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Pursuant to Rule 424(b)(3)
Registration No. 333-38482
PROSPECTUS
BIOSPHERE MEDICAL, INC.
2,032,255 SHARES OF COMMON STOCK
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The selling stockholders that we name on page 18 of this prospectus
are selling up to an aggregate of 2,032,255 shares of our common stock.
We have listed our common stock for trading on the Nasdaq
National Market under the symbol "BSMD." On August 11, 2000, our common
stock's last reported sale price on the Nasdaq National Market was $12.00 per
share.
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INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 3.
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The Securities and Exchange Commission and state securities regulators
have not approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
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The date of this prospectus is August 22, 2000
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TABLE OF CONTENTS
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WHO WE ARE ................................................................ 1
RISK FACTORS .............................................................. 3
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS ......................... 12
USE OF PROCEEDS ........................................................... 13
SELLING STOCKHOLDERS ...................................................... 13
PLAN OF DISTRIBUTION ...................................................... 16
LEGAL MATTERS ............................................................. 18
EXPERTS ................................................................... 18
WHERE YOU CAN FIND MORE INFORMATION ....................................... 18
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE ........................... 18
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WHO WE ARE
OUR COMPANY
We develop, market and manufacture innovative medical device
products for the treatment of hypervascularized tumors or arteriovenous
malformations using embolotherapy. Embolotherapy is a minimally invasive
procedure in which physicians inject materials that inhibit blood flow
through a hollow, flexible tube called a catheter into the blood vessels to
inhibit blood flow to tumors and arteriovenous malformations. By selectively
blocking the tumor's blood supply, embolotherapy attempts to cause the tumor
to shrink. We refer to these materials that inhibit blood flow as embolic
materials. Our lead product, Embosphere Microspheres, is an acrylic bead with
a proprietary design that physicians use as an embolic material.
Hypervascularized tumors are tumors that receive blood from a larger
number of blood vessels than the number of blood vessels supplying the tissue
surrounding the tumor. Arteriovenous malformations are abnormal connections
between arteries and veins, frequently characterized by a dense and
wide-spread network of interconnecting blood vessels.
We intend that our first products will target the treatment of
hypervascularized tumors. Hypervascularized tumors include some tumors
affecting the brain and spinal cord, tumors in the uterus, known as uterine
fibroids, and tumors associated with liver cancer. Our primary focus is on
commercializing our microspheres for the treatment of uterine fibroids. We
are also focusing on the development and commercialization of microspheres
for the treatment of liver cancer. Additionally, we are exploring and/or
developing microspheres for use in the treatment of a number of conditions,
including stress urinary incontinence, facial wrinkles, gastroesophageal
reflux disease, a condition characterized by the abnormal reverse flow of
stomach contents into the esophagus, and tissue repair.
In April 2000, the United States Food and Drug Administration, or
FDA, granted us clearance to market our Embosphere Microspheres product for
embolization of hypervascularized tumors and arteriovenous malformations. We
have commenced clinical testing under an investigational device exemption to
support an application for FDA approval of our Embosphere Microspheres for
the treatment of uterine fibroids. An investigational device exemption is a
regulatory exemption that the FDA grants to medical device manufacturers for
the purpose of conducting clinical studies. We intend, pending FDA clearance
and approval, that our first products will target uterine fibroids and liver
cancer. We do not anticipate that the FDA will grant us labeling approval for
use of our products in treating uterine fibroids and liver cancer before
2002, if at all.
We received CE Mark approval of our Embosphere Microspheres product
in the European Union in 1997. CE Mark Approval is a certification granted by
European regulatory bodies, or by some manufacturers with satisfactory
quality systems, that substantiates the compliance of products with specific
standards of quality and/or safety. We require this approval to commercialize
and sell our product in the European Union. In January 2000, we received
marketing approval of our Embosphere Microspheres product in Australia and
Canada. We expect to file for marketing approval in Japan for our Hepasphere
Microspheres product for the treatment of liver cancer within the next 24
months.
Radiologists specializing in the use of interventional devices to
deliver therapies in addition to diagnosing diseases, also known as
interventional radiologists, have performed embolotherapy procedures for over
20 years. However, the current embolic material that interventional
radiologists use, called polyvinyl alcohol, has many significant drawbacks,
including limited effectiveness, limited control, difficulty with use and
chronic inflammatory response. We believe our microspheres are a promising
new alternative to the current embolic material.
Based on the number of vials of Embosphere Microsphere product that
we have sold to date, we estimate that physicians have treated over 7,000
patients with our Embosphere Microspheres product outside of the United
States.
CORPORATE HISTORY
We incorporated in Delaware in December 1993. As of August 1,
2000, Sepracor Inc. beneficially owned approximately 56% of our outstanding
common stock. During 1999, we strategically refocused our business on the
commercialization of our microspheres for medical applications. In February
1999, we acquired a 51% ownership interest in Biosphere Medical S.A.
Biosphere Medical S.A. has the license to the embolotherapy device that is
now the main focus of our business. In May 1999, we sold substantially all of
our assets relating to our former core business, chromotography, and changed
our name to BioSphere Medical, Inc. In April 2000, we increased our ownership
interest in Biosphere Medical, S.A. to 85%. We have an option to acquire the
remaining 15% at a later date. We have incurred net losses in each year since
our inception, including net losses of approximately $4.6 million during 1999
and $3.6 million for the first half of 2000. At June 30, 2000, we had an
accumulated deficit of approximately $39.7 million. We expect to incur net
losses for the forseeable future although the amount of future losses and the
time we will require to reach profitability, if ever, are highly uncertain.
We maintain ur principal executive offices at 1050 Hingham Street,
Rockland, Massachusetts 02370, and our telephone number is (781) 681-7900.
Embosphere(R) is a registered trademark and BioSphere Medical(TM) and
HepaSphere(TM) are trademarks of BioSphere Medical, Inc.
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RISK FACTORS
AN INVESTMENT IN OUR COMMON STOCK INVOLVES SIGNIFICANT RISKS. YOU
SHOULD CAREFULLY CONSIDER THE FOLLOWING RISKS BEFORE YOU DECIDE TO BUY OUR
COMMON STOCK.
RISK RELATING TO OUR FUTURE PROFITABILITY
BECAUSE WE HAVE A HISTORY OF LOSSES AND OUR FUTURE PROFITABILITY IS UNCERTAIN,
OUR COMMON STOCK IS A HIGHLY SPECULATIVE INVESTMENT
We have incurred operating losses since our inception and, as of June
30, 2000, had an accumulated deficit of approximately $39.7 million. We expect
to spend substantial funds to continue research and product testing, to
establish sales, marketing, quality control, regulatory and administrative
capabilities, and for other general corporate purposes. We expect to incur
increasing losses over the next several years as we expand our commercialization
efforts.
We may never become profitable. If we do become profitable, we may
not remain profitable on a continuing basis. If we fail to become and remain
profitable then the market price of our common stock will decline and our
ability to raise capital and continue our operations will be impaired.
RISKS RELATING TO REGULATORY MATTERS
IF WE DO NOT OBTAIN THE REGULATORY APPROVALS REQUIRED TO MARKET AND SELL OUR
PRODUCTS, THEN OUR BUSINESS WILL BE UNSUCCESSFUL AND THE MARKET PRICE OF OUR
STOCK WILL SUBSTANTIALLY DECLINE
We are subject to governmental regulation by national and local
government agencies in the United States and abroad with respect to the
commercialization and sale of our products. We will incur significant time and
expense in our efforts to obtain the necessary regulatory approvals from these
agencies. We have not yet received all of the approvals we will require to
market and sell our products worldwide. For example, we have not yet received
FDA approval to market Embosphere Microspheres in the United States for use in
the embolization of uterine fibroids. In order to obtain approval for this
indication, the FDA will require us to undertake clinical trials, which may be
lengthy and expensive. If we do not receive required regulatory approval to
market our products, we will not be able to develop and commercialize our
products and become profitable, and the value of our common stock will
substantially decline.
IF THE FDA OR OTHER REGULATORY AGENCIES PLACE RESTRICTIONS ON, OR IMPOSE
ADDITIONAL APPROVAL REQUIREMENTS WITH RESPECT TO, PRODUCTS WE ARE THEN
MARKETING, WE MAY INCUR SUBSTANTIAL ADDITIONAL COSTS AND EXPERIENCE DELAYS OR
DIFFICULTIES IN CONTINUING TO MARKET AND SELL THESE PRODUCTS
Even if the FDA grants to us approval with respect to any of our
products, it may place substantial restrictions on the indications for which we
may market the product or to whom we may market the product. These restrictions
could result in us achieving less sales and lower revenues. For example, our
products are not specifically approved for labeling for use for uterine
fibroids, which is one of the uses for which we anticipate physicians may use
our
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products. If the FDA determines that we have made claims beyond those that they
have approved, then we will be in violation of the Federal Food, Drug, and
Cosmetic Act.
We may in the future make modifications to our Embosphere Microspheres
and we may be prohibited from marketing the modified product until we obtain FDA
clearance or approval, which could delay our ability to introduce product
modifications and enhancements into the market. Further, the FDA could in the
future promulgate a regulation requiring additional approvals of our product to
allow it to remain on the market. This requirement would likely require us to
conduct costly and lengthy clinical trials. If we fail to obtain the additional
approvals, the FDA would require us to remove our product from the United States
market.
Our legally-marketed products will be subject to continuing FDA
requirements relating to quality control, quality assurance, maintenance of
records, documentation, labeling and promotion of medical devices. We are also
required to submit medical device reports to the FDA to report device-related
deaths, serious injuries and malfunctions, the recurrence of which would be
likely to cause or contribute to a death or serious injury. These reports are
publicly available and, therefore, can become a basis for private tort suits,
including class actions, with respect to our products. Any of these suits would
be costly and time-consuming, could place further restrictions on our ability to
market and sell our product, and would divert our management's attention from
the continued development of our business.
IF WE FAIL TO COMPLY WITH REGULATORY LAWS AND REGULATIONS, WE WILL BE SUBJECT TO
ENFORCEMENT ACTIONS, WHICH WILL AFFECT OUR ABILITY TO MARKET AND SELL OUR
PRODUCTS AND MAY HARM OUR REPUTATION
If we fail to comply with applicable federal, state or foreign laws
or regulations, we could be subject to enforcement actions, such as product
recalls, the withdrawal of product approvals, civil and criminal penalties
and fines. If we are subject to any enforcement action, it could impede our
ability to develop, market and sell our products successfully and could harm
our reputation and lead to less acceptance of our products by the market.
IF WE ARE NOT ABLE TO SUCCESSFULLY COMPLETE OUR CLINICAL TRIALS, WE WILL NOT BE
ABLE TO DEVELOP AND COMMERCIALIZE OUR PRODUCTS
Although for planning purposes we forecast the timing of completion of
clinical trials, the actual timing can vary dramatically due to factors such as
delays, scheduling conflicts with participating clinicians and clinical
institutions, the rate of patient accruals and the uncertainties inherent in the
clinical trial process. In addition, because we have limited experience in
conducting clinical trials, we may rely on academic institutions or clinical
research organizations to conduct, supervise or monitor some or all aspects of
clinical trials involving our products. Accordingly, we have less control over
the timing and other aspects of these clinical trials than if
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we conducted them entirely on our own. As a result of these factors, we or third
parties may not successfully begin or complete our clinical trials and we may
not make regulatory submissions or receive required regulatory approvals to
commence or continue our clinical trials in the time periods we have forecasted,
if at all. If we or third parties fail to commence or complete, or experience
delays in, any of our planned clinical trials, then we are likely to incur
additional costs and delays in our product development programs, which could
cause our stock price to decrease.
RISKS RELATING TO OUR INDUSTRY, BUSINESS AND STRATEGY
IF THE MARKET IS NOT RECEPTIVE TO OUR EMBOSPHERE MICROSPHERES PRODUCT, OUR
BUSINESS PROSPECTS WILL BE SERIOUSLY HARMED
We only recently began selling our Embosphere Microspheres product,
which we have developed using new technologies and therapeutic approaches. Our
success will depend upon the medical community, patients and third party payors
accepting our Embosphere Microspheres product as clinically useful,
cost-effective and safe. In particular, our success will depend upon obstetrics
and gynecology physicians referring patients to interventional radiologists to
receive treatment using our products in lieu of, or in addition to, receiving
other forms of treatment which the obstetrics and gynecology physicians can
provide directly.
If the market determines or concludes that our product is not safe or
effective for any reason, we may be exposed to product liability claims, product
recalls and fines or other penalties and associated adverse publicity. In
addition, we have provided to our customers a satisfaction guarantee that
requires us to accept the return of any inventory and credit the entire amount
of the original order if a properly-trained customer is not satisfied with the
performance of our embospheres. If we experience adverse publicity or are
subject to product liability claims, excessive guarantee claims, recalls, fines
and the like, we will be unable to commercialize successfully our products and
achieve profitability.
IF WE EXPERIENCE DELAYS, DIFFICULTIES OR UNANTICIPATED COSTS IN ESTABLISHING THE
SALES, DISTRIBUTION AND MARKETING CAPABILITIES NECESSARY TO SUCCESSFULLY
COMMERCIALIZE OUR PRODUCTS, WE WILL HAVE DIFFICULTY MAINTAINING AND INCREASING
OUR SALES
We currently lack sales, distribution and marketing capabilities in the
United States and have only limited sales, distribution and marketing
capabilities in the European Union. It will be expensive and time-consuming for
us to develop a marketing and sales force and, consequently, we could be
required to delay our product launches. Moreover, we may choose or find it
necessary to enter into strategic partnerships to sell, market and distribute
our products. The terms of any partnership may not be favorable to us. We
currently rely on 17 distributors to sell our products outside of France. We may
not be able to provide adequate incentive to these distributors to promote our
products. If we are unable to successfully employ qualified marketing and sales
personnel and develop our sales and marketing capabilities, or if our
distributors fail to promote our products, we will have difficulty maintaining
and increasing our sales.
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IF WE ARE NOT BE ABLE TO COMPETE EFFECTIVELY, WE MAY EXPERIENCE DECREASED DEMAND
FOR OUR PRODUCTS AND PRICE REDUCTIONS
Our success depends upon our ability to develop and maintain a
competitive position in the embolotherapy market. We have many competitors in
the United States and abroad, including medical device and therapeutics
companies, universities and other private and public research institutions. Our
key competitors are Cordis Corporation, a Johnson & Johnson company, Boston
Scientific Corporation and Nycomed Amersham. These and many of our other
competitors have greater capabilities, experience and financial resources than
we do. As a result, they may develop products which compete with our Embosphere
Microspheres product more rapidly or at less cost than we can. Currently, the
primary products with which our Embosphere Microspheres compete in some
applications are polyvinyl alcohol, polymerizing gels and coils. In addition,
our competitors may develop new technologies that render our products obsolete
or otherwise noncompetitive. Any failure by us to compete effectively may result
in less demand for our products and impair our ability to become profitable.
IF WE DO NOT RETAIN OUR SENIOR MANAGEMENT AND OTHER KEY EMPLOYEES, WE MAY NOT BE
ABLE TO IMPLEMENT SUCCESSFULLY OUR BUSINESS STRATEGY
The loss of Jean-Marie Vogel, our Chairman, John M. Carnuccio, our
President and Chief Executive Officer, Jonathan McGrath, our Vice-President
Worldwide Research and Development or other key members of our staff could harm
us. Mr. Vogel is the only key employee with whom we currently have a long-term
employment agreement. We do not have key person life insurance policies on any
of our key employees. We also depend on our scientific collaborators and
advisors, all of whom have other commitments that may limit their availability
to us. Our success is substantially dependent on the ability, experience and
performance of these members of our senior management and other key employees,
scientific collaborators and advisors. Because of their ability and experience,
if we lose one or more of these individuals, our ability to implement
successfully our business strategy could be seriously harmed.
IF WE ARE COMPELLED TO ACQUIRE THE REMAINING INTEREST IN BIOSPHERE MEDICAL S.A.,
WE MAY BE REQUIRED TO INCUR INDEBTEDNESS OR MAKE A SIGNIFICANT CASH PAYMENT,
WHICH MAY RESULT IN A DECREASE IN AVAILABLE CASH FOR OUR OPERATIONS
We currently own 85% of the outstanding capital stock of Biosphere
Medical S.A. We have the right to acquire the remaining 15% of Biosphere Medical
S.A. in 2004. The purchase price that we are required to pay if we exercise this
right is equal to 15% of the aggregate sales of Biosphere Medical S.A. and sales
of our microspheres subject to our license agreement with Biosphere Medical S.A.
for the twelve-month period prior to the exercise of our right. In addition, the
holder of the remaining 15% of Biosphere Medical S.A. has a "put" right to
require us to purchase the remaining 15% in 2004. The purchase price that we are
required to pay if the minority holder exercises this put right is equal to 15%
of the aggregate sales of Biosphere Medical S.A. and sales of our microspheres
subject to our license agreement with Biosphere Medical S.A. for the nine-month
period prior to the exercise of the put right. In any event, the price that we
are required to pay if the minority holder exercises the put right shall not be
less than FF1,800,000 ($261,237 at June 30, 2000). If we are compelled by the
minority stockholder
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to acquire the minority interest at a future date, we could be required to make
a significant cash payment, which could result in us incurring debt or a
decrease in the cash available to us for our operations.
RISKS RELATING TO OUR FINANCIAL RESULTS AND NEED FOR FINANCING
WE WILL CONTINUE TO NEED SUBSTANTIAL ADDITIONAL FUNDS, AND IF ADDITIONAL CAPITAL
IS NOT AVAILABLE, WE MAY HAVE TO CURTAIL OR CEASE OUR OPERATIONS
We will need to raise additional funds to successfully develop and
commercialize our products. If we cannot raise more funds, we could be required
to reduce our capital expenditures, scale back our product development, reduce
our workforce and license to others products or technologies that we otherwise
would seek to commercialize ourselves. We may not receive additional funding on
reasonable terms or at all. Other than a $2.0 million credit line with a bank,
we have no committed source of capital. Sepracor is the guarantor of this credit
line. We have entered into a security agreement with Sepracor pursuant to which
we have pledged to Sepracor all of our assets, including our equity interest of
Biosphere Medical S.A., as collateral for Sepracor's guarantee to the bank. We
are likely to raise more money for working capital purposes by selling
additional capital stock, which is a common strategy for companies such as ours.
Any sales of additional shares of our capital stock are likely to dilute our
existing stockholders. Further, if we issue additional equity securities, the
new equity securities may have rights, preferences or privileges senior to those
of existing holders of our common stock. Alternatively, we may borrow money from
commercial lenders, possibly at high interest rates, which will increase the
risk of your investment in us.
IF OUR OPERATING RESULTS FLUCTUATE SIGNIFICANTLY FROM QUARTER TO QUARTER, THEN
OUR STOCK PRICE MAY DECLINE
Our operating results could fluctuate significantly from quarter to
quarter. These fluctuations may be due to several factors including the timing
and volume of customer orders for our Embosphere Microspheres, customer
cancellations, increased operating expenses, and general economic conditions. We
also expect that our operating results will be affected by seasonality, since we
expect our revenues to decline substantially in the third quarter of each year
from the first two quarters of each year because we do a significant percentage
of our business in the European Union, which typically experiences a slowdown of
business during August. Due to these fluctuations, our operating results in some
quarters may not meet the expectations of stock market analysts and investors.
In that case, our stock price would probably decline.
RISKS RELATING TO THE PRODUCTION AND SUPPLY OF OUR PRODUCTS
IF WE EXPERIENCE MANUFACTURING DELAYS OR INTERRUPTIONS IN PRODUCTION THEN WE MAY
EXPERIENCE CUSTOMER DISSATISFACTION AND OUR REPUTATION COULD SUFFER
If we fail to produce enough products at our own manufacturing facility
or at a third-party manufacturing facility, we may be unable to deliver products
to our customers on a timely basis, which could lead to customer dissatisfaction
and could harm our reputation and ability to compete. We currently produce all
of our Embosphere Microspheres products in one manufacturing facility in France.
We would likely experience significant delays or cessation in
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producing our products at this facility if a labor strike, natural disaster,
local or regional conflict or other supply disruption were to occur. If we are
unable to manufacture our products at our facility in France, we may be required
to enter into arrangements with one or more contract manufacturing companies. We
do not currently have contingency plans in place and, if alternate arrangements
are required, we could encounter delays or difficulties establishing
relationships with contract manufacturers or in meeting any additional
regulatory requirements which agencies such as the FDA may impose on us or any
third-party manufacturer. We may also be required to establish agreements on
terms that are unfavorable to us. In addition, if we are required to depend on
third-party manufacturers, our profit margins may be lower, which will make it
more difficult for us to achieve profitability.
BECAUSE WE RELY ON A LIMITED NUMBER OF SUPPLIERS WE MAY EXPERIENCE DIFFICULTY IN
MEETING OUR CUSTOMERS' DEMANDS FOR OUR PRODUCTS IN A TIMELY MANNER OR WITHIN
BUDGET
We currently purchase key components of our Embosphere Microspheres
from approximately 16 outside sources. Some of these components may only be
available to us through a few sources. We generally do not have long-term
agreements with any of our suppliers.
Our reliance on our suppliers exposes us to risks, including:
- the possibility that one or more of our suppliers could terminate
their services at any time without penalty;
- the potential inability of our suppliers to obtain required
components;
- the potential delays and expenses of seeking alternative sources of
supply;
- reduced control over pricing, quality and timely delivery due to the
difficulties in switching to alternative suppliers; and
- the possibility that one or more of our suppliers could fail to
satisfy any of the FDA's required current Good Manufacturing
Practices regulations.
Consequently, in the event that our suppliers delay or interrupt the
supply of components for any reason, our ability to produce and supply our
products could be impaired, which could lead to customer dissatisfaction.
RISKS RELATING TO INTELLECTUAL PROPERTY
IF WE ARE UNABLE TO OBTAIN PATENT PROTECTION FOR OUR DISCOVERIES, THE VALUE OF
OUR TECHNOLOGY AND PRODUCTS COULD DECLINE AND WE MAY NOT BE ABLE TO DEVELOP AND
COMMERCIALIZE OUR PRODUCTS, OR THE COST OF DOING SO MAY INCREASE
We may not obtain meaningful protection for our technology and products
with the patents and patent applications that we own or license relating to our
microsphere technology. In particular, our patents and patent applications may
not prevent others from designing products
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similar to or otherwise competitive with our Embosphere Microspheres and other
products commercialized by us. For example, one of the three patents related to
copolymers used to make our present Embosphere Microspheres will expire in June
2001. To the extent that our competitors are able to design products competitive
with ours without infringing our intellectual property rights, we may experience
less market penetration with our products and, consequently, we will have
decreased revenues.
We do not know whether competitors have similar United States patent
applications on file, since United States patent applications are secret until
issued. Consequently, the United States Patent and Trademark Office could
initiate interference proceedings involving our owned or licensed United States
patent applications or issued patents. Further, there is a substantial backlog
of patent applications at the United States Patent and Trademark Office, and the
approval or rejection of patent applications may take several years.
We have a license to technology invented by a Japanese inventor.
However, the license is limited to a single Japanese patent application. In
other words, corresponding United States and European patent applications were
not filed by this inventor. We intend to file patent applications directed to
improvements of this inventor's technology. However, patent applications may not
issue as patents, and these patents, if issued, may not provide us with
sufficient protection against competitors. Further, we may be required to obtain
additional licenses concerning the Japanese patent application, and any
licenses, if obtained, may not be on terms that are acceptable to us.
IF WE BECOME INVOLVED IN EXPENSIVE PATENT LITIGATION OR OTHER PROCEEDINGS TO
ENFORCE OUR PATENT RIGHTS, WE COULD INCUR SUBSTANTIAL COSTS AND EXPENSES OR
SUBSTANTIAL LIABILITY FOR DAMAGES OR BE REQUIRED TO STOP OUR PRODUCT DEVELOPMENT
AND COMMERCIALIZATION EFFORTS
In order to protect or enforce our patent rights, we may have to
initiate legal proceedings against third parties, such as infringement suits or
interference proceedings. By initiating legal proceedings to enforce our
intellectual property rights, we may also provoke these third parties to assert
claims against us. Intellectual property litigation is costly, and, even if we
prevail, could divert management attention and resources away from our business.
If we do not prevail in any litigation, in addition to any damages we
might have to pay, our patents could be narrowed, invalidated or rendered
unenforceable by a court. We could also be required to obtain a license. Any
required license may not be available to us on acceptable terms, or at all. In
addition, some licenses may be nonexclusive, and therefore, our competitors may
have access to the same technology licensed to us. If we fail to obtain a
required license or are unable to design around a patent, we may be unable to
sell some of our products, which would make it more difficult for us to achieve
profitability.
Our majority-owned French subsidiary, Biosphere Medical S.A., jointly
owns two United States patents and corresponding foreign patents relating to
with embolotheraphy L'Assistance Publique-Hopitaux De Paris, referred to as
AP-HP, a French public health establishment. Pursuant to the terms of a related
license agreement with AP-HP, Biosphere Medical S.A. may be required to seek
AP-HP's participation in any United States legal proceedings it initiates
against third parties to protect or enforce its rights under the jointly-owned
patents. If Biosphere
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Medical S.A. is not able to obtain the cooperation of AP-HP in any infringement
suit against a third party, then it may be unable to pursue a lawsuit and
enforce these patent rights.
IF ANY OF OUR LICENSES TO USE THIRD-PARTY TECHNOLOGIES IN OUR PRODUCTS ARE
TERMINATED, WE MAY BE UNABLE TO DEVELOP, MARKET AND SELL OUR PRODUCTS
We are dependent on various license agreements relating to each of our
current and proposed products that give us rights under intellectual property
rights of third parties. These licenses impose commercialization, sublicensing,
royalty, insurance and other obligations on us. Our failure, or any third
party's failure, to comply with the terms of any of these licenses could result
in us losing our rights to the license, which could result in us being unable to
develop, manufacture or sell products which contain the licensed technology.
RISKS RELATING TO OUR FOREIGN OPERATIONS
IF WE ARE UNABLE TO MEET THE OPERATIONAL, LEGAL AND FINANCIAL CHALLENGES THAT WE
WILL ENCOUNTER IN OUR INTERNATIONAL OPERATIONS, WE MAY NOT BE ABLE TO GROW OUR
BUSINESS
Our operations are currently conducted primarily through our French
subsidiary. Furthermore, we currently derive substantially all of our revenue
from the sale of our Embosphere Microspheres and other products in the European
Union. We are increasingly subject to a number of challenges which specifically
relate to our international business activities. Our international operations
may not be successful if we are unable to meet and overcome these challenges,
which would limit the growth of our business. These challenges include:
- failure of local laws to provide the same degree of protection
against infringement of our intellectual property;
- protectionist laws and business practices that favor local
competitors, which could slow our growth in international markets;
- potentially longer sales cycles to sell products, which could slow
our revenue growth from international sales;
- potentially longer accounts receivable payment cycles and
difficulties in collecting accounts receivable; and
- fluctuations in our future operating results due to foreign currency
translation gains and losses.
RISKS RELATING TO AN INVESTMENT IN OUR COMMON STOCK
BECAUSE THE MARKET PRICE OF OUR STOCK IS HIGHLY VOLATILE, YOUR INVESTMENT IN US
COULD RAPIDLY LOSE ITS VALUE AND WE MAY INCUR SIGNIFICANT COSTS FROM CLASS
ACTION LITIGATION
The market price of our stock is highly volatile. As a result, your
investment in us could rapidly lose its value. In addition, the stock market
often experiences extreme price and volume
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fluctuations, which affect the market price of many medical device companies and
which are often unrelated to the operating performance of these companies.
Recently, when the market price of a stock has been as volatile as our
stock price has been, holders of that stock have occasionally instituted
securities class action litigation against the company that issued the stock. If
any of our stockholders were to bring a lawsuit of this type against us, even if
the lawsuit is without merit, we could incur substantial costs in defending the
lawsuit. The lawsuit could also divert the time and attention of our management.
BECAUSE SEPRACOR INC. AND OUR EXECUTIVE OFFICERS AND DIRECTORS OWN A MAJORITY OF
OUR COMMON STOCK, THEY HAVE SUBSTANTIAL CONTROL OVER US
As of August 1, 2000, Sepracor Inc. beneficially owned approximately
56% of our outstanding common stock. In addition, as of August 1, 2000, our
executive officers and directors beneficially owned, in the aggregate,
approximately 9.2% of our outstanding common stock, excluding shares owned by
Sepracor which some of our directors and executive officers may be deemed to
beneficially own. Two of our directors are executive officers of Sepracor.
Sepracor and our executive officers and directors are able to control all
corporate actions requiring stockholder approval irrespective of how our other
stockholders may vote, including:
- the election of directors;
- the amendment of charter documents;
- the approval of mergers and other significant corporate
transactions, including a sale of substantially all of our assets;
and
- the defeat of any non-negotiated takeover attempt that might
otherwise benefit the public stockholders.
This ownership concentration could cause the market price of our common
stock to decline. In addition, conflicts of interest between us and Sepracor may
arise, including with respect to competitive business activities and control of
our management and our affairs.
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<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the documents that we incorporate by reference
in this prospectus contain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934 that involve substantial risks and uncertainties. We
may, in some cases use words such as "project," "plan," "could,"
"anticipate," "believe," "estimate," "expect," "intend," "may,"
"should," "will," and "would" or similar words that convey uncertainty of
future events or outcomes to identify forward-looking statements. The
important factors listed above in the section captioned "Risk Factors," as
well as any cautionary language in this prospectus and in the documents we
incorporate by reference, provide examples of risks, uncertainties and events
that may cause our actual results to differ materially from the expectations
described in these forward-looking statements. You should read these factors
and the other cautionary statements that we make in this prospectus and in
the documents we incorporate by reference as being applicable to all related
forward-looking statements that we make in this prospectus and in the
documents we incorporate by reference.
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<PAGE>
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares by the
selling stockholders.
The selling stockholders will pay any selling commissions and
expenses they may incur for brokerage, accounting, tax, legal services or
other expenses relating to the disposition of their shares, as well as any
transfer taxes on the shares that they sell. We will bear all other costs,
fees and expenses relating to the registration of the shares, including,
without limitation, all registration and filing fees, Nasdaq listing fees,
fees and expenses of our counsel, fees of our accountants, and blue sky fees
and expenses.
SELLING STOCKHOLDERS
We issued the shares of common stock that this prospectus covers,
including the shares of common stock underlying the warrants set forth below,
in private placements in February 2000 and July 2000. We have set forth in
the following table, to our knowledge, information about the selling
stockholders as of June 30, 2000, or such later date as the selling
stockholders have provided the information. We have calculated beneficial
ownership based on SEC requirements, and the information we have included
regarding beneficial ownership is not necessarily indicative of beneficial
ownership for any other purpose. Unless we otherwise indicate below, each
stockholder named in the table has sole voting and investment power with
respect to all shares he, she or it beneficially owns, subject to applicable
community property laws. We have based the percentage calculated for each
selling stockholder upon the sum of the "Common Stock" and "Common Stock
Issuable Upon Exercise of Warrants" columns.
John Carnuccio is a director and the President and Chief Executive
Officer of BioSphere; Jean-Marie Vogel is the Chairman of BioSphere; Timothy
Barberich and David Southwell, directors of BioSphere, are President and
Chief Executive Officer and Executive Vice President and Chief Financial
Officer, respectively of Sepracor, the parent corporation of BioSphere.
Sepracor is also a selling stockholder and we are registering for Sepracor
the 454,545 shares it acquired in our private placement in July 2000. We are
party to a corporate services agreement with Sepracor, whereby Sepracor
provides to us, for a monthly fee, accounting, human resources and data
processing services. Sepracor is also the guarantor of our line of credit
with a bank. In connection with Sepracor's guarantee, we are party to a
security agreement with Sepracor, pursuant to which we have pledged our
assets to Sepracor as collateral for its guarantee to the bank. Except as set
forth in this paragraph, none of the selling stockholders has held any
position or had any material relationship with BioSphere in the past three
years.
We do not know when or in what amounts the selling stockholders may
offer shares for sale. The selling stockholders may decide not to sell all or
any of the shares that this prospectus covers. Because the selling
stockholders may offer all or some of the shares pursuant to this offering,
and because there are currently no agreements, arrangements or understandings
with respect to the sale of any of the shares that the selling stockholders
will hold after completion of the offering, we cannot estimate the number of
the shares that the selling stockholders will hold after completion of the
offering. However, for purposes of this table, we have assumed that, after
completion of the offering, the selling stockholders will hold none of the
shares that this prospectus covers.
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<PAGE>
<TABLE>
<CAPTION>
Number of Shares of Common Stock Number of Number of Shares of Common Stock
Beneficially Owned Prior to Offering Shares of Beneficially Owned After Offering
----------------------------------------- Common -----------------------------------
Stock to be
Number Percent Sold Number Percent
------------------------ ----------- ------------ ------------------------------ -------------
Common Stock Common Stock
Name of Issuable Issuable
Selling Common Upon Exercise Common Upon Exercise
Stockholders Stock of Warrants Stock of Warrants
------------- ----------- -------------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
ABS Employees'
Venture Fund
Limited
Partnership 27,777 6,944 * 34,721 0 0 0
ACI Capital /
BSMD, LLC 16,666 4,166 * 20,832 0 0 0
ACI Capital /
BSMDI, LLC 177,777 44,444 2.1 222,221 0 0 0
Timothy J.
Barberich 75,777(1) 6,944 * 34,721 48,000(1) 0 *
Biopergs, LLC 27,777 6,944 * 34,721 0 0 0
CCL Fund LLC 18,182 0 * 18,182 0 0 0
John M.
Carnuccio 89,955(1) 1,388 * 6,943 84,400(1) 0 *
Castle Creek
Healthcare
Partners LLC 72,728 0 * 72,728 0 0 0
Cerberus
Partners, L.P. 55,556 13,889 * 69,445 0 0 0
Cerberus
International,
LTD. 116,112 27,778 1.4 138,890 5,000 0 *
Domain Public
Equity
Partners L.P. 80,000 0 * 80,000 0 0 0
Jane Macrae 10,000 0 * 10,000 0 0 0
Pequod
Investments,
L.P. 200,000 25,000 2.1 149,800 50,200 0 *
Pequod
International,
LTD 125,000 16,667 1.3 103,435 38,232 0 *
Pharma
w/Health 136,363 0 1.3 136,363 0 0 0
Richard Gallen
& Co. Pension
Trust 002 11,112 2,778 * 13,890 0 0 0
Richter
Investment
Corp. 5,000 0 * 5,000 0 0 0
Rudman
Partners, L.P. 90,909 0 * 90,909 0 0 0
Sepracor Inc. 5,824,333 0 55.6 454,545 5,369,788 0 51.3
David P.
Southwell 13,555(1) 1,388 * 6,943 8,000(1) 0 *
Summer Hill
Partners L.P. 45,455 0 * 45,455 0 0 0
Teton Partners 50,000 0 * 50,000 0 0 0
United Capital
Management,
Inc. 181,818 0 1.7 181,818 0 0 0
Ursus Capital,
L.P. 15,000 3,750 * 18,750 0 0 0
Jean-Marie
Vogel 647,215(1) 1,388 5.8 6,943 641,660(1) 0 5.8
-------------------------
</TABLE>
-------------------------
*Represents beneficial ownership of less than one percent of our common stock.
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<PAGE>
(1) Includes shares of common stock underlying options which the following
persons may exercise within 60 days of June 30, 2000 in the following
amounts: Timothy J. Barberich, 48,000 shares; John Carnuccio, 74,400 shares;
David Southwell, 7,000 shares; and Jean-Marie Vogel, 607,433 shares. Excludes
the 5,824,333 shares of common stock beneficially owned by Sepracor, the
parent corporation of BioSphere, as to which shares Messrs. Barberich,
Carnuccio, Southwell and Vogel disclaim beneficial ownership.
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<PAGE>
PLAN OF DISTRIBUTION
The selling stockholders may, from time to time, offer and sell the
shares that this prospectus covers. The term "selling stockholders" includes
pledgees, donees, transferees or other successors in interest selling shares
that they acquired after the date of this prospectus from the selling
stockholders as a pledge, gift or other non-sale related transfer. To the
extent that the SEC requires, we may amend and supplement this prospectus
from time to time to describe a specific plan of distribution.
The selling stockholders will act independently of us in making
decisions with respect to the timing, manner and size of each sale. The
selling stockholders may make these sales at prices and under terms then
prevailing or at prices related to the then current market price. The selling
stockholders may also make sales in negotiated transactions, including
pursuant to one or more of the following methods:
- purchases by a broker-dealer as principal and resale by such
broker-dealer for its own account pursuant to this prospectus;
- ordinary brokerage transactions and transactions in which the
broker solicits purchasers;
- block trades in which the broker-dealer will attempt to sell
the shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction;
- an over-the-counter distribution in accordance with the rules
of the Nasdaq National Market; and
- in privately negotiated transactions.
In connection with distributions of the shares or otherwise, the
selling stockholders may:
- enter into hedging transactions with broker-dealers or other
financial institutions, which may in turn engage in short
sales of the shares in the course of hedging the positions
they assume;
- sell the shares short and redeliver the shares to close out
such short positions;
- enter into option or other transactions with broker-dealers or
other financial institutions which require the delivery to
them of shares that this prospectus offers, which they may in
turn resell; and
- pledge shares to a broker-dealer or other financial
institution, which, upon a default, they may in turn resell.
In addition, the selling stockholders may sell any shares that qualify
for sale pursuant to Rule 144 under Rule 144 rather than pursuant to this
prospectus.
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<PAGE>
In effecting sales, broker-dealers or agents that the selling
stockholders engage may arrange for other broker-dealers to participate.
Broker-dealers or agents may receive commissions, discounts or concessions
from the selling stockholders, in amounts that the parties may negotiate
immediately prior to the sale.
In offering shares that this prospectus covers, the selling
stockholders, and any broker-dealers and any other participating
broker-dealers who execute sales for the selling stockholders, may qualify as
"underwriters" within the meaning of the Securities Act in connection with
these sales. Any profits that the selling stockholders realize, and the
compensation that they pay to any broker-dealer, may qualify as underwriting
discounts and commissions.
In order to comply with the securities laws of some states, the
selling stockholders must sell the shares in those states only through
registered or licensed brokers or dealers. In addition, in some states the
selling stockholders must sell the shares only if we have registered or
qualified those shares for sale in the applicable state or an exemption from
the registration or qualification requirement is available and the selling
stockholder complies with the exemption.
We will advise the selling stockholders that the anti-manipulation
rules of Regulation M under the Exchange Act may apply to sales of shares in
the market and to the activities of the selling stockholders and their
affiliates. In addition, we will make copies of this prospectus available to
the selling stockholders for the purpose of satisfying the prospectus
delivery requirements of the Securities Act. The selling stockholders may
indemnify any broker-dealer that participates in transactions involving the
sale of the shares against liabilities, including liabilities arising under
the Securities Act.
At the time a selling stockholder makes a particular offer of
shares, if required, we will distribute a prospectus supplement that will set
forth:
- the number of shares that the selling stockholder is
offering;
- the terms of the offering, including the name of any
underwriter, dealer or agent;
- the purchase price paid by any underwriter;
- any discount, commission and other underwriter compensation;
- any discount, commission or concession allowed or reallowed or
paid to any dealer; and
- the proposed selling price to the public.
We have agreed to indemnify the selling stockholders against
liabilities, including liabilities under the Securities Act.
We have agreed with the selling stockholders to keep the
Registration Statement of which this prospectus constitutes a part effective
until the earlier of (i) such time as the selling stockholders have disposed
of all of the shares, (ii)
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<PAGE>
the second anniversary of the date upon which we originally sold the shares
or (iii) such time as the selling stockholders can sell all of the shares
without registration under the Securities Act.
LEGAL MATTERS
Hale and Dorr LLP has passed upon the validity of the shares offered
by this prospectus.
EXPERTS
Arthur Andersen LLP, independent public accountants, have audited
our financial statements which are incorporated by reference in this
prospectus and elsewhere in the registration statement, as indicated in their
reports with respect thereto. The financial statements are incorporated
herein in reliance upon the authority of Arthur Andersen as experts in
accounting and auditing in giving these reports.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly, and special reports, proxy statements,
and other information with the SEC. You can read our SEC filings, including
the registration statement, over the Internet at the SEC's web site at
HTTP://WWW.SEC.GOV. You may also read and copy any document we file with the
SEC at its public reference facilities at 450 Fifth Street, N.W., Washington,
D.C. 20549. You may also obtain copies of the documents at prescribed rates
by writing to the Public Reference Section of the SEC at 450 Fifth Street,
N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for
further information on the operation of the public reference facilities.
This prospectus is part of a registration statement that we filed
with the SEC. The registration statement contains more information than this
prospectus regarding us and our common stock, including specified exhibits
and schedules. You can obtain a copy of the registration statement from the
SEC at the address listed above or from its Internet web site.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate" into this prospectus information
we file with the SEC in other documents. This means that we can disclose
important information to you by referring to other documents that contain
that information. The information we incorporate by reference is part of this
prospectus, and information that we file with the SEC in the future and
incorporate by reference will automatically update and may supersede the
information contained in this prospectus. We incorporate by reference the
documents listed below and any future filings we make with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the sale of
all the shares covered by this prospectus:
- our Annual Report on Form 10-K for the year ended December 31,
1999;
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<PAGE>
- our Quarterly Report on Form 10-Q for the quarters ended
March 31, 2000;
- our Current Report on Form 8-K dated February 4, 2000;
- all of our filings pursuant to the Exchange Act after the date
of filing the initial registration statement and prior to
effectiveness of the registration statement; and
- the description of our common stock that our
Registration Statement on Form S-1, as amended (File No.
33-75212) contains, including any amendments or reports
filed for the purpose of updating that description.
You may request a copy of these documents, at no cost, by writing to:
BioSphere Medical, Inc.
1050 Hingham Street
Rockland, Massachusetts 02370
Attention: Comptroller
Telephone: (781) 681-7900
We have not authorized anyone to provide you with information
different from that which we have included or incorporated by reference in
this prospectus. The selling stockholders are offering to sell, and seeking
offers to buy, shares of our common stock only in jurisdictions which permit
these offers and sales. The information that this prospectus contains is
accurate only as of the date of this prospectus, regardless of the time that
a particular selling stockholder delivers this prospectus or sells any of the
shares.
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