PROSPECTUS
VIDAMED, INC.
3,147,065 Shares of Common Stock
This Prospectus relates to (i) 2,517,652 shares (the "Shares") of common
stock, $.001 par value per share (the "Common Stock") and (ii) a maximum of
629,413 additional shares of Common Stock (the "Warrant Shares") issuable upon
exercise of certain warrants (the "Warrants") to purchase Common Stock of
VidaMed, Inc. (the "Company" or "VidaMed"). The Shares and the Warrant Shares
collectively are referred to herein as the "Securities." The Securities may be
offered by certain stockholders of the Company (the "Selling Security Holders")
from time to time in transactions in the over-the-counter market through
Nasdaq, in privately negotiated transactions, through the writing of options on
the Securities, or through a combination of such methods of sale, at fixed
prices that may be changed, at market prices prevailing at the time of sale, at
prices relating to such prevailing market prices or at negotiated prices. The
Selling Security Holders may effect such transactions by selling the Securities
to or through broker-dealers, and such broker-dealers may receive compensation
in the form of discounts, concessions or commissions from the Selling Security
Holders and/or the purchasers of the Securities for whom such broker-dealers
may act as agents or to whom they may sell as principals, or both (which
compensation as to a particular broker-dealer might be in excess of customary
commissions). See "Selling Security Holders" and "Plan of Distribution."
None of the proceeds from the sale of the Securities by the Selling
Security Holders will be received by the Company. The Company has agreed to
bear all expenses (other than selling commissions and fees and ex penses of
counsel and other advisers to the Selling Security Holders) in connection with
the registration and sale of the Securities being offered by the Selling
Security Holders. The Company has agreed to indemnify the Selling Security
Holders against certain liabilities, including liabilities under the Securities
Act of 1933, as amended (the "Securities Act").
All the Securities were "restricted securities" under the Securities Act
prior to their registration here under. The Company sold 2,517,652 shares of
Common Stock and 629,413 Warrants to the Selling Security Holders in private
transactions in September 1997. Such shares of Common Stock and the 629,413
Warrant Shares which may be issuable upon exercise of the Warrants (such shares
together the "Securities") are registered hereunder. This Prospectus has been
prepared so that future sales of Common Stock by the Selling Security Holders
will not be restricted under the Securities Act. In connection with any sales,
the Selling Security Holders and any brokers participating in such sales may be
deemed to be "underwriters" within the meaning of the Securities Act. See
"Selling Security Holders."
The Company's Common Shares are traded on the Nasdaq National Market
System under the symbol "VIDA."
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THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS."
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.
The date of this Prospectus is October 17, 1997
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AVAILABLE INFORMATION
As used in this Prospectus, unless the context otherwise requires, the
terms "VidaMed" and the "Company" mean VidaMed, Inc. and its subsidiaries. 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 reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Reports, proxy statements and other
information filed with the Commission pursuant to the informational
requirements of the Exchange Act may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the following regional offices of
the Commission: New York Regional Office, 7 World Trade Center, Suite 1300, New
York, New York 10048; and Chicago Regional Office, Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials
may be obtained from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission
maintains a World Wide Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. The address of the site is http://www.sec.gov.
The Company's Common Stock is traded on the Nasdaq National Market.
Reports and other information concerning the Company may be inspected at the
National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006.
This Prospectus constitutes part of a Registration Statement on Form S-3
(herein, together with all amendments and exhibits thereto, referred to as the
"Registration Statement") filed by the Company with the Commission under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
securities offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. For
further information, reference is hereby made to the Registration Statement,
copies of which may be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, upon payment of the
fees prescribed by the Commission. Statements contained in this Prospectus as
to the contents of any contract or any other document filed, or incorporated by
reference, as an exhibit to the Registration Statement, are qualified in all
respects by such reference.
INFORMATION INCORPORATED BY REFERENCE
The Company's Form 8-A filed with the Commission on January 31, 1997, the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1996, the Company's Quarterly Reports on Form 10-Q for the quarters ended March
31, 1997 and June 30, 1997 and the Company's Current Report on Form 8-K filed
on September 24, 1997 heretofore filed by the Company with the Commission
pursuant to the Exchange Act, are hereby incorporated by reference, except as
superseded or modified herein.
Each document filed subsequent to the date of this Prospectus pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act and prior to the
termination of this offering shall be deemed to be incorporated by reference
into this Prospectus and shall be part hereof from the date of filing of such
document.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of any such
person, a copy of any document described above (other than exhibits). Requests
for such copies should be directed to VidaMed, Inc. at its principal offices
located at 46107 Landing Parkway, Fremont, California 94538, telephone (510)
492-4902, attention
Investor Relations.
Any statement contained in a document all or a portion of which is
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed to constitute a part of this Prospectus except as so modified, and any
statement so superseded shall not be deemed to constitute part of this
Prospectus.
VidaMed(R), the VidaMed logo and TUNA(TM) are trademarks of VidaMed, Inc.
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THE COMPANY
VidaMed, Inc. (the "Company" or "VidaMed") was founded in July 1992 and
reincorporated in the State of Delaware in June 1995. VidaMed designs,
develops, manufactures and markets technologically and clinically advanced,
cost effective systems for urological applications. The Company's initial focus
is upon the treatment of benign prostatic hyperplasia ("BPH"). The Company's
first product, the patented TUNA System, is designed to offer a cost effective,
minimally invasive alternative therapy with compelling clinical advantages for
BPH treatment. The Company commenced manufacturing production and product sales
in 1993. On October 8, 1996, the Company received 510(k) clearance from the
United States Food and Drug Administration ("FDA") to market the TUNA System
commercially in the United States for the treatment of BPH. In the United
States, the Company sells its products primarily through direct sales personnel
and a network of specialty urology product dealers. International sales are
primarily to distributors who resell to physicians and hospitals.
VidaMed has designed and developed the TUNA System to be the therapy of
choice for BPH over watchful waiting, drug therapy and current surgical
therapies. The TUNA System is designed to restore and improve urinary flow
while resulting in fewer complications and adverse effects, shorter recovery
time and greater cost effectiveness than other therapies for treating BPH. The
Company believes that the cost of treatment with TUNA will be less than the
cost of many other interventional BPH therapies because the procedure is
designed to be performed on an outpatient basis and to result in fewer
complications.
The principal components of the TUNA system are (i) a single-use needle
ablation handpiece that delivers RF energy to the prostate, (ii) a low power RF
energy generator and (iii) an optical device that allows direct viewing during
the procedure.
TUNA Handpiece. The single-use TUNA handpiece measures 22 French
(approximately seven millimeters) in diameter and contains laterally deployed
needles that extend at an approximately 90 degree angle. Each needle is encased
by a retractable shield which protects the urethra and is adjusted by the
urologist to selectively control the area of prostate tissue ablated during the
procedure. Controls on the handpiece handle allow for independent advancement
and retraction of the needle and shields. Thermocouples located at the shield
tip and at the handpiece tip record temperatures at the lesion site and in the
prostatic urethra. The handpiece includes capabilities for irrigation and
aspiration, enhancing visualization for the physician and enabling drainage of
the bladder without removing and reinserting the handpiece. In addition, these
capabilities allow the physician to more closely control urethral tissue
temperature during the procedure.
TUNA RF Generator. The TUNA RF energy generator is designed specifically
for use with the TUNA handpiece. The RF generator has digital displays
indicating the temperature at each thermocouple, the RF power being delivered
to each needle, ablation time and electrical impedance. These measurements are
used by the physician to control tissue ablation. The generator incorporates
both automated and manual control modes. The generator has an automatic
shut-off activated by both temperature and impedance measurements to ensure
controlled tissue ablation.
TUNA Optics. The TUNA optical device allows precise positioning of the
handpiece between the verumontanum and the bladder neck during the procedure
using direct vision control. The optical device is reusable after sterilization
and is equipped with a three-way exchange adapter, which allows the unit to be
used with endoscopic light sources manufactured by other companies.
The TUNA procedure desiccates prostatic tissue, leading to improved
urinary flow, and can be performed in approximately 30 to 45 minutes with local
anesthesia, which may be supplemented by intravenous sedation. The TUNA
handpiece is inserted into the patient's urethra, and the two shielded needle
electrodes are then advanced into one of the two lateral lobes of the prostate.
Controlled RF energy delivered by the needle electrodes heats targeted portions
of the prostate lobe to temperatures of 90 to 100 degrees centigrade, creating
a localized area of desiccated tissue measuring approximately one to two
centimeters in diameter, while the shields protect the urethra from thermal
damage. Once a lesion of sufficient size has been created, the urologist
retracts the needles and places the handpiece at the next site to be ablated
and repeats the process. Typically, two treatments in each lateral prostate
lobe are
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performed depending upon the size of the prostate. If the patient is unable to
urinate due to temporary swelling or irritation of the urethra, a catheter will
be inserted into the patient's urethra. This catheter, if inserted, is
typically left in place for one to two days.
The Company believes that the design of the TUNA system offers significant
advantages over other BPH therapies. Because the TUNA system shields the
urethra and delivers controlled RF energy directly into the interior of the
prostate, the procedure protects the prostatic urethra and reduces the risk of
unintended thermal damage to surrounding structures. In other procedures where
this control does not exist, the prostatic urethra and other structures can be
damaged or destroyed, causing significant patient discomfort and complications.
Clinical trials of the TUNA system indicate that TUNA results in fewer of the
complications associated with transurethral resection of prostate ("TURP")
surgery, including impotence, retrograde ejaculation and incontinence. The
Company believes that the cost of the TUNA procedure in the United States,
including physician charges, will be significantly less than the cost of TURP.
The TUNA RF generator is typically currently sold at approximately $35,000 in
the United States, which is less than the general surgical lasers required to
perform laser procedures and the ultrasound and microwave devices required for
other surgical procedures.
The Company believes TUNA will also provide patients, physicians and
health care payors with a clinically and economically superior alternative to
ongoing drug therapy, other minimally invasive surgeries and watchful waiting.
To date, the symptomatic relief experienced by patients in the Company's
clinical trials suggests that TUNA provides greater relief than drug therapy or
watchful waiting. The Company believes that if the relief provided by TUNA
proves to be sufficiently long lasting, TUNA may prove to be economically
superior to the noninvasive approaches. To date, the Company's available two to
three-year clinical follow-up data for TUNA patients do not suggest the need
for retreatment within this time frame. However, there can be no assurance as
to whether and how frequently TUNA patients will require retreatment.
The Company has recently relocated to a new facility in Fremont,
California. This facility has the capacity and resources for manufacturing the
headpiece component of the TUNA system. Accordingly, the Company is currently
exploring various alternatives for consolidation of TUNA system manufacturing
at this facility.
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RISK FACTORS
An investment in the Securities being offered by this Prospectus involves
a high degree of risk. The following factors, in addition to those discussed
elsewhere in this Prospectus, should be carefully considered in evaluating the
Company and its business prospects before purchasing Securities offered by this
Prospectus.
Limited Operating History; History of Losses and Expectation of Future
Losses; Fluctuations in Operating Results. The Company has a limited history of
operations. Since its inception in July 1992, the Company has been primarily
engaged in research and development of the TUNA system. The Company has
experienced significant operating losses since inception and, as of June 30,
1997, had an accumulated deficit of $60.2 million.
The development and commercialization by the Company of the TUNA system
and other new products, if any, will require substantial product development,
clinical, regulatory, marketing and other expenditures. The Company expects its
operating losses to continue for at least the next 12 to 18 months as it
continues to expend substantial resources in expanding marketing and sales
activities, funding clinical trials in support of regulatory and reimbursement
approvals and research and development. There can be no assurance that the TUNA
system will be successfully commercialized or that the Company will achieve
significant revenues from either international or domestic sales. In addition,
there can be no assurance that the Company will achieve or sustain
profitability in the future. Results of operations may fluctuate significantly
from quarter to quarter and will depend upon numerous factors, including
actions relating to regulatory and reimbursement matters, progress of clinical
trials, the extent to which the TUNA system gains market acceptance, varying
pricing promotions and volume discounts to distributors, introduction of
alternative therapies for BPH and competition.
Uncertainty of Market Acceptance. TUNA represents a new therapy for BPH,
and there can be no assurance that the TUNA system will gain any significant
degree of market acceptance among physicians, patients and health care payors,
even if necessary international and United States reimbursement approvals are
obtained. Physicians will not recommend the TUNA procedure unless they
conclude, based on clinical data and other factors, that it is an attractive
alternative to other methods of BPH treatment, including more established
methods such as TURP and drug therapy. In particular, physicians may elect not
to recommend the TUNA procedure until such time, if any, as the duration of the
relief provided by the procedure has been established. Broad use of the TUNA
system will require the training of numerous physicians, and the time required
to complete such training could result in a delay or dampening of market
acceptance. Even if the clinical efficacy of the TUNA procedure is established,
physicians may elect not to recommend the procedure unless acceptable
reimbursement from health care payors is available. Health care payor
acceptance of the TUNA procedure will require evidence of the cost
effectiveness of TUNA as compared to other BPH therapies, which will depend in
large part on the duration of the relief provided by the TUNA procedure. A
thorough analysis of multi-year patient follow-up data will be necessary to
assess the durability of the relief provided by TUNA therapy. Patient
acceptance of the procedure will depend in part on physician recommendations as
well as other factors, including the degree of invasiveness and rate and
severity of complications associated with the procedure as compared to other
therapies.
Uncertainty Relating to Third Party Reimbursement. The Company's success
will be dependent upon, among other things, its ability to obtain satisfactory
reimbursement from health care payors for the TUNA procedure. In the United
States and in international markets, third party reimbursement is generally
available for existing therapies used for treatment of BPH. In the United
States, third party reimbursement for the TUNA procedure will be dependent upon
decisions by the Health Care Financing Administration ("HCFA") for Medicare, as
well as by individual health maintenance organizations, private insurers and
other payors.
Reimbursement systems in international markets vary significantly by
country. Many international markets have governmentally managed health care
systems that govern reimbursement for new devices and procedures. In most
markets, there are private insurance systems as well as governmentally managed
systems.
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Regardless of the type of reimbursement system, the Company believes that
physician advocacy of the TUNA system will be required to obtain reimbursement.
Availability of reimbursement will depend not only on the clinical efficacy and
direct cost of the TUNA procedure, but also on the duration of the relief
provided by the procedure. In the United States, TUNA procedures are currently
being reimbursed by certain private payors. However, due to the age of the
typical BPH patient, Medicare reimbursement is particularly critical for
widespread market acceptance of the TUNA procedure in the United States.
Although certain state Mediczre directors have permitted reimbursement for TUNA
procedures on an ad hoc basis, national Medicare reimbursement will require, at
a minimum, publication by HCFA of an American Medical Association ("AMA")
current procedure terminology ("CPT") code covering the TUNA procedure. The
Company has been advised by the AMA that a CPT code covering the physician fee
component of the TUNA procedure will be included in the 1998 edition of CPT
codes which will become effective January 1, 1998. However, national Medicare
reimbursement of TUNA procedure costs in an office setting at an adequate level
will in addition require, among other things, completion by HCFA of a review of
the cost and efficacy of the TUNA procedure. Such cost and efficacy review may
involve an assessment of clinical data with up to five-year patient follow-up.
Accordingly, there can be no assurance that reimbursement for the Company's
products will be available in the United States or in international markets
under either governmental or private reimbursement systems at adequate levels,
or that physicians will support reimbursement for TUNA procedures. Furthermore,
the Company could be adversely affected by changes in reimbursement policies of
governmental or private health care payors. Failure by physicians, hospitals
and other users of the Company's products to obtain sufficient reimbursement
from health care payors, including in particular Medicare reimbursement in the
United States, or adverse changes in governmental and private third party
payors' policies toward reimbursement for procedures employing the Company's
products would have a material adverse effect on the Company's business,
financial condition and results of operations.
Risk of Inadequate Funding. The Company plans to continue to expend
substantial funds for clinical trials in support of regulatory and
reimbursement approvals, expansion of sales and marketing activities, research
and development and establishment of commercial scale manufacturing capability.
The Company may be required to expend greater than anticipated funds if
unforeseen difficulties arise in the course of clinical trials of the TUNA
system, in connection with obtaining necessary regulatory and reimbursement
approvals or in other aspects of the Company's business. Although the Company
believes that its existing cash reserves, including the proceeds from the sale
of the securities being registered for resale and cash generated from the
future sale of products will be sufficient to meet the Company's operating and
capital requirements during the next 12 to 18 months, there can be no assurance
that the Company will not require additional financing within this time frame.
The Company's future liquidity and capital requirements will depend upon
numerous factors, including progress of clinical trials, actions relating to
regulatory and reimbursement matters, and the extent to which the TUNA system
gains market acceptance. Any additional financing, if required, may not be
available on satisfactory terms or at all. Future equity financings may result
in dilution to the holders of the Company's Common Stock. Future debt
financings may require the Company to pledge assets and to comply with
financial and operational covenants.
Possible Volatility of Stock Price. The stock market has 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 shares of Common Stock is likely 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 and general
market conditions may have a significant effect on the market price of the
Common Stock.
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Competition and Technological Advances. Competition in the market for
treatment of BPH is intense and is expected to increase. The Company believes
its principal competition will come from invasive therapies, such as TURP, and
noninvasive courses of action, such as drug therapy and watchful waiting. The
Company may encounter competition from emerging therapies in attracting
clinical investigators as well as prospective clinical trial patients. Most of
the Company's competitors have significantly greater financial, technical,
research, marketing, sales, distribution and other resources than the Company.
There can be no assurance that the Company's competitors will not succeed in
developing or marketing technologies and products that are more effective or
commercially attractive than any which are being developed by the Company. Such
developments could have a material adverse effect on the Company's business,
financial condition and results of operations.
Any product developed by the Company that gains regulatory approval will
have to compete for market acceptance and market share. An important factor in
such competition may be the timing of market introduction of competitive
products. Accordingly, the relative speed with which the Company can develop
products, complete clinical testing and regulatory approval processes, gain
reimbursement acceptance and supply commercial quantities of the product to the
market are expected to be important competitive factors. The Company expects
that competition in the BPH field will also be based, among other things, on
the ability of the therapy to provide safe, effective and lasting treatment,
cost effectiveness of the therapy, physician, health care payor and patient
acceptance of the procedure, patent position, marketing and sales capability,
and third party reimbursement policies.
Government Regulation. The Company's TUNA system is regulated in the
United States as a medical device by the FDA under the Federal Food, Drug, and
Cosmetic Act ("FDC Act"). Pursuant to the FDC Act, the FDA regulates the
manufacture, distribution and production of medical devices in the United
States. Noncompliance with applicable requirements can result in fines,
injunctions, civil penalties, recall or seizure of products, total or partial
suspension of production, failure of the government to grant approval for
devices, and criminal prosecution. Medical devices are classified into one of
three classes, class I, II or III, on the basis of the controls necessary to
reasonably ensure their safety and effectiveness. The safety and effectiveness
can be assured for class I devices through general controls (e.g., labeling,
premarket notification and adherence to GMPs) and for class II devices through
the use of special controls (e.g., performance standards, postmarket
surveillance, patient registries, and FDA guidelines). Generally, class III
devices are those which must receive premarket approval by the FDA to ensure
their safety and effectiveness (e.g., life-sustaining, life-supporting and
implantable devices, or new devices which have not been found substantially
equivalent to legally marketed devices).
Before a new device can be introduced into the market, the manufacturer
must generally obtain FDA clearance through either a 510(k) notification or a
premarket approval ("PMA"). A 510(k) clearance will be granted if the submitted
data establishes that the proposed device is "substantially equivalent" to a
legally marketed class I or II medical device, or to a class III medical device
for which the FDA has not called for a PMA. The FDA has recently been requiring
a more rigorous demonstration of substantial equivalence than in the past. It
generally takes from three to nine months from submission to obtain a 510(k)
clearance, but it may take longer. The FDA may determine that the proposed
device is not substantially equivalent, or that additional data is needed
before a substantial equivalence determination can be made. A "not
substantially equivalent" determination, or a request for additional data,
could delay the market introduction of new products that fall into this
category and could have a materially adverse effect on the Company's business,
financial condition and results of operations. There can be no assurance that
the Company will obtain 510(k) clearance within the above time frames, if at
all, for any device for which it files a future 510(k) notification.
Furthermore, there can be no assurance that the Company will not be required to
submit a PMA application for any device which it may develop in the future. For
any of the Company's products that are cleared through the 510(k) process,
including the Company's TUNA System, modifications or enhancements that could
significantly affect safety or efficacy will require new 510(k) submissions.
Sales of medical devices outside the United States are subject to
regulatory requirements that vary widely from country to country. The time
required to obtain approval for sale in a foreign country may be longer or
shorter than that required for FDA approval, and the requirements may differ.
VidaMed has
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received regulatory approvals where required for commercial sale of the TUNA
system in all major international markets. In May 1994 the Company's United
Kingdom facility passed inspection by the United Kingdom Department of Health
and received GMP certification. In June 1994, the Company received a report of
compliance for the TUNA system from the British Standards Institute ("BSI") and
in August 1994 the Company received a certificate of compliance with IEC 601-1
and IEC 601-2 regulations from TUV Product Services. TUV and BSI
certifications, which are issued by organizations analogous to Underwriters
Laboratories in the United States, are focused on device safety and adherence
of the device to published electronic or mechanical specifications. In February
1995, the Company received ISO 9002 certification for its manufacturing
facility in the United Kingdom. ISO 9002 certification is based on adherence to
established standards in the areas of quality assurance and manufacturing
process control. These certifications allow the Company to affix the CE mark to
the TUNA system, permitting the Company to commercially market and sell the
TUNA system in all countries of the European Economic Area. In order to
maintain these approvals, the Company is subject to periodic inspections.
Additional product approvals from foreign regulatory authorities may be
required for international sale of the Company's general electrosurgical device
for which an FDA 510(k) notification has been filed. Failure to comply with
applicable regulatory requirements can result in loss of previously received
approvals and other sanctions and could have a material adverse effect on the
Company's business, financial condition and results of operations.
The Company's distributor in Japan, Century Medical, is responsible for
management of clinical trials and obtaining regulatory and reimbursement
approval for the TUNA system. Such regulatory approval was received from the
Japanese Ministry of Health and Welfare in July 1997. However, market
acceptance in Japan will be dependent in large part upon receipt of
reimbursement approvals in the Japanese health care system. Such reimbursement
approvals have not yet been obtained and there can be no assurance that the
Company or Century Medical will ever obtain such approvals. Failure to obtain
reimbursement approval for the TUNA procedure in Japan could preclude the
commercial viability of the Company's products in Japan and could have a
material adverse effect on the Company's business, financial condition and
results of operations.
Limited Manufacturing Experience; Scale-Up Risk; Product Recall
Risk. VidaMed purchases components used in the TUNA system from various
suppliers and relies on single sources for several components. Delays
associated with any future component shortages, particularly as the Company
scales up its manufacturing activities in support of commercial sales, could
have a material adverse effect on the Company's business, financial condition
and results of operations.
The Company currently manufactures the TUNA system in limited quantities
at its United Kingdom facility. However, the Company has limited experience in
manufacturing its products in commercial quantities. Manufacturers often
encounter difficulties in scaling up production of new products, including
problems involving production yields, quality control and assurance, component
supply and lack of qualified personnel.
Difficulties encountered by VidaMed in manufacturing scale-up could have a
material adverse effect on its business, financial condition and results of
operations. In mid-1994, the Company experienced problems at its United Kingdom
facility with respect to mechanical aspects of the TUNA catheter's needle
assembly. As a result, a substantial portion of catheters in the field were
returned for rework. The Company has modified its manufacturing process to
rectify these problems and has completed product rework. However, there can be
no assurance that future manufacturing difficulties or product recalls, either
of which could have a material adverse effect on the Company's business,
financial condition and results of operations, will not occur. In addition, the
Company's new Fremont facility has capacity to manufacture the TUNA system
headpiece and the Company is currently in the process of qualifying this
facility under FDA good manufacturing practice regulations and under ISO 9000
standards. The Company is also exploring alternatives for consolidating TUNA
headpiece manufacturing in Fremont. Inability to obtain FDA good manufacturing
practice and ISO 9000 qualification for the Fremont facility, or problems
associated with any future consolidation of manufacturing at such facility,
could have a material adverse effect on the Company's business.
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Any products manufactured or distributed by the Company pursuant to FDA
clearances or approvals are subject to pervasive and continuing regulation by
FDA including recordkeeping requirements and reporting of adverse experience
with the use of the device. The Company's manufacturing facilities are subject
to periodic inspection by FDA, certain state agencies and foreign regulatory
agencies. Failure to comply with regulatory requirements could have a material
adverse effect on the Company's business. There can be no assurance that the
Company will not be required to incur significant costs to comply with laws and
regulations in the future or that laws or regulations will not have a material
adverse effect upon the Company's business.
Uncertainty Regarding Patents and Protection of Proprietary
Technology. The Company has been issued 30 United States patents covering a
method of prostate ablation using the TUNA System and the design of the TUNA
System. The Company currently has approximately 27 patent applications on file
in the United States and over 80 corresponding patent applications on file in
various foreign countries. In addition, the Company holds licenses to certain
technology used in the TUNA System. There can be no assurance that the
Company's issued United States patents, or any patents which may be issued as a
result of the Company's applications, will offer any degree of protection.
There can be no assurance that any of the Company's patents or patent
applications will not be challenged, invalidated or circumvented in the future.
In addition, there can be no assurance that competitors, many of which have
substantial resources and have made substantial investments in competing
technologies, will not seek to apply for and obtain patents that will prevent,
limit or interfere with the Company's ability to make, use or sell its products
either in the United States or in international markets.
Intellectual Property Litigation Risks. The medical device industry has
been characterized by extensive litigation regarding patents and other
intellectual property rights, and companies in the medical device industry have
employed intellectual property litigation to gain a competitive advantage. The
Company is aware of patents held by other participants in the BPH market, and
there can be no assurance that the Company will not in the future become
subject to patent infringement claims and litigation or United States Patent
and Trademark Office ("USPTO") interference proceedings. The defense and
prosecution of intellectual property suits, USPTO inter ference proceedings and
related legal and administrative proceedings are both costly and time
consuming. Litigation may be necessary to enforce patents issued to the
Company, to protect trade secrets or know-how owned by the Company or to
determine the enforceability, scope and validity of the proprietary rights of
others.
Any litigation or interference proceedings could result in substantial
expense to the Company and significant diversion of effort by the Company's
technical and management personnel. An adverse determination in litigation or
interference proceedings to which the Company may become a party could subject
the Company to significant liabilities to third parties or require the Company
to seek licenses from third parties. Although patent and intellectual property
disputes in the medical device area have often been settled through licensing
or similar arrangements, costs associated with such arrangements may be
substantial and could include ongoing royalties. Furthermore, there can be no
assurance that necessary licenses would be available to the Company on
satisfactory terms or at all. Accordingly, an adverse determination in a
judicial or administrative proceeding or failure to obtain necessary licenses
could prevent the Company from manufacturing and selling its products, which
would have a material adverse effect on the Company's business, financial
condition and results of operations.
In addition to patents, the Company relies on trade secrets and
proprietary know-how, which it seeks to protect, in part, through proprietary
information agreements with employees, consultants and other parties. The
Company's proprietary information agreements with its employees and consultants
contain industry standard pro visions requiring such individuals to assign to
the Company without additional consideration any inventions con ceived or
reduced to practice by them while employed or retained by the Company, subject
to customary exceptions. There can be no assurance that proprietary information
agreements with employees, consultants and others will not be breached, that
the Company would have adequate remedies for any breach, or that the Company's
trade secrets will not otherwise become known to or independently developed by
competitors.
Rights to Founder's Inventions Limited to Urology. The proprietary
information agreement between the Company and Stuart D. Edwards, one of the
Company's founders, obligates Mr. Edwards to
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assign to the Com pany his inventions and related intellectual property only in
the field of urology. Mr. Edwards has assigned to Rita Medical Systems, Inc.
("RITA") his inventions in the cancer field. Mr. Edwards has conceived of, and
may continue to conceive of, various medical device product concepts for other
fields outside of urology, including certain product concepts for the treatment
of snoring and sleep apnea that have been assigned to an unrelated third party
and certain product concepts in the gynecology field that have been licensed to
another unrelated third party. Such party also has an option to purchase all
future technology developed by Mr. Edwards in the gynecology field. Product
concepts outside of urology developed by Mr. Edwards will not be owned by or
commercialized through VidaMed, and VidaMed will have no rights or ownership
interests with respect thereto.
Risks Relating to RITA. The Company has entered into a cross license
agreement with RITA, formerly ZoMed International, Inc. Under the cross
license, RITA has the right to use VidaMed technology in the cancer field and
VidaMed has the right to use RITA technology in the treatment of urological
diseases and disorders. The cross license between VidaMed and RITA allows both
companies to develop products for treatment of prostate cancer and cancers of
the lower urinary tract, and VidaMed and RITA may therefore become competitors
in this field.
Product Liability Risk; Limited Insurance Coverage. The business of the
Company entails the risk of product liability claims. Although the Company has
not experienced any product liability claims to date, any such claims could
have an adverse impact on the Company. The Company maintains product liability
insurance and evaluates its insurance requirements on an ongoing basis. There
can be no assurance that product liability claims will not exceed such
insurance coverage limits or that such insurance will be available on
commercially reasonable terms or at all.
Effect of Certain Charter, Bylaw and Other Provisions. Certain provisions
of the Company's Certificate of Incorporation and Bylaws 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. Such provisions
could limit the price that certain investors might be willing to pay in the
future for shares of the Company's Common Stock. Certain of these provisions
allow the Company to issue Preferred Stock without any vote or further action
by the stockholders, eliminate the right of stockholders to act by written
consent without a meeting and eliminate cumulative voting in the election of
directors. These provisions may make it more difficult for stockholders to take
certain corporate actions and could have the effect of delaying or preventing a
change in control of the Company.
No Public Market for the Warrants; Arbitrary Determination of Purchase
Price; Price Volatility. Prior to the offering of the Securities, there has
been no public market for the Warrants, and there can be no assurance that an
active trading market will develop in any of the Warrants after any offering
thereof. The Company does not intend to apply for the listing of the Warrants
on any exchange. The exercise price and terms of the Warrants may be determined
arbitrarily by negotiations between the Company and any purchaser thereof.
Factors con sidered in such negotiations, in addition to prevailing market
conditions, may include the history and prospects for the industry in which the
Company competes, an assessment of the Company's management, the prospects of
the Company, its capital structure and certain other factors as were deemed
relevant. Therefore, the exercise price and terms of the Warrants may not
necessarily bear any relationship to established valuation criteria and
therefore may not be indicative of prices that may prevail at any time or from
time to time in a public market for the Warrants.
Legal Restrictions on Sales of Shares Underlying the Warrants. The
Warrants will not be exercisable unless, at the time of the exercise, the
Company has a current prospectus covering the shares of Common Stock issuable
upon exercise of the Warrants, and such shares have been registered, qualified
or deemed to be exempt under the securities laws of the state of residence of
the exercising holder of the Warrants. Although the Company has undertaken to
use its best efforts to have all the shares of Common Stock issuable upon
exercise of the Warrants registered or qualified on or before the exercise date
and to maintain a current prospectus relating thereto until the expiration of
the Warrants, there can be no assurance that it will be able to do so. The
Warrants may be deprived of value if a current prospectus covering the shares
of Common Stock issuable upon the exercise of the Warrants is not kept
effective.
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SELLING SECURITYHOLDERS
The following table provides the names of the Selling Security Holders and
the number of Securities being offered by each of them. After completion of
this offering, assuming all the Shares and Warrant Shares offered hereby are
sold, no Selling Security Holder will hold any securities of the Company except
as set forth in the footnotes below.
No. of Shares No. of Warrant
Selling Security Holders Offered Shares Offered
- --------------------------------------------- --------------- ---------------
INVESCO Trust Company(1) .................... 1,052,632 263,158
Kane & Co. .................................. 147,400 36,850
for Arthur D. Little Employee Investment Plan
Mellon Bank N.A. ............................ 210,500 52,625
Custodian for PERSI--Zesiger Capital for
Public Employee Retirement System of Idaho
Westcoast & Co. ............................ 694,700 173,675
for State of Oregon PERS/ZCG
ProMed Partners, LP ......................... 55,264 13,816
David B. Musket ............................ 41,364 10,341
Augusta Capital Management .................. 105,264 26,316
Circle F Ventures(2) ........................ 210,528 52,632
- ------------
(1) Consists of shares held by Global Health Sciences Fund. GHS is a mutual
fund company advised by INVESCO Funds Group, Inc., which is a subsidiary
of INVECO PLC. INVESCO Trust Company is a subsidiary of INVESCO Funds
Group, Inc.
(2) Circle F Ventures owns 71,900 shares of Common Stock of the Company in
addition to the Shares and the Warrant Shares offered hereby.
No Selling Security Holder has held any position, office or other material
relationship with the Company or any of its affiliates within the past three
years.
The Company sold 2,517,652 Shares of Common Stock and Warrants to purchase
629,413 Shares of Common Stock to the Selling Security Holders in private
transactions in September 1997. Such Shares, including the Warrant Shares
issuable upon exercise of the Warrants, are registered hereunder.
Each Selling Security Holder has represented to the Company that it
purchased the Securities for investment, with no present intention of
distribution. However, in recognition of the fact that investors, even though
purchasing the Securities for investment, may wish to be legally permitted to
sell their securities when they deem appropriate, the Company has filed with
the Commission under the Securities Act the Registration Statement with respect
to the resale of the Shares and the Warrant Shares from time to time in the
over-the-counter market through Nasdaq or in privately negotiated transactions,
through the writing of options on the Shares or the Warrant Shares, or through
a combination of the foregoing. The Company has agreed to prepare and file such
amendments and supplements to the Registration Statement as may be necessary to
keep the Registration Statement effective for four years from the date of
closing of the issuance of the Shares.
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PLAN OF DISTRIBUTION
The sale of the Securities by the Selling Security Holders may be effected
from time to time in transactions in the over-the-counter market through
Nasdaq, in privately negotiated transactions, through the writing of options on
the Securities, or through a combination of such methods of sale, at fixed
prices, that may be changed, at market prices prevailing at the time of sale,
at prices relating to such prevailing market prices or at negotiated prices.
The Selling Security Holders may effect such transactions by selling the
Securities to or through broker-dealers, and such broker-dealers may receive
compensation in the form of discounts, concessions or commissions from the
Selling Security Holders and/or the purchasers of the Securities for whom such
broker-dealers may act as agents or to whom they may sell as principals, or
both (which compensation as to a particular broker-dealer may be in excess of
customary compensation). Any broker-dealer may act as a broker-dealer on behalf
of one or more of the Selling Security Holders in connection with the offering
of certain of the Securities by the Selling Security Holders.
The Selling Security Holders and any broker-dealers who act in connection
with the sale of the Securities hereunder may be deemed to be "underwriters"
within the meaning of Section 2(11) of the Securities Act, and any commissions
received by them and profit on any resale of the Securities as principal might
be deemed to be underwriting discounts and commissions under the Securities
Act. The Company has agreed to indemnify the Selling Security Holders against
certain liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for
VidaMed by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo
Alto, California. As of the date of this Prospectus, members of Wilson Sonsini
Goodrich & Rosati, Professional Corporation, who have represented the Company
in connec tion with this offering, beneficially own approximately 8,809 shares
of the Company's Common Stock. J. Casey McGlynn, Secretary of the Company, and
Christopher D. Mitchell, Assistant Secretary of the Company, are members of
Wilson Sonsini Goodrich & Rosati, Professional Corporation.
EXPERTS
The Consolidated Financial Statements of VidaMed, Inc. incorporated by
reference in VidaMed, Inc.'s Annual Report (Form 10-K) for the fiscal year
ended December 31, 1996, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon incorporated by reference
therein and incorporated herein by reference. Such Consolidated Financial
Statements are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
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No dealer, salesperson or other person has been authorized in connection
with any offering made hereby to give any information or to make any
representations other than those contained in or incorporated by reference in
this Prospectus, and, if given or made, such information or representations
must not be relied upon as having been authorized. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any security
other than the securities offered hereby, nor do they constitute an offer to
sell or a solicitation of any offer to buy any of the securities offered hereby
to any person in any jurisdiction in which such offer or solicitation would be
unlawful or to any person to whom it is unlawful. Neither the delivery of this
Prospectus nor any offer or sale made hereunder shall, under any circumstances,
create any implication that there has been no change in the affairs of the
Company or that the information contained herein is correct as of any time
subsequent to the date hereof.
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TABLE OF CONTENTS
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Page
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Available Information .................. 2
Information Incorporated by Reference .. 2
The Company ........................... 3
Risk Factors ........................... 5
Selling Securityholders ............... 11
Plan of Distribution .................. 12
Legal Matters ........................ 12
Experts .............................. 12
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VIDAMED, INC.
3,147,065 Shares of
Common Stock
----------------
PROSPECTUS
----------------
October 17, 1997
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