<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 27, 1996
REGISTRATION NO. 333-______________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
INNERDYNE, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 87-0431168
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1244 Reamwood Avenue
Sunnyvale, California 94089
(408) 745-6010
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
WILLIAM G. MAVITY
President and Chief Executive Officer
InnerDyne, Inc.
1244 Reamwood Avenue
Sunnyvale, California 94089
(408) 745-6010
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
COPIES TO:
CATHRYN S. CHINN
LAURA A. GORDON
Venture Law Group
A Professional Corporation
2800 Sand Hill Road
Menlo Park, California 94025
(415) 854-4488
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE
TO THE PUBLIC: AS SOON AS PRACTICABLE AFTER THE EFFECTIVE
DATE OF THIS REGISTRATION STATEMENT.
If the securities only being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please 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. /X/
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==================================================================================================================================
Title of Each Class Proposed Maximum Proposed Maximum
of Securities Amount to be Offering Price Aggregate Amount of
to be Registered Registered Per Share(1) Offering Price(1) Registration Fee
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
$.01 par value per share............. 166,667 shs $3.25 $541,667.75 $186.78
==================================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of computing the amount of the registration
fee based on the average of the high and low prices of the Common Stock as
reported on the Nasdaq National Market on September 23, 1996 pursuant to Rule
457(c).
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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
<PAGE> 2
SUBJECT TO COMPLETION
INNERDYNE, INC.
166,667 SHARES
COMMON STOCK
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE
"RISK FACTORS" ON PAGE 3 OF THIS PROSPECTUS FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
All references herein to "InnerDyne" or the "Company" mean InnerDyne,
Inc. unless otherwise indicated by the context.
The 166,667 shares of InnerDyne Common Stock, $0.01 par value, covered
by this Prospectus (the "Shares") are offered for the account of a stockholder
of InnerDyne (the "Selling Stockholder"). The Shares were issued to the Selling
Stockholder in connection with a private placement of InnerDyne Common Stock on
April 17, 1996 (the "Private Placement"). For additional information concerning
this Private Placement, see "Issuance of Common Stock to Selling Stockholder."
The Selling Stockholder may sell the Shares from time to time on the
over-the-counter market in regular brokerage transactions, in transactions
directly with market makers or in certain privately negotiated transactions. See
"Plan of Distribution." The Selling Stockholder has advised the Company that no
sale or distribution other than as disclosed herein will be effected until after
this Prospectus shall have been appropriately amended or supplemented, if
required, to set forth the terms thereof. The Company will not receive any
proceeds from the sale of the Shares by the Selling Stockholder.
The Selling Stockholder may be deemed to be an "Underwriter," as such
term is defined in the Securities Act of 1933, as amended (the "Securities
Act").
On September 23, 1996, the last sale price of the Company's Common
Stock on the Nasdaq National Market was $3.25 per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
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Underwriting Proceeds to
Price to Discounts and Selling Stockholder
Public Commissions(1)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share See Text Above See Text Above See Text Above
Total
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) All expenses of registration of the Shares, estimated to be
approximately $18,750.00 shall be borne by the Company. Selling
commissions, brokerage fees, any applicable stock transfer taxes and
any fees and disbursements of counsel to the Selling Stockholder are
payable by the Selling Stockholder.
The date of this Prospectus is _______________, 1996
<PAGE> 3
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and in
accordance therewith files proxy statements, reports and other information with
the Securities and Exchange Commission (the "Commission"). This filed material
can be inspected and copied at regional offices of the Commission located at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511 and 7 World Trade Center, Suite 1300, New York, New York 10048; and
at the Public Reference Office of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549.
Copies of such material can be obtained from the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. The Company's Common Stock is quoted on the Nasdaq National
Market under the symbol "IDYN." Reports, proxy and information statements and
other information about the Company may be inspected at the Nasdaq National
Market, 1735 K Street, N.W., Washington, DC 20006-1506.
INFORMATION INCORPORATED BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated by reference in this Prospectus:
1. The Company's Annual Report on Form 10-KSB for the year ended
December 31, 1995.
2. The Company's definitive Proxy Statement dated April 26, 1996, filed
in connection with the Company's May 29, 1996 Annual Meeting of Stockholders.
3. The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996.
4. The Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1996.
5. The description of the Company's Common Stock set forth in the
Company's Registration Statement on Form 8-A filed with the Commission on
December 4, 1991.
All documents 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 of the Common Stock offered hereby shall be
deemed to be incorporated by reference in this Prospectus. Any statement
contained in a document incorporated by reference herein shall be deemed to be
modified or superseded for purposes hereof to the extent that a statement
contained herein (or in any other subsequently filed document which also is
incorporated by reference herein) modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed to constitute a
part hereof, except as so modified or superseded.
The Company will furnish without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, on the written or oral
request of such person, a copy of any or all of the documents incorporated by
reference, other than exhibits to such documents. Requests should be directed to
Scott Mayfield, InnerDyne, Inc., 5060 West Amelia Earhart Drive, Salt Lake City,
Utah 84116, telephone: (801) 350-3600.
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THE COMPANY
InnerDyne designs, develops, manufacturers and commercializes minimally
invasive surgical ("M.I.S.") access products incorporating its proprietary
radial dilation technology. The Company also has proprietary technology in the
areas of thermal ablation and biocompatible coatings, which it intends to
continue developing either internally or through strategic alliances. InnerDyne,
Inc. is the successor corporation resulting from the merger of CardioPulmonics,
Inc. and InnerDyne Medical, Inc. in April 1994.
The Company was incorporated in Utah in December 1985 as Midsix
Cardiovascular/Pulmonary, Inc. and changed its name in July 1987 to
CardioPulmonics, Inc., and in April 1994 to InnerDyne, Inc. The Company
reincorporated in Delaware in January 1992. The Company's principal executive
offices are located at 1244 Reamwood Avenue, Sunnyvale, California 94089 and its
telephone number at that location is (408) 745-6010.
RISK FACTORS
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. This
Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed below. The
Company undertakes no obligation to publicly release the result of any revisions
to these forward-looking statements which may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
History of Losses; Profitability Uncertain. InnerDyne has experienced
operating losses since its inception in December 1985. InnerDyne reported net
losses of $2.8 million on revenues of $3.6 million, $5.6 million on revenues of
$5.3 million, $9.9 million on revenues of $878,909 and $10.4 million on revenues
of $42,821 for the six months ended June 30, 1996 and the fiscal years ended
December 31, 1995, 1994 and 1993, respectively. As of June 30, 1996, InnerDyne
had an accumulated deficit of approximately $49.4 million.
In the future, the Company expects to incur substantial additional
operating losses and have cash outflow requirements as a result of expenditures
related to expansion of sales and marketing capability, expansion of
manufacturing capacity, research and development activities, compliance with
regulatory requirements, and possible investment in or acquisition of additional
complementary products, technologies or businesses. The timing and amounts of
these expenditures will depend upon many factors, such as the progress of the
Company's research and development, and will include factors that may be beyond
the Company's control, such as the results of product trials, the requirements
for and the time required to obtain regulatory approval for existing products
and any other products that may be developed or acquired, and the market
acceptance of the Company's products. The Company believes that it is likely to
incur operating losses at least through 1996. The cash needs of the Company have
changed significantly as a result of the merger completed during 1994 and the
support requirements of the added business focus areas. There can be no
assurance that the Company will not continue to incur losses, that the Company
will be able to raise cash as necessary to fund operations or that the Company
will ever achieve profitability.
Intense Competition. The primary industry in which the Company
competes, minimally invasive surgery, is dominated by two large, well-positioned
entities that are intensely competitive and frequently offer substantial
discounts as a competitive tactic. The United States Surgical Corporation ("U.S.
Surgical") is primarily engaged in developing, manufacturing and marketing
surgical wound management
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products, and has historically been the firm most responsible for providing
products that have led to the growth of the industry. U.S. Surgical supplies a
broad line of products to the M.I.S. industry, including products which
facilitate access, assessment and treatment. Ethicon Endo-Surgery ("Ethicon"), a
Johnson & Johnson company, has made a major investment in the M.I.S. field in
recent years and is one of the leading suppliers of hospital products in the
world. Furthermore, U.S. Surgical and Ethicon each utilize purchasing contracts
that link discounts on the purchase of one product to purchases of other
products in their broad product lines. Substantially all of the hospitals in the
United States have purchasing contracts with one or both of these entities.
Accordingly, customers may be dissuaded from purchasing access products from the
Company rather than U.S. Surgical or Ethicon to the extent it would cause them
to lose discounts on products that they regularly purchase from U.S. Surgical or
Ethicon.
The Company faces a formidable task in successfully gaining significant
revenues within the M.I.S. access market. In order to succeed, management
believes that the Company will need to objectively demonstrate substantial
product benefits, and its sales effort must be able to effectively present such
benefits to both clinicians and health care administrators. The M.I.S. access
market is dominated by U.S. Surgical and Ethicon. Both entities introduced new
access devices, trocars with added features, during the past two years. A number
of other entities participate in various segments of the M.I.S. access market.
There can be no assurance that the Company will be able to successfully
compete in the M.I.S. access market, and failure to do so would have a material
adverse effect on the Company's business, financial condition and results of
operations.
In the thermal ablation market, the Company considers its primary
competition to be current therapies for the treatment of excessive menstrual
bleeding, including drug therapy, dilatation and curettage, surgical endometrial
ablation and hysterectomy. The Company will also compete against other
techniques under development for the treatment of excessive menstrual bleeding,
including endometrial ablation techniques that employ radio frequency ("RF")
energy or freezing techniques ("cryoablation") and the uterine balloon therapy
system being clinically tested by GyneCare, Inc.
There are many large companies with significantly greater financial,
manufacturing, marketing, distribution and technical resources and clinical
experience than the Company that are developing and marketing devices for
surgical removal of the uterus, uterine fibroids, the endometrial lining of the
uterus and other uterine tissues or are developing non-surgical methods for
treating these conditions. Additionally, there are smaller companies developing
alternative methods of uterine tissue ablation that compete with the Company.
There can be no assurance that these companies will not succeed in developing
technologies and products that are more effective than any which have been or
are being developed by the Company or that would render the Company's
technologies or products obsolete or not competitive. Such competition could
have a material and adverse effect on the Company's business, financial
condition and results of operations. As a result of the entry of large and small
companies into the market, the Company expects competition for devices and
systems used to treat excessive menstrual bleeding to increase.
Continued Dependence on Step Products. To date, substantially all of
the Company's revenues from product sales are attributable to Step products, and
InnerDyne currently anticipates that sales of Step products will represent
substantially all of the Company's revenues in the immediate future.
Accordingly, the success of the Company is largely dependent upon increased
market acceptance of its Step product line by the medical community as a
reliable, safe and cost-effective access product for minimally invasive surgery.
InnerDyne commenced commercial sales of its Step product in the fourth quarter
of 1994, and to date sales have been made to a relatively limited number of
physicians and hospitals. Recommendations and endorsements by influential
members of the medical community are important for the increased market
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acceptance of the Company's Step products, and there can be no assurance that
existing recommendations or endorsements will be maintained or that new ones
will be obtained. Failure to increase market acceptance of the Company's Step
products would have a material adverse effect upon the Company's business,
financial condition and results of operations.
Reliance on Future Products and New Applications; Uncertainty of
Technology Changes. The medical device industry is characterized by innovation
and technological change. The Company has made significant investments in
researching and developing its proprietary technologies, including radial
dilation, thermal ablation and biocompatible coatings. During June 1996, the
Company commercially introduced on a limited basis the Reposable Step, and the
Company expects to commercially introduce on a limited basis sometime later in
1996 the MiniStep, each of which is a further enhancement of its Step product
line. The future success of the Company will depend in part on the timely
commercial introduction and market acceptance of these products. There can be no
assurance that these products will be timely introduced in commercial
quantities, if at all, or that such products will achieve market acceptance. A
failure by the Company to timely introduce such products or a failure of such
products to achieve market acceptance could have a material adverse effect on
the Company's business, financial condition and results of operations. The
future success of the Company will also depend upon, among other factors, its
ability to develop and gain regulatory clearance for new and enhanced versions
of products in a timely fashion, including, but not limited to, the EnAbl
Thermal Ablation System. There can be no assurance that the Company will be able
to successfully develop new products or technologies, manufacture new products
in commercial volumes, obtain regulatory approvals on a timely basis or gain
market acceptance of such products. Delays in development, manufacturing,
regulatory approval or market acceptance of new or enhanced products could have
a material adverse impact on the Company's business, financial condition and
results of operations.
Limited Manufacturing Experience; Compliance with Good Manufacturing
Practices. The Company initiated manufacture of commercial quantities of its
Step access device in its Salt Lake City, Utah facility during late 1994.
Accordingly, the Company has limited experience in manufacturing M.I.S. access
products or other products in commercial quantities at acceptable costs. The
Company's success will depend in part on its ability to manufacture its products
in compliance with the Good Manufacturing Practices ("GMP") regulations of the
United States Food and Drug Administration (the "FDA") and other regulatory
requirements in sufficient quantities and on a timely basis, while maintaining
product quality and acceptable manufacturing costs. Manufacturers often
encounter difficulties in scaling up production of new products, including
problems involving production yields, quality control and assurance, component
supply and shortages of qualified personnel. Failure to maintain production
volumes or increase production volumes in a timely or cost-effective manner
would have a material adverse effect on the Company's business, financial
condition and results of operations.
Potential Fluctuations in Operating Results. The Company's quarterly
operating results have in the past fluctuated and will continue to fluctuate
significantly in the future depending on the timing and shipment of product
orders, new product introductions and changes in pricing policies by the Company
or its competitors, the timing and market acceptance of the Company's new
products and product enhancements, the continued market acceptance of
InnerDyne's Step product line by the medical community, the Company's product
mix, the mix of distribution channels through which the Company's products are
sold, the extent to which the Company recognizes licensing revenues during a
quarter, and the Company's ability to obtain sufficient supplies of sole or
limited source components for its products. In particular, fluctuations in
production volumes affect gross margins from quarter to quarter. Furthermore,
gross margins can fluctuate from quarter to quarter to the extent the Company
recognizes license revenue during a quarter because the Company may derive
differing gross margins from license revenue than from
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product sales. In response to competitive pressures or new product
introductions, the Company may take certain pricing or other actions that could
materially and adversely affect the Company's operating results. In addition,
new product introductions by the Company could contribute to quarterly
fluctuations in operating results as orders for new products commence and orders
for existing products decline.
The Company's expense levels are based, in part, on its expectations of
future revenues. Because a substantial portion of the Company's revenue in each
quarter normally results from orders booked and shipped in the final weeks of
that quarter, revenue levels are extremely difficult to predict. If revenue
levels are below expectations, net income will be disproportionately affected
because only a small portion of the Company's expenses varies with its revenue
during any particular quarter. In addition, the Company typically does not
operate with any material backlog as of any particular date.
As a result of the foregoing factors and potential fluctuations in
operating results, results of operations in any particular quarter should not be
relied upon as an indicator of future performance. In addition, in some future
quarter the Company's operating results may be below the expectations of public
market analysts and investors. In such event, the price of the Company's Common
Stock would likely be materially and adversely affected.
Limited Sales, Marketing and Distribution Experience. InnerDyne began
commercial sales of its first M.I.S. access product in the fourth quarter of
1994 and, therefore, has limited sales, marketing and distribution experience.
The Company is marketing its M.I.S. access products mainly to general surgeons
and gynecologists. In the United States, InnerDyne markets its products
primarily through direct representatives who are employed by the Company within
selected geographical areas and a network of independent sales representatives
who typically sell other complementary M.I.S. products to the same customer
base. If the need arises, the Company may expand its sales force, which will
require recruiting and training additional personnel. There can be no assurance
that the Company will be able to recruit and train such additional personnel in
a timely fashion. Loss of a significant number of InnerDyne's current sales
personnel or independent sales representatives, or failure to attract additional
personnel, could have a material adverse effect on the Company's business,
financial condition and results of operations.
The Company markets its products outside of the United States through
international distributors in selected foreign countries after regulatory
approvals, if necessary, have been obtained. Although InnerDyne currently has
relationships with a limited number of international distributors, there can be
no assurance that the Company will be able to build a network of international
distributors capable of effectively marketing its M.I.S. access products or that
such distributors will generate significant sales of such products. The Company
has limited experience in marketing its products and faces substantial
competition from well-entrenched and formidable competitors. As a result, there
can be no assurance that the Company will successfully achieve acceptable levels
of product sales at prices which provide an adequate return. Failure to do so
would have a material adverse effect on the Company's business, financial
condition and results of operations.
Patents and Proprietary Rights. The Company's success will depend in
large part on its ability to obtain patent protection for products and
processes, to preserve its trade secrets and to operate without infringing the
proprietary rights of third parties. Although InnerDyne has obtained certain
patents and applied for additional United States and foreign patents covering
certain aspects of its technology, no assurance can be given that any additional
patents will be issued or that the scope of any patent protection will exclude
competitors or provide a competitive advantage, or that any of the Company's
patents will be held valid if subsequently challenged. The validity and breadth
of claims covered in medical technology patents involves complex legal and
factual questions and therefore may be highly uncertain. InnerDyne
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also relies upon unpatented trade secrets, and no assurance can be given that
others will not independently develop or otherwise acquire substantially
equivalent trade secrets. In addition, whether or not the Company's patents are
issued, others may hold or receive patents that contain claims having a scope
that covers products developed by InnerDyne.
There has been substantial litigation regarding patent and other
intellectual property rights in the medical device industry, and companies in
the medical device industry have used litigation to gain competitive advantage.
Litigation involving the Company would result in substantial cost and diversion
of management attention from the day-to-day operation of the business, but could
be necessary to enforce patents issued to the Company, to protect trade secrets
and other specialized knowledge unknown to outside parties, to defend the
Company against claimed infringement of the rights of others or to determine the
scope and validity of the proprietary rights of others. An adverse determination
in litigation could subject the Company to significant liabilities to third
parties, could require the Company to seek licenses from third parties under
less favorable terms than might otherwise be possible and could prevent the
Company from manufacturing, selling or using its products, any of which could
have a material adverse effect on the Company's business, financial condition
and results of operations.
The Company has in the past, and may in the future, receive
correspondence from third parties claiming that the Company's products or
technologies infringe intellectual property rights of such third parties. The
Company and its patent counsel thoroughly review such claims, and no such
outstanding claims currently exist. However, there can be no assurance that
InnerDyne will not receive additional claims that its products or technologies
infringe third party rights or that third parties will not litigate such claims.
Any such occurrence could have a material adverse effect on the Company's
business, financial condition and results of operations.
Government Regulation. Clinical testing, manufacture and sale of the
Company's products, including the Step product line, the EnAbl Thermal Ablation
System and the Company's biocompatible coatings technology, are subject to
regulation by the FDA and corresponding state and foreign regulatory agencies.
Pursuant to the Federal Food, Drug, and Cosmetic Act, and the regulations
promulgated thereunder, the FDA regulates the preclinical and clinical testing,
manufacture, labeling, distribution and promotion of medical devices.
Noncompliance with applicable requirements can result in, among other things,
fines, injunctions, civil penalties, recall or seizure of products, total or
partial suspension of production, failure of the government to grant premarket
clearance or premarket approval for devices, withdrawal of marketing approvals
and criminal prosecution. The FDA also has the authority to request recall,
repair, replacement or refund of the cost of any device manufactured or
distributed by the Company.
Before a new device can be introduced in the domestic market, the
manufacturer must generally obtain FDA clearance of 510(k) notification or
approval of a premarket approval ("PMA") application. 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
called for PMAs. The PMA process can be expensive, uncertain and lengthy, and a
number of devices for which FDA approval has been sought by other companies have
never been approved for marketing. Management expects that the EnAbl System will
be subject to the PMA approval process prior to marketing within the United
States. There can be no assurance that the Company will be able to obtain the
necessary regulatory approval on a timely basis, or at all, and a delay in
receipt of or failure to receive such approval would have a material adverse
effect on the Company's business, financial condition and results of operations.
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
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<PAGE> 9
medical device for which the FDA has not called for PMAs. For any of the
Company's devices cleared through the 510(k) process, modifications or
enhancements that could significantly affect the safety or effectiveness of the
device or that constitute a major change to the intended use of the device will
require a new 510(k) submission. There can be no assurance that the Company will
obtain 510(k) premarket clearance within a reasonable time frame, or at all, for
any of the devices or modifications for which it may file a 510(k).
The Company has received clearance from the FDA for the marketing of
its Step device for use in accessing the abdominal and thoracic cavities for the
performance of minimally invasive surgical procedures. The Company has also
received FDA clearance for the marketing of its Radial Expanding Dilator
("R.E.D.") product for use in the areas of gastrostomy, cystostomy,
cholecystotomy, the dilation of biliary and urethral strictures, laparoscopy and
enterostomy. The Company has also received market clearance for alternative
versions of its Step and R.E.D. products, including products designed to employ
its radial dilation technology in vascular and orthopedic applications and for
biliary indications. Although the Company has been successful in preparing
requests for 510(k) clearance, there can be no assurance that 510(k) clearances
for future products or product modifications can be obtained in a timely manner
or at all, or that any existing clearance can be successfully maintained. A
delay in receipt of, or failure to receive or maintain, such clearances would
have a material adverse effect on the Company's business, financial condition
and results of operations. Although the Company is strictly limited to marketing
its products for the indications for which they were cleared, physicians are not
prohibited by the FDA from using the products for indications other than those
cleared by the FDA. There can be no assurance that the Company will not become
subject to FDA action resulting from physician use of its products outside of
their approved indications.
The Company has made modifications to its cleared devices that the
Company believes do not require the submission of new 510(k) notices. There can
be no assurance, however, that the FDA would agree with any of the Company's
determinations not to submit a new 510(k) notice for any of these changes or
would not require the Company to submit a new 510(k) notice for any of the
changes made to the device. If the FDA requires the Company to submit a new
510(k) notice for any device modification, the Company may be prohibited from
marketing the modified device until the 510(k) notice is cleared by the FDA.
Any devices manufactured or distributed by the Company pursuant to FDA
clearance or approval are subject to pervasive and continuing regulation by the
FDA and certain state agencies and various foreign governments. Manufacturers of
medical devices for marketing in the United States are required to adhere to
applicable regulations setting forth detailed GMP requirements, which include
testing, control and documentation requirements. Manufacturers must also comply
with Medical Device 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, would be likely to cause or contribute to a death or serious
injury.
The Company is registered as a manufacturer of medical devices with the
FDA. The Company is subject to routine inspection by the FDA and certain state
agencies for compliance with GMP requirements, MDR requirements and other
applicable regulations.
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Failure of the Company to maintain satisfactory GMP, MDR or other applicable
regulatory compliance could have a significant adverse effect on the Company's
ability to continue to manufacture and distribute its products and, in the most
serious cases, could result in the seizure or recall of products, injunction
and/or civil fines.
Dependence on Sole Sources. The materials utilized in the Company's
M.I.S. products consist of both standard and custom components that are
purchased from a variety of independent sources. The plastic parts used in the
Step product are injection molded by outside vendors. The majority of these
parts are produced utilizing molds that have been specially machined for and are
owned by the Company. Although the Company maintains significant inventories of
molded parts, any inability to utilize these molds for any reason might have a
material adverse effect upon the Company's ability to meet its customers' demand
for product. In addition to plastic parts produced from injection molds owned by
the Company, a number of other materials are available only from a limited
number of sources at the present time, including the sheath component of the
Company's Step products. Efforts to identify and qualify additional sources of
this sheath component and other key materials and components are underway.
Although InnerDyne believes that alternative sources of these components can be
obtained, internal testing and qualification of substitute vendors could require
significant lead times and additional regulatory submissions. There can be no
assurance that such internal testing and qualification or additional regulatory
approvals will be obtained in a timely fashion, if at all. Any interruption of
supply of raw materials could have a material adverse effect on the Company's
ability to manufacture its products, and therefore on its business, financial
condition and results of operations.
Uncertainty Relating to Third Party Reimbursement. In the United
States, health care providers, such as hospitals and physicians, that purchase
medical devices, such as the Company's products, generally rely on third-party
payors, principally federal Medicare, state Medicaid and private health
insurance plans, to reimburse all or part of the cost of the procedure in which
the medical device is being used. In addition, certain health care providers are
moving toward a managed care system in which such providers contract to provide
comprehensive health care for a fixed cost per person. Managed care providers
are attempting to control the cost of health care by authorizing fewer elective
surgical procedures. The Company is unable to predict what changes will be made
in the reimbursement methods utilized by third-party health care payors.
Furthermore, the Company could be adversely affected by changes in reimbursement
policies of governmental or private health care payors, particularly to the
extent any such changes affect reimbursement for procedures in which the
Company's products are used. Failure by physicians, hospitals and other users of
the Company's products to obtain sufficient reimbursement from health care
payors for procedures in which the Company's products are used or adverse
changes in governmental and private third-party payors' policies toward
reimbursement for such procedures would have a material adverse effect on the
Company's business, financial condition and results of operations.
If the Company obtains the necessary foreign regulatory approvals,
market acceptance of the Company's products in international markets would be
dependent, in part, upon the availability of reimbursement within prevailing
health care payment systems. Reimbursement and health care payment systems in
international markets vary significantly by country, and include both
government-sponsored
9
<PAGE> 11
health care and private insurance. The Company intends to seek international
reimbursement approvals, although there can be no assurance that any such
approvals will be obtained in a timely manner, if at all, and failure to receive
international reimbursement approvals could have an adverse effect on market
acceptance of the Company's products in the international markets in which such
approvals are sought.
Dependence on International Sales. In the future, the Company expects
to derive an increasing portion of its revenue from international sales. To the
extent the Company's international sales increase in future periods, a
significant portion of the Company's revenues could be subject to the risks
associated with international sales, including economic or political
instability, shipping delays, changes in applicable regulatory policies,
fluctuations in foreign currency exchange rates and various trade restrictions,
all of which could have significant impact on the Company's ability to deliver
products on a competitive and timely basis. Future imposition of, or significant
increases in the level of, customs duties, import quotas or other trade
restrictions could have an adverse effect on the Company's business, financial
condition and results of operations. The regulation of medical devices,
particularly in the European Community, continues to expand, and there can be no
assurance that new laws or regulations will not have an adverse effect on the
Company.
Future Additional Capital Requirements; No Assurance Future Capital
Will be Available. The Company's capital requirements will depend on numerous
factors, including market acceptance and demand for its products; the resources
the Company devotes to the development, manufacture and marketing of its
products; the progress of the Company's clinical research and product
development programs; the receipt of, and the time required to obtain,
regulatory clearances and approvals; the resources required to protect the
Company's intellectual property; the resources expended, if any, to acquire
complementary businesses, products and technologies; and other factors. The
timing and amount of such capital requirements cannot be accurately predicted.
Funds may also be used for the acquisition of businesses, products and
technologies that are complementary to those of the Company. Consequently,
although the Company believes that the proceeds of its public offering completed
during the second quarter of 1996, together with revenues, credit facilities and
other sources of liquidity, will provide adequate funding for its capital
requirements through at least 1997, the Company may be required to raise
additional funds through public or private financings, collaborative
relationships or other arrangements. There can be no assurance that the Company
will not require additional funding or that such additional funding, if needed,
will be available on terms attractive to the Company, or at all. Any additional
equity financings may be dilutive to stockholders, and debt financing, if
available, may involve restrictive covenants.
Dependence on Key Personnel. InnerDyne is dependent upon a limited
number of key management and technical personnel. The Company's future success
will depend in part upon its ability to attract and retain highly qualified
personnel. The Company will compete for such personnel with other companies,
academic institutions, government entities and other organizations. There can be
no assurance that the Company will be successful in hiring or retaining
qualified personnel. The loss of key personnel or the inability to hire or
retain qualified personnel could have a material adverse effect on the Company's
business, financial condition and results of operations.
Product Liability; Claims in Excess of Insurance Coverage. The
development, manufacture and sale of the Company's products entail the risk of
product liability claims, involving both potential financial exposure and
associated adverse publicity. The Company's current product liability insurance
coverage
10
<PAGE> 12
limits are $1,000,000 per occurrence and $2,000,000 in the aggregate, and there
can be no assurance that such coverage limits are adequate to protect the
Company from any liabilities it might incur in connection with the development,
manufacture and sale of its current and potential products. In addition, the
Company may require increased product liability insurance. Product liability
insurance is expensive and may not be available in the future on acceptable
terms, or at all. In addition, if such insurance is available, there can be no
assurance that the limits of coverage of such policies will be adequate. A
successful product liability claim in excess of the Company's insurance coverage
could have a material adverse effect on the Company's business, financial
condition and results of operations.
Stock Price Volatility. The stock market in general and stocks of
medical device companies in particular, have from time to time experienced
significant price and volume fluctuations that are unrelated to the operating
performance of particular companies. These broad market fluctuations may
adversely affect the market price of the Company's Common Stock. In addition,
the market price of the Common Stock has been and is likely to continue to be
highly volatile. Factors such as fluctuations in the Company's operating
results, announcements of technological innovations or new products by the
Company or its competitors, FDA and international regulatory actions, actions
with respect to reimbursement matters, developments with respect to patents or
proprietary rights, public concern as to the safety of products developed by the
Company or others, changes in health care policy in the United States and
internationally, changes in stock market analyst recommendations regarding the
Company, other medical device companies or the medical device industry generally
or general market conditions may have a significant effect on the market price
of the Common Stock.
Environmental Regulations. The Company is subject to a variety of
local, state and federal governmental regulations relating to the use, storage,
handling, manufacture and disposal of toxic and other hazardous substances used
to manufacture the Company's products. The Company believes that it is currently
in compliance in all material respects with applicable governmental
environmental regulations. Nevertheless, the failure by the Company to comply
with current or future environmental regulations could result in the imposition
of substantial fines on the Company, suspension of production, alteration of its
manufacturing processes or cessation of operations. Compliance with such
regulations could require the Company to acquire expensive remediation equipment
or to incur substantial expenses. Any failure by the Company to control the use,
disposal, removal or storage of, or to adequately restrict the discharge of, or
assist in the cleanup of, hazardous or toxic substances, could subject the
Company to significant liabilities, including joint and several liability under
certain statutes. The imposition of such liabilities could have a material
adverse effect on the Company's business, financial condition and results of
operations.
Anti-Takeover Effect of Certain Charter Provisions of Common Stock.
Provisions of the Company's Certificate of Incorporation that allow the Company
to issue Preferred Stock without any vote or further action by the stockholders
as well as the fact that the Company's Certificate of Incorporation does not
permit stockholders to cumulate votes in the election of directors may have the
effect of making it more difficult for a third party to acquire, or of
discouraging a third party from attempting to acquire, control of the Company.
Certain provisions of Delaware law applicable to the Company could also delay or
make more difficult a merger, tender offer or proxy contest involving the
Company, including Section 203, which prohibits a Delaware corporation from
engaging in any business combination with any interested stockholder for a
period of three years unless certain conditions are met. The possible issuance
of Preferred Stock, the inability of stockholders to cumulate votes in the
election of directors and provisions of Delaware law could have the effect of
delaying, deferring or preventing a change in control of the Company, including
without limitation, discouraging a proxy contest or making more difficult the
acquisition of a substantial block of the Company's Common Stock. The possible
issuance of Preferred
11
<PAGE> 13
Stock and these provisions could also limit the price that investors might be
willing to pay in the future for shares of the Company's Common Stock.
Lack of Dividends. The Company has not paid any dividends and does not
anticipate paying any dividends in the foreseeable future.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 145 of the Delaware General Corporation Law authorizes a court
to award, or a corporation's Board of Directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933, as amended (the "Securities
Act"). Article Tenth of the Company's Amended and Restated Certificate of
Incorporation and Article VI of the Company's Bylaws provide for indemnification
of its directors, officers, employees and other agents to the maximum extent
permitted by law. In addition, the Company has entered into Indemnification
Agreements with its officers and directors and maintains director and officer
liability insurance.
ISSUANCE OF COMMON STOCK TO SELLING STOCKHOLDER
On April 17, 1996, InnerDyne privately placed 166,667 shares of its
Common Stock to the Selling Stockholder pursuant to the terms of a Common Stock
Purchase Agreement dated as of April 17, 1996 by and between InnerDyne and the
Selling Stockholder. This Prospectus covers the 166,667 shares of InnerDyne
Common Stock issued in the Private Placement to the Selling Stockholder.
PLAN OF DISTRIBUTION
The Selling Stockholder may sell the Shares in whole or in part, from
time to time on the over-the-counter market at prices and on terms prevailing at
the time of any such sale. Any such sale may be made in broker's transactions
through broker-dealers acting as agents, in transactions directly with market
makers or in privately negotiated transactions where no broker or other third
party (other than the purchaser) is involved. The Selling Stockholder will pay
selling commissions or brokerage fees, if any, with respect to the sale of the
Shares in amounts customary for the type of transaction effected. The Selling
Stockholder will also pay all applicable transfer taxes and all fees and
disbursements of counsel for the Selling Stockholder incurred in connection with
the sale of shares.
The Selling Stockholder has advised the Company that during such time
as the Selling Stockholder may be engaged in the attempt to sell Shares
registered hereunder, it will:
(i) not engage in any stabilization activity in connection with any of
the Company's securities;
(ii) cause to be furnished to each person to whom Shares included
herein may be offered, and to each broker-dealer, if any, through whom Shares
are offered, such copies of this Prospectus, as supplemented or amended, as may
be required by such person;
(iii) not bid for or purchase any of the Company's securities or any
rights to acquire the Company's securities, or attempt to induce any person to
purchase any of the Company's securities or rights to acquire the Company's
securities other than as permitted under the Exchange Act;
12
<PAGE> 14
(iv) not effect any sale or distribution of the Shares until after the
Prospectus shall have been appropriately amended or supplemented, if required,
to set forth the terms thereof; and
(v) effect all sales of Shares in broker's transactions through
broker-dealers acting as agents, in transactions directly with market makers or
in privately negotiated transactions where no broker or other third party (other
than the purchaser) is involved.
The Selling Stockholder, and any other persons who participate in the
sale of the Shares, may be deemed to be "Underwriters" as defined in the
Securities Act. Any commissions paid or any discounts or concessions allowed to
any such persons, and any profits received on resale of the Shares, may be
deemed to be underwriting discounts and commissions under the Securities Act.
The Company has agreed to maintain the effectiveness of this
Registration Statement until such date as the Company shall be satisfied that
each holder of Shares can sell all of the Shares it holds in any three-month
period in compliance with Rule 144 promulgated under the Securities Act, but in
no event after January 1, 2001. No sales may be made pursuant to this Prospectus
after such date unless the Company amends or supplements this Prospectus to
indicate that it has agreed to extend such period of effectiveness.
The Company has agreed to indemnify the Selling Stockholder against
certain liabilities, including liabilities under the Securities Act.
SELLING STOCKHOLDER
The following table sets forth certain information as of September 15,
1996 with respect to the Selling Stockholder:
<TABLE>
<CAPTION>
Shares Beneficially Shares of Shares Beneficially
Owned Prior Common Stock Owned After
Name Of Selling Stockholder to the Offering(1) Offered Hereby(1) the Offering(1)(2)
--------------------------- ------------------ ----------------- ------------------
Number Percent Number Percent
------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Boston Scientific Corporation 166,667 * 166,667 -- *
</TABLE>
- ------------------------------
* Less than 1%
(1) Information with respect to beneficial ownership is based upon information
obtained from the Company's transfer agent and the Selling Stockholder.
(2) Assumes sale of all Shares offered hereby and no other purchases or sales
of InnerDyne Common Stock. See "Plan of Distribution."
The Company has entered into an agreement with the Selling Stockholder
covering the potential application and use of the Company's proprietary
biocompatible coating technologies with the Selling Stockholder's stents,
grafts, vena cava filters and other implantable medical devices.
13
<PAGE> 15
LEGAL MATTERS
Certain legal matters with respect to the legality of the issuance of
the Common Stock offered hereby will be passed upon for the Company by Venture
Law Group, A Professional Corporation, 2800 Sand Hill Road, Menlo Park,
California 94025.
EXPERTS
The financial statements of InnerDyne, Inc. as of December 31, 1995 and
1994, and for each of the years in the three-year period ended December 31, 1995
have been incorporated by reference herein and in the registration statement in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants incorporated by reference, and upon the authority of said firm as
experts in accounting and auditing.
14
<PAGE> 16
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses payable by the
Registrant in connection with the sale and distribution of the Common Stock
being registered. Selling commissions and brokerage fees and any applicable
transfer taxes and fees and disbursements of counsel for the Selling Stockholder
are payable by the Selling Stockholder. All amounts are estimates except the
registration fee.
<TABLE>
<CAPTION>
Amount
To be Paid
----------
<S> <C>
Registration Fee .............. 186.78
Legal Fees and Expenses ....... 10,000.00
Accounting Fees and Expenses .. 2,750.00
Miscellaneous ................. 5,813.22
----------
Total .................... $18,750.00
----------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law authorizes a court
to award, or a corporation's Board of Directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933. Article Tenth of the
Registrant's Amended and Restated Certificate of Incorporation and Article VI of
the Registrant's Bylaws provide for indemnification of its directors, officers,
employees and other agents to the maximum extent permitted by law. In addition,
the Registrant has entered into Indemnification Agreements with its officers and
directors and maintains director and officer liability insurance.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------ ----------------------
<S> <C>
4.1(1) Common Stock Purchase Agreement dated as of April 17, 1996 by and
between the Registrant and the purchaser named therein
5.1 Opinion of Venture Law Group, A Professional Corporation
23.1 Consent of KPMG Peat Marwick LLP, Independent Auditors (see page
II-5)
23.2 Consent of Counsel (included in Exhibit 5.1)
24.1 Power of Attorney (see page II-4)
</TABLE>
- ---------------------
(1) Incorporated by reference to Exhibit 10.2 filed in response to Item 7
"Financial Statements, Pro Forma Financial Information and Exhibits" of the
Registrant's Current Report on Form 8-K dated April 18, 1996.
II-1
<PAGE> 17
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement to include any
material information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment 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.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) That, 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 the initial bona
fide offering thereof.
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 provisions referred to in Item 15 above 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 Securities Act of 1933 and is, therefore, unenforceable. In the
event 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 against the Registrant by such director, officer
or controlling person in connection with the securities being registered
hereunder, 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 Securities Act of 1933 and will be governed by the
final adjudication of such issue.
II-2
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Sunnyvale, State of California, on the 27th day of
September 1996.
INNERDYNE, INC.
By: /s/ WILLIAM G. MAVITY
-------------------------------
William G. Mavity
President and Chief Executive
Officer
II-3
<PAGE> 19
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints, jointly and severally, William G.
Mavity and Robert A. Stern, and each of them acting individually, as his
attorney-in-fact, each with full power of substitution, for him in any and all
capacities, to sign any and all amendments to this Registration Statement
(including post-effective amendments), and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming our signatures as they may
be signed by our said attorney to any and all amendments to said Registration
Statement. Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE Title Date
- ----------------------------------- ----------------------------------------------- ------------------
<S> <C> <C>
/s/ WILLIAM G. MAVITY
--------------------------------
(William G. Mavity) President, Chief Executive Officer and Director September 27, 1996
(Principal Executive Officer)
/s/ ROBERT A. STERN
--------------------------------
(Robert A. Stern) Vice President and Chief Financial Officer September 27, 1996
(Principal Financial and Accounting Officer)
/s/ EDWARD W. BENECKE
--------------------------------
(Edward W. Benecke) Director September 27, 1996
/s/ ROBERT M. CURTIS
--------------------------------
(Robert M. Curtis) Director September 27, 1996
/s/ EUGENE J. FISCHER
--------------------------------
(Eugene J. Fischer) Director September 27, 1996
/s/ GUY P. NOHRA
--------------------------------
(Guy P. Nohra) Director September 27, 1996
/s/ STEVEN N. WEISS
--------------------------------
(Steven N. Weiss) Director September 27, 1996
</TABLE>
II-4
<PAGE> 20
INDEPENDENT AUDITOR'S CONSENT
We consent to incorporation by reference in the Registration Statement
on Form S-3 of InnerDyne, Inc. of our report dated March 15, 1996, relating to
the balance sheets of InnerDyne, Inc. as of December 31, 1995 and 1994, and the
related statements of operations, stockholders' equity, and cash flows for each
of the years in the three-year period ended December 31, 1995, which report
appears in the December 31, 1995 annual report on Form 10-K of InnerDyne, Inc.
San Francisco, California KPMG PEAT MARWICK LLP
September 25, 1996
II-5
<PAGE> 21
INNERDYNE, INC.
INDEX TO EXHIBITS
EXHIBIT
NUMBER
- ------
4.1(1) Common Stock Purchase Agreement dated as of April 17, 1996 by and
between the Company and the Selling Stockholder
5.1 Opinion of Venture Law Group, A Professional Corporation
23.1 Consent of KPMG Peat Marwick, Independent Auditors (see page II-5)
23.2 Consent of Counsel (included in Exhibit 5.1)
24.1 Power of Attorney (see page II-4)
- ---------------------
(1) Incorporated by reference to Exhibit 10.2 filed in response to Item 7
"Financial Statements, Pro Forma Financial Information and Exhibits" of
the Registrant's Current Report on Form 8-K dated April 18, 1996.
II-6
<PAGE> 1
EXHIBIT 5.1
September 27, 1996
InnerDyne, Inc.
1244 Reamwood Avenue
Sunnyvale, CA 94089
REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-3 to be filed by
you with the Securities and Exchange Commission on or about September 27, 1996
(the "Registration Statement") in connection with the registration under the
Securities Act of 1933, as amended, of a total of 166,667 shares of your Common
Stock (the "Shares") issued to a stockholder (the "Selling Stockholder") in a
private placement on April 17, 1996. As your legal counsel, we have examined the
proceedings taken in connection with the sale of the Shares to the Selling
Stockholder and are familiar with the proceedings proposed to be taken by you
and the Selling Stockholder in connection with the sale of the Shares under the
Registration Statement.
It is our opinion that the Shares are legally and validly issued, fully
paid and nonassessable and when resold in the manner referred to in the
Registration Statement, the Shares will be legally and validly issued, fully
paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever it appears in the
Registration Statement and any amendments to it.
Sincerely,
VENTURE LAW GROUP
A Professional Corporation
CSC
