290,000 shares of
Common Stock offered by the Company hereby are estimated to be $4.5 million,
assuming an offering price of $17.938 per share and after deducting estimated
fees of the Placement Agents and offering expenses payable by the Company.
There can be no assurance that the Company will be successful in selling any
or all of the shares of Common Stock offered hereby. The Company has not fixed
a minimum number of shares of Common Stock to be sold pursuant to this
offering. Therefore, the Company may sell less than all of the shares of
Common Stock offered hereby, which may significantly reduce the amount of
proceeds received by the Company.
The Company expects to use the net proceeds from this offering for research
and development, expansion of its manufacturing capabilities and other general
corporate purposes. In particular, the Company expects that a substantial
portion of the net proceeds will be used to support the TAH and other
development efforts, although there can be no assurance that the net proceeds
will be so used. The Company may also use a portion of the net proceeds for
strategic acquisitions of businesses, products or technologies complementary
to the Company's business. The Company does not have any commitments to make
any such acquisitions and has not allocated a specific amount of the net
proceeds for this purpose. Pending such uses, the Company plans to invest the
net proceeds of the offering in short-term, interest-bearing investment-grade
securities.
DIVIDEND POLICY
The Company has never declared or paid cash dividends on its capital stock
and does not plan to pay any cash dividends in the foreseeable future. The
Company's current policy is to retain all of its earnings to finance future
growth.
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PRICE RANGE OF COMMON STOCK
The Company's Common Stock is traded on the Nasdaq National Market under the
symbol "ABMD." The following table sets forth, for the periods indicated, the
high and low sales prices per share of Common Stock, as reported by the Nasdaq
National Market.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
FISCAL YEAR ENDED MARCH 31, 1996
First Quarter................................................... $ 9 $ 6
Second Quarter.................................................. 13 1/4 6 7/8
Third Quarter................................................... 16 8 3/4
Fourth Quarter.................................................. 15 1/4 11 1/2
FISCAL YEAR ENDED MARCH 31, 1997
First Quarter................................................... 18 12 1/2
Second Quarter.................................................. 18 1/4 10 1/8
Third Quarter................................................... 18 1/4 11 1/2
Fourth Quarter.................................................. 13 1/4 9 1/2
FISCAL YEAR ENDING MARCH 31, 1998
First Quarter................................................... 16 9 1/2
Second Quarter.................................................. 19 13 1/2
Third Quarter (through November 19, 1997)....................... 23 1/2 16 3/8
</TABLE>
The last reported sale price of the Common Stock on the Nasdaq National
Market on November 19, 1997 was $17.938 per share. As of September 30, 1997,
there were approximately 337 holders of record of the Company's Common Stock,
including multiple beneficial holders at depositories, banks and brokers
listed as a single holder in the street name of each respective depository,
bank or broker.
18
<PAGE>
CAPITALIZATION
The following table sets forth as of September 30, 1997 the unaudited actual
capitalization of the Company, and such capitalization as adjusted to reflect
the receipt of the estimated net proceeds from the sale of 290,000 shares of
Common Stock being offered by the Company hereby at an assumed offering price
of $17.938 per share and after deducting estimated fees of the Placement
Agents and offering expenses payable by the Company.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
------------------------
ACTUAL AS ADJUSTED
------------ -----------
(in thousands)
<S> <C> <C>
Long-term debt....................................... $ -- $ --
------------ -----------
Stockholders' investment (1):
Class B Preferred Stock, $0.01 par value, 1,000,000
shares authorized; no shares issued and
outstanding;...................................... -- --
Common Stock, $.01 par value, 25,000,000 shares
authorized; 8,264,556 shares issued and
outstanding and 8,554,556 shares issued and
outstanding as adjusted........................... 82,646 85,546
Additional paid-in capital......................... 53,221,747 57,737,357
Accumulated deficit................................ (20,655,947) (20,655,947)
------------ -----------
Total stockholders' investment................... 32,648,446 37,166,956
------------ -----------
Total capitalization........................... $ 32,648,446 $37,166,956
============ ===========
</TABLE>
- --------
(1) Based on the number of shares outstanding as of September 30, 1997.
Excludes 964,410 shares of Common Stock reserved for issuance upon the
exercise of stock options outstanding as of September 30, 1997 at a
weighted average exercise price of $10.81 per share. See Note 6 to
Consolidated Financial Statements.
19
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table contains certain selected consolidated financial data of
the Company and is qualified in its entirety by the more detailed Consolidated
Financial Statements included elsewhere in this Prospectus. The consolidated
statements of operations data for the fiscal years ended March 31, 1995, 1996
and 1997, and the consolidated balance sheet data as of March 31, 1996 and
1997, have been derived from the Consolidated Financial Statements, which
statements have been audited by Arthur Andersen LLP, independent public
accountants, and are included elsewhere in this Prospectus. The consolidated
statement of operations data for the fiscal years ended March 31, 1993 and
1994, and the consolidated balance sheet data as of March 31, 1993, 1994 and
1995 have been derived from the Company's consolidated financial statements,
which statements have been audited by Arthur Andersen LLP and are not included
in this Prospectus. The consolidated statement of operations data for the six
months ended September 30, 1996 and 1997, and the consolidated balance sheet
data as of September 30, 1997 have been derived from unaudited Consolidated
Financial Statements included elsewhere in this Prospectus. These unaudited
financial statements have been prepared on the same basis as the audited
financial statements and, in the opinion of management, include all
adjustments and reclassifications (consisting only of normal recurring
adjustments and reclassifications) necessary to present fairly the financial
condition and results of operations for the periods presented. The results for
the six months ended September 30, 1997 are not necessarily indicative of the
results that may be expected for the full year. This data should be read in
conjunction with the Consolidated Financial Statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
appearing elsewhere herein.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED MARCH 31, SEPTEMBER 30,
------------------------------------------- -------------
1993 1994 1995 1996 1997 1996 1997
------- ------- ------- ------- ------- ------ ------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues:
Products.............. $ 1,709 $ 4,648 $ 6,893 $ 9,725 $12,311 $5,760 $9,324
Contracts............. 1,736 2,027 2,337 3,118 4,151 1,754 3,680
------- ------- ------- ------- ------- ------ ------
Total revenues...... 3,445 6,675 9,230 12,843 16,462 7,514 13,004
Costs and expenses:
Cost of products...... 2,042 2,211 3,289 3,921 5,361 2,123 3,438
Research and
development (1)...... 2,097 2,431 2,464 3,218 3,833 1,781 3,654
Selling, general and
administrative....... 3,803 4,553 4,278 5,741 7,068 3,229 4,970
------- ------- ------- ------- ------- ------ ------
Total costs and
expenses........... 7,942 9,195 10,031 12,880 16,262 7,133 12,062
------- ------- ------- ------- ------- ------ ------
Income (loss) from
operations............. (4,497) (2,520) (801) (37) 200 381 942
Interest and other
income................. 604 537 449 528 535 256 417
------- ------- ------- ------- ------- ------ ------
Net income (loss)....... $(3,893) $(1,983) $ (352) $ 491 $ 735 $ 637 $1,359
======= ======= ======= ======= ======= ====== ======
Net income (loss) per
common and common
equivalent share....... $ (0.60) $ (0.31) $ (0.05) $ 0.07 $ 0.10 $ 0.09 $ 0.17
======= ======= ======= ======= ======= ====== ======
Weighted average number
of common and common
equivalent shares
outstanding............ 6,441 6,461 6,512 6,995 7,162 7,196 7,869
</TABLE>
<TABLE>
<CAPTION>
MARCH 31,
--------------------------------------- SEPTEMBER 30,
1993 1994 1995 1996 1997 1997
------- ------- ------- ------- ------- -------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents
and short-term
marketable securities.. $ 9,486 $ 3,067 $ 4,491 $10,647 $ 9,361 $24,312
Working capital......... 10,727 6,043 6,304 12,735 12,850 29,109
Long-term investments... 4,307 7,219 6,533 -- -- --
Total assets............ 17,504 15,426 14,730 16,209 18,547 36,348
Long-term debt.......... 3,820 3,773 -- -- -- --
Total stockholders'
investment (2)......... 12,460 10,589 13,305 13,945 15,225 32,648
</TABLE>
- -------
(1) Research and development expenses include certain contract costs. See Note
1(e) to Consolidated Financial Statements.
(2) No cash dividends on Common Stock were declared or paid during any of the
periods presented.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains forward-looking statements which involve
risks and uncertainties. The Company's actual results could differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including those set forth under "Risk Factors" and elsewhere
in this Prospectus.
OVERVIEW
The Company is a leader in the research and development of cardiac assist
and heart replacement technology. The Company developed, manufactures and
sells the BVS, a temporary cardiac assist device, and is developing a totally
implantable artificial heart. The Company's operating results reflect the dual
activities of commercial operations and investments in the research and
development of new technologies.
The BVS is a temporary cardiac assist device designed to provide a patient's
failing heart with full circulatory assistance while allowing the heart to
rest, heal and recover its function. The BVS is the only device that can
provide full circulatory assistance approved by the FDA as a bridge-to-
recovery device for the treatment of patients with reversible heart failure.
Since fiscal 1994, the first full year of marketing the BVS in the United
States, increasing new orders and reorders of the BVS have made product
revenues the largest contributor to the Company's revenues. The Company has
focused its initial selling efforts of the BVS on the approximately 300
medical centers that perform the most heart surgery procedures, teaching
centers and transplant centers. As of September 30, 1997, the BVS had been
purchased by over 275 medical centers in the United States, many of which are
within the group of medical centers initially targeted. The BVS is comprised
of a pneumatic drive and control console, single-use external blood pumps and
cannulae. During the six months ended September 30, 1997 and fiscal 1997,
revenues from BVS sales represented 94% and 88%, respectively, of the
Company's total product revenues with no single customer representing more
than 5% of product revenues.
Research and development is a significant portion of the Company's
operations. The Company's research and development efforts are focused on the
development of new products, primarily related to cardiac assist and heart
replacement, and the continued enhancement of the BVS and related
technologies. The Company's research and development expenses have been
primarily attributable to research and development under the Company's
government contracts and grants. Revenues from contract research and
development and total research and development costs have increased in each of
the past three years. The Company's government-sponsored research and
development contracts generally provide for payment on a cost-plus-fixed-fee
basis. The Company accounts for revenue under these contracts and grants as
work is performed, provided that the government has appropriated sufficient
funds for the work. There can be no assurance that the government will not
terminate, reduce or delay the funding for any of the Company's contracts. In
addition, there can be no assurance that the Company will be successful in
obtaining any new government contracts or further extensions to existing
contracts.
The Company plans to use its own resources to fund the further development
of the TAH in amounts significantly in excess of the funding provided under
the Company's TAH Contract. The Company estimates that the development of the
TAH, including conducting pre-clinical and clinical studies and obtaining
regulatory approvals, will require substantial funds. As a result, the Company
believes that it is likely that the Company will incur losses, potentially as
soon as the quarter ending December 31, 1997. There can be no assurance that
the Company will be able to develop the TAH, or receive the required
regulatory approvals to commence clinical trials on a timely basis or within
budget, if at all.
The Company has significant net tax operating loss carryforwards and tax
credit carryforwards. As a result, income tax expense incurred during the
periods presented have not been material. See Note 4 to Consolidated Financial
Statements.
21
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth certain consolidated statements of operations
data for the periods indicated as a percentage of total revenues:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED MARCH 31, SEPTEMBER 30,
----------------------- --------------
1995 1996 1997 1996 1997
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Revenues:
Products.................. 74.7% 75.7% 74.8% 76.7% 71.7%
Contracts................. 25.3 24.3 25.2 23.3 28.3
------ ------ ------ ------ ------
Total revenues.......... 100.0 100.0 100.0 100.0 100.0
Costs and expenses:
Cost of products.......... 35.6 30.5 32.6 28.2 26.5
Research and development.. 26.7 25.1 23.3 23.7 28.1
Selling, general and
administrative........... 46.4 44.7 42.9 43.0 38.2
------ ------ ------ ------ ------
Total costs and
expenses............... 108.7 100.3 98.8 94.9 92.8
------ ------ ------ ------ ------
Income (loss) from
operations................. (8.7) (0.3) 1.2 5.1 7.2
Interest and other income... 4.9 4.1 3.2 3.4 3.2
------ ------ ------ ------ ------
Net income (loss)........... (3.8)% 3.8% 4.4% 8.5% 10.4%
====== ====== ====== ====== ======
</TABLE>
Six Months Ended September 30, 1997 and 1996
Revenues. Total revenues, excluding interest income, increased by 73% to
$13.0 million in the six months ended September 30, 1997 from $7.5 million in
the six months ended September 30, 1996. This increase was attributable to an
increase in both product and contract revenues.
Product revenues increased by 62% to $9.3 million in the six months ended
September 30, 1997 from $5.8 million in the six months ended September 30,
1996. This increase was primarily attributable to increased unit sales of BVS
blood pumps, consoles and related accessories. Product revenues during the six
months ended September 30, 1997 included a $640,000 reduction in the Company's
backlog for BVS blood pumps. This backlog had primarily resulted from the
Company's voluntary recall of certain production lots of single-use BVS blood
pumps during the quarter ended December 31, 1996. As of September 30, 1997,
the Company's backlog of unshipped customer orders was $370,000. More than 90%
of total product revenues in the six months ended September 30, 1997 were
derived from domestic sources.
Contract revenues increased by 110% to $3.7 million in the six months ended
September 30, 1997 from $1.8 million in the six months ended September 30,
1996. This increase primarily reflected increased activity under the Company's
TAH Contract. The Company accounts for revenue under its government contracts
and grants as work is performed, provided that the government has appropriated
sufficient funds for the work. Through September 30, 1997, the government had
appropriated $4.9 million of the $8.5 million Phase II TAH Contract amount.
The original government appropriation schedule calls for no further
appropriation for the TAH Contract until October 1998. This schedule is
subject to change at the discretion of the government. During the six months
ended September 30, 1997, the Company's expenditures under the TAH Contract
exceeded the appropriated amount, resulting in the Company recognizing as
revenue all of the remaining $3.2 million balance of the $4.9 million
appropriated under the TAH Contract.
While the Company currently plans to further increase its expenditures in
connection with the development of the TAH, the Company will not recognize any
further contract revenues under the TAH Contract until such time as additional
funds are appropriated under the TAH Contract, if ever. The Company believes
that certain of its costs incurred prior to further appropriations may be
reimbursable under the TAH
22
<PAGE>
Contract, if and when additional appropriation under the TAH Contract is made.
Due to the Company's accelerated TAH development activity and the timing of
government appropriations, the Company believes that it will experience
significant quarterly fluctuations in contract revenues. The Company also
believes that its total expenses to complete the development of the TAH will
significantly exceed the remaining $3.6 million TAH Contract amount. As a
result, the Company believes that it is likely that the Company will again
incur losses, potentially as soon as the quarter ending December 31, 1997.
As of September 30, 1997, the Company's total backlog of research and
development contracts and grants was $8.7 million, including the remaining
$3.6 million under the TAH Contract and $3.0 million for Heart Booster
research and development. Funding for the Company's government research and
development contracts is subject to government appropriation, and all of these
contracts contain provisions which make them terminable at the convenience of
the government.
Cost of Products. Cost of products sold as a percentage of product revenues
remained unchanged at 36.9% for the six months ended September 30, 1997 and
1996.
Research and Development Expenses. Research and development expenses
increased by 105% to $3.7 million, 28% of total revenues, for the six months
ended September 30, 1997, from $1.8 million, 24% of total revenues, for the
six months ended September 30, 1996. This increase primarily reflected a
higher level of activity under the Company's cost-plus-fixed-fee research and
development contracts and grants, particularly the TAH Contract. Research and
development expenses during the six months ended September 30, 1997 also
included $230,000 of expenses incurred in connection with the Company's
development activities for the TAH in excess of the appropriated amounts under
the TAH Contract. The Company anticipates that its research and development
expenses will increase significantly as a result of its plans to increase its
internally funded research and development efforts for TAH.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by 54% to $5.0 million, 38% of total
revenues, for the six months ended September 30, 1997 from $3.2 million, 43%
of total revenues, for the six months ended September 30, 1996. The increase
in absolute dollars primarily reflected increased sales and marketing
expenses, particularly increased personnel and sales commissions, related to
the increase in product revenues, as well as additional administrative
personnel. The decrease in selling, general and administrative expenses as a
percentage of total revenues reflected the Company's higher revenue base to
support these increased costs.
Interest and Other Income. Interest and other income consists primarily of
interest on the Company's investment balances, net of interest and other
expenses. Interest income increased by 62% to $417,000, 3% of total revenues,
for the six months ended September 30, 1997, from $257,000, 3% of total
revenues, for the six months ended September 30, 1996. This increase primarily
reflected the interest earned on the Company's higher average investment
balances.
Fiscal Years Ended March 31, 1997, 1996 and 1995
Revenues. Total revenues, excluding interest income, for fiscal 1997
increased to $16.5 million as compared to $12.8 million in fiscal 1996 and
$9.2 million in fiscal 1995, representing increases of 28% and 39% in fiscal
1997 and 1996, respectively.
Product revenues increased to $12.3 million in fiscal 1997 from $9.7 million
in fiscal 1996, and $6.9 million in fiscal 1995, representing increases of 27%
and 41% in fiscal 1997 and fiscal 1996, respectively. These increases were
primarily attributable to growing United States unit sales of the BVS consoles
and single-use products, including increased blood pump reorders, and to
increased average selling prices of BVS consoles and single-use products. The
majority of the Company's product revenues in the last three years have been
to United States customers. International revenues represented 7%, 9% and 13%
of total product revenues in fiscal 1997, 1996 and 1995 respectively. The
Company's product revenues from its dental business, ABIODENT, increased in
fiscal 1997 to 12% of total product revenues and represented less than 10% of
total revenues in all periods presented in this Prospectus.
23
<PAGE>
Contract revenues increased to $4.2 million in fiscal 1997 from $3.1 million
in fiscal 1996 and $2.3 million in fiscal 1995, representing increases of 33%
in both fiscal 1997 and 1996. These increases are reflective of the increased
level of the Company's research and development activities under its
government cost reimbursement contracts in each year. The majority of the
Company's contract revenues, approximately 59% in fiscal 1997, were recognized
in connection with the research and development under the TAH Contract,
including amounts paid under Phase I of that contract.
Cost of Products. Cost of products represented approximately 44%, 40% and
48% of product revenues for fiscal 1997, 1996 and 1995, respectively. The
decrease in gross product margins experienced in fiscal 1997 as compared to
fiscal 1996 is primarily attributable to the mix of products sold. The Company
generally receives higher margins on the sale of single-use blood pumps than
on the sale of consoles. A higher proportion of the Company's revenues was
derived from the sale of BVS consoles in fiscal 1997 as compared to fiscal
1996. In addition, the Company's margins in fiscal 1997 were affected by
increased costs of production of the single-use blood pumps, including
approximately $200,000 in costs related to the Company's voluntary recall
during the third quarter of fiscal 1997 of certain production lots of single-
use BVS blood pumps. During that quarter, the Company became aware of certain
isolated cases where components of its BVS blood pumps exhibited certain
abnormalities. In response the Company commenced a product recall for and
removed from inventory all blood pumps from the affected production lots.
Research and Development Expenses. Cost of research and development
increased to approximately $3.8 million, 23.3% of total revenues, in fiscal
1997 compared to $3.2 million, 25.1% of total revenues, and $2.5 million,
26.7% of total revenues, in fiscal 1996 and 1995, respectively. These
increases reflect increased activity under research and development contracts
and grants, which are billed on a cost-plus-fixed-fee basis. Costs of internal
research and development primarily relate to continued engineering support and
improvement of existing products as well as regulatory support for all
products.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased to $7.1 million, 42.9% of total revenues, in
fiscal 1997 from $5.7 million, 44.7% of total revenues, and $4.3 million,
46.4% of total revenues, in fiscal 1996 and fiscal 1995, respectively. These
increases primarily reflect increased costs associated with higher product
revenues, including the expansion of the United States based sales team and
clinical post-sales support personnel. The decreases in selling, general and
administrative expenses as a percentage of total revenues in fiscal 1996 and
1997 primarily reflect the Company's higher revenue base to support these
increased costs.
Interest and Other Income. Interest and other income totaled $540,000,
$530,000, and $450,000, for fiscal 1997, 1996 and 1995, respectively. This
income primarily represents income earned on short-term investments.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1997, the Company had $24.3 million in cash and short-
term marketable securities. The Company also has a $3.0 million line of credit
from a bank that expires in September 1998, and which was entirely available
at September 30, 1997.
During the six months ended September 30, 1997, operating activities
provided $2,000 of cash. Net cash provided by operating activities during the
six months ended September 30, 1997 reflected net income of $1.4 million,
including depreciation and amortization expense of $440,000, and an increase
in accrued expenses of $535,000. These sources of cash were partially offset
by an increase in accounts receivable of $2.0 million, a decrease in accounts
payable of $156,000, and increases in prepaid expenses and inventory of
$220,000 and $30,000, respectively. The increase in the Company's accounts
receivable was primarily attributable to the Company's increased sales,
including an increase in product revenues attributable to sales-type lease
transactions.
24
<PAGE>
During the six months ended September 30, 1997, investing activities used
$17.0 million of cash. Net cash used by investing activities included $15.9
million of purchases of short-term investments and $1.1 million of purchases
and improvements of property and equipment. Although the Company does not
currently have significant capital commitments, the Company believes that it
will continue to make significant investments over the next several years to
support the development and commercialization of its products and the
expansion of its manufacturing facility.
During the six months ended September 30, 1997, financing activities
provided $16.1 million of cash. Net cash provided by financing activities
included $16.0 million in net proceeds from the private placement of Common
Stock to Genzyme Corporation and certain of the Company's directors in July
1997.
The Company believes that its revenues and existing resources will be
sufficient to fund its planned operations, including the planned increase in
its internally funded TAH development efforts, for at least through the next
twelve months. See "Risks Factors--Future Capital Needs and Uncertainty of
Additional Funding."
25
<PAGE>
BUSINESS
The Company is a leader in the research and development of cardiac assist
and heart replacement technology. The Company developed, manufactures and
sells the BVS, a temporary cardiac assist device designed to provide a
patient's failing heart with full circulatory assistance while allowing the
heart to rest, heal and recover its function. The BVS is most frequently used
in patients whose hearts fail to immediately recover function following heart
surgery. The BVS is the only device that can provide full circulatory
assistance approved by the FDA as a bridge-to-recovery device for the
treatment of patients with reversible heart failure.
The Company is developing a battery-powered totally implantable artificial
heart intended as a permanent replacement device to assume the full pumping
function of both the left and right ventricles of the heart. The TAH is
designed for use by patients with irreparably damaged hearts and at risk of
death due to acute myocardial infarction ("AMI"), chronic ischemic disease or
some form of end-stage congestive heart failure, but whose vital organs
otherwise remain viable.
HEART DISEASE
Overview
The human heart consists of four chambers, including a left and right
ventricle. The left ventricle pumps oxygen rich blood throughout the body. The
right ventricle pumps oxygen depleted blood which has been circulated through
the body to the lungs where it is re-oxygenated. The heart muscles of the
ventricles require an uninterrupted supply of oxygenated blood, which is
provided through coronary arteries.
Insufficient blood flow to the muscles of the heart, known as ischemia,
results in oxygen deprivation and leads to various complications. These
complications include reduced cell function and, in more severe cases,
permanent damage to the heart muscle, such as AMI. Diseases to the coronary
arteries which affect blood flow to the heart are generally classified as
coronary heart disease.
Congestive heart failure is a condition manifested clinically by an enlarged
heart. Congestive heart failure develops over time primarily due to excess
demand on the heart muscle caused by a variety of factors, including chronic
hypertension (high blood pressure), incompetent valves, coronary heart
disease, infections of the heart muscle or the valves and congenital heart
problems.
Abnormalities in the electrical conduction system regulating the pumping
function of the heart, known as rhythm disorders, can also lead to
complications. These complications range from ventricular fibrillation
(unsynchronized contractions) and arrhythmia (irregular heartbeats) to cardiac
arrest. Most cardiac arrests result in sudden death.
Prevalence and Mortality
In 1994, there were an estimated 13.7 million people with coronary heart
disease, 4.8 million people with congestive heart failure, 4.0 million people
with rhythm disorders, and 1.4 million people with valvular diseases in the
United States. These diseases and conditions resulted in approximately 750,000
deaths in 1995, of which approximately half were sudden deaths. Of the deaths
that did not occur suddenly, approximately 110,000, 131,000, and 59,000 were
associated with AMI, chronic ischemic disease and congestive heart failure,
respectively.
Circulatory Support Therapies
In general, there are four modalities for the treatment or support of
failing ventricles: pharmaceutical therapies, cardiological interventions,
surgical corrections, and mechanical cardiac interventions. Pharmaceutical
therapies, including diuretics, ACE inhibitors, beta blockers and calcium
channel blockers, are commonly the first treatment option. Cardiological
interventions, including angioplasty and the use of stents, are minimally
invasive procedures that primarily address certain forms of coronary heart
disease. Surgical corrections, including coronary bypass surgery and valve
replacement, while effective, are a viable alternative only for those patients
with enough functional heart muscle to sustain life. Mechanical cardiac
26
<PAGE>
interventions involve the use of devices for those patients whose heart
muscles are unable to sustain life without cardiac assistance.
Mechanical Cardiac Interventions
Mechanical cardiac interventions can be divided into three groups of
devices: temporary cardiac assist, permanent cardiac assist and heart
replacement.
Temporary Cardiac Assist. Patients who are candidates for temporary cardiac
assist consist of those with severely but reversibly failing hearts and those
who need ventricular support to remain alive while they await transplantation.
Temporary cardiac devices which are designed to support the recovery of
patients with reversibly failing hearts are referred to as "bridge-to-
recovery" devices, and those which can support patients awaiting
transplantation are referred to as "bridge-to-transplant" devices.
Approximately 12,000 patients with potentially recoverable hearts die every
year in the United States following heart surgery. Bridge-to-recovery devices
can save the lives of many of these patients by temporarily assuming the
pumping function of the heart, while allowing the heart to rest, heal and
recover its normal function. These devices can also be used for bridge-to-
recovery for nonsurgical patients who would otherwise die as a result of
certain transient viral infections that attack the heart muscle. Bridge-to-
transplant devices are ventricular assist devices ("VADs") used to support a
portion of the patients awaiting heart transplants. There are approximately
2,300 heart transplants performed in the United States annually.
Permanent Cardiac Assist. Patients with life-impairing or life-threatening
heart failure due to permanent muscle damage may require support to either the
left or both ventricles. Depending upon the severity of the damage and the
nature of the heart's condition, these patients may be helped with permanent
assist devices. Permanent assist devices under development can be grouped into
two types, those that pump blood directly, such as VADs, and those that wrap
around and help contract the heart without direct blood contact. Both types
potentially may be used to treat end-stage congestive heart failure patients
as well as those patients who are not at imminent risk of death but whose
daily activities are generally restricted due to their weakened hearts. In
1995, there were approximately 59,000 deaths in the United States attributable
to congestive heart failure.
Heart Replacement. Patients with irreparably damaged hearts and at risk of
death due to AMI, chronic ischemic disease or some form of end-stage
congestive heart failure but whose vital organs otherwise remain viable are
candidates for heart replacement. Included among these patients are those with
massive heart damage or infection, severe rhythm disorders, prosthetic valves,
clots or thrombi in the ventricles, high pulmonary resistance, chronic right
ventricle failure and heart transplant rejection. Among these combined groups,
the Company believes that approximately 60,000 patients per year could benefit
from a heart replacement device. No life-supporting treatment is currently
available for these patients except for the approximately 2,300 who receive
heart transplants annually in the United States. Currently, available donor
hearts are primarily reserved for transplantation of select end-stage
congestive heart failure patients because many of these patients are able to
survive for the long waiting periods required before a suitably matched donor
heart can be found. The Company believes that the development of an artificial
heart would increase the number of lives saved by eliminating the scarcity of,
and waiting period for, available hearts.
ABIOMED PRODUCTS AND PRODUCTS UNDER DEVELOPMENT
The Company markets the BVS, which is a temporary cardiac assist device, and
is developing the TAH and the Heart Booster, which are replacement and
permanent cardiac assist devices, respectively.
The BVS-5000 Bi-Ventricular Assist System. The BVS is a temporary cardiac
assist device designed to provide a patient's failing heart with full
circulatory assistance while allowing the heart to rest, heal and recover its
function. The BVS is most frequently used in patients whose hearts fail to
immediately recover function following heart surgery. In November 1992, the
Company received PMA approval from the FDA for
27
<PAGE>
the BVS for this post-surgery therapy. In 1996 and 1997, the FDA approved the
use of the BVS for additional indications, expanding its use for the treatment
of all patients with reversible heart failure as a bridge-to-recovery device.
The BVS is the only device that can provide full circulatory assistance
approved by the FDA for the treatment of these patients.
The BVS system is comprised of a microprocessor-based pneumatic drive and
control console, single-use external blood pumps and cannulae. The BVS console
incorporates a closed-loop control system that automatically adjusts the
pumping rate, similar to the natural heart. The dual-chamber blood pumps
provide complete or partial pumping of blood for the left, right or both sides
of a patient's heart and are designed to mimic the function of the natural
heart. The BVS blood pumps reduce the risk of damaging blood cells by filling
the ventricles passively and continuously by gravity rather than by suction.
The cannulae are specially designed tubes used to connect the blood pumps to
the heart. The integration of the cannulae, blood pumps and console creates a
system with the ability to reduce the load on the heart, provide pulsatile
blood flow to vital organs and allow the heart muscles time to rest and
recover. Stabilization of patients who recover under BVS support typically
occurs in a period of less than one week. The BVS is designed to be simple and
easy to use and does not require a specially trained technician to constantly
monitor or adjust the pumping parameters, which can reduce hospital operating
costs.
The following diagram illustrates the BVS.
[ILLUSTRATION OF THE BVS SYSTEM APPEARS HERE]
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The BVS is intended for use in any hospital performing open-chest cardiac
surgery, of which there are more than 900 in the United States. As of
September 30, 1997, the BVS had been purchased by over 275 medical centers in
the United States including many of the largest centers. Typically, medical
centers initially purchase the BVS console, two to four BVS single-use blood
pumps, cannulae, training and related accessories. The BVS is capable of
supporting the left, right or both ventricles of the heart. In the Company's
clinical experience, approximately half of the patients required support to
both ventricles of the heart, and therefore the use of two single-use BVS
blood pumps. The Company's United States list price for a BVS console, and a
blood pump and cannulae set are $59,500 and $6,950, respectively.
The Totally Implantable Artificial Heart (TAH). The Company is developing a
battery-powered totally implantable artificial heart intended as a permanent
replacement device to assume the full pumping function of both the left and
right ventricles of the heart. The TAH is designed for use by patients with
irreparably damaged hearts and at risk of death due to AMI, chronic ischemic
disease or some form of end-stage congestive heart failure but whose vital
organs otherwise remain viable. Included among these patients are those with
massive heart damage or infection, severe rhythm disorders, prosthetic valves,
clots or thrombi in the ventricles, high pulmonary resistance, chronic right
ventricle failure and heart transplant rejection.
The core technology for the TAH has been under development by the Company
since the Company's inception. The Company has completed its feasibility
studies of the TAH system and substantially finalized the design of the TAH.
The system and individual components have been tested through a variety of
laboratory and animal tests. The Company is currently accelerating the
development of the TAH and is devoting significant resources towards improving
the manufacturing process in order to reach consistency and reliability levels
necessary to conduct advanced pre-clinical and clinical trials. The Company's
goal is to initiate clinical trials of the TAH by the end of the year 2000.
There can be no assurance that the Company will be able to successfully
complete pre-clinical testing of the TAH and receive FDA approval to begin
clinical trials of the TAH in a timely manner, if at all. Moreover, pre-
clinical trials may not be predictive of results that will be obtained in
clinical trials. The Company is consulting with regulatory authorities,
leading medical centers and physicians to define protocols and patient
populations for future clinical trials. The Company has built a new
development and pilot-scale manufacturing facility, and has significantly
increased the personnel focused on the manufacturability and testing of the
TAH.
The TAH system is comprised of a thoracic unit, or "replacement heart," a
rechargeable battery, a miniaturized electronics package, a transcutaneous
energy transmission system, and an external belt-worn battery pack. The
thoracic unit includes two artificial ventricles with their associated valves
and a hydraulic pumping system. The unit provides complete pumping of the
blood to the lungs and throughout the body. The ventricles and their
associated valves are being designed and manufactured with seamless surfaces
which reduce the risk of damaging blood cells, or creating clots or thrombi.
The electronics package automatically adjusts the rate and amount of blood
flow to the patient's needs, similar to the natural heart. The implantable
rechargeable battery and the transcutaneous energy transmission system
eliminate the need for wires penetrating the patient's skin and associated
risks of infection. The entire TAH system is being designed to be highly
reliable with minimal maintenance and patient involvement.
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The following diagram illustrates the TAH.
[ILLUSTRATION OF THE TAH APPEARS HERE]
Much of the development of the TAH has been funded by the NHLBI. Prior to
receiving its most recent $8.5 million TAH Contract extension, the Company
demonstrated to the NHLBI that the basic design of the system functioned in
laboratory and animal models without significant complications. The Company
retains the right to market the resulting TAH without royalty to NHLBI. The
Company is responsible for the complete research and development program and
has collaborated over the past nine years with the Texas Heart Institute for
pre-clinical product testing and evaluation.
The Heart Booster. The Company is developing the Heart Booster as a
permanent cardiac assist device designed to wrap around and help contract the
heart without direct blood contact. The Heart Booster is being designed for
use in patients with congestive heart failure who are not at imminent risk of
death, but whose daily activities are generally restricted due to their
weakened hearts. This device, unlike most devices being developed to pump
blood directly, avoids the potential risks of damage to blood cells and
formation of clots and thrombi. The Heart Booster consists of a pliant and
thin artificial plastic "muscle" that can be wrapped around the heart. This
artificial muscle is being developed to mimic the contraction-relaxation
characteristics of the heart muscle and provide sufficient contractility. The
design goal of the Heart Booster is to restore an acceptable and active
quality of life to the patient. The Heart Booster is in an earlier stage of
research and development than the TAH and is being developed under a five
year, $4.3 million contract from the NHLBI. Columbia Presbyterian Medical
Center is collaborating with the Company on this project for pre-clinical
testing and evaluation. There can be no assurance that the Company will be
successful in developing the Heart Booster.
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ABIOMED STRATEGY
The Company's goal is to be a leader in the development, manufacture and
marketing of mechanical cardiac assist and replacement devices that address
the varying needs of a wide range of patients.The Company is pursuing the
following strategies to achieve this objective.
Accelerate Development of the TAH. The Company is devoting significant
resources with the goal to be the first to clinically introduce a totally
implantable artificial heart. The Company is consulting with regulatory
authorities, leading medical centers and physicians to define protocols and
patient populations for future clinical trials. The Company has built a new
development and pilot-scale manufacturing facility, and has significantly
increased the personnel focused on the manufacturability and testing of the
TAH.
Increase Market Penetration of BVS. The Company has recently increased the
size of both its domestic sales force and its clinical support group. Its
sales force focuses on BVS sales to new customers, while its clinical support
group focuses on training and educating existing customers in order to improve
clinical outcomes and increase BVS blood pump usage. As of September 30, 1997,
the BVS had been purchased by over 275 medical centers in the United States,
including many of the largest centers. The Company believes that its
relationships with its customers will facilitate the adoption of the BVS by
other medical centers.
Maintain and Enhance Technological Leadership. The Company is a leader in
the research and development of mechanical cardiac assist and replacement
devices. The Company has accumulated substantial proprietary knowledge and has
been granted a number of patents relating to the technologies incorporated in
these devices. The Company intends to continue to enhance and expand upon its
core technical expertise to maintain its leadership and to further develop
advanced mechanical cardiac assist and replacement devices.
Pursue Strategic Relationships to Support Research and Commercialization
Efforts. Many of the Company's products under development, including the TAH,
have been funded using government contracts and grants. The Company seeks
funding from third parties to support its research and development programs
and generally limits the use of its own funds until the scientific risk is
reduced. In addition, the Company intends to pursue collaborative
relationships to develop and commercialize the Company's non-cardiac assist
technologies.
MARKETING AND SALES
Approximately 900 medical centers in the United States perform heart
surgery. The Company has focused its initial BVS selling efforts on teaching
and transplant centers as well as the medical centers that perform the most
heart surgery procedures. As of September 30, 1997, the BVS had been purchased
by over 275 medical centers in the United States, many of which are within the
group of medical centers initially targeted. The Company believes that its
installed base of customers provides an opportunity for reorders of the
single-use BVS blood pumps as well as a reference base to assist in selling to
new accounts.
The Company sells the BVS in the United States through direct sales and
clinical support teams. As of September 30, 1997, the Company's BVS sales,
clinical support, marketing and field service teams included 35 full-time
employees. Its sales force focuses on BVS sales to new customers. Its clinical
support group focuses on training and educating existing customers in order to
improve clinical outcomes and increase BVS blood pump usage. The Company
believes the efforts of its clinical support group contribute significantly to
increasing the number of lives saved by the BVS and increasing usage and
reorders of BVS blood pumps. The Company also believes that its sales and
support teams will be key assets for the introduction of potential future
products such as the TAH. Building on its experience in the United States, the
Company also is working to expand its international sales efforts both through
distributors, including a recent collaborative arrangement for distribution in
Japan, and by selling directly in select European markets. The Company
believes that sales of its BVS may be somewhat seasonal, with reduced sales in
the summer months, reflecting hospital personnel and physician vacation
schedules.
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MANUFACTURING
The Company manufactures the BVS console, BVS blood pumps and related
accessories. The manufacture of BVS consoles consists primarily of assembly,
testing and quality control. The Company purchases the majority of the
materials, parts and peripheral components used in the BVS consoles. The
Company manufactures certain blood contacting components for the BVS blood
pumps, including valves and bladders, from its proprietary Angioflex polymer.
The nature of the Company's products requires high quality manufacturing.
The Company's manufacturing and quality testing processes and procedures are
highly dependent on the diligence and experience of the Company's personnel.
To the extent that the Company's manufacturing volumes expand or the Company
begins the manufacture of new products, this dependence on personnel will
likely increase. In addition, the manufacture of blood contacting surfaces of
the Company's products requires a high degree of precision. These surfaces are
manufactured from polyurethane-based materials. The quality and composition of
polyurethane-based products can vary significantly based on numerous factors
including humidity, temperature, material content and air flow during the
manufacturing process. The Company's products also incorporate plastic
components for non-blood contacting surfaces. The Company relies on third-
party vendors to provide these components to the Company's specifications. The
Company is not able to fully inspect the quality of all vendor supplied
components and, therefore, relies on its vendors with respect to the quality
of these components. Once the plastic-based components of the Company's
products have been assembled, accessibility for inspection is limited. If a
defect is detected in as few as one of the Company's products, or in one
component of a Company product, it can result in the recall or restriction on
sale of products. Once assembled, in most cases, the Company's blood
contacting components cannot be reworked for human use. The manufacturing lead
times for parts and assemblies, particularly the polyurethane-based
components, can take many weeks from the date that all materials and
components are received by the Company. In addition, vendor lead times for
materials and components of the Company's products vary significantly, with
lead times for certain materials and components exceeding six months.
The Company is planning to expand its manufacturing facility for the BVS
during the next twelve months. There can be no assurance that the products
manufactured in the expanded facility will be manufactured at the same cost
and quality as the BVS is currently being manufactured. In addition, to the
extent that the Company's products under development have been manufactured,
they have been manufactured as prototypes with, at most, pilot-scale
production. The Company's products under development are likely to involve
additional manufacturing complexities and high quality requirements. There can
be no assurance that the Company will be able to increase production of the
BVS or manufacture future products, if developed and approved, in commercial
quantities on a consistent and timely basis, with acceptable cost and quality.
The inability to manufacture current and future products in sufficient
quantities in a timely manner, and with acceptable cost and quality, would
have a material adverse effect on the Company's business, financial condition
and results of operations.
The Company relies on outside vendors to supply certain components used in
the BVS and in its products under development. Certain of the components of
the BVS are supplied by sole source vendors or are custom made for the
Company. From time to time, suppliers of certain components of the BVS have
indicated that they intend to discontinue, or have discontinued, making such
components. In addition, certain of these components are supplied from single
sources due to quality considerations, costs or constraints imposed by
regulatory authorities. There are relatively few additional sources of supply
for such components and establishing additional or replacement suppliers for
such components cannot be accomplished quickly and may require FDA approval.
In the past, certain suppliers have announced that, due to government
regulation or in an effort to reduce potential product liability exposure,
they intend to limit or terminate sales of certain products to the medical
industry. There can be no assurance that, if such an interruption were to
occur, the Company would be able to find suitable alternative supplies at
reasonable prices or would be able to obtain requisite regulatory approvals in
a timely manner, if at all. Similarly, when and if the Company reaches the
clinical testing stage of its products under development, it may find that
certain components become more
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difficult to source from outside vendors due to the product liability risk
perceived by those vendors. The Company's inability to obtain acceptable
components in a timely manner or to find suitable replacements at an
acceptable cost would have a material adverse effect on the Company's
business, financial condition and results of operations.
RESEARCH AND PRODUCT DEVELOPMENT
The Company has substantial expertise in electro-mechanical systems, cardiac
physiology and experimental surgery, blood-material interactions, fluid
mechanics and hemodynamics, internal and external electronic hardware,
software, plastics processing, lasers and optical physics. The Company's
research and development efforts are focused on the development of new
products, primarily related to mechanical cardiac assist and heart
replacement, and the continued enhancement of the BVS and related
technologies. The Company's research and development personnel also are
involved in establishing protocols, monitoring and submitting test data to the
FDA and corresponding foreign regulatory agencies to obtain the necessary
clearances and approvals for its products. Sophisticated tools, such as 3-
dimensional CAD/CAM, and procedures are used in an effort to ensure smooth
transition of new products from research to product development to
manufacturing.
Cardiac assist products currently under development by the Company include
the TAH, the Heart Booster, and a variety of specialized pumps, such as a
miniaturized rotary blood pump and a magnetically-suspended centrifugal pump.
The Company is also developing devices in the area of minimally invasive
surgery applications, such as tissue welding and vascular welding for the
repair of small arteries.
During the six months ended September 30, 1997 and the fiscal years ended
March 31, 1997, 1996 and 1995, the Company expended $3.7 million, $3.8
million, $3.2 million and $2.5 million, respectively, on research and
development. A substantial portion of these expenses were funded by government
contracts and grants. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business--Strategic Relationships."
STRATEGIC RELATIONSHIPS
Genzyme
In July 1997, the Company sold 1,153,846 shares of Common Stock to Genzyme
Corporation ("Genzyme"). In connection with this sale, the Company and Genzyme
agreed to discuss collaborative arrangements that would allow them to jointly
develop and commercialize products which combine biotechnology and biomedical
engineering, primarily for the surgical market. A potential target for
collaboration is minimally invasive cardiac surgery, an emerging field in
which surgeons use new products and techniques to reduce the trauma, recovery
period, and expense of heart surgery. The Company and Genzyme are engaged in
ongoing discussions regarding this potential collaboration. The Chief
Executive Officer of Genzyme is a member of the Company's board of directors.
There can be no assurance that the Company and Genzyme will agree to jointly
collaborate on any project, that any such project would result in the
development of any product, or that any such product, if developed, would be
commercially successful. See "Certain Transactions."
National Heart, Lung and Blood Institute
Since the Company's inception, United States government agencies,
particularly the NHLBI, have provided significant support to the Company's
product development efforts. The most significant current funding from the
NHLBI supports the Company's development of the TAH and Heart Booster. In
September 1996, the Company received an $8.5 million extension to its TAH
Contract from the NHLBI. In September 1995, the Company received a $4.3
million contract from the NHLBI to develop the Heart Booster. During the six
months ended September 30, 1997 and the fiscal years ended March 31, 1997,
1996 and 1995, the
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Company recognized revenues of $3.7 million, $4.2 million, $3.1 million and
$2.3 million, respectively, under United States government contracts and
grants. All of the Company's government contracts and grants contain
provisions making them terminable at the convenience of the government and are
subject to government appropriations. There can be no assurance that the
government will not terminate, reduce or delay the funding for any of the
Company's contracts. In addition, there can be no assurance that the Company
will be successful in obtaining any new government contracts or further
extensions to existing contracts.
COMPETITION
Competition in the cardiac assist market is intense and subject to rapid
technological change and evolving industry requirements and standards. Many of
the companies developing or marketing cardiac assist products have
substantially greater financial, product development, sales and marketing
resources and experience than the Company. These competitors may develop
superior products or products of similar quality at the same or lower prices.
Moreover, there can be no assurance that improvements in current or new
technologies will not make them technically equivalent or superior to the
Company's products in addition to providing cost or other advantages. Other
advances in medical technology, biotechnology and pharmaceuticals may reduce
the size of the potential markets for the Company's products or render those
products obsolete.
The BVS is the only device that can provide full circulatory assistance
approved by the FDA as a bridge-to-recovery device for the treatment of
patients with reversible heart failure. However, the Company is aware of at
least one other company, Thoratec Laboratories Corporation, seeking approval
of a temporary cardiac assist device to address this market. Approval by the
FDA of products that compete directly with the BVS would increase competitive
pricing and other pressures and could have a material adverse effect on the
Company's business, financial condition and results of operations. The Company
believes that it would compete with any such product on the basis of cost,
clinical outcome and customer relations. There can be no assurance that the
Company would be able to compete effectively with respect to these factors.
The Company is aware of other artificial heart development efforts in the
United States, Canada, Europe and Japan. A team comprised of Pennsylvania
State University and 3M Corporation, Inc. has been developing a heart
replacement device for many years with significant NHLBI support. There are a
number of companies, including Thermo Cardiosystems, Inc. and Novacor, a
division of Baxter International, Inc., which are developing permanent cardiac
assist products, including implantable left ventricular assist devices and
miniaturized rotary ventricular assist devices, that may address markets that
overlap with certain segments of the markets targeted by the Company's TAH.
The Company's TAH may compete with those VADs for some patient groups, notably
patients with severe congestive heart failure due to predominant left
ventricle dysfunction. An implantable VAD supplements the pumping ability of a
failing ventricle. In contrast, the TAH is being designed to replace failing
ventricles. The Company believes that Thermo Cardiosystems, Inc. has commenced
clinical testing for PMA approval of LVADs for permanent cardiac assist. The
Company believes that the TAH, LVADs and other VADs, if developed, will
generally be used to address the needs of different patient populations, with
an overlap for certain segments of the heart failure population. There can be
no assurance that the Company will develop and receive FDA approval to market
its TAH on a timely basis, if at all, or that once developed, the TAH will be
commercially successful.
The Company's customers frequently have limited budgets. As a result, the
Company's products compete against the broad range of medical devices for
these limited funds. The Company's success will depend in large part upon its
ability to enhance its existing products and to develop new products to meet
regulatory and customer requirements and to achieve market acceptance. The
Company believes that important competitive factors with respect to the
development and commercialization of its products include the relative speed
with which it can develop products, establish clinical utility, complete
clinical testing and regulatory approval processes, obtain reimbursement and
supply commercial quantities of the product to the market. There can be no
assurance that the Company will be able to compete successfully or that
competition will not have a material adverse effect on the Company's business,
financial condition and results of operations.
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THIRD-PARTY REIMBURSEMENT
The Company's BVS product is, and most of its products under development are
intended to be, sold to medical institutions. Medical institutions and their
physicians typically seek reimbursement for the use of these products from
third-party payors, including Medicare, Medicaid, private health insurers and
managed care organizations. As a result, market acceptance of the Company's
current and proposed products may depend in large part on the extent to which
reimbursement is available to medical institutions and their physicians for
use of the Company's products.
The level of reimbursement provided by United States and foreign third-party
payors varies according to a number of factors, including the medical
procedure category, payor, location, outcome and cost. In the United States,
many private health care insurance carriers follow the recommendations of
HCFA, which establishes guidelines for the reimbursement of health care
providers treating Medicare and Medicaid patients. Internationally, healthcare
reimbursement systems vary significantly. In certain countries, medical center
budgets are fixed regardless of levels of patient treatment. In other
countries, such as Japan, reimbursement from government or third party payors
must be applied for and approved. As of the date of this Prospectus, under
HCFA guidelines, Medicare reimburses medical institutions for Medicare
patients based on the category of surgical procedures in which the BVS is used
and incrementally reimburses physicians for the use of the BVS. Medicare does
not, however, currently reimburse medical institutions for the incremental
cost of using the BVS above the amount allowed for the reimbursement category
of the surgical procedure. Certain private health insurers and managed care
providers provide incremental reimbursement to both the medical institutions
and their physicians. The Company is currently petitioning HCFA to assign a
higher paying reimbursement category whenever the BVS is used. In October
1995, HCFA established a special "ICD-9" code for the BVS in an effort to more
clearly track and evaluate hospital and physician costs associated
specifically with the BVS compared to current reimbursement levels, so that
HCFA can determine the appropriate category and level of reimbursement. There
can be no assurance that HCFA will reassign the BVS to a higher paying
category in a timely manner, if at all.
No reimbursement levels have been established for the Company's products
under development, including the TAH. Prior to approving coverage for new
medical devices, most third-party payors require evidence that the product has
received FDA approval or clearance for marketing, is safe and effective and
not experimental or investigational, and is medically necessary and
appropriate for the specific patient for whom the product is being used.
Increasing numbers of third-party payors require evidence that the procedures
in which the products are used, as well as the products themselves, are cost-
effective. There can be no assurance that the Company's products under
development will meet these criteria, that third-party payors will reimburse
physicians and medical institutions for the use of the products or that the
level of reimbursement will be sufficient to support the widespread use of the
products. Furthermore, there can be no assurance that third-party payors will
continue to provide reimbursement for the use of BVS or that such payors will
not reduce the current level of reimbursement for the product. Failure to
achieve adequate reimbursement for its current or proposed products would have
a material adverse effect on the Company's business, financial condition and
results of operations.
ABIODENT SUBSIDIARY
ABIODENT, Inc. ("ABIODENT"), a wholly owned subsidiary of the Company,
manufactures and markets the PerioTemp periodontal screening system
("PerioTemp") and markets the Halimeter for early detection and assessment of
risk of periodontal disease and other sources of halitosis. ABIODENT is
operated independently from the Company's cardiac assist activities. As of
September 30, 1997, ABIODENT employed eight full-time employees.
The PerioTemp is a tool for use by dentists, periodontists and other dental
specialists to instantly detect sites of gum inflammation. The PerioTemp
patented technology, developed in part through funding from the National
Institute of Dental Research, consists of a book-sized console, containing a
microprocessor that is
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connected to a probe, shaped much like a dentist's probe, with a heat-sensing
tip. The device is used in a manner which is consistent with traditional
probing but includes an instantaneous display and record of temperature
deviations from normal inside the pockets between teeth and the surrounding
gum. According to published sources, gum temperature has been shown to be a
reliable indicator of the presence of inflammation, a precursor of periodontal
disease. The PerioTemp also allows the clinician to record gum pocket depth
and bleeding point information.
ABIODENT markets the PerioTemp in conjunction with the Halimeter, to provide
differential evaluation of the sources of halitosis. ABIODENT purchases the
Halimeter from Interscan, Inc. under a distribution arrangement which is
exclusive to ABIODENT if it meets certain defined sales volume levels.
ABIODENT markets its dental products with complementary products of others
used in preventive and cosmetic dental programs. Revenues from this subsidiary
represented 12% of the Company's total product revenues in fiscal 1997 and
represented less than ten percent of the Company's total revenues in all
periods presented in this Prospectus. The Company believes that it cannot
alone adequately support the investment that the continued growth of its
dental business requires and is looking for alternative ways to support its
dental business.
PATENTS AND PROPRIETARY RIGHTS
The Company's business depends significantly upon its proprietary
technology. The Company relies on a combination of trade secret laws, patents,
copyrights, trademarks and confidentiality agreements and other contractual
provisions to establish, maintain and protect its proprietary rights, all of
which afford only limited protection. There can be no assurance that others
will not independently develop substantially equivalent proprietary
information and techniques or otherwise gain access to the Company's trade
secrets or disclose such technology or that the Company can meaningfully
protect its trade secrets.
The Company has been issued or allowed 22 patents and has pending three
patent applications in the United States. The Company has obtained or applied
for corresponding patents and patent applications for certain of these patents
and patent applications in a limited number of foreign countries. These
patents relate to the BVS and certain of its products under development
including the TAH. The Company's United States patents expire at various times
from 2003 to 2016. There can be no assurance that the Company's pending patent
applications or any future applications will be approved, that any patents
will provide the Company with competitive advantages or will not be challenged
by third parties, or that the patents of others will not render the Company's
patents obsolete or otherwise have an adverse effect on the Company's ability
to conduct business. Because foreign patents may afford less protection under
foreign law than is available under United States patent law, there can be no
assurance that any such patents issued to the Company will adequately protect
the Company's proprietary information. Others may have filed and may file
patent applications in the future that are similar or identical to those of
the Company. To determine the priority of inventions, the Company may have to
participate in interference proceedings declared by the United States Patent
and Trademark Office or opposition proceedings before a foreign patent office
that could result in substantial cost to the Company. No assurance can be
given that any such interfering patent or patent application will not have
priority over patent applications filed on behalf of the Company or that the
Company will prevail in any opposition proceeding.
The medical device industry is characterized by a large number of patents
and by frequent and substantial intellectual property litigation. There can be
no assurance that the Company's products and technologies do not infringe or
violate any patents or proprietary rights of third parties. The Company has in
the past and may in the future be notified that it may be infringing or
violating proprietary rights possessed by others. Any intellectual property
litigation would be costly and could divert the efforts and attention of the
Company's management and technical personnel, which could have a material
adverse effect on the Company's business, financial condition and results of
operations. There can be no assurance that infringement or other claims will
not be asserted in the future or such assertions, if proven to be true, will
not prevent the Company from selling its products or materially and adversely
affect the Company's business, financial condition and results of operations.
If any such claims are asserted against the Company's proprietary
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rights, it may seek to enter into a royalty or licensing arrangement. There
can be no assurance, however, that a license will be available on reasonable
terms, or at all. The Company could decide, in the alternative, to resort to
litigation to challenge such claims or to design around the patented or
otherwise proprietary technology. Such actions could be costly and would
divert the efforts and attention of the Company's management and technical
personnel, which would materially and adversely affect the Company's business,
financial condition and results of operations.
The Company has recently received letters from a third party alleging that
certain technology incorporated into the transcutaneous energy transmission
system component of the Company's TAH may infringe the patent or other
proprietary rights of that party. The Company is in the preliminary stages of
assessing the allegations, but does not believe that it is infringing any
patent or other intellectual property rights of this third party. There can be
no assurance that the Company would prevail in the defense of any infringement
or other claim, if made. If infringement or violation of the patent or other
proprietary rights of the third party were determined to exist, the Company
would either be required to use or develop alternative technology or to seek a
license of the technology. There can be no assurance that the Company could
obtain a license of this technology on a timely basis or on reasonable terms,
if at all. In addition, there can be no assurance that the Company could
develop or license alternative technology on a timely basis, if at all. As a
result, a determination of infringement or violation could have a material
adverse effect on the Company's development of the TAH and on its business,
financial condition and results of operations. Any patent or intellectual
property dispute or litigation could result in product development delays,
would be costly and could divert the efforts and attention of the Company's
management and technical personnel, and could have a material adverse effect
on the Company's business, financial condition and results of operations.
Certain of the Company's products have been developed in part under
government contracts pursuant to which the Company may be required to
manufacture a substantial portion of the product in the United States and the
government may obtain certain rights to use or disclose technical data
developed under those contracts. The Company retains the right to obtain
patents on any inventions developed under those contracts (subject to a non-
exclusive, non-transferable, royalty-free license to the government), provided
it follows certain prescribed procedures.
The Company purchased certain of its technology, including technology
incorporated in the BVS, from the Abiomed Limited Partnership (the
"Partnership"), in which the Company has a 61.7% interest. As a result of this
purchase, the Company is required to pay the Partnership a royalty through
August 3, 2000. See Note 7 to the Consolidated Financial Statements.
GOVERNMENT REGULATION
Clinical testing, manufacture and sale of the Company's products and
products under development, including the BVS, TAH and Heart Booster and the
Company's dental devices, are or will be subject to regulation by the FDA and
corresponding state and foreign regulatory agencies. Noncompliance with
applicable requirements can result in, among other things, fines, injunctions,
civil penalties, recall or seizure of products, total or partial suspension of
production, failure of the government to grant pre-market clearance or pre-
market approval for devices, withdrawal of marketing approvals and criminal
prosecution. The FDA also has the authority to request repair, replacement or
refund of the cost of any device manufactured or distributed by the Company.
In the United States, medical devices are classified into one of three
classes (i.e., Class I, II or III) on the basis of the controls deemed
necessary by the FDA to reasonably ensure their safety and effectiveness.
Class I devices are subject to general controls, such as labeling, pre-market
notification and adherence to the FDA's Current Good Manufacturing Practices
requirements set forth in the Quality System Regulation ("QSR"), which include
testing, control and documentation requirements. Class II devices are subject
to general and special controls, such as performance standards, post-market
surveillance, patient registries and QSR compliance. Class III devices, which
are typically life-sustaining, life-supporting and implantable devices, or new
devices that have been found not to be substantially equivalent to legally
marketed devices, are subject to the requirements applicable to Class I and
Class II devices and must generally also receive pre-market approval by the
FDA to ensure their safety and effectiveness.
37
<PAGE>
Before introducing a new device into the market, the Company must generally
obtain FDA clearance or approval through either clearance of a 510(k)
notification or receipt of a Pre-Market Approval ("PMA"). A 510(k) clearance
will be granted if the submitted information establishes that the proposed
device is "substantially equivalent" to a legally marketed Class I or Class II
medical device or a Class III medical device for which the FDA has not
required PMAs. The Company has received FDA market clearance under Section
510(k) for the PerioTemp.
A PMA application must be filed if a proposed device is not substantially
equivalent to a legally marketed Class I or Class II device, or if it is a
Class III device for which the FDA has required PMAs. A PMA application must
be supported by valid scientific evidence, which typically includes extensive
information including relevant bench tests, laboratory and animal studies and
clinical trial data to demonstrate the safety and effectiveness of the device.
The PMA application also must contain a complete description of the device and
its components, a detailed description of the methods, facilities and controls
used to manufacture the device, and the proposed labeling advertising
literature and training materials. By regulation, the FDA has 180 days to
review the PMA application, and during that time an advisory committee may
evaluate the application and provide recommendations to the FDA. Advisory
Committee reviews often occur over a significantly protracted period, and a
number of devices for which FDA approval has been sought have never been
cleared for marketing. In addition, modifications to a device that is the
subject of an approved PMA, or to its labeling or manufacturing process, may
require approval by the FDA, including the submission of PMA supplements or
new PMAs.
If clinical trials of a device are required in order to obtain FDA approval
and the device presents a "significant risk," the sponsor of the trial will
have to file an Investigational Device Exemption ("IDE") application prior to
commencing clinical trials. The IDE application must be supported by data,
which typically includes the results of animal and laboratory testing. If the
IDE application is approved by the FDA and all of the appropriate
Institutional Review Boards ("IRBs"), clinical trials may begin at a specific
number of investigational sites with a specific number of patients, as
approved by the FDA. If the device presents a "nonsignificant risk" to the
patient, a sponsor may begin the clinical trial after obtaining approval for
the study by one or more appropriate IRBs without the need for FDA approval.
Sponsors of clinical trials are permitted to charge for investigational
devices distributed in the course of the study provided that compensation does
not exceed recovery of the costs of manufacture, research, development and
handling. An IDE supplement must be submitted to and approved by the FDA
before a sponsor or investigator may make a change to the investigational plan
that may affect its scientific soundness or the rights, safety or welfare of
human subjects.
In November 1992, the Company received PMA approval from the FDA for the
BVS. In 1996 and 1997, the FDA approved the use of the BVS for additional
indications, expanding its use to the treatment of all patients with
reversible heart failure. The TAH and the Heart Booster will be Class III
devices and therefore will be subject to the IDE and PMA processes and the
QSR.
Any devices, including the BVS, that are manufactured or distributed by the
Company pursuant to FDA clearances or approvals are subject to pervasive and
continuing regulation by the FDA and certain state agencies. Manufacturers of
medical devices for marketing in the United States are required to adhere to
the QSR and must also comply with Medical Devices Reporting ("MDR")
requirements that a firm report to the FDA any incident in which its product
may have caused or contributed to a death or serious injury, or in which its
product malfunctioned and, if the malfunction were to recur, it would be
likely to cause or contribute to a death or serious injury. Labeling and
promotional activities are subject to scrutiny by the FDA and, in certain
circumstances, by the Federal Trade Commission. Current FDA enforcement policy
prohibits the marketing of approved medical devices for unapproved uses. The
Company is subject to routine inspection by the FDA and certain state agencies
for compliance with the QSR and MDR requirements, as well as other applicable
regulations.
In addition, the FDA requires that manufacturers of certain devices,
including the BVS, conduct postmarket surveillance studies after receiving
approval of a PMA application. The primary purpose of required postmarket
surveillance is to provide an early warning system to alert the health care
community to
38
<PAGE>
any potential problems with a device within a reasonable time of the initial
marketing of the device. Postmarket surveillance provides clinical monitoring
of the early experiences with the device once it is distributed in the general
population under actual conditions of use.
The Company is also subject to regulation in each of the foreign countries
in which it sells its products. Many of the regulations applicable to the
Company's products in these counties are similar to those of the FDA. The
Company has obtained the requisite foreign regulatory approvals for sale of
the BVS in many foreign countries, including most of Western Europe, and has
recently commenced the regulatory approval process in Japan. The Company
believes that foreign regulations relating to the manufacture and sale of
medical devices are becoming more stringent. The European Union has adopted
regulations requiring that medical devices comply with the Medical Device
Directive by June 15, 1998, which includes ISO-9001 and CE certification. The
Company's BVS currently has German MedGV approval but is not yet certified for
ISO-9001 compliance. The Company is working to obtain ISO-9001 and independent
CE certification for its BVS facility. There can be no assurance that the
Company will obtain such certification in a timely manner, if at all. Unless
ISO and CE certification are obtained, the Company's sale of the BVS into the
European Union may be restricted. Many manufacturers of medical devices,
including the Company, have often relied on foreign markets for the initial
commercial introduction of their products. The more stringent foreign
regulatory environment could make it more difficult, costly and time consuming
for the Company to pursue this strategy for new products.
Any FDA, foreign or state regulatory approvals or clearances, once obtained,
can be withdrawn or modified. Delay in the Company obtaining, or inability of
the Company to obtain and maintain, any necessary United States or foreign
clearances or approvals for new or existing products or product enhancements,
or cost overruns resulting from these regulatory requirements, would have a
material adverse effect on the Company's business, financial condition and
results of operations.
EMPLOYEES
As of September 30, 1997, the Company had 166 full-time employees. The
Company has entered into contractual agreements with all of its employees
which include strict confidentiality and non-compete commitments by each
employee. None of the Company's employees is represented by a union. The
Company considers its employee relations to be good.
PROPERTIES
The Company leases its headquarters and research and development and
production facilities in three separate buildings in an industrial office park
covering approximately 55,000 square feet. The addresses of these leased
spaces are 33 Cherry Hill Drive and 24 Cherry Hill Drive in Danvers,
Massachusetts and 66 Cherry Hill Drive in Beverly, Massachusetts. All
facilities are located approximately 22 miles north of Boston. The leases at
the primary facilities, representing 23,000 square feet and 22,000 square
feet, respectively, expire in April 2000 and June 2001, respectively. All
leases have options to extend at market rates.
The Company's facilities include fabrication areas for medical and dental
device manufacturing, and development facilities for laboratory and durability
testing of plastics and electronics. The Company has begun improving
approximately 18,000 square feet of this space to better accommodate its BVS
growth and to allow for expanded engineering, production and testing relating
to the TAH. The Company believes that these facilities are adequate for its
current needs.
LEGAL PROCEEDINGS
The Company is not a party to any material pending legal proceedings. See
"Business--Patents and Proprietary Rights."
39
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS, KEY EMPLOYEES AND DIRECTORS
The Company's executive officers, key employees and directors are as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
------------------------------------- --- ------------------------------------
<S> <C> <C>
David M. Lederman, Ph.D*............. 53 Chairman of the Board of Directors,
President, Chief Executive Officer
and Assistant Treasurer
Robert T.V. Kung, Ph.D*.............. 53 Senior Vice President--Research and
Development, and Assistant
Secretary
Eugene D. Rabe*...................... 41 Vice President--Global Sales,
Marketing and Clinical Programs
John F. Thero*....................... 37 Vice President--Finance, Chief
Financial Officer, Treasurer and
Assistant Secretary
Anthony W. Bailey.................... 41 Vice President--Engineering
William J. Bolt...................... 45 Vice President (in charge of
ABIODENT)
David Nikka.......................... 42 Vice President--Resources and
Administration
Janice Piasecki...................... 43 Vice President--Regulatory Affairs
Edward G. Taylor, Ph.D............... 46 Vice President--Program Director,
Implantable Artificial Heart
W. Gerald Austen, M.D................ 67 Director
Paul Fireman......................... 53 Director
John F. O'Brien...................... 54 Director
Desmond H. O'Connell, Jr. ........... 61 Director
Henri A. Termeer..................... 51 Director
</TABLE>
- --------
*Executive Officer
Dr. David M. Lederman founded the Company in 1981, has served as Chairman of
the Board and Chief Executive Officer since that time, and as President for
the majority of that time. Prior to founding ABIOMED, he was Chairman of the
Medical Research Group at the Everett Subsidiary of Avco Corporation. He
originated the design and development of ABIOMED's artificial heart blood
pumps and their valves, has authored over 40 medical publications, is a member
of numerous medical and scientific professional organizations and has been a
frequent speaker in forums on cardiac support systems and on the financing and
commercialization of advanced medical technology. Dr. Lederman received a
Ph.D. degree in Aerospace Engineering from Cornell University.
Dr. Robert T.V. Kung has served as Vice President of Research and
Development of the Company since 1987. From 1982 to 1987, he served as Chief
Scientist of the Company. Since 1995, Dr. Kung has served as the Senior Vice
President of the Company. Prior to joining ABIOMED, he was a Principal
Research Scientist at Schafer Associates and at the Avco Everett Research
Laboratory. He developed non-linear optical techniques for laser applications
and investigated physical and chemical phenomena in re-entry physics. Dr. Kung
has been Principal Investigator for the Company's TAH and Heart Booster
programs and has conceived of and directed the development of the Company's
laser-based minimally invasive technologies, as well as the PerioTemp. Dr.
Kung received a Ph.D. degree in Physical Chemistry from Cornell University.
Mr. Eugene D. Rabe joined the Company in 1993, as its Vice-President for
Sales. In 1996, he assumed responsibility for all domestic sales, clinical and
field support. Recently he was promoted to Vice-President Global Sales,
Marketing and Clinical Programs. Prior to joining ABIOMED, he was Vice-
President, Sales and
40
<PAGE>
Marketing for Endosonics Corporation before which he was a Sales Manager for
St. Jude Medical, Inc. He has been involved in the sales and marketing of
cardiovascular/cardiological devices for over ten years. Mr. Rabe received a
Bachelor's degree from St. Cloud State University and his MBA from the
University of California.
Mr. John F. Thero joined the Company in 1994 as Vice President, Finance and
Administration and Chief Financial Officer. Prior to joining ABIOMED, during
the period 1992 to 1995, Mr. Thero was Chief Financial Officer and acting
President for the restructuring of two venture-backed companies. From 1987 to
1992, Mr. Thero was employed, in various capacities including Chief Financial
Officer, by Aries Technology, Inc. From 1983 to 1987, Mr. Thero was employed
by the commercial audit division of Arthur Andersen & Co. during which time he
became a Certified Public Accountant. Mr. Thero received a B.A. in
Economics/Accounting from The College of the Holy Cross.
Mr. Anthony W. Bailey joined the Company in 1997 to lead the Electronics
System Development of the Implantable Artificial Heart Program and is
currently Vice President--Engineering. Prior to joining ABIOMED, during 1987
to 1997, Mr. Bailey was Vice President and General Manager for Pace Medical,
Inc., a manufacturer of external pacemakers, rhythm management analyzers and
accessories. From 1982 to 1987, he was Manager of Design and Development at
Shiley Infusaid, Inc., a manufacturer of implantable drug pumps and infusion
ports. Prior to that, Mr. Bailey served in various engineering functions with
manufacturers of implantable pacemakers, data acquisition and control systems
and medical monitoring equipment. Mr. Bailey received his Bachelor's degree
from University of Lowell.
Mr. William J. Bolt joined the Company in 1982. Since that time, he has
served in various roles, from Director of Operations to Vice President of
Engineering, and was the engineer in-charge when the BVS and PerioTemp systems
were developed. He is presently responsible for the business operations of
ABIODENT, including dental product sales, marketing, manufacturing and
engineering support. Mr. Bolt received a Bachelor's degree in Electrical
Engineering and a Masters degree in Business Administration from Northeastern
University.
Mr. David Nikka joined the Company in 1997 as its Vice President--Resources
and Administration. Prior to joining ABIOMED, he was Vice President, Human
Resources from 1991 to 1997 for Genzyme Genetics, Director of Human Resources
from 1989 to 1991 for Genzyme Corporation and Director of Human Resources for
Integrated Genetics from 1986 to 1989. Mr. Nikka received his Bachelor Degree
from Boston University. Mr. Nikka is past Chairperson of both the BIO and the
Massachusetts Biotechnology Council Human Resource Committees.
Ms. Janice Piasecki joined the Company in 1991 as Manager of Clinical
Research and Regulatory Affairs. In this role she has worked extensively on
PMA submissions for the BVS which led to FDA approvals. She was promoted to
Vice-President, Regulatory Affairs in 1994. Prior to joining ABIOMED, she held
position of Investigator for the United States Food and Drug Administration
and Manager of Regulatory Affairs for C.R. Bard. Ms. Piasecki received her
B.S. degree in Biology and Chemistry from Boston College.
Dr. Edward G. Taylor joined the Company at the end of 1996 as Vice President
and Director of the Artificial Heart Program. Prior to joining ABIOMED, Dr.
Taylor worked in the United States Air Force from 1972 to 1996 where he
attained the rank of Colonel and was most recently the Program Director for
the Airborne Warning and Control System (AWACS) in the United States, Europe
and Japan. Previously he had directed high technology research and development
of nationally significant defense programs, including self-protection avionics
for Air Force One. He was also involved in the launch and operation of
reconnaissance and communication satellites. Dr. Taylor holds a Bachelor's
degree from the Illinois Institute of Technology, a Master's degree from the
Air Force Institute of Technology and a Ph.D. degree in Estimation and Control
from the Massachusetts Institute of Technology.
41
<PAGE>
Dr. W. Gerald Austen has served as a director of the Company since 1985.
From 1969 to the present, Dr. Austen has been Chief of the Surgical Services
at Massachusetts General Hospital, and from 1974 to the present, has been the
Edward D. Churchill Professor of Surgery at Harvard Medical School. He became
President of the Massachusetts General Physicians Organization in 1994. Dr.
Austen is the former President of the American College of Surgeons, the
American Association for Thoracic Surgery, the American Surgical Association
and the Massachusetts and American Heart Associations. Dr. Austen is a member
of the Institute of Medicine of the National Academy of Sciences, a Fellow of
the American Academy of Arts and Sciences and a life member of the corporation
of the Massachusetts Institute of Technology.
Mr. Paul Fireman has served as a director of the Company since 1987. He is
the founder of Reebok International Ltd., a leading worldwide designer,
marketer and distributor of sports, fitness and casual footwear, apparel and
equipment. Mr. Fireman has served as Chief Executive Officer and a director of
that company since 1979, as Chairman of the Board of Directors since 1985 and
President from 1979 to 1987 and since 1989. Mr. Fireman has also served as the
chairman of the Entrepreneurial Advisory Board of Babson College since 1995.
Mr. John F. O'Brien has served as a director since 1989. Since August 1989
he has been the President and Chief Executive Officer and a director of First
Allmerica Financial Life Insurance Company (formerly State Mutual Life
Assurance Company of America). Since January 1995 he has been President, Chief
Executive Officer and a Director of Allmerica Financial Corporation, a
financial services holding company. Mr. O'Brien is also President, Chief
Executive Officer and a director of Allmerica Property & Casualty Companies,
Inc.; Chairman of the Board, President and Chief Executive Officer of Citizens
Corporation; and a trustee and Chairman of the Board of Allmerica Securities
Trust, Allmerica Investment Trust and Allmerica Funds. From 1972 until 1989,
Mr. O'Brien was employed by Fidelity Investments in various capacities,
including as Group Managing Director of FMR Corp. Mr. O'Brien is also a
director of Cabot Corporation and TJX Companies, Inc. and a Trustee of the
Worcester Art Museum.
Mr. Desmond H. O'Connell, Jr. has served as a director of the Company since
1995. He has been an independent management consultant since September 1990
and has served as a director of Chryslais International Corporation, an
international contract research organization, since 1991. From December 1992
until December 1993, he served as the Chairman, Management Committee, of
Pharmakon Research International, Inc., a provider of pre-clinical testing
services to pharmaceutical biotechnology companies. During 1991, he briefly
served as Chairman of the Board and Chief Executive Officer of Osteotech,
Inc., a medical products company. Mr. O'Connell was with the BOC Group, PLC,
an industrial gas and health care company, in senior management positions from
1980 to 1990 and was a member of the Board of Directors of BOC Group, PLC from
1983 to 1990. From April 1990 until September 1990, Mr. O'Connell was
President and Chief Executive Officer of BOC Health Care. From 1986 to April
1990, he was Group Managing Director of BOC Group, PLC. Prior to joining BOC,
Mr. O'Connell held various positions at Baxter Laboratories, Inc. including
chief executive of the Therapeutic and Diagnostic Division and Vice President,
Corporate Development.
Mr. Henri A. Termeer has served as a director of the Company since 1987. Mr.
Termeer has served as President and a director of Genzyme, a biotechnology
company engaged in the production and marketing of human health care products,
since 1983, as its Chief Executive Officer since 1985, and as its Chairman of
the Board since 1988. Mr. Termeer is also Chairman of the Board of Genzyme
Transgenics Corporation. He is also a director of AutoImmune, Inc., GelTex
Pharmaceuticals, Inc. and Diacrin, Inc. and serves as a trustee of Hambrecht &
Quist Healthcare Investors and Hambrecht & Quist Life Sciences Investors.
42
<PAGE>
CERTAIN TRANSACTIONS
In July 1997, the Company sold a total of 1,242,710 shares of Common Stock
to Genzyme and certain of the Company's directors for a purchase price of
$13.00 per share, for a total purchase price of $16.2 million. The Chief
Executive Officer of Genzyme, Henri A. Termeer, is a director of the Company.
Of the shares sold, 1,153,846 shares were sold to Genzyme, 23,480 shares were
sold to Paul Fireman, 7,692 shares were sold to Desmond H. O'Connell, Jr. and
57,692 shares were sold to John F. O'Brien. In addition, simultaneously with
this transaction, David M. Lederman, the President and Chief Executive Officer
of the Company sold 153,846 shares of Common Stock to Paul Fireman, a director
of the Company. In connection with these transactions, the Company granted
Genzyme certain registration rights with respect to the shares of Common Stock
purchased by Genzyme. Commencing in July 1998, Genzyme may on up to three
occasions require the Company to register not less than 25% of Genzyme's
shares of Common Stock. Genzyme has also been granted certain piggyback
registration rights to participate in underwritten public offerings by the
Company, subject to certain limitations, commencing in July 1998. In addition,
the other purchasers received similar piggyback registration rights commencing
in July 1998, with respect to the 242,710 shares of Common Stock purchased by
them. In connection with its purchase of the Common Stock, Genzyme agreed,
subject to certain limited exceptions, not to acquire additional voting
securities of the Company for a period of five years following the
consummation of the transaction without the consent of the Company, and,
during that five year period, to vote its shares in the same proportion as
votes cast by other stockholders of the Company or, in Genzyme's discretion,
in accordance with the recommendations of the Company's Board of Directors.
43
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of September 30, 1997, and as
adjusted to reflect the sale of the Common Stock offered hereby, (i) by each
person who is known by the Company to own beneficially more than 5% of the
outstanding shares of Common Stock, (ii) by each executive officer and
director of the Company and (iii) by all executive officers and directors of
the Company as a group. This information is based upon information received
from or on behalf of the named individuals.
<TABLE>
<CAPTION>
PERCENTAGE
BENEFICIALLY OWNED(1)
-------------------------
SHARES
BENEFICIALLY PRIOR TO AFTER
NAME OWNED(1) OFFERING OFFERING
- ---- ------------ ---------- ----------
<S> <C> <C> <C>
David M. Lederman, Ph.D(2)............ 1,322,554 16.0% 15.5%
Genzyme Corporation................... 1,153,846 14.0% 13.5%
Robert T.V. Kung, Ph.D(3)(4).......... 173,188 2.1% 2.0%
Eugene D. Rabe(4)..................... 18,750 * *
John F. Thero(4)...................... 7,764 * *
W. Gerald Austen, M.D.(4)............. 25,400 * *
Paul Fireman(4)....................... 225,226 2.7% 2.6%
John F. O'Brien(4).................... 85,092 1.0% 1.0%
Desmond H. O'Connell, Jr.(4).......... 18,092 * *
Henri A. Termeer(4)(5)................ 1,179,246 14.2% 13.7%
All executive officers and directors
as a group(2)(3)(4)(5)
(9 persons).......................... 3,055,312 36.2% 35.0%
</TABLE>
- --------
*Represents beneficial ownership of less than 1% of the outstanding shares of
Common Stock.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Beneficial ownership also
includes shares of stock subject to options currently exercisable or
exercisable within 60 days of September 30, 1997. Percentage of beneficial
ownership is based on 8,264,556 shares of Common Stock outstanding on
September 30, 1997 and 8,554,556 shares of Common Stock outstanding upon
completion of this offering. Unless otherwise noted, each person
identified possesses sole voting and investment power with respect to the
shares listed.
(2) Includes 725,923 shares held by Dr. Lederman's wife, as to which Dr.
Lederman disclaims beneficial ownership.
(3) Includes 60,000 shares held by Dr. Kung's wife and 12,000 shares held in
trust for the benefit of certain relatives of Dr. Kung, as to which Dr.
Kung disclaims beneficial ownership.
(4) Includes the following shares subject to options which are exercisable
within 60 days after September 30, 1997: Dr. Kung--51,188; Mr. Rabe--
18,750; Mr. Thero--7,500; Dr. Austen--25,000; Mr. Fireman--25,000; Mr.
O'Brien--25,000; Mr. O"Connell--5,000; Mr. Termeer--25,000.
(5) Includes 1,153,846 shares held by Genzyme Corporation as to which Mr.
Termeer disclaims beneficial ownership. Mr. Termeer is the Chief Executive
Officer of Genzyme.
44
<PAGE>
DESCRIPTION OF CAPITAL STOCK
As of September 30, 1997, the Company's authorized capital stock consisted
of 25,000,000 shares of Common Stock, $.01 par value, and 1,000,000 shares of
Class B Preferred Stock, $.01 par value ("Preferred Stock").
COMMON STOCK
As of September 30, 1997, there were 8,264,556 shares of Common Stock
outstanding. These shares were held of record by approximately 340
stockholders, including multiple beneficial holders at depositories, banks and
brokers listed as a single holder in the street name of each respective
depository, bank or broker. There will be 8,554,556 shares of Common Stock
outstanding after giving effect to the sale of the shares of Common Stock
offered hereby by the Company.
The holders of Common Stock are entitled to one vote per share on all
matters to be voted on by stockholders and are entitled to receive dividends,
if any, as may be declared from time to time by the Board of Directors from
funds legally available therefore. Upon liquidation or dissolution of the
Company, the holders of Common Stock are entitled to receive all assets
available for distribution to the stockholders, subject to any preferential or
other rights of the holders of Preferred Stock. The Common Stock has no
preemptive or other subscription rights, and there are no conversion rights or
redemption or sinking fund provisions with respect to such shares. The holders
of Common Stock do not have cumulative voting rights in the election of
directors. All of the shares of Common Stock are, and the shares to be sold in
the offering will be, fully paid and nonassessable.
PREFERRED STOCK
The Company has no Preferred Stock outstanding. The Board of Directors has
the authority to issue the Preferred Stock in one or more series and to fix
the dividend rights, dividend rate, conversion rights, voting rights, rights
and terms of redemption, liquidation preferences, sinking fund terms and other
rights, preferences, privileges and restrictions of any series of Preferred
Stock, the number of shares constituting any such series and the designation
thereof, without further vote or action by the stockholders. The Board of
Directors may, without stockholder approval, issue Preferred Stock with rights
and privileges which could, among other things, have the effect of delaying,
deferring or preventing a change in control of the Company. The issuance of
Preferred Stock with voting and conversion rights may adversely affect the
voting power and other rights of the holders of Common Stock, including the
loss of voting control to others. The Company currently has no plans to issue
any of the Preferred Stock. The Board of Directors has designated 25,000
shares of the Preferred Stock as the "Series A Junior Participating Preferred
Stock" in connection with the Rights described below.
ANTI-TAKEOVER EFFECT OF PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BY-
LAWS, RIGHTS DISTRIBUTION AND DELAWARE LAW
Certificate of Incorporation and By-laws
The Certificate of Incorporation includes several provisions in addition to
the Preferred Stock, which may render more difficult an unfriendly tender
offer, proxy contest, merger or other change in control of the Company. These
provisions are intended to enhance the likelihood of continuity and stability
in the composition of the Board of Directors and in the policies formulated by
the Board of Directors and to discourage certain types of transactions that
may involve an actual or threatened change of control of the Company. These
provisions are also designed to reduce the vulnerability of the Company to
unsolicited acquisition proposals and to discourage certain tactics that may
be used in proxy fights. However, such provisions could have the effect of
discouraging others from making tender offers for the shares of Common Stock
and, as a consequence, they also may inhibit fluctuations in the market price
of the shares of Common Stock which could result from actual or rumored
takeover attempts. Such factors also may have the effect of preventing changes
in the management of the Company.
45
<PAGE>
The Certificate of Incorporation (i) provides for the classification of the
Company's Board of Directors into three classes, (ii) eliminates the ability
of stockholders to enlarge the Board of Directors, (iii) provides that
vacancies in the office of a director shall be in the first instance filled by
the remaining directors, except in the case of the directors elected by the
Common Stock voting as a separate class, in which case it shall be filled by
the holders of that class voting as a separate class, (iv) provides that
directors may only be removed "for cause" and only by the class or classes of
stock which elected them, and (v) requires an 80% affirmative vote of all
votes entitled to be cast to amend the preceding provisions. The
classification of directors has the effect of making it more difficult to
change the composition of the Board of Directors. At least two stockholder
meetings, instead of one, are required to effect a change in the control of
the Board.
The By-laws provide that advance written notice of any stockholder
nomination for director must be provided not less than 45 nor more than 60
days prior to the anticipated date of the annual meeting for election of
directors.
The Certificate of Incorporation explicitly directs the Board of Directors
to take into account all relevant factors in exercising its business judgment
in determining what is in the best interests of the Company and its
stockholders in evaluating certain tender offers and business combination
proposals. Relevant factors include, without limitation, the Board's estimate
of the future value of the Company, the resources and future prospects of the
other party, and the possible social, legal, environmental and economic
effects on the Company and on the employees, customers, suppliers and
creditors of the Company and on the communities in which the Company's
facilities are located.
The Certificate of Incorporation and the By-laws also provide that all
stockholder action must be effected at a duly called meeting and not by
written consent.
The authority of the Board of Directors to issue authorized but unissued
shares of Common Stock might be considered as having the effect of
discouraging an attempt by another person or entity to effect a takeover or
otherwise gain control of the Company since the issuance of additional shares
of Common Stock would dilute the voting power of the Common Stock then
outstanding.
Rights Distribution
On August 13, 1997, the Board of Directors declared a dividend of one
preferred share purchase right (a "Right") for each outstanding share of
Common Stock on August 28, 1997 (the "Record Date") to the stockholders of
record on that date. Each Right entitles the registered holder to purchase
from the Company one one-thousandth of a share of Series A Junior
Participating Preferred Stock, par value $0.01 per share (the "Preferred
Shares"), of the Company, at a price of $90.00 per one one-thousandth of a
Preferred Share, subject to adjustment.
Subject to certain limited exceptions until the earlier to occur of (i) ten
days following a public announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired beneficial ownership
of 15% or more of the outstanding shares of Common Stock, or (ii) ten business
days (or such later date as may be determined by action of the Board of
Directors prior to such time as any person becomes an Acquiring Person)
following the commencement of, or announcement of an intention to make, a
tender offer or exchange offer the consummation of which would result in the
beneficial ownership by a person or group of 15% or more of the outstanding
shares of Common Stock (the earlier of such dates being called the
"Distribution Date"), the Rights will be evidenced by the Common Stock
certificates with a copy of the Summary of Rights attached thereto. As soon as
practicable following the Distribution Date, the rights will become
exercisable, separate certificates evidencing the Rights ("Right
Certificates") will be mailed to stockholders of record on the Distribution
Date and the separate Right Certificates alone will evidence the Rights. The
Rights will expire on the earlier of (i) August 13, 2007 or (ii) the date on
which the Rights are redeemed.
46
<PAGE>
In the event that any person becomes an Acquiring Person, proper provision
will be made so that each holder of a Right, other than Rights beneficially
owned by the Acquiring Person and its affiliates and associates (which will
thereafter be void), will thereafter have the right to receive upon exercise,
that number of shares of Common Stock having a market value of two times the
exercise price of the Right. In the event that, at any time after a person
becomes an Acquiring Person, the Company is acquired in a merger or other
business combination transaction or 50% or more of its consolidated assets or
earning power are sold, proper provision will be made so that each holder of a
Right will thereafter have the right to receive, upon the exercise thereof at
the then current exercise price of the Right, that number of shares of common
stock of the acquiring company which at the time of such transaction will have
a market value of two times the exercise price of the Right.
At any time after any person becomes an Acquiring Person and prior to the
acquisition by any person or group of a majority of the outstanding shares of
Common Stock, the Board of Directors may exchange the Rights (other than
Rights owned by such person or group which have become void), in whole or in
part, at an exchange ratio of one share of Common Stock per Right, subject to
adjustment. At any time prior to the time any Person becomes an Acquiring
Person, the Board of Directors of the Company may redeem the Rights in whole,
but not in part, at a price of $0.001 per Right (the "Redemption Price"). The
redemption of the Rights may be made effective at such time, on such basis and
with such conditions as the Board of Directors in its sole discretion may
establish. Immediately upon any redemption of the Rights, the right to
exercise the Rights will terminate and the only right of the holders of Rights
will be to receive the Redemption Price.
The terms of the Rights may be amended by the Board of Directors without the
consent of the holders of the Rights, except that from and after such time as
any person becomes an Acquiring Person no such amendment may adversely affect
the interests of the holders of the Rights (other than the Acquiring Person
and its affiliates and associates).
Delaware Takeover Statute
Pursuant to Delaware law, Delaware corporations are prohibited from engaging
in a wide range of specified transactions with any "interested stockholder,"
defined to include, among others, any person or entity who in the last three
years obtained 15% or more of any class or series of stock entitled to vote
generally in the election of directors, unless, among other exceptions, the
transaction is approved by (i) the Board of Directors prior to the date the
interested stockholder obtained such status or (ii) the holders of two-thirds
of the outstanding shares of each class or series of stock entitled to vote
generally in the election of directors, not including those shares owned by
the interested stockholder. By virtue of the Company's decision not to opt out
of the provisions of this law, it applies to the Company.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is Boston EquiServe
LP.
47
<PAGE>
PLAN OF DISTRIBUTION
The shares of Common Stock being offered hereby are being offered for sale
by the Company principally to one or more selected institutional investors.
BancAmerica Robertson Stephens and UBS Securities LLC have been retained to
act, on a reasonable efforts basis, as the exclusive agents for the Company in
arranging sales of the shares to be sold in the offering. The Placement Agents
may retain one or more subplacement agents in connection with the offering.
The closing of the offering is not conditioned on the sale of any minimum
number of shares of Common Stock offered hereby.
The Placement Agents are not obligated and do not intend themselves to
purchase any of the shares offered hereby. It is anticipated that the
Placement Agents will obtain indications of interest from potential investors
for the amount of the offering, and that effectiveness of the Registration
Statement for the offering will not be requested until indications of interest
have been received by the Placement Agents from investors. Confirmations
containing requests for written commitments from investors purchasing in the
offering and definitive prospectuses will be distributed to all investors as
soon as practicable after pricing. No investor funds will be accepted prior to
the effectiveness of the Registration Statement. Upon the closing, each
investor will deliver to the Company by wire transfer in immediately available
funds an amount equal to the aggregate purchase price of the shares of Common
Stock being sold to such investor, the Company will deliver to each investor
the number of shares purchased by such investor in accordance with
instructions previously delivered by the Placement Agents on behalf of the
investors and the Company will pay the Placement Agents their fee. All
investor payments for the shares will be made simultaneously. The offering
will not continue after the closing date. Orders to purchase Common Stock will
be effective only upon acceptance by the Company, which reserves the right to
reject any order in whole or in part.
The Company has agreed to pay to the Placement Agents a fee equal to 5.45%
of the aggregate purchase price of the shares purchased by investors in the
offering. The Placement Agents have the right to terminate the offering prior
to the closing date upon the occurence of certain events, such as a material
adverse change in the condition of the Company, the imposition of additional
material governmental restrictions upon securities trading, a loss to the
Company due to a strike or natural disaster that interferes materially with
the conduct of the Company's business or a material adverse change in the
general political or economic conditions or financial markets or outbreak of
hostilities or other national emergency that, in the reasonable opinion of the
Placement Agents, makes it impracticable or inadvisable to proceed with the
offering. The Placement Agency Agreement also contains covenants of indemnity
between the Placement Agents and the Company against certain civil
liabilities, including liabilities under the Securities Act and liabilities
arising from breaches of representations and warranties contained in the
Placement Agency Agreement.
Since September 1996, an entity affiliated with UBS Securities LLC has
managed certain assets of the Company, primarily in the form of marketable
securities, held by ABD Holding, Inc., a wholly owned subsidiary of the
Company. The Company pays quarterly fees for such services based on a
percentage of the assets managed. UBS Securities LLC also received fees in
connection with its role as the Company's financial advisor in connection with
the implementation of a stockholder rights plan for the holders of the
Company's Common Stock in August 1997 and its opinion as to the fairness from
a financial point of view of the consideration received by the Company
pursuant to a private placement of the Company's Common Stock in July 1997.
See "Certain Transactions."
48
<PAGE>
LEGAL MATTERS
The validity of the securities offered hereby has been passed upon for the
Company by Brown, Rudnick, Freed & Gesmer, Boston, Massachusetts. Certain legal
matters in connection with this offering will be passed upon for the Placement
Agents by Testa, Hurwitz & Thibeault, LLP, Boston, Massachusetts. A member of
Brown, Rudnick, Freed & Gesmer, counsel to the Company, is the Secretary of the
Company.
EXPERTS
The financial statements included or incorporated by reference in this
Prospectus or elsewhere in this Registration Statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are included or incorporated by reference
herein upon the authority of said firm as experts in giving said report.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange Act,
and in accordance therewith files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information filed by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, NW, Room
1024, Judiciary Plaza, Washington, D.C. 20549, and at the Commission's Regional
Offices at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and 7 World Trade Center, Suite 1300, New York, New York 10048,
at prescribed rates. In addition, such reports, proxy statements and
information are available through the Commission's Electronic Data Gathering
and Retrieval System at http://www.sec.gov. The Company's Common Stock is
listed on the Nasdaq National Market, and reports, proxy statements and certain
other information concerning the Company can also be inspected at the offices
of the Nasdaq National Market, 1735 K Street NW, Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on Form S-
3 under the Securities Act of 1933, as amended, with respect to the Common
Stock being offered hereby. This Prospectus, which constitutes a part of the
Registration Statement, does not contain all of the information set forth in
such Registration Statement and the exhibits and schedules thereto to which
reference is hereby made. The statements in this Prospectus as to the contents
of such Registration Statement are qualified in their entirety by such
reference. The Registration Statement, together with its exhibits and
schedules, may be inspected without charge at the Public Reference Section of
the Commission in Washington, D.C. at the address noted above, and copies of
all or any part thereof may be obtained from the Commission upon payment of the
prescribed fees.
49
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant to
the Exchange Act are incorporated herein by reference:
(1) the Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 1997;
(2) the Company's Quarterly Reports on Form 10-Q and all amendments
thereto for the fiscal quarters ended June 30 and September 30, 1997;
(3) the Company's Current Report on Form 8-K filed with the Commission on
August 25, 1997; and
(4) the description of the Company's Common Stock and the Rights
contained in the Company's Registration Statements on Form 8-A filed with
the Commission on June 11, 1987 and August 25, 1997.
All reports and other documents subsequently filed by the Company pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of the offering shall be deemed to be
incorporated by reference in this Prospectus and shall be part hereof from the
date of the filing of such document. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein, or in any other subsequently filed document that
also is (or is deemed to be) incorporated by reference herein, modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of the
Registration Statement or this Prospectus. The Company will provide without
charge to each person, including any beneficial owner, to whom this Prospectus
is delivered, upon written or oral request of such person, a copy of any of the
documents referred to above (other than exhibits). Requests for such documents
should be submitted in writing to: Investor Relations, ABIOMED, Inc., Cherry
Hill Drive, Danvers, Massachusetts 01923, or by telephone at (978) 777-5410.
50
<PAGE>
ABIOMED, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................................. F-2
Consolidated Balance Sheets as of March 31, 1996 and 1997 and September
30, 1997 (unaudited)..................................................... F-3
Consolidated Statements of Operations for the Fiscal Years Ended March 31,
1995, 1996 and 1997 and for the Six Months Ended September 30, 1996 and
1997 (unaudited)......................................................... F-4
Consolidated Statements of Stockholders' Investment for the Fiscal Years
Ended March 31, 1995, 1996 and 1997 and for the Six Months Ended
September 30, 1997 (unaudited)........................................... F-5
Consolidated Statements of Cash Flows for the Fiscal Years Ended March 31,
1995, 1996 and 1997 and for the Six Months Ended September 30, 1996 and
1997 (unaudited)......................................................... F-6
Notes to Consolidated Financial Statements................................ F-7
</TABLE>
F-1
<PAGE>
ABIOMED, INC. AND SUBSIDIARIES
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To ABIOMED, Inc.:
We have audited the accompanying consolidated balance sheets of ABIOMED,
Inc. (a Delaware corporation) and subsidiaries as of March 31, 1996 and 1997,
and the related consolidated statements of operations, stockholders'
investment and cash flows for each of the three years in the period ended
March 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of ABIOMED, Inc. and
subsidiaries as of March 31, 1996 and 1997, and the results of their
operations and their cash flows for each of the three years in the period
ended March 31, 1997, in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Boston, Massachusetts
May 8, 1997
F-2
<PAGE>
ABIOMED, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
-------------------------- -------------
1996 1997 1997
------------ ------------ -------------
(unaudited)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents (Note
1)................................ $ 2,938,332 $ 1,616,696 $ 711,425
Short-term marketable securities
(Note 1).......................... 7,709,110 7,744,664 23,600,089
Accounts receivable, net of
allowance for doubtful accounts of
$111,000, $229,000 and $231,000 at
March 31, 1996, 1997 and September
30, 1997, respectively............ 2,606,289 4,816,500 6,257,797
Inventories (Note 1)............... 1,653,512 1,820,783 1,847,624
Prepaid expenses and other current
assets............................ 92,280 173,172 391,383
------------ ------------ -------------
Total current assets............. 14,999,523 16,171,815 32,808,318
------------ ------------ -------------
Property and Equipment, at cost (Note
1):
Machinery and equipment............ 2,378,851 3,147,837 3,981,322
Furniture and fixtures ............ 156,048 241,867 380,242
Leasehold improvements............. 378,998 1,118,677 1,262,937
------------ ------------ -------------
2,913,897 4,508,381 5,624,501
Less -- Accumulated depreciation
and amortization.................. 2,331,145 2,618,603 2,988,902
------------ ------------ -------------
582,752 1,889,778 2,635,599
Other Assets, net (Notes 1 and 7): 627,154 485,000 904,286
------------ ------------ -------------
$ 16,209,429 $ 18,546,593 $ 36,348,203
============ ============ =============
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Accounts Payable................... $ 777,943 $ 1,289,024 $ 1,132,730
Accrued expenses (Notes 8 and 9)... 1,486,981 2,032,506 2,567,027
------------ ------------ -------------
Total current liabilities........ 2,264,924 3,321,530 3,699,757
------------ ------------ -------------
Commitments (Notes 5 and 7)
Stockholders' Investment (Notes 2 and
6):
Class B Preferred Stock, $.01 par
value --
Authorized -- 1,000,000 shares
issued and outstanding-- none..... -- -- --
Common Stock, $.01 par value --
Authorized --25,000,000 shares
issued and outstanding --
5,518,054, 7,008,282 and 8,264,556
shares at March 31, 1996, March
31, 1997 and September 30, 1997,
respectively...................... 55,180 70,082 82,646
Class A Common Stock, $.01 par
value --
Authorized -- 2,346,000 shares
issued and outstanding-- 1,428,000
shares at March 31, 1996 and none
at March 31, 1997 and September
30, 1997, respectively............ 14,280 --
Additional paid-in capital........... 36,625,221 37,169,893 53,221,747
Accumulated deficit.................. (22,750,176) (22,014,912) (20,655,947)
------------ ------------ -------------
Total stockholders' investment....... 13,944,505 15,225,063 32,648,446
------------ ------------ -------------
$ 16,209,429 $ 18,546,593 $ 36,348,203
============ ============ =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
ABIOMED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED MARCH, 31, SEPTEMBER 30,
------------------------------------- -----------------------
1995 1996 1997 1996 1997
----------- ----------- ----------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Revenues (Note 1):
Products.............. $ 6,892,931 $ 9,725,332 $12,311,178 $5,759,555 $9,324,205
Contracts............. 2,337,505 3,118,278 4,150,752 1,753,849 3,680,252
----------- ----------- ----------- ---------- ----------
9,230,436 12,843,610 16,461,930 7,513,404 13,004,457
----------- ----------- ----------- ---------- ----------
Costs and expenses:
Cost of products...... 3,288,833 3,921,319 5,360,449 2,122,853 3,437,803
Research and
development
(Note 1)............. 2,464,519 3,218,211 3,832,918 1,780,737 3,654,181
Selling, general and
administrative....... 4,278,392 5,740,830 7,068,403 3,229,235 4,970,150
----------- ----------- ----------- ---------- ----------
10,031,744 12,880,360 16,261,770 7,132,825 12,062,134
----------- ----------- ----------- ---------- ----------
Income (loss) from
operations............. (801,308) (36,750) 200,160 380,579 942,323
Interest and other
income............... 449,124 527,874 535,104 256,537 416,642
----------- ----------- ----------- ---------- ----------
Net income (loss)....... $ (352,184) $ 491,124 $ 735,264 $ 637,116 $1,358,965
=========== =========== =========== ========== ==========
Net income (loss) per
common and common
equivalent share (Note
1)..................... $ (0.05) $ 0.07 $ 0.10 $ 0.09 $ 0.17
=========== =========== =========== ========== ==========
Weighted average number
of common and common
equivalent shares
outstanding (Note 1)... 6,511,777 6,995,664 7,162,347 7,196,343 7,868,675
=========== =========== =========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
ABIOMED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
<TABLE>
<CAPTION>
CLASS A
COMMON STOCK COMMON STOCK
------------------- --------------------- ADDITIONAL TOTAL
NUMBER $0.01 NUMBER $0.01 PAID-IN ACCUMULATED STOCKHOLDERS'
OF SHARES PAR VALUE OF SHARES PAR VALUE CAPITAL DEFICIT INVESTMENT
--------- --------- ---------- --------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, March 31,
1994................... 4,432,686 $44,327 2,040,000 $20,400 $33,413,242 $(22,889,116) $10,588,853
Stock options
exercised............. 1,100 11 -- -- 6,314 -- 6,325
Stock issued under
employee stock
purchase plan......... 639 7 -- -- 3,873 -- 3,880
Stock issued in
exchange for amount
due to Abiomed Limited
Partnership........... 451,427 4,514 -- -- 3,053,341 -- 3,057,855
Net loss............... -- -- -- -- -- (352,184) (352,184)
--------- ------- ---------- ------- ----------- ------------ -----------
Balance, March 31,
1995................... 4,885,852 48,859 2,040,000 20,400 36,476,770 (23,241,300) 13,304,729
Conversion of Class A
Common Stock to Common
Stock................. 612,000 6,120 (612,000) (6,120) -- -- --
Stock options
exercised............. 19,425 194 -- -- 143,018 -- 143,212
Stock issued under
employee stock
purchase plan......... 777 7 -- -- 5,433 -- 5,440
Net income............. -- -- -- -- -- 491,124 491,124
--------- ------- ---------- ------- ----------- ------------ -----------
Balance, March 31,
1996................... 5,518,054 55,180 1,428,000 14,280 36,625,221 (22,750,176) 13,944,505
Conversion of Class A
Common Stock to Common
Stock................. 1,428,000 14,280 (1,428,000) (14,280) -- -- --
Stock options
exercised............. 59,112 611 -- -- 533,142 -- 533,753
Stock issued to
directors and under
employee stock
purchase plan......... 3,116 11 -- -- 11,530 -- 11,541
Net income............. -- -- -- -- -- 735,264 735,264
--------- ------- ---------- ------- ----------- ------------ -----------
Balance, March 31,
1997................... 7,008,282 70,082 -- -- 37,169,893 (22,014,912) 15,225,063
Stock options
exercised............. 12,015 120 -- -- 83,448 -- 83,568
Stock issued under
employee stock
purchase plan......... 1,549 17 -- -- 15,764 -- 15,781
Private placement of
Common Stock ......... 1,242,710 12,427 -- -- 15,952,642 -- 15,965,069
Net income............. -- -- -- -- -- 1,358,965 1,358,965
--------- ------- ---------- ------- ----------- ------------ -----------
Balance, September 30,
1997 (unaudited)....... 8,264,556 82,646 -- -- 53,221,747 (20,655,947) 32,648,446
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
ABIOMED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEARS ENDED MARCH 31, SEPTEMBER 30,
---------------------------------- ------------------------
1995 1996 1997 1996 1997
--------- ---------- ----------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income (loss)....... $(352,184) $ 491,124 $ 735,264 $ 637,116 $ 1,358,965
Adjustments to reconcile
net income (loss) to
net cash provided by
(used in) operating
activities --
Depreciation and
amortization.......... 353,293 349,756 429,612 192,168 441,376
Noncash transactions
related to Abiomed
Limited Partnership... (251,883) -- -- -- --
Changes in current
assets and
liabilities --
Accounts receivable... (73,518) (830,555) (2,210,211) (337,286) (1,441,297)
Inventories........... 815,518 (244,232) (167,271) (164,591) (26,841)
Prepaid expenses and
other current
assets............... 58,530 (38,450) (80,892) (112,073) (708,574)
Accounts payable...... (65,894) 579,663 511,081 148,932 (156,294)
Accrued expenses...... 428,244 259,602 545,525 (252,435) 534,521
--------- ---------- ----------- ---------- -----------
Net cash provided by
(used in) operating
activities......... 912,106 566,908 (236,892) 111,831 1,856
--------- ---------- ----------- ---------- -----------
Cash flows from investing
activities:
(Purchases) maturities
of short term
marketable security
investments, net....... (604,618) 2,701,323 (35,554) 4,519,658 (15,855,425)
Purchases of property
and equipment.......... (132,087) (322,642) (1,594,484) (531,873) (1,116,120)
Purchases of Abiomed
Limited Partnership
units from limited
partners (Note 7)...... -- (770,000) -- -- --
--------- ---------- ----------- ---------- -----------
Net cash provided by
(used in) investing
activities......... (736,705) 1,608,681 (1,630,038) 3,987,785 (16,971,545)
--------- ---------- ----------- ---------- -----------
Cash flows from financing
activities:
Registration fees and
costs in connection
with exchange of common
stock for amounts due
to Abiomed Limited
Partnership............ (51,573) -- -- -- --
Proceeds from private
placement of Common
Stock, net............. -- -- -- -- 15,965,069
Proceeds from exercise
of stock options and
stock purchase plan.... 10,205 148,652 545,294 266,401 99,349
--------- ---------- ----------- ---------- -----------
Net cash (used in)
provided by
financing
activities......... (41,368) 148,652 545,294 266,401 16,064,418
--------- ---------- ----------- ---------- -----------
Net increase (decrease)
in cash and cash
equivalents, excluding
investments............. 134,033 2,324,241 (1,321,636) 4,366,017 (905,271)
Cash and cash
equivalents, excluding
investments, at
beginning of period..... 480,058 614,091 2,938,332 2,938,332 1,616,696
--------- ---------- ----------- ---------- -----------
Cash and cash
equivalents, excluding
investments, at end of
period.................. $ 614,091 $2,938,332 $ 1,616,696 $7,304,349 $ 711,425
========= ========== =========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
ABIOMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997 AND SEPTEMBER 30, 1997 (UNAUDITED)
(1) SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
ABIOMED, Inc. and subsidiaries (the Company) is engaged primarily in the
research, development and commercialization of medical devices, with a primary
focus on the development of cardiac assist and heart replacement technology.
In particular, the Company markets the BVS-5000, a bi-ventricular temporary
cardiac assist device, from which the majority of the Company's product
revenues have been derived. The accompanying consolidated financial statements
reflect the application of certain significant accounting policies described
below.
(a) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries, and beginning in fiscal 1996,
the accounts of its majority-owned subsidiary Abiomed Limited Partnership. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
(b) Uses of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
(c) Interim Financial Statements
The accompanying consolidated financial statements include amounts from
interim periods that are unaudited but, in the opinion of management, include
all adjustments (consisting only of normal, recurring adjustments) necessary
for a fair presentation of results for these interim periods. The results of
operations for the six months ended September 30, 1997 are not necessarily
indicative of results to be expected for the fiscal year ending March 31,
1998.
(d) Product Revenues
The Company recognizes product revenues at the time products are shipped to
the customers. Service revenues, which are not material, are recognized over
the periods of the contracts. In fiscal 1995, 1996 and 1997, 13%, 9% and 7%,
respectively, of product revenues were from customers located outside of the
United States. No customer accounted for greater than 10% of product revenues
during fiscal 1995, 1996 or 1997.
During the year ended March 31, 1997 and the six months ended September 30,
1997, the Company recognized $580,000 and $870,000, respectively, of product
revenues related to sales-type lease transactions. The terms of these
noncancellable leases are for one to three years. As of September 30, 1997,
the long-term portion of these lease payments, approximately $490,000, is
included in other assets and the current portion, approximately $350,000, is
included in accounts receivable.
(e) Contract Revenues
In fiscal 1995, 1996 and 1997, the majority of the Company's research and
development contract revenues were generated from contracts and grants with
various government agencies. Each of these contracts and grants provide for
revenues on a cost-plus-fixed-fee basis. The Company recognizes revenue under
its government contracts and grants as work is performed, provided that the
government has appropriated sufficient funds for the work. The Company retains
rights to all technological discoveries and products resulting from these
efforts. Costs associated with these contracts and grants are recorded in the
accompanying consolidated financial statements as part of research and
development expenses and totaled approximately $1,718,000, $2,457,000,
$3,232,000, $1,396,000 and $3,410,000 for fiscal 1995, 1996 and 1997, and for
the six months ended September 30, 1996 and 1997, respectively.
F-7
<PAGE>
ABIOMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1997 AND SEPTEMBER 30, 1997 (UNAUDITED)
(f) Inventories
Inventories include raw materials, work-in-process and finished goods, are
priced at the lower of cost (first-in, first-out) or market and consist of the
following:
<TABLE>
<CAPTION>
MARCH 31,
--------------------- SEPTEMBER 30,
1996 1997 1997
---------- ---------- -------------
(unaudited)
<S> <C> <C> <C>
Raw materials............................ $ 799,548 $ 896,433 $ 919,677
Work-in-process.......................... 428,287 373,383 360,025
Finished goods........................... 425,677 550,967 567,922
---------- ---------- ----------
$1,653,512 $1,820,783 $1,847,624
========== ========== ==========
</TABLE>
Finished goods and work-in-process inventories consist of direct material,
labor and overhead.
(g) Depreciation and Amortization
The Company provides for depreciation and amortization by charges to
operations in amounts that allocate the cost of depreciable assets over their
estimated useful lives as follows:
<TABLE>
<CAPTION>
ESTIMATED
CLASSIFICATION METHOD USEFUL LIFE
-------------- ------ -------------
<S> <C> <C>
Machinery and equip-
ment................... Sum-of-the-year's digits/Straight-line 3- 5 Years
Furniture and fixtures.. Sum-of-the-year's digits/Straight-line 5-10 Years
Leasehold improvements.. Straight-line Life of lease
</TABLE>
(h) Net Income (Loss) per Common and Common Equivalent Share
Net income per common and common equivalent share is computed by dividing
net income by the weighted average number of common and common equivalent
shares outstanding during the period using the treasury stock method. Net loss
per share is computed by dividing the net loss by the weighted average number
of common shares outstanding during the period excluding the effect of stock
options outstanding.
(i) Cash and Cash Equivalents
The Company classifies any marketable security with an original maturity
date of 90 days or less at the time of purchase as a cash equivalent.
(j) Investments
The Company classifies any security, including marketable securities, with
an original maturity of greater than 90 days as investments and classifies
investments with a maturity of greater than one year from the balance sheet
date as long-term investments.
Under Statement of Financial Accounting Standards (SFAS) No. 115, Accounting
for Certain Investments in Debt and Equity Securities, investments that the
Company has the positive intent and ability to hold to maturity are reported
at amortized cost and classified as held-to-maturity. The Company has
classified all investments at March 31, 1996 and 1997 as held-to-maturity. The
amortized cost and market value of short-term investments were approximately
$7,709,000 and $7,545,000 at March 31, 1996 and $7,745,000 and $7,689,000 at
March 31, 1997, respectively. At March 31, 1997, these short-term investments
consisted of government grade securities.
F-8
<PAGE>
ABIOMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1997 AND SEPTEMBER 30, 1997 (UNAUDITED)
(k) Disclosures about Fair Value of Financial Instruments
As of March 31, 1996 and 1997 the Company's financial instruments were
comprised of cash and cash equivalents, accounts receivable, accounts payable
and short term investments, the carrying amounts of which approximated fair
market value.
(l) Recent Accounting Pronouncements
For fiscal 1997, under SFAS No. 121 Accounting for the Impairment of Long-
lived Assets and for Long-lived Assets to be Disposed of, the Company is
required to review impairment of long-lived assets and certain intangibles
whenever events indicate that the carrying amount of the assets may not be
recoverable. The adoption of this statement did not have a material impact on
the Company's results of operations.
On March 3, 1997, the Financial Accounting Standards Board (FASB) issued
SFAS No. 128, Earnings Per Share, superseding Accounting Principles Board
(APB) Opinion No. 15. SFAS No. 128 establishes standards for the computation
and presentation of earnings per share (EPS) and applies to entities with
publicly held common stock or potential common stock. This statement is
effective for fiscal years ending after December 15, 1997 and requires
restatement of all prior-period EPS data presented. The statement is not
expected to have a material impact on the Company's EPS presentation.
(2) CAPITAL STOCK
Each share of Common Stock has a voting right of one vote per share. During
fiscal 1996 and 1997 respectively, 612,000 and 1,428,000 shares of Class A
Common Stock, representing all of the remaining shares of Class A Common
Stock, were converted to Common Stock. As of August 1997, Class A Common Stock
is no longer authorized.
On July 15, 1997, the Company completed a private placement of 1,242,710
shares of its Common Stock. Proceeds to the Company from the private
placement, net of approximately $145,000 in direct transaction related
expenses, totaled approximately $15,965,000.
The Company has authorized 1,000,000 shares of Class B Preferred Stock, $.01
par value, of which the designation, rights and privileges can be set by the
Board of Directors. No share of Class B Preferred Stock has been issued or is
outstanding.
On August 13, 1997, the Company declared a dividend of one Preferred Share
Purchase Right (the "Right") for each outstanding share of Common Stock to its
stockholders of record at August 28, 1997. Each right entitles the registered
holder to purchase from the Company one one-thousandth of a share of Series A
Junior Participating Preferred Stock with a par value of $0.01 per share, at a
price of $90.00 per one one-thousandth of a share, subject to adjustment.
In accordance with the terms set forth in the Rights Agreement, the Rights
are not exercisable until the occurrence of certain events, as defined. In
addition, the registered holders of the Rights will have no rights as a Common
stockholder of the Company until the Rights are exercised. The terms of the
Rights may be amended by the Board of Directors. The Rights will expire on
August 13, 2007.
F-9
<PAGE>
ABIOMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1997 AND SEPTEMBER 30, 1997 (UNAUDITED)
(3) LINE OF CREDIT WITH A BANK
The Company has an unsecured demand line of credit under which it can borrow
up to $3,000,000 from a bank at the bank's prime rate. The Company is required
to maintain a compensating balance of $100,000 plus 5% of any amounts
outstanding under the arrangement. There were no borrowings under the
company's line of credit at March 31, 1996 and 1997 and September 30, 1997.
The Company has renewed this line of credit in each of the past three years.
The current line of credit expires in September 1998.
(4) INCOME TAXES
The Company accounts for income taxes in accordance with the provisions of
SFAS No. 109, Accounting for Income Taxes. The asset and liability approach
used under SFAS No. 109 requires a recognition of deferred tax assets and
liabilities for the expected future tax consequences of temporary differences
between the carrying amounts and the tax bases of other assets and
liabilities.
At March 31, 1997 the Company had available net operating loss carryforwards
of approximately $21,241,000. The Company also had available, at March 31,
1997, approximately $766,000 of tax credits to reduce future federal income
taxes, if any. The net operating loss and tax credit carryforwards expire
through 2010. These carryforwards are subject to review by the Internal
Revenue Service and may be subject to limitation in any given year under
certain conditions.
During 1997, the Company utilized a portion of its net operating loss
carryforward to reduce its current year taxable income. The Company has placed
a valuation allowance of approximately $11,330,000 as of March 31, 1997
against its otherwise recognizable net deferred tax asset due to the
uncertainty surrounding the timing of the realization of the tax benefits.
The deferred tax asset as of March 31, 1996 and 1997 consisted of the
following:
<TABLE>
<CAPTION>
MARCH 31,
--------------------------
1996 1997
------------ ------------
<S> <C> <C>
Purchase of technology (Note 7)................. $ 1,573,000 $ 1,353,000
Net operating loss and tax credit
carryforwards.................................. 9,082,000 9,262,000
Other, net...................................... 549,000 715,000
------------ ------------
11,204,000 11,330,000
Less--Valuation allowance....................... (11,204,000) (11,330,000)
------------ ------------
$ -- $ --
============ ============
</TABLE>
(5) COMMITMENTS
(a) The Company leases its facilities and certain equipment under various
operating lease agreements with terms through fiscal 2001. Total rent expense
under these leases, included in the accompanying consolidated statements of
operations, was approximately $262,000, $233,000 and $324,000 for fiscal 1995,
1996 and 1997, respectively.
F-10
<PAGE>
ABIOMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1997 AND SEPTEMBER 30, 1997 (UNAUDITED)
Future minimum lease payments under these agreements are as follows:
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31, AMOUNT
--------------------- --------
<S> <C>
1998............................................................ $307,000
1999............................................................ 247,000
2000............................................................ 120,000
2001............................................................ 31,000
--------
$705,000
========
</TABLE>
(b) The Company maintains various insurance coverages. Most policies renew
on a fiscal year basis while several policies have been secured for a three-
year period. Future insurance obligations under these insurance policies, over
a three-year period, are approximately $540,000.
(6) STOCK OPTIONS PLANS
All stock options granted by the Company under the plans described below
were granted at the fair value of the stock at the date of grant. Outstanding
stock options, if not exercised, expire 10 years from the date of grant.
The 1992 Combination Stock Option Plan (the Combination Plan) as amended,
approved by the Company's stockholders, combined and restated the Company's
then outstanding Incentive Stock Option Plan and Nonqualified Plan. The
options generally become exercisable ratably over five years. All of the
options granted under the Combination Plan during the three years ended March
31, 1997 were to employees.
In addition, the Company has a nonqualified stock option plan for
nonemployee directors (the Directors' Plan). The Directors' Plan, as adopted
in July 1989 and amended, with shareholder approval, granted options to
purchase 12,500 shares of the Company's Common Stock to each of the Company's
then elected outside directors and provides for grants of options to purchase
12,500 shares of the Company's Common Stock to any newly elected eligible
director. Thereafter, each eligible director will be granted a new option to
purchase 12,500 shares of Common Stock on July 1 of each successive fifth
year. These options vest over a five-year period at the rate of 2,500 shares
per year, commencing on June 30 of the year following the date of grant.
F-11
<PAGE>
ABIOMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1997 AND SEPTEMBER 30, 1997 (UNAUDITED)
The following table summarizes stock option activity under these plans:
<TABLE>
<CAPTION>
COMBINATION PLAN DIRECTORS' PLAN
---------------------------------- ---------------------------------
WEIGHTED WEIGHTED
NUMBER AVERAGE NUMBER AVERAGE
OF PRICE OF PRICE
OPTIONS EXERCISE PRICE PER SHARE OPTIONS EXERCISE PRICE PER SHARE
-------- -------------- --------- ------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding,
March 31, 1994......... 410,830 $ 0.55-$13.50 $ 8.47 95,000 $ 7.00-$13.88 $10.72
Options granted........ 17,000 5.63- 6.50 6.19 -- -- --
Options exercised...... (1,100) 5.75 5.75 -- -- --
Options canceled....... (31,500) 5.75- 13.50 8.48 -- -- --
-------- ------------- ------ ------- ------------- ------
Options outstanding,
March 31, 1995......... 395,230 0.55-13.50 8.38 95,000 7.00-13.88 $10.72
Options granted........ 219,000 6.25-11.00 10.23 12,500 11.00 11.00
Options exercised...... (16,925) 5.75- 8.50 7.34 (2,500) 7.00 7.00
Options canceled....... (19,140) 5.75-13.50 9.90 (15,000) 11.00-11.13 11.02
-------- ------------- ------ ------- ------------- ------
Options outstanding,
March 31, 1996......... 578,165 0.55-13.50 $ 9.09 90,000 7.00-13.88 10.81
Option granted......... 234,235 11.00-13.50 12.53 -- -- --
Options exercised...... (59,112) 0.55-13.50 8.65 -- -- --
Options canceled....... (55,413) 5.75-13.50 11.45 -- -- --
-------- ------------- ------ ------- ------------- ------
Options outstanding,
March 31, 1997......... 697,875 $ 5.63-$13.50 $10.29 90,000 $ 7.00-$13.88 $10.81
Option granted......... 159,750 10.00-12.15 11.52 50,000 14.00 14.00
Options exercised...... (12,015) 5.63-8.00 6.96 -- -- --
Options canceled....... (21,200) 5.63-10.63 9.11 -- -- --
-------- ------------- ------ ------- ------------- ------
Options outstanding,
September 30, 1997..... 824,410 $ 5.63-$13.50 $10.53 140,000 $ 7.00-$14.00 $10.81
======== =======
Options exercisable:
March 31, 1997......... 179,415 $ 5.63-$13.50 $8.96 70,000 $ 7.00-$13.88 $10.76
======== =======
September 30, 1997..... 182,500 $ 5.63-$13.50 $9.02 82,500 $ 7.00-$14.00 $10.76
======== =======
Shares available for
Future issuance,
March 31, 1997......... 459,032 107,500
======== =======
September 30, 1997..... 320,482 57,500
======== =======
</TABLE>
The Company has an Employee Stock Purchase Plan (the Purchase Plan), as
amended. Under the Purchase Plan, all employees (including officers and
directors) of the Company who have completed six months of employment are
eligible to purchase the Company's Common Stock at an exercise price equal to
85% of the fair market value of the Common Stock. The Company has reserved
100,000 shares of Common Stock for issuance under the Purchase Plan, of which
89,138 shares are available for future issuance as of March 31, 1997. During
the years ended March 31, 1996 and 1997, and the six months ended September
30, 1997, 777 shares, 1,116 shares and 1,549 shares, respectively, of Common
Stock were sold pursuant to the Purchase Plan.
F-12
<PAGE>
ABIOMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1997 AND SEPTEMBER 30, 1997 (UNAUDITED)
In October 1995, FASB issued SFAS No. 123, Accounting for Stock-Based
Compensation. SFAS No. 123 requires the measurement of the fair value of stock
options, including stock purchase plans, or warrants granted to employees to
be included in the statement of operations or disclosed in the notes to
financial statements. The Company has determined that it will continue to
account for stock-based compensation for employees under APB Opinion No. 25
and elect the disclosure-only alternative under SFAS No 123. The Company has
computed the pro forma disclosures required under SFAS No. 123 for options
granted in fiscal 1996 and 1997 using the Black-Scholes option pricing model
prescribed by SFAS No. 123. The weighted average information and assumptions
used for 1996 and 1997 are as follows:
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Risk-free interest rate.................................. 6.75% 6.75%
Expected dividend yield.................................. -- --
Expected life............................................ 5 years 5 years
Expected volatility...................................... 30% 33%
</TABLE>
The Black-Scholes option-pricing model was developed for use in estimating
the fair value of traded options, which have no vesting restrictions and are
fully transferable. In addition, option-pricing models require the input of
highly subjective assumptions including expected stock price volatility.
Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in
the subjective input assumptions can materially affect the fair value
estimate, in management's opinion, the existing models do not necessarily
provide a reliable single measure of the fair value of its employee stock
options.
The total fair value of the options granted during fiscal 1996 and 1997 was
computed as approximately $431,000 and $598,000, respectively. Of these
amounts approximately $108,000 and $257,000 would be charged to operations for
the years ended March 31, 1996 and 1997 respectively. The remaining amount,
approximately $664,000, would be amortized over the remaining vesting periods.
Similarly, the total fair value of stock sold under this Purchase Plan was
computed as approximately $4,000 and $3,000 during fiscal 1996 and 1997. The
resulting pro forma compensation expense may not be representative of the
amount to be expected in future years as pro forma compensation expense may
vary based upon the number of options granted and shares purchased.
The pro forma net income and pro forma net income per common share presented
below have been computed assuming no tax benefit. The effect of a tax benefit
has not been considered since a substantial portion of the stock options
granted are incentive stock options and the Company does not anticipate a
future deduction associated with the exercise of these stock options.
The pro forma effect of SFAS No. 123 for the years ended March 31, 1996 and
1997 is as follows:
<TABLE>
<CAPTION>
1996 1997
--------------------- ---------------------
AS REPORTED PRO FORMA AS REPORTED PRO FORMA
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Net income..................... $491,124 $379,124 $735,264 $475,264
Pro forma net income per common
and common equivalent share... $ 0 .07 $ 0 .05 $ 0 .10 $ 0 .07
</TABLE>
(7) ROYALTY OBLIGATION
Commencing April 1, 1995 and ending August 3, 2000, the Company owes a
royalty to certain third parties equal in aggregate to approximately 2.1% of
certain revenues derived from the BVS 5000 and certain
F-13
<PAGE>
ABIOMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1997 AND SEPTEMBER 30, 1997 (UNAUDITED)
other technology. This royalty is subject to certain maximum revenue amounts
and to certain adjustments, as defined, in the event that the Company sells
the underlying technology. For the years ended March 31, 1996 and 1997, and
the six months ended September 30, 1997 the amount of this royalty, net of
certain reimbursed expenses, was approximately $160,000, $216,000 and $174,000
respectively. These amounts are reflected as part of the cost of product sales
in the accompanying consolidated financial statements.
This royalty is paid to the third parties through Abiomed Limited
Partnership which, at present, is inactive except with respect to the
distribution of such royalties. During fiscal 1996, the Company paid $770,000
to reduce its royalty obligation to 2.1%, as described above. This one-time
payment capitalized by the Company, is being amortized on a straight-line
basis over the estimated useful life of the asset (5 years) and, net of
accumulated amortization, is classified as a long-term other asset in the
accompanying consolidated financial statements.
(8) EMPLOYEE DEFERRED COMPENSATION PROFIT-SHARING PLAN AND TRUST
The Company has an Employee Deferred Compensation Profit-sharing Plan and
Trust (the 401(k) Plan) that covers all employees over 20 years of age who
have completed at least six months of service with the Company. Contributions
by the Company are determined by the Company's Board of Directors and totaled
approximately $36,000, $80,000 and $59,000 for the fiscal years ended March
31, 1995, 1996 and 1997, respectively.
(9) ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
MARCH 31,
--------------------- SEPTEMBER 30,
1996 1997 1997
---------- ---------- -------------
(unaudited)
<S> <C> <C> <C>
Salaries and benefits................... $ 703,478 $ 700,570 $1,227,718
Legal and audit......................... 72,436 76,914 103,106
Customer advances....................... 56,067 287,882 67,340
Sales taxes............................. 214,521 172,836 221,023
Warranty................................ 72,662 227,093 187,472
Other................................... 367,817 567,211 760,368
---------- ---------- ----------
$1,486,981 $2,032,506 $2,567,027
========== ========== ==========
</TABLE>
F-14
<PAGE>
-----------------------------------------
THE COMPANY'S TOTAL ARTIFICIAL HEART IS
A CLASS III DEVICE UNDER DEVELOPMENT
AND HAS NOT BEEN APPROVED FOR SALE IN
ANY COUNTRY. THE COMPANY DOES NOT IN-
TEND TO APPLY FOR REGULATORY APPROVAL
TO MARKET THIS DEVICE FOR SEVERAL
YEARS, IF EVER, AND WILL BE REQUIRED TO
SUCCESSFULLY COMPLETE CLINICAL TRIALS
TO DEMONSTRATE ITS SAFETY AND EFFICACY
PRIOR TO FILING FOR REGULATORY APPROV-
AL. SEE "RISK FACTORS."
-----------------------------------------
ILLUSTRATION OF THE IMPLANTABLE
COMPONENTS OF THE ABIOMED TAH, A
BATTERY-POWERED TOTALLY IMPLANTABLE
ARTIFICIAL HEART BEING DEVELOPED AS A
PERMANENT REPLACEMENT DEVICE TO ASSUME
THE FULL PUMPING FUNCTION OF BOTH THE
LEFT AND RIGHT VENTRICLES OF THE HEART.
DEVELOPMENTAL MODEL TAH WITH THE
IMPLANTABLE COMPONENTS: THE THORACIC
UNIT, THE INTERNAL RECHARGEABLE
BATTERY, THE INTERNAL ELECTRONICS
PACKAGE AND THE INTERNAL COMPONENT
OF THE ENERGY TRANSMISSION SYSTEM.
<PAGE>
[LOGO OF ABIOMED APPEARS HERE]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
SEC Registration Fee................................................... $14,323
NASD Filing Fee........................................................ 30,500
Nasdaq National Market Listing Fee..................................... 17,500
Transfer Agent and Registrant Fees..................................... 2,500*
Accounting Fees and Expenses........................................... 50,000*
Legal Fees and Expenses................................................ 175,000*
Printing and Engraving ................................................ 60,000*
Miscellaneous.......................................................... 50,177*
-------
TOTAL................................................................ 400,000*
=======
</TABLE>
- --------
* Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation provides that, to the fullest
extent permitted by Delaware law, no director of the Company shall be
personally liable to the Company or its stockholders for monetary damages for
breach of fiduciary duty as a director, notwithstanding any other provision of
law. However, a director shall be liable to the extent required by law (i) for
any breach of the director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) in respect of
certain unlawful dividend payments or stock redemptions or repurchases, or
(iv) for any transaction from which the director derived an improper personal
benefit.
The Company entered into indemnification agreements with each of its
directors and anticipates that it will enter into similar agreements with any
future director. Generally, these agreements attempt to provide the maximum
protection permitted by Delaware law with respect to indemnification. The
indemnification agreements provide that the Company will pay certain amounts
incurred by a director in connection with any civil or criminal action or
proceeding, specifically including actions by or in the name of the Company
(derivative suits) where the individual's involvement is by reason of the fact
that he is or was a director or officer. For directors, such amounts include,
to the maximum extent permitted by law, attorney's fees, judgments, civil or
criminal fines, settlement amounts and other expenses customarily incurred in
connection with legal proceedings. Under the indemnification agreements, a
director will not receive indemnification if the director is found not to have
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company. The Company has also entered
into similar agreements with certain of the Company's officers and top
management personnel who are not also directors. The indemnification
agreements with officers are slightly more restrictive. Generally, the
indemnification agreements attempt to provide the maximum protection permitted
by Delaware law with respect to indemnification of directors and officers.
The effect of these provisions would be to permit such indemnification by
the Company for liabilities arising under the Securities Act of 1933, as
amended.
Reference is hereby made to Section 7 of the Placement Agency Agreement
between the Company and the Placement Agents, filed as Exhibit 1.1 to this
Registration Statement, for a description of indemnification arrangements
between the Company and the Placement Agents.
II-1
<PAGE>
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
-------
<C> <S>
1.1 Form of Placement Agency Agreement***
3.1 Restated Certificate of Incorporation of the Company**
3.2 Restated Bylaws of the Company--Filed as Exhibit 3(b) to the
Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 1991*
Certificate of Designations of Series A Junior Participating
3.3 Preferred Stock**
4.1 Specimen Certificate of Common Stock--Filed as Exhibit 4.1 to
Registration Statement No. 33-14861 on Form S-1*
4.2 Description of Capital Stock (contained in the Restated
Certificate of Incorporation of the Company filed as Exhibit 3.1
and in the Certificate of Designations of Series A Junior
Participating Preferred Stock filed as Exhibit 3.3)**
4.3 Rights Agreement between the Registrant and BankBoston, N.A., as
Rights Agent dated as of August 13, 1997 (including Form of
Right Certificate attached thereto as Exhibit A)--Filed as
Exhibit 4 to the Registrant's Current Report on Form 8-K, dated
August 13, 1997*
5.1 Legal Opinion of Brown, Rudnick, Freed & Gesmer**
23.1 Consent of Arthur Andersen LLP***
Consent of Brown, Rudnick, Freed & Gesmer (included in Exhibit
23.2 5.1)**
24.1 Power of Attorney**
99.1 Common Stock Purchase Agreement between the Company and Genzyme
Corporation**
99.2 Common Stock Purchase Agreements between the Company and certain
directors**
</TABLE>
- --------
* Not filed herewith. In accordance with Rule 411 promulgated pursuant to
the Securities Act of 1933, as amended, reference is made to the documents
previously filed with the Commission, which are incorporated by reference
herein.
** Previously filed.
*** Filed herewith.
ITEM 17. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the Registrants By-Laws, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event
II-2
<PAGE>
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of such issue.
(b) The undersigned Registrant hereby further undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, each filing of the Registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
initial bona fide offering thereof.
(2) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(3) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS DULY CAUSED THIS POST-EFFECTIVE AMENDMENT NO. 1 TO THE
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO
DULY AUTHORIZED, IN THE CITY OF BOSTON, COMMONWEALTH OF MASSACHUSETTS, ON
NOVEMBER 20, 1997.
ABIOMED, Inc.
By: /s/ David M. Lederman
-------------------------------------------
DR. DAVID M. LEDERMAN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS POST-
EFFECTIVE AMENDMENT NO. 1 TO THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE
FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
Chief Executive
/s/ David M. Lederman Officer, President November 20, 1997
- ------------------------------------ and Director
DAVID M. LEDERMAN (Principal
Executive Officer)
Chief Financial
/s/ John F. Thero Officer, Vice November 20, 1997
- ------------------------------------ President--Finance
JOHN F. THERO and Treasurer
(Principal Financial
and Accounting
Officer)
* Director
- ------------------------------------ November 20, 1997
DESMOND H. O'CONNELL, JR.
* Director
- ------------------------------------ November 20, 1997
JOHN F. O'BRIEN
* Director
- ------------------------------------ November 20, 1997
HENRI A. TERMEER
* Director
- ------------------------------------ November 20, 1997
W. GERALD AUSTEN
* Director
- ------------------------------------ November 20, 1997
PAUL FIREMAN
*By: /s/ David M. Lederman
-------------------------------
DAVID M. LEDERMAN
ATTORNEY-IN-FACT
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1 Form of Placement Agency Agreement***
3.1 Restated Certificate of Incorporation of the Company**
3.2 Restated Bylaws of the Company--Filed as Exhibit 3(b) to the Company's
Annual Report on Form 10-K for the fiscal year ended March 31, 1991*
Certificate of Designations of Series A Junior Participating Preferred
3.3 Stock**
4.1 Specimen Certificate of Common Stock--Filed as Exhibit 4.1 to
Registration Statement No. 33-14861 on Form S-1*
4.2 Description of Capital Stock (contained in the Restated Certificate of
Incorporation of the Company filed as Exhibit 3.1 and in the
Certificate of Designations of Series A Junior Participating Preferred
Stock filed as Exhibit 3.3)**
4.3 Rights Agreement between the Registrant and BankBoston, N.A., as
Rights Agent dated as of August 13, 1997 (including Form of Right
Certificate attached thereto as Exhibit A)--Filed as Exhibit 4 to the
Registrant's Current Report on Form 8-K, dated August 13, 1997*
5.1 Legal Opinion of Brown, Rudnick, Freed & Gesmer**
23.1 Consent of Arthur Andersen LLP***
23.2 Consent of Brown, Rudnick, Freed & Gesmer (included in Exhibit 5.1)**
24.1 Power of Attorney**
99.1 Common Stock Purchase Agreement between the Company and Genzyme
Corporation**
99.2 Common Stock Purchase Agreements between the Company and certain
directors**
</TABLE>
- --------
* Not filed herewith. In accordance with Rule 411 promulgated pursuant to
the Securities Act of 1933, as amended, reference is made to the documents
previously filed with the Commission, which are incorporated by reference
herein.
** Previously filed.
*** Filed herewith.
<PAGE>
Exhibit 1.1
290,000 Shares
ABIOMED, INC.
Common Stock
PLACEMENT AGENCY AGREEMENT
November ___, 1997
BANCAMERICA ROBERTSON STEPHENS
555 California Street
Suite 2600
San Francisco, California 94104
UBS SECURITIES LLC
299 Park Avenue
New York, NY 10171
Ladies/Gentlemen:
ABIOMED, Inc., a Delaware corporation (the "Company"), proposes to offer
-------
and sell 290,000 shares of its Common Stock, $.0l par value per share (the
"Shares"), to certain investors (collectively, the "Investors"). The Shares are
- ------- ---------
more fully described in the Registration Statement defined below. The Company
hereby confirms its agreements with you as follows:
1. Agreement to Act as Placement Agents. On the basis of the
------------------------------------
representations, warranties and agreements of the Company herein contained and
subject to all the terms and conditions of this Agreement, BancAmerica Robertson
Stephens and UBS Securities LLC (individually a "Placement Agent" and
---------------
collectively the "Placement Agents") agree to act as the Company's exclusive
----------------
placement agents, on a reasonable efforts basis, in connection with the issuance
and sale by the Company of the Shares to the Investors. As compensation for
services rendered, on the Closing Date, the Company shall pay to the Placement
Agents, by wire transfer of immediately available funds to an account or
accounts designated by the Placement Agents, an amount equal to 5.45% of the
gross proceeds received by the Company from the sale of the Shares at a price of
$___ per share. All shares of Common Stock, $.0l per value per share, of the
Company to be outstanding after giving effect to the sales contemplated hereby,
including the Shares, are hereinafter referred to as "Common Stock." Each
------------
Placement Agent may, in its sole discretion, retain one or more sub-Placement
Agents, upon prior notice to the Company, and currently only Gilford Securities
Incorporated ("Gilford") has been retained as a sub-Placement Agent, to whom
-------
BancAmerica Robertson Stephens shall pay a fee equivalent to ___% of its
commission described above promptly upon receipt of such commissions from the
Company.
<PAGE>
-2-
2. Delivery and Payment.
--------------------
(a) On or before the third business day following the date hereof (the
"Closing Date") (as defined below), BancAmerica Robertson Stephens shall notify
------------
the Company of the total number of Shares for which the Placement Agents have
received and confirmed orders to purchase in the offering at a purchase price
acceptable to the Company (the "Purchased Shares"). Notwithstanding anything to
----------------
the contrary in this Agreement, the Company reserves the right to reject any
order in whole or in part.
(b) On the Closing Date, the Company shall cause its transfer agent,
through the Depository Trust Corporation ("DTC"), to credit "free of payment"
---
the total number of Purchased Shares to the account of BancAmerica Robertson
Stephens, to be held in the name and for the benefit of the Company (the
"Nominee Account"). BancAmerica Robertson Stephens will, in turn, cause DTC to
- ----------------
credit the account of each Investor through DTC with the number of Purchased
Shares purchased by such Investor against receipt of the full purchase price for
such Purchased Shares in the Nominee Account. On the Closing Date, BancAmerica
Robertson Stephens shall cause to be paid to the Company, by wire transfer of
immediately available funds to a bank account or accounts designated by the
Company, the gross proceeds from the sale of the Purchased Shares in the
offering which have been credited to the Nominee Account. With respect to any
Purchased Shares for which an Investor or Investors has not credited payment in
full to the Nominee Account by the Closing Date (or such later date as the
Company and the Placement Agents may agree), BancAmerica Robertson Stephens
shall, through DTC, cause such Shares to be returned to the Company's transfer
agent for the Company's account. The Placement Agents shall have no liability
to the Company for any Purchased Shares credited to the Nominee Account for
which payment of the purchase price for such Shares is not, in turn, credited to
the Nominee Account as long as such Shares are returned to the Company's
transfer agent through DTC.
3. Representations, Warranties and Agreements of the Company.
---------------------------------------------------------
The Company represents and warrants to and agrees with the Placement
Agents and Gilford that:
(a) A registration statement on Form S-3 (File No. 333-36657) with
respect to the Shares, including a prospectus subject to completion, has been
prepared by the Company in conformity with the requirements of the Securities
Act of 1933, as amended (the "Act"), and the applicable rules and regulations
---
(the "Rules and Regulations") of the Securities and Exchange Commission (the
---------------------
"Commission") under the Act and has been filed with the Commission; such pre-
- -----------
and post-effective amendments to such registration statement, such amended
prospectuses subject to completion and such abbreviated registration statements
pursuant to Rule 462(b) of the Rules and Regulations as may have been required
prior to the date hereof have been similarly prepared and filed with the
Commission; and the Company will file such additional amendments to such
registration statement, such amended prospectuses subject to completion and such
abbreviated registration statements as may hereafter be required. Copies of
such registration statement and amendments of each related prospectus subject to
completion (the "Preliminary
-----------
<PAGE>
-3-
Prospectuses"), including all documents incorporated by reference therein, and
- ------------
of any abbreviated registration statement pursuant to Rule 462(b) of the Rules
and Regulations have been delivered to you or your counsel. The Company and the
transactions contemplated by this Agreement meet the requirements for using Form
S-3 under the Act.
If the registration statement and any post-effective amendment thereto
relating to the Shares has been declared effective under the Act by the
Commission, the Company will prepare and promptly file with the Commission the
information omitted from the registration statement pursuant to Rule 430A(a) or,
if BancAmerica Robertson Stephens, on behalf of the several Placement Agents,
shall agree to the utilization of Rule 434 of the Rules and Regulations, the
information required to be included in any term sheet filed pursuant to Rule
434(b) or (c), as applicable, of the Rules and Regulations pursuant to
subparagraph (1), (4) or (7) of Rule 424(b) of the Rules and Regulations or as
part of a post-effective amendment to the registration statement (including a
final form of prospectus). If the registration statement or any post-effective
amendment thereto relating to the Shares has not been declared effective under
the Act by the Commission, the Company will prepare and promptly file an
amendment to the registration statement, including a final form of prospectus,
or, if BancAmerica Robertson Stephens, on behalf of the several Placement
Agents, shall agree to the utilization of Rule 434 of the Rules and Regulations,
the information required to be included in any term sheet filed pursuant to Rule
434(b) or (c), as applicable, of the Rules and Regulations. The term
"Registration Statement" as used in this Agreement shall mean such registration
- -----------------------
statement, including financial statements, schedules and exhibits, in the form
in which it became or becomes, as the case may be, effective (including, if the
Company omitted information from the registration statement pursuant to Rule
430A(a) or files a term sheet pursuant to Rule 434 of the Rules and Regulations,
the information deemed to be a part of the registration statement at the time it
became effective pursuant to Rule 430A(b) or Rule 434(d) of the Rules and
Regulations) and, in the event of any amendment thereto or the filing of any
abbreviated registration statement pursuant to Rule 462(b) of the Rules and
Regulations relating thereto after the effective date of such registration
statement, shall also mean (from and after the effectiveness of such amendment
or the filing of such abbreviated registration statement) such registration
statement as so amended, together with any such abbreviated registration
statement. The term "Prospectus" as used in this Agreement shall mean the
----------
prospectus relating to the Shares as included in such Registration Statement at
the time it becomes effective (including, if the Company omitted information
from the Registration Statement pursuant to Rule 430A(a) of the Rules and
Regulations, the information deemed to be a part of the Registration Statement
at the time it became effective pursuant to Rule 430A(b) of the Rules and
Regulations), provided, however, that if in reliance on Rule 434 of the Rules
-------- -------
and Regulations and with the consent of BancAmerica Robertson Stephens, on
behalf of the several Placement Agents, the Company shall have provided to the
Placement Agents a term sheet pursuant to Rule 434(b) or (c), as applicable,
prior to the time that a confirmation is sent or given for purposes of Section
2(10)(a) of the Act, the term "Prospectus" shall mean the "prospectus subject to
----------
completion" (as defined in Rule 434(g) of the Rules and Regulations) last
provided to the Placement Agents by the Company and circulated by the Placement
Agents to all prospective purchasers of the Shares (including the information
deemed to be a part of the Registration Statement at the time it became
effective pursuant to Rule 434(d) of the Rules and Regulations). Notwithstanding
the foregoing, if any revised prospectus shall be provided to the Placement
Agents by the Company
<PAGE>
-4-
for use in connection with the offering of the Shares that differs from the
prospectus referred to in the immediately preceding sentence (whether or not
such revised prospectus is required to be filed with the Commission pursuant to
Rule 424(b) of the Rules and Regulations), the term "Prospectus" shall refer to
----------
such revised prospectus from and after the time it is first provided to the
Placement Agents for such use. If in reliance on Rule 434 of the Rules and
Regulations and with the consent of BancAmerica Robertson Stephens, on behalf of
the several Placement Agents, the Company shall have provided to the Placement
Agents a term sheet pursuant to Rule 434(b) or (c), as applicable, prior to the
time that a confirmation is sent or given for purposes of Section 2(10)(a) of
the Act, the Prospectus and the term sheet, together, will not be materially
different from the prospectus in the Registration Statement. Any reference to
the Registration Statement or the Prospectus shall be deemed to refer to and
include the documents incorporated by reference therein pursuant to Item 12 of
Form S-3 under the Act, as of the date of the Registration Statement or the
Prospectus, as the case may be, and any reference to any amendment or supplement
to the Registration Statement or the Prospectus shall be deemed to refer to and
include any documents filed after such date under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), which, upon filing, are incorporated by
------------
reference therein, as required by paragraph (b) of Item 12 of Form S-3. As used
in this Agreement, the term "Incorporated Documents" means the documents which
-----------------------
at the time are incorporated by reference in the Registration Statement, the
Prospectus or any amendment or supplement thereto.
(b) The Commission has not issued any order preventing or suspending
the use of any Preliminary Prospectus or instituted proceedings for that
purpose, and each such Preliminary Prospectus has conformed in all material
respects to the requirements of the Act and the Rules and Regulations and, as of
its date, has not included any untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading; and at the time
the Registration Statement became or becomes, as the case may be, effective and
at all times subsequent thereto up to and on the Closing Date (hereinafter
defined), (i) the Registration Statement and the Prospectus, and any amendments
or supplements thereto, contained and will contain all material information
required to be included therein by the Act and the Rules and Regulations and
will in all material respects conform to the requirements of the Act and the
Rules and Regulations, (ii) the Registration Statement, and any amendments or
supplements thereto, did not and will not include any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and (iii) the
Prospectus, and any amendments or supplements thereto, did not and will not
include any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, however, that none of the
-------- -------
representations and warranties contained in this subparagraph (b) shall apply to
information contained in or omitted from the Registration Statement or
Prospectus, or any amendment or supplement thereto, in reliance upon, and in
conformity with, written information relating to any Placement Agent furnished
to the Company by such Placement Agent specifically for use in the preparation
thereof.
The Incorporated Documents heretofore filed, when they were filed (or, if
any amendment with respect to any such document was filed, when such amendment
was filed), conformed in all material respects with the requirements of the
Exchange Act and the rules and
<PAGE>
-5-
regulations of the Commission thereunder; any further Incorporated Documents so
filed will, when they are filed, conform in all material respects with the
requirements of the Exchange Act and the rules and regulations of the Commission
thereunder; no such document when it was filed (or, if an amendment with respect
to any such document was filed, when such amendment was filed), contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not misleading;
and no such further amendment will contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading.
(c) Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation (or, with respect to Abiomed
Limited Partnership (the "Partnership"), is duly and validly organized and
-----------
validly existing as a limited partnership under the laws of the Commonwealth of
Massachusetts and has all requisite partnership power and authority), with full
power and authority (corporate and other) to own, lease and operate its
properties and conduct its business as described in the Prospectus; the Company
owns all of the outstanding capital stock of its subsidiaries (other than the
Partnership) and, together with its subsidiaries, owns 61.7% of the partnership
interests of the Partnership, free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest; each of the Company and its
subsidiaries is duly qualified to do business as a foreign corporation (or, with
respect to the Partnership, as a foreign limited partnership) and is in good
standing in each jurisdiction in which the ownership or leasing of its
properties or the conduct of its business requires such qualification, except
where the failure to be so qualified or be in good standing would not have a
material adverse effect on the financial condition, earnings, operations,
business or business prospects of the Company and its subsidiaries considered as
one enterprise; no proceeding has been instituted in any such jurisdiction,
revoking, limiting or curtailing, or seeking to revoke, limit or curtail, such
power and authority or qualification; each of the Company and its subsidiaries
is in possession of and operating in compliance with all authorizations,
licenses, approvals, certificates, consents, orders and permits from state,
federal and other domestic and foreign regulatory authorities, including,
without limitation, the United States Food and Drug Administration (the "FDA"),
---
which are material to the conduct of its business, all of which are valid and in
full force and effect; neither the Company nor any of its subsidiaries is in
violation of its respective charter or bylaws (or, with respect to the
Partnership, its Limited Partnership Agreement) or in default in the performance
or observance of any material obligation, agreement, covenant or condition
contained in any material bond, debenture, note or other evidence of
indebtedness, or in any material lease, contract, indenture, mortgage, deed of
trust, loan agreement, joint venture or other agreement or instrument to which
the Company or any of its subsidiaries is a party or by which it or any of its
subsidiaries or their respective properties may be bound; neither the Company
nor any of its subsidiaries is in material violation of any law, order, rule,
regulation, writ, injunction, judgment or decree of any court, government or
governmental agency or body, domestic or foreign, having jurisdiction over the
Company or any of its subsidiaries or over their respective properties of which
it has knowledge; neither the Company nor any of its subsidiaries is in material
violation of the Food, Drug and Cosmetic Act, as amended, or any of the rules
and regulations of the FDA, including the FDA's Quality System Regulations, or
of the rules and regulations of any other federal, state or foreign regulatory
body or agency; there is not any pending or, to the best of the Company's
knowledge,
<PAGE>
-6-
threatened FDA enforcement action against the Company or any of its
subsidiaries; and to the best of the Company's knowledge there is not any
pending or threatened investigation by the FDA of the Company or any of its
subsidiaries or any of their products. The Company does not own or control,
directly or indirectly, any corporation, association or other entity other than
ABIOMED Cardiovascular, Inc., ABIODENT, Inc., ABIOMED R&D, Inc., ABD Holding
Company, Inc., Abiomed Research & Development, Inc. and the Partnership
(collectively, the "subsidiaries").
-------------
(d) The Company has full legal right, power and authority to enter
into this Agreement and perform the transactions contemplated hereby. This
Agreement has been duly authorized, executed and delivered by the Company and is
a valid and binding agreement on the part of the Company, enforceable in
accordance with its terms, except as rights to indemnification hereunder may be
limited by applicable law and except as the enforcement hereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting creditors' rights generally or by general
equitable principles; the performance of this Agreement and the consummation of
the transactions herein contemplated will not result in a material breach or
violation of any of the terms and provisions of, or constitute a default under,
(i) any bond, debenture, note or other evidence of indebtedness, or under any
lease, contract, indenture, mortgage, deed of trust, loan agreement, joint
venture or other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which it or any of its subsidiaries or any of
their respective properties may be bound, (ii) the charter or bylaws of the
Company or any of its subsidiaries, or (iii) to the knowledge of the Company,
any law, order, rule, regulation, writ, injunction, judgment or decree of any
court, government or governmental agency or body, domestic or foreign, having
jurisdiction over the Company or any of its subsidiaries or over any of their
respective properties. No consent, approval, authorization or order of or
qualification with any court, government or governmental agency or body,
domestic or foreign, having jurisdiction over the Company or any of its
subsidiaries or over their respective properties is required for the execution
and delivery of this Agreement and the consummation by the Company or any of its
subsidiaries of the transactions herein contemplated, except such as may be
required by the National Association of Securities Dealers, Inc. (the "NASD")
----
with respect to the listing of the additional shares of Common Stock to be
offered hereby on The Nasdaq National Market or as may be required under the Act
or under state or other securities or Blue Sky laws, all of which requirements
have been satisfied in all material respects.
(e) There is not any pending or, to the best of the Company's
knowledge, threatened action, suit, claim or proceeding against the Company, any
of its subsidiaries or any of their respective officers or any of their
respective properties, assets or rights before any court, government or
governmental agency or body, domestic or foreign, having jurisdiction over the
Company or any of its subsidiaries or over their respective officers or
properties or otherwise which (i) might result in any material adverse change in
the financial condition, earnings, operations, business or business prospects of
the Company and its subsidiaries considered as one enterprise or might
materially and adversely affect their properties, assets or rights considered as
one enterprise, (ii) might prevent consummation of the transactions contemplated
hereby or (iii) is required to be disclosed in the Registration Statement or
Prospectus and is not so disclosed; and there are no agreements, contracts,
leases or documents of the Company or any of its subsidiaries of a character
required to be described or referred to in the Registration Statement or
Prospectus or any
<PAGE>
-7-
Incorporated Document or to be filed as an exhibit to the Registration Statement
or any Incorporated Document by the Act or the Rules and Regulations or by the
Exchange Act or the rules and regulations of the Commission thereunder which
have not been accurately described in all material respects in the Registration
Statement or Prospectus or any Incorporated Document or filed as exhibits to the
Registration Statement or any Incorporated Document.
(f) All outstanding shares of capital stock of the Company have been
duly authorized and validly issued and are fully paid and nonassessable, have
been issued in compliance with all federal and state securities laws, were not
issued in violation of or subject to any preemptive rights or other rights to
subscribe for or purchase securities, and the authorized and outstanding capital
stock of the Company is as set forth in the Prospectus under the caption
"Capitalization" and conforms in all material respects to the statements
relating thereto contained in the Registration Statement and the Prospectus and
any Incorporated Document (and such statements correctly state the substance of
the instruments defining the capitalization of the Company); the Shares have
been duly authorized for issuance and sale to the Investors pursuant to this
Agreement and, when issued and delivered by the Company against payment therefor
in accordance with the terms of this Agreement, will be duly and validly issued
and fully paid and nonassessable, and will be sold free and clear of any pledge,
lien, security interest, encumbrance, claim or equitable interest; and no
preemptive right, co-sale right, registration right, right of first refusal or
other similar right of stockholders exists with respect to any of the Shares or
the issuance and sale thereof other than those that have been expressly waived
prior to the date hereof and those that will automatically expire upon the
consummation of the transactions contemplated on the Closing Date. No further
approval or authorization of any stockholder, the Board of Directors of the
Company or others is required for the issuance and sale or transfer of the
Shares except as may be required under the Act or the Exchange Act, under state
or other securities or Blue Sky laws or with respect to the listing of the
Shares on The Nasdaq National Market. All issued and outstanding shares of
capital stock of each subsidiary of the Company (other than the Partnership)
have been duly authorized and validly issued and are fully paid and
nonassessable, all partnership interests in the Partnership are duly and validly
created and issued limited partnership interests, and such shares of capital
stock and partnership interests were not issued in violation of or subject to
any preemptive right, or other rights to subscribe for or purchase shares or
partnership interests, as applicable, and are owned by the Company free and
clear of any pledge, lien, security interest, encumbrance, claim or equitable
interest, except for Abiomed Limited Partnership of which the Company and its
subsidiaries collectively own 61.7% of the outstanding partnership interests.
Except as disclosed in or contemplated by the Prospectus and the financial
statements of the Company, and the related notes thereto, included or
incorporated by reference in the Prospectus, neither the Company nor any of its
subsidiaries has any outstanding options to purchase, or any preemptive rights
or other rights to subscribe for or to purchase, any securities or obligations
convertible into, or any contracts or commitments to issue or sell, shares of
its capital stock or any such options, rights, convertible securities or
obligations. The description of the Company's stock option, stock bonus and
other stock plans or arrangements, and the options or other rights granted and
exercised thereunder, set forth or incorporated by reference in the Prospectus
accurately and fairly presents the information required to be shown with respect
to such plans, arrangements, options and rights.
<PAGE>
-8-
(g) Arthur Andersen LLP, which has examined the consolidated balance
sheets of the Company, together with the related schedules and notes, as of
March 31, 1996 and 1997 and the related consolidated statements of operations,
stockholders' investment and cash flows for each of the three (3) years in the
period ended March 31, 1997 filed with the Commission as a part of the
Registration Statement, which are included in the Prospectus, are independent
accountants within the meaning of the Act and the Rules and Regulations; the
audited consolidated financial statements of the Company, together with the
related schedules and notes, and the unaudited consolidated financial
information, forming part of the Registration Statement and Prospectus, fairly
present the financial position and the results of operations of the Company and
its subsidiaries at the respective dates and for the respective periods to which
they apply; and all audited consolidated financial statements of the Company,
together with the related schedules and notes, and the unaudited consolidated
financial information, filed with the Commission as part of or incorporated by
reference into the Registration Statement, have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved except as may be otherwise stated therein. The selected and
summary financial and statistical data included or incorporated by reference in
the Registration Statement present fairly the information shown therein and have
been compiled on a basis consistent with the audited financial statements
presented therein. No other financial statements or schedules are required to
be included or incorporated by reference in the Registration Statement.
(h) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, there has not been (i) any
material adverse change in the financial condition, earnings, operations,
business or business prospects of the Company and its subsidiaries considered as
one enterprise, (ii) any transaction that is material to the Company and its
subsidiaries considered as one enterprise, except transactions entered into in
the ordinary course of business, (iii) any obligation, direct or contingent,
that is material to the Company and its subsidiaries considered as one
enterprise, incurred by the Company or its subsidiaries, except obligations
incurred in the ordinary course of business, (iv) any change in the capital
stock, partnership interests or outstanding indebtedness of the Company or any
of its subsidiaries that is material to the Company and its subsidiaries
considered as one enterprise, (v) any dividend or distribution of any kind
declared, paid or made on the capital stock of the Company or any of its
subsidiaries, or (vi) any loss or damage (whether or not insured) to the
property of the Company or any of its subsidiaries which has been sustained or
will have been sustained which has a material adverse effect on the financial
condition, earnings, operations, business or business prospects of the Company
and its subsidiaries considered as one enterprise.
(i) Except as set forth in the Registration Statement and Prospectus
and any Incorporated Document, (i) each of the Company and its subsidiaries has
good and marketable title to all properties and assets described in the
Registration Statement and Prospectus and any Incorporated Document as owned by
it, free and clear of any pledge, lien, security interest, encumbrance, claim or
equitable interest, other than such as would not have a material adverse effect
on the financial condition, earnings, operations, business or business prospects
of the Company and its subsidiaries considered as one enterprise, (ii) the
agreements to which the Company or any of its subsidiaries is a party described
in the Registration Statement and Prospectus and any Incorporated Document are
valid agreements, enforceable by the Company and its subsidiaries (as
applicable), except as the enforcement thereof may be limited by applicable
<PAGE>
-9-
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by general equitable
principles and, to the best of the Company's knowledge, the other contracting
party or parties thereto are not in material breach or material default under
any of such agreements, and (iii) each of the Company and its subsidiaries has
valid and enforceable leases for all properties described in the Registration
Statement and Prospectus and any Incorporated Document as leased by it, except
as the enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally or by general equitable principles. Except as set
forth in the Registration Statement and Prospectus and any Incorporated
Document, the Company owns or leases all such properties as are necessary to its
operations as now conducted or as proposed to be conducted.
(j) The Company and its subsidiaries have timely filed all necessary
federal, state and foreign income and franchise tax returns and have paid all
taxes shown thereon as due, and there is no tax deficiency that has been or, to
the best of the Company's knowledge, might be asserted against the Company or
any of its subsidiaries that might have a material adverse effect on the
financial condition, earnings, operations, business or business prospects of the
Company and its subsidiaries considered as one enterprise; and all material tax
liabilities are adequately provided for on the books of the Company and its
subsidiaries.
(k) The Company and its subsidiaries maintain insurance with insurers
of recognized financial responsibility of the types and in the amounts generally
deemed adequate for their respective businesses and consistent with insurance
coverage maintained by similar companies in similar businesses, including, but
not limited to, product liability insurance, insurance covering real and
personal property owned or leased by the Company or its subsidiaries against
theft, damage, destruction, acts of vandalism, and insurance covering all other
risks customarily insured against, all of which insurance is in full force and
effect; neither the Company nor any such subsidiary has been refused any
insurance coverage sought or applied for; and neither the Company nor any such
subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the financial
condition, earnings, operations, business or business prospects of the Company
and its subsidiaries considered as one enterprise.
(l) To the best of the Company's knowledge, no labor disturbance by
the employees of the Company or any of its subsidiaries exists or is imminent;
and the Company is not aware of any existing or imminent labor disturbance by
the employees of any of its principal suppliers, subcontractors, dealers or
distributors that might be expected to result in a material adverse change in
the financial condition, earnings, operations, business or business prospects of
the Company and its subsidiaries considered as one enterprise. No collective
bargaining agreement exists with any of the Company's or any of its
subsidiaries' employees and, to the best of the Company's knowledge, no such
agreement is imminent.
(m) Each of the Company and its subsidiaries owns or possesses
adequate rights to use all patents, patent rights, inventions, trade secrets,
know-how, trademarks, service marks, trade names and copyrights (collectively,
"Intellectual Property Rights") which are necessary to
- -----------------------------
<PAGE>
-10-
conduct its business as described in the Registration Statement and Prospectus
and any Incorporated Document; the Company has not received any notice of, and
has no knowledge of, any infringement of or conflict with asserted rights of the
Company by others with respect to any Intellectual Property Rights; and, except
as disclosed in the Registration Statement, the Company has not received any
notice of, and has no knowledge of, any infringement of or conflict with
asserted rights of others with respect to any Intellectual Property Rights
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, might have a material adverse effect on the financial
condition, earnings, operations, business or business prospects of the Company
and its subsidiaries considered as one enterprise; and to the knowledge of the
Company, none of the patents owned by the Company or any of its subsidiaries are
unenforceable or invalid. The Company has duly and properly filed or caused to
be filed with the United States Patent and Trademark Office (the "PTO") and
---
applicable foreign and international patent authorities all patent applications
described or referred to in the Prospectus, and believes it has complied with
the PTO's duty of candor and disclosure for each of the United States patent
applications described or referred to in the Prospectus; the Company is unaware
of any facts which would preclude the grant of a patent from each of the patent
applications described or referred to in the Prospectus; and the Company has no
knowledge of any facts which would preclude it from having clear title to its
patent applications described or referred to in the Prospectus.
(n) The Common Stock is registered pursuant to Section 12(g) of the
Exchange Act and is listed on The Nasdaq National Market, and the Company has
taken no action designed to, or likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act or delisting the Common
Stock from The Nasdaq National Market, nor has the Company received any
notification that the Commission or the NASD is contemplating terminating such
registration or listing.
(o) The Company has been advised concerning the Investment Company Act
of 1940, as amended (the "1940 Act"), and the rules and regulations thereunder,
--------
and has in the past conducted, and intends in the future to conduct, its affairs
in such a manner as to ensure that it will not become an "investment company" or
a company "controlled" by an "investment company" within the meaning of the 1940
Act and such rules and regulations. Neither the Company nor any of its
subsidiaries is, nor will the Company or any of its subsidiaries become upon the
sale of the Shares and the application of the proceeds therefrom as described in
the Prospectus under the caption "Use of Proceeds," an "investment company" or a
person controlled by an "investment company" within the meaning of the 1940 Act.
(p) The Company has not distributed and will not distribute prior to
the Closing Date any offering material in connection with the offering and sale
of the Shares other than any Preliminary Prospectuses, the Prospectus, the
Registration Statement and other materials, if any, permitted by the Act.
(q) Neither the Company nor any of its subsidiaries has at any time
during the last five (5) years (i) made any unlawful contribution to any
candidate for foreign office or failed to disclose fully any contribution in
violation of law, or (ii) made any payment to any federal or state governmental
officer or official, or other person charged with similar public or quasi-public
duties,
<PAGE>
-11-
other than payments required or permitted by the laws of the United States or
any jurisdiction thereof.
(r) The Company has not taken and will not take, directly or
indirectly, any action designed to or that might reasonably be expected to cause
or result in stabilization or manipulation of the price of the Common Stock to
facilitate the sale or resale of the Shares.
(s) Except as set forth in the Registration Statement and Prospectus
and any Incorporated Document, (i) the Company and each of its subsidiaries is
in compliance in all material respects with all rules, laws and regulations
relating to the use, treatment, storage and disposal of toxic substances and
protection of health or the environment ("Environmental Laws") which are
------------------
applicable to its business, (ii) neither the Company nor any of its subsidiaries
has received any notice from any governmental authority or third party of an
asserted claim under Environmental Laws, which claim is required to be disclosed
in the Registration Statement, the Prospectus or any Incorporated Document,
(iii) in the reasonable judgment of the Company based on the Company's knowledge
of facts and circumstances, neither the Company nor any of its subsidiaries will
be required to make future material capital expenditures to comply with
Environmental Laws and (iv) no property which is owned, leased or occupied by
the Company or any subsidiary has been designated as a Superfund site pursuant
to the Comprehensive Response, Compensation, and Liability Act of 1980, as
amended (42 U.S.C. (S) 9601, et seq.), or otherwise designated as a contaminated
-- ----
site under applicable state or local law.
(t) The Company and each of its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(u) There are no outstanding loans, advances (except normal advances
for business expenses in the ordinary course of business) or guarantees of
indebtedness by the Company to or for the benefit of any of the officers or
directors of the Company or any of the members of the families of any of them,
except as disclosed in the Registration Statement and the Prospectus and any
Incorporated Document.
(v) The Company has complied with all provisions of Section 517.075,
Florida Statutes relating to doing business with the Government of Cuba or with
any person or affiliate located in Cuba.
(w) To the best of the Company's knowledge, no officer of the Company,
director of the Company or securityholder of 5% or more of any class of the
Company's securities has an "association" or "affiliation" with any member of
the NASD, within the meaning of Rule 2710 of the Conduct Rules of the NASD. The
Company does not have an
<PAGE>
-12-
"association" or "affiliation" with any member of the NASD, within the meaning
of Rule 2710 of the Conduct Rules of the NASD.
4. Further Agreements of the Company. The Company agrees with the
---------------------------------
Placement Agents that:
(a) The Company will use its best efforts to cause the Registration
Statement and any post-effective amendment thereof, if not effective at the time
and date that this Agreement is executed and delivered by the parties hereto, to
become effective as promptly as possible; the Company will use its best efforts
to cause any abbreviated registration statement pursuant to Rule 462(b) of the
Rules and Regulations as may be required subsequent to the date the Registration
Statement is declared effective to become effective as promptly as possible; the
Company will notify you, promptly after it shall receive notice thereof, of the
time when the Registration Statement, any subsequent amendment to the
Registration Statement or any abbreviated registration statement has become
effective or any supplement to the Prospectus has been filed; if the Company
omitted information from the Registration Statement at the time it was
originally declared effective in reliance upon Rule 430A(a) of the Rules and
Regulations, the Company will provide evidence satisfactory to you that the
Prospectus contains such information and has been filed, within the time period
prescribed, with the Commission pursuant to subparagraph (1) or (4) of Rule
424(b) of the Rules and Regulations or as part of a post-effective amendment to
such Registration Statement as originally declared effective which is declared
effective by the Commission; if the Company files a term sheet pursuant to Rule
434 of the Rules and Regulations, the Company will provide evidence satisfactory
to you that the Prospectus and term sheet meeting the requirements of Rule
434(b) or (c), as applicable, of the Rules and Regulations, have been filed,
within the time period prescribed, with the Commission pursuant to subparagraph
(7) of Rule 424(b) of the Rules and Regulations; if for any reason the filing of
the final form of Prospectus is required under Rule 424(b)(3) of the Rules and
Regulations, it will provide evidence satisfactory to you that the Prospectus
contains such information and has been filed with the Commission within the time
period prescribed; it will notify you promptly of any request by the Commission
for the amending or supplementing of the Registration Statement or the
Prospectus or for additional information; promptly upon your request, it will
prepare and file with the Commission any amendments or supplements to the
Registration Statement or Prospectus which, in the reasonable opinion of Testa,
Hurwitz & Thibeault, LLP, counsel to the Placement Agents ("Placement Agents'
-----------------
Counsel"), may be necessary or advisable in connection with the placement of the
- -------
Shares by the Placement Agents; it will promptly prepare and file with the
Commission, and promptly notify you of the filing of, any amendments or
supplements to the Registration Statement or Prospectus which may be necessary
to correct any statements or omissions, if, at any time when a prospectus
relating to the Shares is required to be delivered under the Act, any event
shall have occurred as a result of which the Prospectus or any other prospectus
relating to the Shares as then in effect would include any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; and it will file no amendment or supplement to the Registration
Statement or Prospectus which shall not previously have been submitted to you a
reasonable time prior to the proposed filing thereof or to which you shall
reasonably object in writing, subject, however, to compliance with the Act, the
Rules and
<PAGE>
-13-
Regulations, the Exchange Act and the rules and regulations of the Commission
thereunder and the provisions of this Agreement.
(b) The Company will advise you, promptly after it shall receive
notice or obtain knowledge, of the issuance of any stop order by the Commission
suspending the effectiveness of the Registration Statement or of the initiation
or threat of any proceeding for that purpose; and it will promptly use its best
efforts to prevent the issuance of any stop order or to obtain its withdrawal at
the earliest possible moment if such stop order should be issued.
(c) The Company will use its best efforts to qualify the Shares for
offering and sale under the securities laws of such jurisdictions as you may
designate and to continue such qualifications in effect for so long as may be
required for purposes of the distribution of the Shares, except that the Company
shall not be required in connection therewith or as a condition thereof to
qualify as a foreign corporation or to execute a general consent to service of
process in any jurisdiction in which it is not otherwise required to be so
qualified or to so execute a general consent to service of process. In each
jurisdiction in which the Shares shall have been qualified as above provided,
the Company will make and file such statements and reports in each year as are
or may be reasonably required by the laws of such jurisdiction.
(d) The Company will furnish to you, as soon as available, and, in the
case of the Prospectus and any term sheet or abbreviated term sheet under Rule
434, in no event later than the first (1st) full business day following the
first day that Shares are traded, copies of the Registration Statement (three of
which will include all exhibits), each Preliminary Prospectus, the Prospectus
and any amendments or supplements to such documents, including any prospectus
prepared to permit compliance with Section 10(a)(3) of the Act, and the
Incorporated Documents (three of which will include all exhibits), all in such
quantities as you may from time to time reasonably request. Notwithstanding the
foregoing, if BancAmerica Robertson Stephens, on behalf of the several Placement
Agents, shall agree to the utilization of Rule 434 of the Rules and Regulations,
the Company shall provide to you copies of a Preliminary Prospectus updated in
all respects through the date specified by you in such quantities as you may
from time to time reasonably request. To the extent applicable, such documents
shall be identical in all material respects to the electronically transmitted
copies thereof filed with the Commission pursuant to EDGAR, except to the extent
permitted by Regulation S-T.
(e) The Company will make generally available to its securityholders
as soon as practicable, but in any event not later than the forty-fifth (45th)
day following the end of the fiscal quarter first occurring after the first
anniversary of the effective date of the Registration Statement, an earnings
statement (which will be in reasonable detail but need not be audited) complying
with the provisions of Section 11(a) of the Act and covering a twelve (12) month
period beginning after the effective date of the Registration Statement.
(f) During a period of five (5) years after the date hereof, the
Company will furnish to its stockholders as soon as practicable after the end of
each respective period, annual reports (including financial statements audited
by independent certified public accountants), will file with the Commission
unaudited quarterly reports of operations for each of the first three quarters
of the fiscal year, and will furnish to the Placement Agents, upon request (i)
statements of
<PAGE>
-14-
operations of the Company for each of the first three (3) quarters in the form
furnished to the Company's stockholders, (ii) a balance sheet of the Company as
of the end of such fiscal year, together with statements of operations, of
stockholders' investment, and of cash flows of the Company for such fiscal year,
accompanied by a copy of the certificate or report thereon of independent
certified public accountants, (iii) as soon as they are available, copies of all
reports (financial or other) mailed to stockholders, (iv) as soon as they are
available, copies of all reports and financial statements furnished to or filed
with the Commission, any securities exchange or the NASD, (v) every material
press release and every material news item or article in respect of the Company
or its affairs which was generally released to stockholders or prepared by the
Company or any of its subsidiaries, and (vi) any additional information of a
public nature concerning the Company or its subsidiaries, or its business which
you may reasonably request. During such five (5) year period, if the Company
shall have active subsidiaries, the foregoing financial statements shall be on a
consolidated basis to the extent that the accounts of the Company and its
subsidiaries are consolidated, and shall be accompanied by similar financial
statements for any significant subsidiary which is not so consolidated.
(g) The Company will apply the net proceeds from the sale of the
Shares in the manner set forth under the caption "Use of Proceeds" in the
Prospectus.
(h) The Company will maintain a transfer agent and, if necessary under
the jurisdiction of incorporation of the Company, a registrar (which may be the
same entity as the transfer agent) for its Common Stock.
(i) If the transactions contemplated hereby are not consummated by
reason of any failure, refusal or inability on the part of the Company to
perform any agreement to be performed hereunder or to fulfill any condition of
the Placement Agents' obligations hereunder pursuant to Section 6, or if the
Placement Agents shall terminate this Agreement pursuant to Section 9(i), the
Company will reimburse the Placement Agents for all out-of-pocket expenses
(including reasonable fees and disbursements of Placement Agents' Counsel)
incurred by the Placement Agents in investigating or preparing to market or
marketing the Shares under this Agreement.
(j) If at any time during the ninety (90) day period after the
Registration Statement or any post-effective amendment thereto becomes
effective, any rumor, publication or event relating to or affecting the Company
shall occur as a result of which in your opinion the market price of the Common
Stock has been or is likely to be materially affected (regardless of whether
such rumor, publication or event necessitates a supplement to or amendment of
the Prospectus), the Company will, subject to the advice of its counsel, after
written notice from you advising the Company to the effect set forth above,
forthwith prepare, consult with you concerning the substance of and disseminate
a press release or other public statement, reasonably satisfactory to you,
responding to or commenting on such rumor, publication or event.
(k) The Company shall use its reasonable efforts to do and perform all
things required or necessary to be done and performed under this Agreement by
the Company prior to the Closing Date and to satisfy all conditions precedent to
the delivery of the Shares.
<PAGE>
-15-
5. Expenses.
--------
(a) Whether or not the transactions contemplated by this Agreement are
consummated or this Agreement is terminated, the Company agrees with each of the
Placement Agents and Gilford that:
(i) The Company will pay and bear all costs and expenses in
connection with the preparation, printing and filing of the Registration
Statement (including financial statements, schedules and exhibits), Preliminary
Prospectuses and the Prospectus and any amendments or supplements thereto; the
printing of this Agreement, the Preliminary Blue Sky Survey and any Supplemental
Blue Sky Survey and any instruments related to any of the foregoing the issuance
and delivery of the Shares hereunder to the Investors, including transfer taxes,
if any, the cost of all certificates representing the Shares and transfer
agents' and registrars' fees; the fees and disbursements, of counsel for the
Company; all fees and other charges of the Company's independent certified
public accountants; the cost of furnishing to the Placement Agents copies of the
Registration Statement (including appropriate exhibits), Preliminary Prospectus
and the Prospectus, and any amendments or supplements to any of the foregoing;
NASD filing fees and the cost of qualifying the Shares under the laws of such
jurisdictions as you may designate (including filing fees and disbursements of
Placement Agents' Counsel in connection with such NASD filings and Blue Sky
qualifications and reasonable fees of Placement Agents' Counsel in connection
with such Blue Sky qualifications); and all other expenses directly incurred by
the Company in connection with the performance of their obligations hereunder.
(ii) In addition to its other obligations under Section 7(a)
hereof, the Company agrees that, as an interim measure during the pendency of
any claim, action, investigation, inquiry or other proceeding described in
Section 7(a) hereof, it will reimburse the Placement Agents and Gilford on a
monthly basis for all reasonable legal or other expenses incurred in connection
with investigating or defending any such claim, action, investigation, inquiry
or other proceeding, notwithstanding the absence of a judicial determination as
to the propriety and enforceability of the Company's obligation to reimburse the
Placement Agents and Gilford for such expenses and the possibility that such
payments might later be held to have been improper by a court of competent
jurisdiction. To the extent that any such interim reimbursement payment is so
held to have been improper, the Placement Agents and Gilford shall promptly
return such payment to the Company together with interest, compounded daily,
determined on the basis of the prime rate (or other commercial lending rate for
borrowers of the highest credit standing) listed from time to time in The Wall
Street Journal which represents the base rate on corporate loans posted by a
substantial majority of the nation's thirty (30) largest banks (the "Prime
-----
Rate"). Any such interim reimbursement payments which are not made to the
- ----
Placement Agents or Gilford within thirty (30) days of a request for
reimbursement shall bear interest at the Prime Rate from the date of such
request.
(b) In addition to its other obligations under Section 7(b) hereof,
each Placement Agent and Gilford, severally and not jointly, agrees that, as an
interim measure during the pendency of any claim, action investigation, inquiry
or other proceeding described in Section 7(b) hereof, it will reimburse the
Company on a monthly basis for all reasonable legal or other
<PAGE>
-16-
expenses incurred in connection with investigating or defending any such claim,
action, investigation, inquiry or other proceeding, notwithstanding the absence
of a judicial determination as to the propriety and enforceability of such
Placement Agent's or Gilford's obligation to reimburse the Company for such
expenses and the possibility that such payments might later be held to have been
improper by a court of competent jurisdiction. To the extent that any such
interim reimbursement payment is so held to have been improper, the Company
shall promptly return such payment to such Placement Agent or Gilford, as the
case may be, together with interest, compounded daily, determined on the basis
of the Prime Rate. Any such interim reimbursement payments which are not made to
the Company within thirty (30) days of a request for reimbursement shall bear
interest at the Prime Rate from the date of such request.
(c) It is agreed that any controversy arising out of the operation of
the interim reimbursement arrangements set forth in Sections 5(a)(ii) and 5(b)
hereof, including the amounts of any requested reimbursement payments, the
method of determining such amounts and the basis on which such amounts shall be
apportioned among the reimbursing parties, shall be settled by arbitration
conducted under the provisions of the Constitution and Rules of the Board of
Governors of the New York Stock Exchange, Inc. or pursuant to the Code of
Arbitration Procedure of the NASD. Any such arbitration must be commenced by
service of a written demand for arbitration or a written notice of intention to
arbitrate, therein electing the arbitration tribunal. In the event the party
demanding arbitration does not make such designation of an arbitration tribunal
in such demand or notice, then the party responding to said demand or notice is
authorized to do so. Any such arbitration will be limited to the operation of
the interim reimbursement provisions contained in Sections 5(a)(ii) and 5(b)
hereof and will not resolve the ultimate propriety or enforceability of the
obligation to indemnify for expenses which is created by the provisions of
Sections 7(a) and 7(b) hereof or the obligation to contribute to expenses which
is created by the provisions of Section 7(d) hereof.
6. Conditions of Placement Agents' Obligations. The obligations of the
-------------------------------------------
Placement Agents hereunder shall be subject to the accuracy, as of the date
hereof and the Closing Date, of the representations and warranties of the
Company herein, to the performance by the Company of its obligations hereunder
and to the following additional conditions (any of which may be waived by
BancAmerica Robertson Stephens, on behalf of the several Placement Agents):
(a) The Registration Statement and any post-effective amendment
thereto shall have become effective not later than 2:00 P.M., Pacific time, on
the date following the date of this Agreement or such later date as shall be
consented to in writing by you; and no stop order suspending the effectiveness
thereof shall have been issued and no proceedings for that purpose shall have
been initiated or, to the knowledge of the Company or either Placement Agent,
threatened by the Commission, and any request of the Commission for additional
information (to be included in the Registration Statement or the Prospectus)
shall have been complied with to the satisfaction of Placement Agents' Counsel.
(b) All corporate proceedings and other legal matters in connection
with this Agreement, the form of Registration Statement and the Prospectus, and
the registration, authorization, issue, sale and delivery of the Shares, shall
have been reasonably satisfactory to Placement Agents' Counsel; and such counsel
shall have been furnished with such papers and
<PAGE>
-17-
information as they may reasonably have requested to enable them to pass upon
the matters referred to in this Section; and such counsel shall have rendered to
you such opinions as you may reasonably request.
(c) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date there shall not have been any change in the financial
condition, earnings, operations, business or business prospects of the Company
and its subsidiaries considered as one enterprise from that set forth in the
Registration Statement or Prospectus, which, in your sole judgment, is material
and adverse and that makes it, in your sole judgment, impracticable or
inadvisable to proceed with the offering of the Shares as contemplated by the
Prospectus.
(d) You shall have received on the Closing Date a written opinion of
Brown, Rudnick, Freed & Gesmer, counsel for the Company, dated the Closing Date
and addressed to the Placement Agents and Gilford to the effect that:
(i) The Company and each subsidiary (other than the Partnership)
has been duly incorporated and is validly existing as a corporation in
good standing under the laws of the jurisdiction of its incorporation,
and the Partnership is duly and validly organized and validly existing
as a limited partnership under the laws of the Commonwealth of
Massachusetts;
(ii) The Company and each subsidiary (other than the Partnership,
which has the partnership power and authority) has the corporate power
and authority to own, lease and operate its properties and to conduct
its business as described in the Prospectus;
(iii) The Company is duly qualified to do business as a foreign
corporation and is in good standing in the Commonwealth of
Massachusetts. To such counsel's knowledge, the Company does not own
or control, directly or indirectly, any corporation, association or
other entity other than ABIOMED Cardiovascular, Inc., ABIODENT, Inc.,
ABIOMED R&D, Inc., ABD Holding Company, Inc., Abiomed Research &
Development, Inc. and the Partnership;
(iv) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Prospectus under the caption
"Capitalization" as of the dates stated therein, the issued and
outstanding shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid and nonassessable,
and, to such counsel's knowledge, will not have been issued in
violation of or subject to any preemptive right, co-sale right,
registration right, right of first refusal or other similar right;
(v) All issued and outstanding shares of capital stock of each
subsidiary (other than the Partnership) of the Company have been duly
authorized and validly issued and are fully paid and nonassessable,
and, to such counsel's knowledge, have not been issued in violation of
or subject to any preemptive right, co-sale right, registration right,
right of first refusal or other similar right and, to such counsel's
<PAGE>
-18-
knowledge, are owned by the Company free and clear of any pledge,
lien, security interest, encumbrance, claim or equitable interest;
(vi) All partnership interests in the Partnership are duly and
validly created and issued limited partnership interests, and, to such
counsel's knowledge, have not been issued in violation of or subject
to any preemptive right, co-sale right, registration right, right of
first refusal or other similar right, and, to such counsel's
knowledge, the Company and its other subsidiaries own 61.7% of the
partnership interests in the Partnership, free and clear of any
pledge, lien, security interest, encumbrance, claim or equitable
interest;
(vii) The Shares have been duly authorized and, upon issuance and
delivery against payment therefor in accordance with the terms hereof,
will be duly and validly issued and fully paid and nonassessable, and
will not have been issued in violation of or subject to any preemptive
right, co-sale right, registration right, right of first refusal or
other similar right (other than such rights as are duly and validly
waived);
(viii) The Company has the corporate power and authority to enter
into this Agreement and to issue, sell and deliver to the Investors
the Shares to be issued and sold by it hereunder;
(ix) This Agreement has been duly authorized by all necessary
corporate action on the part of the Company, has been duly executed
and delivered by the Company and is a valid and binding agreement of
the Company and enforceable against the Company in accordance with its
terms;
(x) Such counsel has been orally advised by the Commission that
the Registration Statement has become effective under the Act and, to
such counsel's knowledge, no stop order suspending the effectiveness
of the Registration Statement has been issued and no proceedings for
that purpose have been instituted or are pending or threatened under
the Act;
(xi) The Registration Statement and the Prospectus, and each
amendment or supplement thereto (other than the financial statements
(including supporting schedules) and financial and statistical
information derived therefrom as to which such counsel need express no
opinion), as of the effective date of the Registration Statement,
complied as to form in all material respects with the requirements of
the Act and the applicable Rules and Regulations; and each of the
Incorporated Documents (other than the financial statements (including
supporting schedules) and the financial and statistical information
derived therefrom as to which such counsel need express no opinion)
complied when filed pursuant to the Exchange Act as to form in all
material respects with the requirements of the Exchange Act and the
applicable rules and regulations of the Commission thereunder;
<PAGE>
-19-
(xii) The terms and provisions of the capital stock of the
Company conform in all material respects to the description thereof
contained in the Registration Statement and the Prospectus, and the
statements under the captions "Capitalization" and "Description of
Capital Stock," to the extent that they constitute summaries of
documents referred to therein or matters of law or legal conclusions,
have been reviewed by such counsel, are accurate in all material
respects and fairly present the matters set forth therein; and the
forms of certificates evidencing the Common Stock and filed as
exhibits to the Registration Statement comply with Delaware law;
(xiii) The description in the Registration Statement and the
Prospectus of the charter and bylaws of the Company and of statutes
are accurate in all material respects and fairly present the
information required to be presented by the Act and the applicable
Rules and Regulations with respect thereto;
(xiv) To such counsel's knowledge, there are no agreements,
contracts, leases or documents to which the Company is a party of a
character required to be described or referred to in the Registration
Statement or Prospectus or any Incorporated Document or to be filed as
an exhibit to the Registration Statement or any Incorporated Document
which are not described or referred to therein or filed as required;
(xv) The performance of this Agreement and the consummation of
the transactions herein contemplated (other than performance of the
Company's indemnification and contribution obligations hereunder,
concerning which no opinion need be expressed) will not (a) result in
any violation of the Company's charter or bylaws or (b) to such
counsel's knowledge, result in a material breach or violation of any
of the terms and provisions of, or constitute a default under, any
bond, debenture, note or other evidence of indebtedness, or any lease,
contract, indenture, mortgage, deed of trust, loan agreement, joint
venture or other agreement or instrument known to such counsel to
which the Company is a party or by which its properties are bound, or
any applicable statute, rule or regulation known to such counsel
(other than state securities or Blue Sky laws or applicable anti-fraud
provisions of federal securities laws, as to which such counsel need
express no opinion except as otherwise set forth herein) or, to such
counsel's knowledge, any law, order, writ, injunction, judgment or
decree of any court, government or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries, or over any
of their properties or operations;
(xvi) No consent, approval, authorization or order of or
qualification with any court, government or governmental agency or
body having jurisdiction over the Company or any of its subsidiaries,
or over any of their properties or operations is necessary in
connection with the consummation by the Company of the transactions
herein contemplated, except such as have been obtained under the Act
and from the Nasdaq National Market or such as may be required under
state or other securities
<PAGE>
-20-
or Blue Sky laws in connection with the purchase and the placement of
the Shares by the Placement Agents and Gilford;
(xvii) To such counsel's knowledge, there are no legal or
governmental proceedings pending or threatened against the Company or
any of its subsidiaries of a character required to be disclosed in the
Registration Statement or the Prospectus or any Incorporated Document
by the Act or the Rules and Regulations or by the Exchange Act or the
applicable rules and regulations of the Commission thereunder, other
than those described therein;
(xviii) To such counsel's knowledge, neither the Company nor any
of its subsidiaries is presently in material violation of its
respective charter or bylaws;
(xix) To such counsel's knowledge, except as set forth in the
Registration Statement and Prospectus and any Incorporated Document,
no holders of Common Stock or other securities of the Company have
registration rights with respect to securities of the Company and no
holders of securities of the Company have rights known to such counsel
to registration of such shares of Common Stock or other securities
because of the filing of the Registration Statement by the Company;
and
(xx) Upon the delivery of and payment for the Shares as
contemplated in this Agreement, each of the Investors will receive
valid marketable title to the Shares purchased by it from Company,
free and clear of any pledge, lien, security interest, encumbrance,
claim or equitable interest. In rendering such opinion, such counsel
may assume that the Investors purchased in good faith and without
notice of any defect in the title of the Shares being purchased from
the Company.
In addition, such counsel shall state that such counsel has participated in
conferences with officials and other representatives of the Company, the
Placement Agents, Placement Agents' Counsel and the independent certified public
accountants of the Company, at which such conferences the contents of the
Registration Statement and Prospectus and related matters were discussed, and
although they are not passing upon and do not assume responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement or the Prospectus (except as specifically provided
above), nothing has come to the attention of such counsel which leads them to
believe that, at the time the Registration Statement became effective and at all
times subsequent thereto up to and on the Closing Date, the Registration
Statement and any amendment or supplement thereto (other than the financial
statements including supporting schedules and other financial and statistical
information derived therefrom and other financial or statistical data, as to
which such counsel need express no comment) contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, or at the Closing
Date, the Registration Statement, the Prospectus and any amendment or supplement
thereto (except as aforesaid) contained any untrue statement of a material fact
or omitted to state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading. Such
counsel shall also state that, to its knowledge, the conditions for the use of
Form S-3 set forth in the General Instructions thereto have been satisfied.
<PAGE>
-21-
Counsel rendering the foregoing opinion shall not be required to opine as
to questions of law except for those involving the laws of the United States,
the Commonwealth of Massachusetts or the State of Delaware, and as to questions
of fact upon representations or certificates of officers of the Company, and of
government officials, in which case their opinion is to state that they are so
relying and that they are not aware of any material misstatement or inaccuracy
in any such opinion, representation or certificate. Copies of any opinion,
representation or certificate so relied upon shall be delivered to the Placement
Agents and to Placement Agents' Counsel.
(e) You shall have received on the Closing Date an opinion of Testa,
Hurwitz & Thibeault, LLP, in form and substance satisfactory to you, with
respect to the sufficiency of all such corporate proceedings and other legal
matters relating to this Agreement and the transactions contemplated hereby as
you may reasonably require, and the Company shall have furnished to such counsel
such documents as they may have requested for the purpose of enabling them to
pass upon such matters.
(f) You shall have received on the Closing Date the opinion of each of
Lahive & Cockfield, LLP and Wolf, Greenfield & Sachs, PC, patent counsel to the
Company, dated the Closing Date, in form and substance satisfactory to you and
addressed to you, to the effect that they serve as patent counsel to Company,
and addressing such other legal matters relating to this Agreement and the
transactions contemplated hereby as you may reasonably require.
(g) You shall have received on the Closing Date a letter from Arthur
Andersen LLP addressed to you, dated the Closing Date, confirming that they are
independent certified public accountants with respect to the Company within the
meaning of the Act and the applicable published Rules and Regulations and based
upon the procedures described in such letter delivered to you concurrently with
the execution of this Agreement (herein called the "Original Letter"), but
---------------
carried out to a date not more than five (5) business days prior to the Closing
Date, (i) confirming, to the extent true, that the statements and conclusions
set forth in the Original Letter are accurate as of the Closing Date, and (ii)
setting forth any revisions and additions to the statements and conclusions set
forth in the Original Letter which are necessary to reflect any changes in the
facts described in the Original Letter since the date of such letter, or to
reflect the availability of more recent financial statements, data or
information. The letter shall not disclose any change in the financial
condition, earnings, operations, business or business prospects of the Company
and its subsidiaries considered as one enterprise from that set forth in the
Registration Statement or Prospectus, which, in your sole judgment, is material
and adverse and that makes it, in your sole judgment, impracticable or
inadvisable to proceed with the public offering of the Shares as contemplated by
the Prospectus. The Original Letter from Arthur Andersen LLP shall be addressed
to or for the use of the Placement Agents and Gilford in form and substance
satisfactory to you and shall (i) represent, to the extent true, that they are
independent certified public accountants with respect to the Company within the
meaning of the Act and the applicable published Rules and Regulations, (ii) set
forth their opinion with respect to their examination of the consolidated
balance sheet of the Company as of March 31, 1997 and related consolidated
statements of operations, shareholders' investment, and cash flows for the
twelve (12) months ended March 31, 1997, (iii) state that Arthur Andersen LLP
has performed the procedures set out in Statement on Auditing
<PAGE>
-22-
Standards No. 71 for a review of interim financial information on the financial
statements for each of the quarters in the two-quarter period ended September
30, 1997 (the "Quarterly Financial Statements"), (iv) state that in the course
------------------------------
of such review, nothing came to their attention that leads them to believe that
any material modifications need to be made to any of the Quarterly Financial
Statements in order for them to be in compliance with generally accepted
accounting principles consistently applied across the periods presented, (v)
state that they reviewed the Company's system of internal accounting controls to
the extent they deemed necessary in establishing the scope of their examination
of the Company's consolidated financial statements as of March 31, 1997 and that
in connection therewith, they did not issue a letter to the Company stating that
they had discovered any weaknesses in internal controls that they considered to
be material weaknesses, and (vi) address other matters agreed upon by Arthur
Andersen LLP and you.
(h) You shall have received on the Closing Date a certificate of the
Company, dated the Closing Date, signed by the Chief Executive Officer and Chief
Financial Officer of the Company, to the effect that, and you shall be satisfied
that:
(i) The representations and warranties of the Company in this
Agreement are true and correct, as if made on and as of the Closing Date, and
the Company has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to the Closing
Date;
(ii) No stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are pending or threatened under the Act;
(iii) When the Registration Statement became effective and at all
times subsequent thereto up to the delivery of such certificate, the
Registration Statement and the Prospectus, and any amendments or supplements
thereto, contained all material information required to be included therein by
the Act and the Rules and Regulations or the Exchange Act and the applicable
rules and regulations of the Commission thereunder, as the case may be, and in
all material respects conformed to the requirements of the Act and the Rules and
Regulations or the Exchange Act and the applicable rules and regulations of the
Commission thereunder, as the case may be, the Registration Statement, and any
amendment or supplement thereto, did not and does not include any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, the
Prospectus, and any amendment or supplement thereto, did not and does not
include any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, and, since the effective date of the
Registration Statement, there has occurred no event required to be set forth in
an amended supplemented Prospectus which has not been so set forth;
(iv) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, there has not been (a) any
material adverse change in the financial condition, earnings, operations,
business or business prospects of the Company and its subsidiaries considered as
one enterprise, (b) any transaction that is material to the Company, except
transactions entered into in the ordinary course of business, (c) any
obligation,
<PAGE>
-23-
direct or contingent, that is material to the Company and its subsidiaries
considered as one enterprise, incurred by the Company, except obligations
incurred in the ordinary course of business, (d) any change in the capital stock
or outstanding indebtedness of the Company or any of its subsidiaries that is
material to the Company and its subsidiaries considered as one enterprise, (e)
any dividend or distribution of any kind declared, paid or made on the capital
stock of the Company, or (f) any loss or damage (whether or not insured) to the
property of the Company which has been sustained or will have been sustained
which has a material adverse effect on the financial condition, earnings,
exemptions, business or business prospects of the Company and its subsidiaries
considered as one enterprise; and
(v) The Shares have been approved for listing on the Nasdaq
National Market.
(i) The Company shall have furnished to you such further certificates
and documents as you shall reasonably request (including certificates of
officers of the Company) as to the accuracy of the representations and
warranties of the Company herein, as to the performance by the Company of its
obligations hereunder and as to the other conditions concurrent and precedent to
the obligations of the Placement Agents and Gilford hereunder.
All such opinions, certificates, letters and documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
to Placement Agents' Counsel. The Company will furnish you with such number of
conformed copies of such opinions, certificates, letters and documents as you
shall reasonably request.
7. Indemnification and Contribution.
--------------------------------
(a) The Company agrees to indemnify and hold harmless each Placement
Agent and Gilford against any losses, claims, damages or liabilities, to which
such Placement Agent or Gilford may become subject under the Act, the Exchange
Act or otherwise, specifically including, but not limited to, losses, claims,
damages or liabilities, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon (i) any breach of
any representation, warranty, agreement or covenant of the Company herein
contained, (ii) any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement or any amendment or supplement
thereto, or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or (iii) any untrue statement or alleged untrue statement of any
material fact contained in any Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and agrees to reimburse the Placement Agents and Gilford
for any legal or other expenses reasonably incurred by it in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company shall not be liable in any such case to the
- -------- -------
extent that any such loss, claim, damage, liability or action arises out of or
is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in the Registration Statement, such Preliminary Prospectus
or the Prospectus, or any such amendment or supplement thereto, in reliance
upon, and in
<PAGE>
-24-
conformity with, written information relating to a Placement Agent or Gilford
furnished to the Company by such Placement Agent or Gilford, directly or through
you, specifically for use in the preparation thereof and, provided further, that
-------- -------
the indemnity agreement provided in this Section 7(a) with respect to any
Preliminary Prospectus shall not inure to the benefit of the Placement Agents or
Gilford with respect to any Investor asserting any losses, claims, damages,
liabilities or actions based upon any untrue statement or alleged untrue
statement of material fact or omission or alleged omission to state therein a
material fact who purchased Shares, if a copy of the Prospectus in which such
untrue statement or alleged untrue statement or omission or alleged omission was
corrected had not been sent or given to such person within the time required by
the Act and the Rules and Regulations, unless such failure is the result of
noncompliance by the Company with Section 4(d) hereof.
The indemnity agreement in this Section 7(a) shall extend upon the same
terms and conditions to, and shall inure to the benefit of, each person, if any,
who controls any Placement Agent or Gilford within the meaning of the Act or the
Exchange Act. This indemnity agreement shall be in addition to any liabilities
which the Company may otherwise have.
(b) Each Placement Agent and Gilford, severally and not jointly,
agrees to indemnify and hold harmless the Company against any losses, claims,
damages or liabilities to which the Company may become subject under the Act or
otherwise, specifically including, but not limited to, losses, claims, damages
or liabilities, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon (i) any breach of any
representation, warranty, agreement or covenant of such Placement Agent or
Gilford, as the case may be, contained herein, (ii) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement or any amendment or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (iii) any untrue
statement or alleged untrue statement of any material fact contained in any
Preliminary Prospectus or the Prospectus or any amendment or supplement thereto,
or the omission or alleged omission to state therein a material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, in the case of subparagraphs (ii) and (iii) of
this Section 7(b) to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to the
Company by such Placement Agent or Gilford, as the case may be, specifically for
use in the preparation thereof, and agrees to reimburse the Company for any
legal or other expenses reasonably incurred by the Company in connection with
investigating or defending any such loss, claim, damage, liability or action.
The indemnity agreement in this Section 7(b) shall extend upon the same
terms and conditions to, and shall inure to the benefit of, each officer of the
Company who signed the Registration Statement and each director of the Company,
and each person, if any, who controls the Company within the meaning of the Act
or the Exchange Act. This indemnity agreement shall be in addition to any
liabilities which the Placement Agents and Gilford may otherwise have.
<PAGE>
-25-
(c) Promptly after receipt by an indemnified party under this Section
7 of notice of the commencement of any action, such indemnified party shall, if
a claim in respect thereof is to be made against any indemnifying party under
this Section 7, notify the indemnifying party in writing of the commencement
thereof. Indemnification provided for in Section 7(a) or 7(b) shall not be
available to any party who shall fail to give notice as provided in this Section
7(c) if the party to whom notice was not given was unaware of the proceeding to
which such notice would have related and was actually prejudiced by the failure
to give such notice; provided, however, that indemnification shall only be
-------- -------
limited to the extent of such prejudice; provided, further, that, the omission
-------- -------
so to notify the indemnifying party will not relieve it from any liability which
it may have to any indemnified party otherwise than under this Section 7. In
case any such action is brought against any indemnified party, and it notified
the indemnifying party of the commencement thereof, the indemnifying party will
be entitled to participate therein and, to the extent that it shall elect by
written notice delivered to the indemnified party promptly after receiving the
aforesaid notice from such indemnified party, to assume the defense thereof,
with counsel reasonably satisfactory to such indemnified party; provided,
--------
however, that if the defendants in any such action include both the indemnified
- -------
party and the indemnifying party and the indemnified party shall have received a
written opinion from counsel that there may be legal defenses available to it
and/or other indemnified parties which are different from or additional to those
available to the indemnifying party, the indemnified party or parties shall have
the right to select separate counsel to assume such legal defenses and to
otherwise participate in the defense of such action on behalf of such
indemnified party or parties. Upon receipt of notice from the indemnifying
party to such indemnified party of the indemnifying party's election so to
assume the defense of such action and approval by the indemnified party of
counsel, the indemnifying party will not be liable to such indemnified party
under this Section 7 for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the next preceding sentence (it being understood, however, that the
indemnifying party shall not be liable for the expenses of more than one
separate counsel (together with appropriate local counsel) approved by the
indemnifying party representing all the indemnified parties under Section 7(a)
or 7(b) hereof who are parties to such action), (ii) the indemnifying party
shall not have employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of
commencement of the action or (iii) the indemnifying party has authorized the
employment of counsel for the indemnified party at the expense of the
indemnifying party. In no event shall any indemnifying party be liable in
respect of any amounts paid in settlement of any action unless the indemnifying
party shall have approved the terms of such settlement; provided that such
--------
consent shall not be unreasonably withheld. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnification could have
been sought hereunder by such indemnified party, unless such settlement includes
an unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
(d) In order to provide for just and equitable contribution in any
action in which a claim for indemnification is made pursuant to this Section 7
but it is judicially determined (by the entry of a final judgment or decree by a
court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification
<PAGE>
-26-
may not be enforced in such case notwithstanding the fact that this Section 7
provides for indemnification in such case, all the parties hereto shall
contribute to the aggregate losses, claims, damages or liabilities to which they
may be subject (after contribution from others) in such proportion so that,
except as set forth in Section 7(e) hereof, each Placement Agent and Gilford is
responsible, severally and not jointly, for the portion represented by the
percentage that such Placement Agent's fee or Gilford's portion of such
Placement Agent's fee, as the case may be, bears to the gross proceeds received
by the Company (before deducting such Placement Agent's fee or Gilford's portion
of such Placement Agent's fee, as the case may be), and the Company is
responsible for the remaining portion, provided, however, that (i) the Placement
-------- -------
Agents and Gilford shall not be required to contribute any amount in excess of
the amount of such Placement Agent's fee or Gilford's portion of such Placement
Agent's fee, as the case may be (excluding expense reimbursements), received by
such Placement Agent or Gilford and (ii) no person guilty of a fraudulent
misrepresentation (within the meaning of Section 11 (f) of the Act) shall be
entitled to contribution from any person who is not guilty of such fraudulent
misrepresentation. The contribution agreement in this Section 7(d) shall extend
upon the same terms and conditions to, and shall inure to the benefit of, each
person, if any, who controls either Placement Agent, Gilford or the Company
within the meaning of the Act or the Exchange Act and each officer of the
Company who signed the Registration Statement and each director of the Company.
(e) The parties to this Agreement hereby acknowledge that they are
sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof including, without limitation, the
provisions of this Section 7, and are fully informed regarding said provisions.
They further acknowledge that the provisions of this Section 7 fairly allocate
the risks in light of the ability of the parties to investigate the Company and
its business in order to assure that adequate disclosure is made in the
Registration Statement and Prospectus as required by the Act and the Exchange
Act.
8. Representations, Warranties, Covenants and Agreements to Survive
----------------------------------------------------------------
Delivery. All representations, warranties, covenants and agreements of the
- --------
Company, the Placement Agents and Gilford herein or in certificates delivered
pursuant hereto, and the indemnity and contribution agreements contained in
Section 7 hereof shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of the Placement Agents or any
controlling person within the meaning of the Act or the Exchange Act, or by or
on behalf of the Company or any of its officers, directors or controlling
persons within the meaning of the Act or the Exchange Act, and shall survive the
delivery of the Shares to the Investors or termination of this Agreement.
9. Termination.
-----------
The Placement Agents shall have the right to terminate this Agreement and
to terminate any obligation of the Investors to purchase the Shares by giving
notice as hereinafter specified at any time at or prior to the Closing Date (i)
if the Company shall have failed, refused or been unable to perform any
agreement on its part to be performed, or because any other condition of the
Placement Agents' obligations hereunder required to be fulfilled is not
fulfilled, including, without limitation, any material adverse change in the
financial condition, earnings, operations,
<PAGE>
-27-
business or business prospects of the Company and its subsidiaries considered as
one enterprise from that set forth in the Registration Statement or Prospectus,
or (ii) if additional material governmental restrictions, not in force and
effect on the date hereof, shall have been imposed upon trading in securities
generally or minimum or maximum prices shall have been generally established on
the New York Stock Exchange, the American Stock Exchange or the Nasdaq National
Market, or trading in securities generally shall have been suspended on either
such exchange or on the Nasdaq National Market, or if a banking moratorium shall
have been declared by federal or New York authorities, or (iii) if the Company
shall have sustained a loss by strike, fire, flood, earthquake, accident or
other calamity of such character as to interfere materially with the conduct of
the business and operations of the Company and its subsidiaries considered as
one enterprise regardless of whether or not such loss shall have been insured,
or (iv) if there shall have been a material adverse change in the general
political or economic conditions or financial markets as in the reasonable
judgment of the Placement Agents makes it inadvisable or impracticable to
proceed with the offering, sale and delivery of the Shares, or (v) if there
shall have been an outbreak or escalation of hostilities or of any other
insurrection or armed conflict or the declaration by the United States of a
national emergency which, in the reasonable opinion of the Placement Agents,
makes it impracticable or inadvisable to proceed with the public offering of the
Shares as contemplated by the Prospectus. In the event of any termination
pursuant to subparagraph (i) above, the Company shall remain obligated to pay
costs and expenses pursuant to Sections 4(i), 5 and 7 hereof. Any termination
pursuant to any of subparagraphs (ii) through (v) above shall be without
liability of any party to any other party except as provided in Sections 5 and 7
hereof.
If you elect to terminate this Agreement as provided in this Section 9, you
shall promptly notify the Company by telephone, telecopy or telegram, in each
case confirmed by letter.
10. Notices. All notices or communications hereunder, except as herein
-------
otherwise specifically provided, shall be in writing and if sent to you shall be
mailed, delivered, telegraphed (and confirmed by letter) or telecopied (and
confirmed by letter) to BancAmerica Robertson Stephens, 555 California Street,
Suite 2600, San Francisco, California 94104, telecopier number (415) 781-0278,
Attention: General Counsel; and if sent to the Company, such notice shall be
mailed, delivered, telegraphed (and confirmed by letter) or telecopied (and
confirmed by letter) to 33 Cherry Hill Drive, Danvers, MA 01923, telecopier
number (978) 777-8411, Attention: Chief Executive Officer, with a copy to Brown,
Rudnick, Freed & Gesmer, P.C., One Financial Center, Boston, MA 02111,
telecopier number (617) 856-8201, Attention: Philip Flink.
11. Parties. This Agreement shall inure to the benefit of and be binding
-------
upon the Placement Agents, any sub-Placement Agent and the Company and their
respective executors, administrators, successors and assigns. Nothing expressed
or mentioned in this Agreement is intended or shall be construed to give any
person or corporation, other than the parties hereto and their respective
executors, administrators, successors and assigns, and the controlling persons
within the meaning of the Act or the Exchange Act, officers and directors
referred to in Section 7 hereof, any legal or equitable right, remedy or claim
in respect of this Agreement or any provisions herein contained, this Agreement
and all conditions and provisions hereof being intended to be and being for the
sole and exclusive benefit of the parties hereto and their
<PAGE>
-28-
respective executors, administrators, successors and assigns and said
controlling persons and said officers and directors, and for the benefit of no
other person or corporation.
12. Applicable Law. This Agreement shall be governed by, and construed in
--------------
accordance with, the internal laws of the State of California.
13. Counterparts. This Agreement may be signed in several counterparts,
------------
each of which will constitute an original.
[Remainder of page intentionally left blank]
<PAGE>
-29-
If the foregoing correctly sets forth the understanding between the Company
and the Placement Agents, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement between
the Company and the Placement Agents.
Very truly yours,
ABIOMED, INC.
By:
--------------------------------
Title:
-----------------------------
Accepted as of the date first above written:
BANCAMERICA ROBERTSON STEPHENS
By:
-----------------------------
Authorized Signatory
UBS SECURITIES LLC
By:
-----------------------------
Authorized Signatory
GILFORD SECURITIES INCORPORATED
By:
-----------------------------
Authorized Signatory
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the inclusion in this
registration statement on Form S-3 (File No. 333-36657) of our report dated
May 8, 1997 and to all references to our Firm included in or made a part of
this registration statement.
ARTHUR ANDERSEN LLP
Boston, MA
November 19, 1997
