As filed with the Securities and Exchange Commission on June 7, 1999
Registration No. 333-
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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EXOGEN, INC.
(Exact Name of Registrant as Specified in Its Charter)
--------------------------------
DELAWARE 22-3208468
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
10 Constitution Avenue
Piscataway, New Jersey 08855
(732) 981-0990
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
--------------------------------
Patrick A. McBrayer
President and Chief Executive Officer
10 Constitution Avenue
Piscataway, New Jersey 08855
(732) 981-0990
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
--------------------------------
Ellen B. Corenswet, Esq.
Luci Staller Altman, Esq.
Brobeck, Phleger & Harrison LLP
1633 Broadway, 47th Floor
New York, New York 10019
(212) 581-1600
Approximate date of commencement of proposed sale to the public: As
soon as practicable on or after this Registration Statement is declared
effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. |X|
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
<PAGE>
CALCULATION OF REGISTRATION FEE
================================================================================
| |Proposed Maximum| Proposed |
Title of Each | Amount | Aggregate | Maximum | Amount of
Class of Securities | to Be | Offering Price | Aggregate |Registration
to be Registered |Registered| Per Share(1) |Offering Price(1)| Fee
=====================|==========|================|=================|============
| | | |
Common Stock, | 125,000 | $2.375 | $296,875 | $83.00
$0.0001 par value | | | |
per share | | | |
================================================================================
(1) The price of $2.375 is the average of the high and low prices of Exogen's
common stock on the Nasdaq Stock Market's National Market on June 2 1999, and is
set forth solely for the purpose of computing the registration fee pursuant to
Rule 457(c).
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
PROSPECTUS
125,000 Shares
EXOGEN, INC.
Common Stock
---------------------
This prospectus relates to the public offering, which is not being
underwritten, of up to 125,000 shares of our Common Stock which is held by two
of our current warrantholders.
The prices at which such stockholders may sell the shares will be
determined by the prevailing market price for the shares or in negotiated
transactions. We will not receive any of the proceeds from the sale of the
shares.
Our common stock is quoted on the Nasdaq National Market under the
symbol EXGN. The last reported sales price of our common sock on the Nasdaq
National Market on June 2, 1999 was $2.50 per share.
AN INVESTMENT IN THE SHARES OF COMMON STOCK OF EXOGEN OFFERED OR SOLD
UNDER THIS PROSPECTUS INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 3.
---------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
---------------------
The date of this prospectus is June 7, 1999
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we file at
the SEC's public reference rooms in Washington D.C., New York, New York, and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. Our SEC filings are also available to the public
from the SEC's web site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and later information filed with the
SEC will update and supersede this information. We incorporate by reference the
documents listed below and any future filings made with the SEC under Section
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until our
offering is completed.
(a) Annual Report on Form 10-K/A for the fiscal year ended September
30, 1998, filed on May 28, 1999;
(b) Current Report of Exogen on Form 8-K filed October 19, 1998;
(c) Quarterly Report on Form 10-Q/A for the period ended December 31,
1998, filed on May 28, 1999;
(d) Quarterly Report on Form 10-Q for the period ended March 31, 1999,
filed on May 14, 1999;
(e) the description of Exogen common stock contained in our
registration statement on Form 8-A filed on May 26, 1995 under Section 12 of the
Exchange Act; and
(f) the description of the Exogen's Share Purchase Rights contained in
our registration statement on Form 8-A filed on December 10, 1996 under Section
12 of the Exchange Act, including any amendments or reports filed for the
purpose of updating such description.
You may request a copy of these filings, other than exhibits to the
documents, unless the exhibits are specifically incorporated by reference into
such document, at no cost, by writing or telephoning us at the following
address:
Chief Financial Officer
Exogen, Inc.
10 Constitution Avenue
Piscataway, New Jersey 08855
(732) 981-0990
You should rely only on the information incorporated by reference or
provided in this prospectus or the prospectus supplement. We have authorized no
one to provide you with different information. We are not making an offer of
these securities in any state where the offer is not permitted. You should not
assume that the information in this prospectus or the prospectus supplement is
accurate as of any date other than the date on the front of the document.
<PAGE>
THE COMPANY
Exogen was incorporated in New York on January 24, 1992, and was
reincorporated in Delaware on February 8, 1993. Our principal executive offices
are located at 10 Constitution Avenue, Piscataway, New Jersey 08855.
Our telephone number is (732) 981-0990.
We design, develop, manufacture, and market medical devices for the
non-invasive treatment of musculoskeletal injury and disease. Our proprietary
ultrasound and mechanical-stress technologies deliver energy that promotes the
growth, repair and maintenance of bone. These technologies are based on the
principle that bone growth is stimulated by mechanical force.
Our Sonic Accelerated Fracture Healing System, or SAFHS(R), device
utilizes mechanical force, produced by low-intensity ultrasound, to accelerate
fracture healing for closed, cast-immobilized, fresh fractures of the lower leg
and lower arm within the device's approved uses. The SAFHS device is small and
portable, and is used by the patient once daily for 20 minutes. Our Pre-Market
Approval, or PMA, application for our first model, the SAFHS Model 2A, was
approved by the U.S. Food and Drug Administration, or FDA, in October 1994. In
May 1997, we
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began commercial distribution of the second-generation SAFHS 2000(R) in the
United States. The SAFHS 2000, which utilizes the same low-intensity ultrasound
signal as does the SAFHS Model 2A, is entirely battery operated and is smaller
and lighter than the SAFHS Model 2A for enhanced portability. The SAFHS device
is the only medical device approved by the FDA for the acceleration of
fresh-fracture healing of the lower leg and lower arm.
RISK FACTORS
In addition to the other information in this prospectus, the following
factors should be considered carefully in evaluating an investment in the shares
of Common Stock offered by this prospectus.
History of Losses and Expectation of Continued Losses at Least Through 2000
We have had a history of substantial net losses since our inception. We
incurred net losses of $3.0 million for the six months ended March 31, 1999,
$7.6 million for the year ended September 30, 1998, $11.2 million for the year
ended September 30, 1997, and $10.6 million for the year ended September 30,
1996. As of March 31, 1999, we had an accumulated deficit of $44.9 million. The
net losses we have incurred to date and the net losses we expect to continue to
incur for at least the next two years have been due to several factors,
including the following:
o engineering and developing the SAFHS device and the
o mechanical-stress device; conducting clinical trials for the
o SAFHS device and mechanical-stress device; obtaining FDA
o approval of the SAFHS device; developing and expanding our
o marketing, sales and distribution network domestically and
internationally;
o expanding our reimbursement activities domestically and
internationally; and
o expanding in-house manufacturing capability.
Although we have been marketing and selling the SAFHS device since
1994, we are still experiencing material losses. We have not achieved
profitability, and we expect to continue to incur operating losses at least
through 2000. Although our revenues have grown in recent quarters, we cannot be
certain that we will achieve sufficient revenues for profitability. Our future
revenues and profitability, if any, are critically dependent on whether we
successfully market and sell, and obtain reimbursement for, the SAFHS device.
Even if we do achieve profitability, we cannot be certain that we can sustain or
increase profitability on a quarterly or annual basis in the future.
<PAGE>
We May Require Additional Financing
Based on our current level of operations, we believe that our existing
capital resources will be sufficient to meet our needs through June 2000.
However, this is a forward-looking statement, and no assurance can be given that
there will be no change that would consume available resources significantly
before such time. After that time, we may not generate sufficient cash flow from
operations or be able to raise capital in sufficient amounts to enable us to
operate our business. If necessary, we would consider other sources of
financing, such as private placements, strategic alliances, and the sale of
assets, but we cannot assure you that such financing would be available when
needed or on terms acceptable to us. If adequate funds are not available, we may
be required to reduce our fixed costs and delay, reduce, or eliminate certain of
our activities, which would materially and adversely affect our business,
financial condition, results of operations and cash flows.
Substantial Dependence on the SAFHS Device; Uncertainty of Market Acceptance
Our future growth depends substantially on the commercial success of
the SAFHS device. Essentially all of our product revenues are derived from sales
of the SAFHS device. We expect the SAFHS device to continue to account for
substantially all of our product revenues for the foreseeable future. Our
long-term success will depend on the following:
o successful domestic and international commercialization of the
SAFHS device for its approved uses, including the ability of our
exclusive U.S. distributor, Smith & Nephew, to successfully
market the SAFHS device in the United States;
o whether the medical community will accept the ultrasound
technology of the SAFHS device as a safe and effective method of
treating fresh, bone fractures;
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o whether third-party payors, including traditional fee-for-service
insurers, workers' compensation insurers, HMOs and other managed
care organizations, automobile insurers, third-party
administrators, Medicare, and other government entities, will
provide third-party reimbursement of the SAFHS device; and
o development and regulatory approval of the SAFHS device for
additional uses.
If the market does not accept the SAFHS device, our business, financial
condition, results of operations, and cash flows will be materially and
adversely affected.
Substantial Dependence on Smith & Nephew U.S. Distribution Arrangement
Our future growth depends substantially on the ability of our exclusive
U.S. distributor, Smith & Nephew, to successfully market the SAFHS device in the
United States. On August 10, 1998, Smith & Nephew acquired exclusive rights to
market the SAFHS device in the United States, under a multi-year master
agreement, a U.S. sales representative agreement, and a stock purchase
agreement. As a result, we are no longer involved in any direct sales activities
relating to the SAFHS device in the United States. Although the U.S. sales
representative agreement has a term of 10 years, it may be terminated by mutual
agreement of Exogen and Smith & Nephew, or by Smith & Nephew in the event of a
default by Exogen.
We cannot assure you that Smith & Nephew will succeed in its efforts to
market the SAFHS device. Smith & Nephew's sales personnel do not have prior
experience in the sale or use of the SAFHS device, although we are providing
them with training and other support. Although we believe that Smith & Nephew is
economically motivated to succeed in performing its responsibilities under the
agreements, the amount of resources and time Smith & Nephew devotes to its
responsibilities is not within our control, and therefore, we cannot assure you
that Smith & Nephew will perform its obligations as expected. If the U.S.
distribution arrangement with Smith & Nephew is not successful or if the
arrangement is terminated, our business, financial condition, results of
operations, and cash flows will be materially and adversely affected.
Substantial Dependence on Third Parties in Europe and Japan to Sell the SAFHS
Device
We depend on independent distributors, sales agents, and marketing
partners to sell the SAFHS device in Europe, Japan, and other territories.
Revenues derived from international sales of the SAFHS device represented 16%
for the six months ended March 31, 1999, 19% for the year ended September 30,
1998, 18% for the year ended September 30, 1997, and 14% for the year ended
September 30, 1996.
Through a subsidiary in Germany, we began selling and marketing the
SAFHS device in Europe in February 1996. We also sell and market the SAFHS
device in Europe through independent distributors and sales agents. We have
recorded sales in Germany, Austria, Holland, Denmark, Switzerland, Belgium, the
United Kingdom, and Israel. Revenues derived from sales of the SAFHS device in
Europe represented 7% for the six months ended March 31, 1999, 6% for the year
ended September 30, 1998, 18% for the year ended September 30, 1997, and 14% for
the year ended September 30, 1996. Most of our sales of the SAFHS device in
Europe are derived from Germany, where we receive limited local reimbursement
only on a case-by-case basis. Our European accounts receivable as of March 31,
1999, net of allowances for returns, pricing adjustments, and bad debt, was
$213,000.
<PAGE>
In Japan, we sell the SAFHS device to our exclusive distributor, Teijin
Limited, a Japanese corporation. We are responsible for manufacturing and
supplying the SAFHS device to Teijin for clinical trials and sales in Japan,
while Teijin is responsible for obtaining regulatory approval and for marketing
and distributing the SAFHS device in Japan. In May 1998, Teijin announced that
the Health and Welfare Ministry of Japan had approved reimbursement for the
SAFHS device, which was the final approval Teijin needed to begin commercial
distribution of the SAFHS device in Japan. In June 1998, Teijin began to sell
the SAFHS device in Japan. Exogen's revenues derived from sales of the SAFHS
device to Teijin represented 9% for the six months ended March 31, 1999, and 13%
for the year ended September 30, 1998. Most of Teijin's purchases of SAFHS
devices in fiscal 1998, which were primarily in the second half of the year,
represented an initial inventory build-up by Teijin to begin commercial
distribution in Japan. Purchases by Teijin in fiscal 1999 should be principally
to restock the inventory that Teijin sells. We do not anticipate that any of
Teijin's quarterly restocking purchases will reach the quarterly volume achieved
by Teijin's initial stocking of inventory in fiscal 1998.
Under the distribution arrangement with Smith & Nephew, Smith & Nephew
has an option to obtain exclusive distribution rights to the SAFHS device
worldwide, except for Japan. In April 1999, we completed an agreement with Smith
& Nephew whereby it obtained the exclusive distribution rights to the SAFHS
device in the
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United Kingdom. We cannot assure you that Smith & Nephew will exercise its
option to obtain worldwide, except for Japan, distribution rights to the SAFHS
device. We also cannot assure you that the existence of this option will not
materially and adversely affect our ability to maintain effective distribution
arrangements in international markets, pending the exercise or expiration of
this option.
We cannot assure you that our independent distributors, sales agents,
and marketing partners will succeed in marketing and selling the SAFHS device in
Europe, Japan, and other territories. Each of the foreign markets in which we
sell, or plan to sell, our products has separate regulatory and product approval
requirements. We cannot assure you that we will be able to obtain the necessary
regulatory approvals of the SAFHS device in foreign markets. If our independent
distributors, sales agents, and marketing partners are not successful in
marketing and selling the SAFHS device in Europe, Japan, and other territories,
our business, financial condition, results of operations, and cash flows could
be materially and adversely affected.
o Risks Associated with International Operations
o Our international operations are subject to other inherent risks,
including the following:
o fluctuations in currency exchange rates;
o regulatory and product approval requirements;
o tariffs and other trade barriers;
o greater difficulty in accounts receivable collection and longer
collection periods;
o reimbursement approvals, both government and private;
o difficulties and costs of staffing and managing foreign
operations and distributors;
o potentially adverse tax consequences;
o reduced protection for intellectual property rights in some
countries, including restrictions on repatriation of earnings;
o burdens of complying with a wide variety of foreign laws;
o the impact of recessions in economies outside the United States;
political and economic instability;
o and seasonal reductions in business activity during the summer
months in Europe and other parts of the world.
<PAGE>
In addition, our international operations and sales are denominated in
local foreign currencies. In Japan, where we do not have operations, our sales
to Teijin are denominated in U.S. dollars. We do not currently engage in
currency hedging activities.
If we fail to successfully market and sell the SAFHS device in
international markets, our business, financial condition, results of operations,
and cash flows could be materially and adversely affected.
Quarterly Operating Results Are Subject to Significant Fluctuations
Our revenues and operating results may vary significantly from quarter
to quarter due to a number of factors, not all of which are within our control.
These factors include the following:
o the success of our exclusive U.S. distributor, Smith & Nephew, in
marketing the SAFHS device
o in the United States;
o the timing of sales of the SAFHS device;
o the mix of sales of the SAFHS device in the United States and
o Europe and to Japan; the timing of reimbursement approval and
payments by governmental authorities and third-party payors;
o new product introductions by us or our competitors; expenses
incurred in the research and development of new products;
o changes in our pricing policies or those of our competitors;
o timing of regulatory actions; general economic and market
conditions; the Asian economic crisis and instability;
o and currency fluctuations.
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Our revenues for the foreseeable future are almost entirely dependent
on sales of the SAFHS device. If revenues grow slower than we anticipate, our
business, financial condition, results of operations, and cash flows will be
materially and adversely affected.
Dependence on Third-Party Reimbursement
Successful sales of the SAFHS device in the United States, Europe,
Japan, and other territories will depend, in part, on whether we will be
reimbursed by third-party payors, including traditional fee-for-service
insurers, workers' compensation insurers, HMOs and other managed care
organizations, automobile insurers, third-party administrators, Medicare, and
other government entities. There is significant uncertainty concerning
third-party reimbursement for the use of any medical device incorporating new
technology, such as the SAFHS device. Third-party payors are increasingly
challenging the price of medical devices, and as a result, are limiting
reimbursement coverage for medical devices and, in many instances, are putting
pressure on medical suppliers to lower their prices. Legislative bodies in the
United States and around the world continue to propose fundamental reforms in
the health care industry that could affect the availability of third-party
reimbursement, and we cannot predict the timing or effect of any such
legislation.
United States. We cannot assure you that costs associated with medical
devices incorporating new technology, such as the SAFHS device, will be
reimbursed. To expedite reimbursement for SAFHS devices in the United States, we
seek reimbursement approval from third-party payors, when possible, prior to
shipping the devices. Regardless of the availability of reimbursement
preapproval, our reimbursement staff works closely with third-party payors,
pursuing reimbursement case-by-case. Prior to approving coverage for a new
medical technology, most third-party payors require evidence that the technology
is safe and effective, not experimental or investigational, and medically
necessary and appropriate for the specific patient. Third-party payors typically
require that the technology has received FDA approval or clearance for
marketing. Also, new technologies are often prescribed for uses other than those
approved by the FDA, for which reimbursement by third-party payors may not be
available. This is so called off-label applications. An increasing number of
third-party payors and managed care plans are also beginning to require evidence
that the technology is cost effective. We have obtained a nationally recognized
product code for the ultrasound device, and this code may expedite reimbursement
from third-party payors for the SAFHS device. However, we cannot assure you that
such codes will be utilized appropriately, or at all.
<PAGE>
We have developed a multi-level program to obtain coverage and
reimbursement from third-party payors for the SAFHS device as a new treatment.
The SAFHS device is classified by third-party payors as durable medical
equipment. Although we have not received broad approval from any reimbursement
authority for payment of the SAFHS device, we have received approval from
various third-party payors case-by-case.
The Health Care Financing Administration, called HCFA, which
administers the Medicare program, has a national coverage policy for
electrical-stimulation devices that initiate the healing of non-union fractures.
In August 1996, HCFA's Technology Advisory Committee recommended that the SAFHS
device not be covered under the Medicare program. The committee's recommendation
stated, "The available data, although demonstrating a reduction in
physician-determined healing time for the study population, could not be
generalized to the Medicare population in a way that would allow a conclusion
that SAFHS was an effective procedure." Since that time, we have continued to
pursue coverage for SAFHS through meetings with HCFA staff, and have provided
additional support of the clinical benefits of the SAFHS therapy, including
information related to the Medicare population. In addition, we have been
working with consultants and the Health Industry Manufacturers Association to
pursue various avenues to obtain Medicare coverage for the SAFHS device. To
date, we have been unable to change the Medicare noncoverage decision; however,
we have an ongoing dialogue with HCFA staff. The United States Congress has the
power to significantly reduce Medicare and Medicaid expenditures, and considers
from time to time proposals to reduce such expenditures. We cannot predict when
Congress may enact legislation reducing Medicare and Medicaid expenditures, and
if such legislation is enacted, what effect, if any, such legislation may have
on our business, financial condition, results of operation and cash flows.
We cannot assure you that we will be successful in obtaining
third-party reimbursement from third-party payors, including Medicare, or that
third-party payors will recommend that their programs cover the SAFHS device. If
we are unable to obtain adequate third-party reimbursement for the SAFHS device,
our business, financial condition, results of operations, and cash flows will be
materially and adversely affected.
International. Our international reimbursement plan varies by country.
In Germany, Holland, and France, we are using indigenous clinical data as well
as data collected in the United States on the effectiveness of the SAFHS device
to support our filings for reimbursement coverage.
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The operating loss for fiscal 1998 includes an $800,000 nonrecurring
charge, recorded in the three months ended March 31, 1998, to write down certain
international accounts receivable - primarily in Germany that exceeded 180 days
outstanding. The nonrecurring charge was precipitated by a German Supreme Social
Court ruling made available to Exogen in the quarter ended March 31, 1998. The
ruling stated that reimbursement under the Bundesausschuss system (the German
federal organization that establishes medical reimbursement policy for
outpatient healthcare providers) for new medical therapies could occur only if
the new therapy was part of the official book of therapies of the
Bundesausschuss. Prior to this ruling, Exogen relied on a 1995 German Supreme
Social Court ruling that established that new medical therapies must be
reimbursed under the pre-Bundesausschuss system if (a) treatment was proven
effective and economical and (b) treatment did not exceed the scope of what was
necessary. Exogen believed the clinical effectiveness of the SAFHS device and
the device's economic benefits would satisfy the requirements of the 1995
ruling. However, based on the later ruling and the fact that the SAFHS therapy
is not part of the official book of therapies, Exogen recorded the nonrecurring
charge.
To assist in the collection of outstanding claims and to expedite the
reimbursement process on future claims, Exogen is seeking nationwide approval by
the Bundesausschuss. To this end, in August 1997, Exogen submitted a formal
application to the National Krankenkasse, which is the predecessor to the
Bundesausschuss. The application process includes scientific and economic
assessments. In August 1998, the Minister of Health accepted the recommendation
of the Bundesausschuss not to approve national reimbursement for SAFHS therapy.
Exogen is appealing the Minister of Health's decision through administrative and
legal channels. Exogen has also filed a lawsuit against the Bundesausschuss to
challenge its decision. Both actions are being actively pursued at this time.
Because there is no nationwide reimbursement approval for the SAFHS
device by the Bundesausschuss, Exogen has adopted the policy that, since
September 1997, for each prescription submitted to Exogen in Germany, Exogen
ships the SAFHS device only after receiving reimbursement approval for that
device. This preapproval involves a case-by-case review by a local reimbursement
authority, which has the discretion to reimburse for the device regardless of
the decision of the Bundesausschuss. The local decision is based on data
supplied by Exogen and the prescribing physician.
In Holland, we have received approval from the Ministry of Health,
Welfare, and Sports of The Netherlands for the nationwide reimbursement of
Exogen's SAFHS device for the treatment of nonunion fractures older than six
months. The approval, effective April 1, 1999, was based on an extensive review
by the Ziekenfondsraad, or the Sick Fund Council, of the clinical efficacy and
economic benefits of SAFHS therapy.
In France, we have applied to be listed on the Tarif Interministeriel
des Prestations Sanitaries, or TIPS. France's list of medical devices allowed
for prescription by physicians working in the private sector and for
reimbursement by the National Health Insurance. That application is still
pending, and therefore, we do not sell SAFHS devices in France at this time.
<PAGE>
In Japan, our Japanese distributor, Teijin, received nationwide
reimbursement approval from the Japanese Health and Welfare Ministry in May
1998.
We cannot assure you that we will be successful in obtaining national
reimbursement approval in Germany, France, or other countries. If we do not
obtain national reimbursement approval of the SAFHS device in Germany, France,
and other countries, our business, financial condition, results of operations,
and cash flows could be materially and adversely affected.
Extensive Government Regulation
United States. Our current product and our future products, if any, are
subject to extensive regulation by the FDA in the United States and by similar
regulatory authorities in other countries. Prior to commercial sale in the
United States, each of our products must undergo an extensive regulatory
approval process conducted by the FDA under the Federal Food, Drug and Cosmetic
Act, commonly called the FDC Act. The FDA regulates the clinical testing,
manufacturing, labeling, distributing, and promoting of medical devices.
Noncompliance with applicable requirements can result in failure of the
government to grant PMA for devices, withdrawal of the PMA, total or partial
suspension of production, fines, injunctions, civil penalties, recall or seizure
of products, and criminal prosecution.
Medical devices are classified into three classes, I, II, or III, on
the basis of the controls necessary to reasonably assure their safety and
effectiveness. The SAFHS device is classified as a Class III device, the class
subject to the highest level of regulation by the FDA. In addition to the
general control requirements of the FDC Act, including registration, labeling,
pre-market notification, and adherence to Good Manufacturing Practices, commonly
called GMP, the SAFHS device is also subject to pre-market approval.
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Before a new Class III device can be introduced into the market, the
manufacturer must obtain FDA clearance through a PMA application. The less
burdensome 510(k) pre-market notification process has not been, and is not
expected to be, available for any of our products. Accordingly, we have had to
obtain, and expect to apply for, PMAs and PMA supplements for our future
products.
A PMA application must be supported by extensive data, including
preclinical and clinical trial data, to demonstrate the safety and efficacy of
the device for the uses specified in the PMA application. If human clinical
trials of a device are required and the device presents a "significant risk,"
the manufacturer or the distributor of the device must file an Investigational
Device Exemption, or IDE, and have an approved application prior to commencing
human clinical trials.
The IDE application must be supported by data, typically including the
results of animal and laboratory testing. If the IDE application is approved,
human clinical trials may begin at a specific number of investigational sites
with a specified maximum number of patients, as recommended by the FDA. Sponsors
of clinical trials are permitted to sell those devices distributed in the course
of study as long as compensation does not exceed recovery of the costs of
manufacturing, researching, developing, and handling.
Upon receipt of the PMA application, the FDA makes a threshold
determination as to whether the application is sufficiently complete to permit a
substantive review. If the FDA determines that the PMA application is
sufficiently complete to permit a substantive review, the FDA will file the
application. An FDA review of a PMA application generally takes between two and
three years from the date the PMA application is filed, but may take
significantly longer. The review time is often significantly extended by
requests from the FDA for more information or clarification of information
already provided in the submission. During the review period, an advisory
committee, including clinicians, will likely be convened to review and evaluate
the application and provide recommendations to the FDA as to whether the device
should be approved. In addition, the FDA will inspect the manufacturing facility
to ensure compliance with the FDA's GMP requirements prior to approval of a PMA
application.
The PMA process can be expensive, lengthy, and uncertain. We cannot
assure you that we will be able to obtain necessary regulatory approvals. The
loss of previously received approvals, or failure to comply with existing or
future regulatory requirements, would have a material adverse effect on our
business, financial condition, results of operations, and cash flows.
<PAGE>
We are required to file a PMA supplement for new or expanded uses of
our SAFHS technology and for any material modifications to the SAFHS device. If
a PMA supplement is not accepted by the FDA for a new or expanded use or
material modification of the SAFHS device, we must commence and complete the
entire pre-market approval process with respect to such use or modification of
the SAFHS device. We began commercial distribution of the SAFHS 2000, the
second-generation SAFHS device, in the United States in May 1997 pursuant to FDA
approval of a PMA supplement in March 1997. In August 1998, we resubmitted a PMA
supplement for expanded and new applications of the SAFHS 2000 device. We cannot
guarantee that this supplement will be accepted on a timely basis or at all. In
addition, we will be required to file a PMA application for our
mechanical-stress device, if and when development is completed. We cannot assure
you that any PMA application relating to the mechanical-stress device will be
filed or granted on a timely basis, or at all.
Any products manufactured or distributed by us pursuant to an approved
PMA are subject to pervasive and continuous regulation by the FDA, including
record-keeping requirements, reports of adverse experience with the use of the
device, postmarket surveillance, postmarket registry, and other actions as
deemed necessary by the FDA. Product labeling and promoting activities are
subject to scrutiny by the FDA and, in certain instances, by the Federal Trade
Commission. Exogen and its agents may promote products only for the products'
approved indications. We cannot assure you that the FDA will not impose
modifications to the labeling that could adversely affect our ability to market,
sell, or be reimbursed for the SAFHS device. In addition, we cannot assure you
that we will not become subject to FDA actions as a result of physicians'
prescribing the SAFHS device for off-label uses.
We are also subject to numerous federal, state, and local laws relating
to such matters as safe working conditions, manufacturing practices,
environmental protection, fire hazard control, and disposal of hazardous or
potentially hazardous substances. We cannot assure you that we will not be
required to incur significant costs to comply with such laws and regulations in
the future, or that such laws or regulations will not have a material adverse
effect upon our business, financial condition, results of operations, or cash
flows.
International. To market and sell the SAFHS device or any future
products in foreign markets, we must comply with foreign government regulations,
the requirements of which differ substantially from country to country. In
Europe, we are required to comply with the Medical Device Directive, which
covers most medical devices.
8
<PAGE>
Under the Medical Device Directive, most medical devices must qualify for the CE
mark, and effective June 1998, must bear a CE mark to be marketed and sold in
the European Union. To obtain the CE mark, a manufacturer must demonstrate
compliance with product safety requirements as well as quality system
requirements. The CE mark is recognized by countries that are members of the
European Union and the European Free Trade Association. We received the CE mark
for the SAFHS Model 2A in August 1996 and for the SAFHS 2000 in March 1998. We
cannot assure you that we will be able to obtain CE marks for future
generations, if any, of the SAFHS device.
Although members of the European Union must accept for marketing
medical devices bearing a CE mark without imposing further requirements related
to product safety and performance, each country may require the use of its own
language on labels and instructions for use. National Competent Authorities, who
are required to enforce compliance with the requirements of the Medical Device
Directive, can restrict, prohibit, and recall CE-marked products if they are
considered to be unsafe. Such a decision must be confirmed by the European
Commission to be valid. Member countries may impose additional requirements as
long as they do not violate the Medical Device Directive or constitute technical
barriers to trade.
We cannot assure you that the FDA or any foreign regulatory authority
will approve our current or future products in a timely manner, or at all. If we
experience delays or failure in obtaining such approvals, lose any previously
received approvals, or fail to comply with existing or future regulatory
requirements, our business, financial condition, results of operations, and cash
flows will be materially and adversely affected.
Uncertainty of New Product Development
We plan to seek FDA approval to begin clinical trials to expand the
approved uses for the SAFHS technology to include other long-bone fractures,
lower-spine fusion, and cartilage repair. We also plan to undertake additional
development activities and human clinical trials for our mechanical-stress
device, which is designed to prevent bone loss related to osteoporosis. Our
research and development efforts with respect to expanded uses of the SAFHS
technology and the mechanical-stress device may not lead to development of
applications or products that are shown to be safe and effective in clinical
trials. In addition, these new applications or products may not:
o meet applicable regulatory standards;
o be capable of being manufactured in commercial quantities at
acceptable costs;
o be eligible for third-party reimbursement from governmental or
private insurers;
o be successfully marketed; or achieve market acceptance.
At any stage of the development process, new applications or products
that appeared promising in preclinical studies or trials may not demonstrate
efficacy in larger-scale clinical trials and as a result, would not receive
regulatory approval. As a result, it is possible that we may have to curtail,
redirect, suspend, or eliminate some or all of our product development programs.
<PAGE>
Risks Associated with Intense Competition
The medical device industry is intensely competitive. The SAFHS device
competes with non-invasive bone-growth electrical-stimulation devices and with
various surgical treatments. In the United States there are four companies that
currently market electrical stimulation devices for the treatment of
slow-healing fractures, in direct competition with the SAFHS device. We believe
that some of these companies are conducting preclinical or clinical research
relating to the use of electrical stimulation for the treatment of fresh
fractures. If our mechanical-stress device is developed, approved by the FDA,
and commercialized, it will compete with drug therapies, growth factors,
bone-graft substitutes, and exercise/physical therapy equipment. Many of our
competitors have substantially greater financial, technical, marketing, sales,
and distribution resources than we do. They also have more experience in
research and development, clinical trials, and regulatory matters than us. In
addition, most of our competitors have established third-party reimbursement for
their products. We cannot assure you that our competitors will not develop
products that are superior to ours, achieve greater market acceptance, or render
our technology and products obsolete or noncompetitive, in which case our
business, financial condition, results of operation, and cash flows will be
materially and adversely affected.
Risks Associated with Rapid Technological Change
The medical device industry is characterized by rapid product
development and technological change. We expect that the technologies associated
with medical devices will continue to develop rapidly. As a result, our future
9
<PAGE>
success will depend in large part upon our ability to maintain a competitive
position with respect to those technologies. Technological developments by
others may result in our products' obsolescence or becoming too expensive before
they are marketed or before we recover a significant portion of expenses
incurred in connection with developing and commercializing those products, in
which case our business, financial condition, results of operations, and cash
flows will be materially and adversely affected.
Limited Protection of Patents, Copyrights and Proprietary Rights; Risk of Patent
Infringement
Our success will depend in part on our ability to obtain and maintain
United States and foreign patent protection, preserve our copyrights and trade
secrets, and operate without infringing the proprietary rights of third parties.
We place considerable importance on obtaining patent protection for significant
new technologies, products, and processes. With respect to our SAFHS technology,
we hold title to 11 issued United States patents, one issued Canadian patent,
one issued Taiwanese patent, one issued New Zealand patent, one registered
Japanese patent, 12 pending United States patent applications, and corresponding
Patent Cooperation Treaty and foreign patent applications. The original United
States ultrasound patent that is the basis of the SAFHS device expires in 2007.
Our 10 other issued United States patents relating to SAFHS technology will
expire between 2008 and 2014.
With respect to our mechanical-stress technology, we are the exclusive
licensee of four issued United States patents, two issued foreign patents, one
pending United States patent application, and five pending foreign patent
applications. The four issued United States patents will expire between 2010 and
2011. The exclusive license agreement relating to the mechanical-stress
technology provides for royalty payments on sales of products using the patented
technology. Under the license agreement, our exclusive license may revert to a
nonexclusive license if we do not use good faith efforts to commercially exploit
the patented technology. The license agreement expires on the later of March
2022 or the expiration of the final patent licensed to us.
We believe we own or have the right to use all the proprietary
technology necessary to manufacture and market our products. Under current law,
patent applications in the United States are maintained in secrecy until patents
issue, and patent applications in foreign countries are maintained in secrecy
for a period after filing. The right to a device patent in the United States is
attributable to the first to invent the device, rather than the first to file a
patent application, while in foreign countries, ownership of a patent is
typically determined by priority of patent filing, not invention. Consequently,
we cannot be certain that we were the first to invent certain technology covered
by pending patent applications or that we were the first to file patent
applications for such inventions. In addition, the patent positions of medical
device companies, including ours, are generally uncertain partly because the
positions involve complex legal and factual questions.
<PAGE>
Legal standards relating to the validity of patents covering medical
devices and biotechnological inventions and the scope of claims made under such
patents are still developing. Our patent position is highly uncertain and
involves complex legal and factual questions. We cannot be certain that the
applicants or inventors of subject matter covered by patent applications or
patents owned by or licensed to us were the first to invent or the first to file
patent applications for such inventions. In addition, we cannot guarantee that:
o patent applications to which we hold rights will result in the
issuance of patents;
o any patents issued or licensed to us will be free from challenge
and that if challenged, they would be held to be valid;
o any such patents will provide commercially significant protection
to our technology, products, and processes;
o others will not independently develop substantially equivalent
proprietary information that is not covered by patents to which
we own rights or obtain access to our know-how;or
o others will not be issued patents that may prevent the sale of
one or more of our products, or require a license and the payment
of significant fees or royalties by us to third parties to enable
us to conduct our business.
We have not received any notices alleging, and we are not aware of, any
infringement by us of any other entity's patents. However, because of the volume
of patents issued and patents applications filed relating to medical devices, we
cannot assure you that current and potential competitors and other third parties
have not filed or will not file patent applications, or have not received or
will not receive patents, relating to materials or processes we use or propose
to use. Accordingly, we cannot assure you our products do not infringe any
patents or proprietary rights of third parties.
10
<PAGE>
If another party claims the same or overlapping subject matter with
subject matter we have claimed in a United States patent application or patent,
we may decide or be required to participate in interference proceedings in the
United States Patent and Trademark Office to determine priority of invention.
Loss of such an interference proceeding would deprive us of patent protection
sought or previously obtained. Participating in such proceedings could result in
substantial costs, whether or not the eventual outcome is favorable.
In addition to patent protection, we rely on trademarks, copyrights,
trade secrets, proprietary know-how, and confidentiality and assignment of
invention agreements with our employees, consultants, distributors, sales
agents, and marketing partners to protect our intellectual property. We hold
United States federal trademark registrations for the marks: SAFHS(R),
EXOGEN(R), SAFHS 2000(R) and EXOGEN 2000(R). We also hold registrations for the
SAFHS(R) mark in Japan, Canada and Mexico. Trademark applications for the EXOGEN
and SAFHS 2000 marks are pending in foreign countries. We hold rights to
copyrights on text and software we develop in connection with the SAFHS device.
We cannot assure you that any issued patents or copyrights we own will
provide us with a competitive advantage or will not be challenged or
circumvented by our competitors. We also cannot assure you that our
confidentiality and assignment of invention agreements will not be breached or
that we would have adequate remedies for any such breach. Finally, we cannot
assure you that our copyrights, trade secrets, proprietary know-how, and
intellectual property will not become known or be independently discovered by
others.
Litigation may be necessary to defend against claims of infringement,
to enforce patents and copyrights issued or licensed to us, or to protect trade
secrets. If we must litigate such issues, we may be forced to incur substantial
costs and to devote substantial resources and time. We cannot assure you that we
would prevail in such litigation. In addition, if any relevant claims of
third-party patents are upheld as valid and enforceable, we could be prevented
from selling our products or could be required to obtain licenses from the
owners of such patents. We cannot guarantee that such licenses would be
available or, even if available, would be on acceptable terms to us. If we are
forced to incur substantial costs in litigation or fail to obtain a license, our
business, financial condition, results of operations, and cash flows will be
materially and adversely affected.
Manufacturing and Related Risks
We have developed in-house manufacturing and refurbishing capability
for the SAFHS 2000 device. Although we are able to manufacture our entire SAFHS
2000 production in-house, previous purchase commitments to a contract
manufacturer and our belief that it is prudent to have a second source to
support our in-house manufacturing require our use of a contract manufacturer.
We anticipate that approximately one third of our fiscal 1999 SAFHS 2000
production will be supplied by the contract manufacturer.
<PAGE>
The FDA regulates manufacturers of medical devices that have received
FDA approval. We are required to adhere to FDA regulations setting forth GMP
requirements relating to tests, control, and documentation. State and federal
agencies monitor ongoing compliance with GMP and other applicable regulatory
requirements through periodic inspections. The FDA has inspected and approved
our facilities and those of our contract manufacturer under the FDA's Quality
System Regulations. If we or the contract manufacturer fail to maintain our
facilities in accordance with the FDA's GMP requirements, the noncomplying party
could lose the ability to manufacture the SAFHS device on a commercial scale.
Loss of this manufacturing capability could limit our ability to deliver the
SAFHS device to physicians or patients. If this occurs, our business, financial
condition, results of operations, and cash flows will be materially and
adversely affected.
The manufacture of the SAFHS device involves an assembly process with a
number of significant components. Each device is tested and released by us in
accordance with FDA requirements. Most purchased components are available from
more than one vendor. However, one key component currently is manufactured by a
single-source vendor. For this component, there are relatively few alternative
sources of supply. However, we are actively in the process of qualifying
alternative vendors for this component. If the supply of this component is
interrupted, and we are unable to establish additional or replacement suppliers
for such component, our business, financial condition, results of operations,
and cash flows will be materially and adversely affected.
Royalty Payment Obligations; Potential Loss of Exclusive License
If we successfully develop the mechanical-stress device, we will be
required to pay a royalty on any net revenues from sales of this product. We
have an exclusive license to the mechanical-stress technology, which we will
lose if we do not commercially exploit the technology underlying the license. We
cannot assure you that we
11
<PAGE>
will be able to commercially exploit this technology. If we lose the exclusive
license, our business, financial condition, results of operations, and cash
flows could be materially and adversely affected.
Reliance on Key Personnel
Our success depends to a significant extent upon our executive officers
and other key technical personnel. If we lose the services of an executive
officer or one or more key employees or our ability to attract and retain such
personnel, our business, financial condition, results of operations, and cash
flows will be materially and adversely affected. Except for Patrick McBrayer,
none of our executive officers or key employees is a party to an employment
agreement with Exogen. We do not have "key person" life insurance policies
covering any of our employees.
Possible Volatility of Stock Price
The trading price of our common stock has been subject to wide
fluctuations in the past. Our common stock's trading price could continue to
fluctuate in response to variations in quarterly operating results,
announcements of technological innovations or new products by us or our
competitors, changes in earning estimates by analysts, general conditions in the
medical device industry, and other events or factors. In addition, the stock
market in general has experienced significant price and volume fluctuations that
have affected the market prices of equity securities of many companies in
industries similar to ours. This volatility has often been unrelated to the
operating performance of these companies. These market fluctuations may
adversely affect the market price of our common stock. In the past, companies
that have experienced volatility in the market price of their stock have been
the object of securities class action litigation. If we were the subject of
securities class action litigation, it could result in substantial costs and a
diversion of management's attention and resources.
Risks Associated With Low-Priced Stocks
Continued inclusion of our common stock on the Nasdaq National Market
will require the following:
o that the public float consist of at least 750,000 shares of
common stock, valued in the aggregate at more than $5 million;
o that we maintain at least $4 million in net tangible assets;
o that our common stock be held by at least 400 holders;and
o that the minimum bid price for our common stock be at least $1.00
per share.
If we are unable to satisfy such maintenance requirements, our common
stock may be removed to the Nasdaq SmallCap Market or delisted from the Nasdaq
Stock Market. In the event our common stock is delisted from the Nasdaq Stock
Market, trading, if any, in the securities would thereafter be conducted in the
over-the-counter market in the pink sheets or the National Association of
Securities Dealers' Electronic Bulletin Board. Consequently, the liquidity of
our common stock could be materially impaired, not only in the number of
securities that can be bought and sold at a given price, but also through delays
in the timing of transactions and reduction in security analysts' and the
media's coverage of us. This could result in lower prices for our common stock
than might otherwise be attained, and could also result in a larger spread
between the bid and asked prices for our common stock.
<PAGE>
In addition, if our common stock is delisted from trading on the Nasdaq
Stock Market and the trading price of our common stock is less than $5.00 per
share, trading in the common stock would also be subject to the requirements of
Rule 15g-9 promulgated under the Exchange Act. Under such rule, broker/dealers
who recommend low-priced securities to persons other than established customers
and accredited investors must satisfy special sales practice requirements,
including a requirement that they make an individualized written suitability
determination for the purchaser and receive the purchaser's written consent
prior to the transaction. The Securities Enforcement Remedies and Penny Stock
Reform Act of 1990 also requires additional disclosure in connection with any
trades involving a stock defined as a penny stock, which is generally any equity
security not traded on an exchange or quoted on the Nasdaq Stock Market that has
a market price of less than $5.00 per share, subject to some exceptions,
including the delivery, prior to any penny stock transaction, of a disclosure
schedule explaining the penny stock market and the associated risks. Such
requirements could severely limit the market liquidity of our common stock. We
cannot assure you that our common stock will not be delisted or treated as a
penny stock.
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<PAGE>
Year 2000 Risks
The Year 2000 compliance issue results from the inability of systems
that utilize computer programs to properly process dates that fall in the year
2000 and beyond. This issue arises because many such programs were developed
using two digits rather than four digits to identify the applicable year. As a
result, programs that use time-sensitive calculations may not function correctly
in the year 2000. Those programs developed using four-digit years are probably
Year 2000 compliant; however, all other programs will likely require
modification and/or replacement to be compliant. The Year 2000 issue not only
affects computer hardware and software, but also can affect equipment used in
the operations of Exogen, and extends to the systems of outside suppliers and
customers, upon which Exogen relies. Failure to address the Year 2000 issue on a
timely basis, or at all, for critical programs used by Exogen could result in
system failures or miscalculations, which could have a material adverse effect
on Exogen's business, financial condition, results of operations, and cash
flows.
We have formed a Year 2000 task force that reviewed our operations in
detail for Year 2000 compliance in the following areas:
o the SAFHS devices;
o our information systems hardware and software;
o our custom-developed business applications;
o third-party business software; and
o other equipment using computer programs.
We do not believe that any of these areas will have a material adverse effect on
our business, financial condition, results of operations, and cash flows. We
cannot assure you that we will not find Year 2000 issues in these areas as
further compliance testing occurs, or that such issues, if found, can be
corrected on a timely basis.
We also reviewed our suppliers, customers, and marketing partners for
Year 2000 compliance. We rely on, and will continue to rely on, these third
parties to provide the following:
o equipment, goods, and services; reimbursement for the SAFHS
devices;
o and marketing and distributing support for the SAFHS device.
There can be no assurance that these third parties will adequately address Year
2000 compliance issues or that contingency plans in certain areas are possible
or practical. As a result, there could be a material adverse affect on our
business, financial condition, results of operations, and cash flows.
Possible Adverse Effect of the Euro Conversion
On January 1, 1999, 11 of the 15 member countries of the European Union
established fixed conversion rates between their existing currencies and a new
common currency called the "euro." This represents an initial step in a process
expected to culminate in the replacement of the existing currencies with the
euro. The conversion to the euro may have operational and legal implications for
some of our international business activities. We have begun consideration of
the effects of the euro conversion on our operations, but we are currently
unsure of the potential impact that the euro conversion will have on our
business, financial condition, results of operations, and cash flows,
particularly as the euro conversion relates to our European operations.
<PAGE>
Certain Anti-takeover Provisions
Certain provisions of our Certificate of Incorporation could make it
more difficult for a third party to acquire control of our business, even if
such change in control would be beneficial to our stockholders. Our Certificate
of Incorporation allows our Board of Directors to issue preferred stock without
stockholder approval. In addition, we entered into a Rights Agreement in
December 1996 that allows our Board of Directors to declare a dividend of one
right to purchase, under certain circumstances, one one-hundredth of a share of
preferred stock for each share of common stock outstanding. Although we do not
have any current plans to issue any preferred stock, the issuance of preferred
stock in the future could make it more difficult for a third party to acquire
our business.
In addition, certain provisions of Delaware law and our bylaws could
discourage a third party from attempting to acquire control of our business.
Section 203 of the Delaware General Corporation Law prohibits us
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<PAGE>
from engaging in any business combination with an interested stockholder
(generally a stockholder who, together with its affiliates, owns 15% or more of
our outstanding stock) for a period of three years unless certain conditions are
met. Section 203 may also have the effect of discouraging a proxy contest or
tender offer. In addition, certain provisions of our bylaws contain specific
procedures stockholders must follow in making director nominations and
submitting proposals for consideration at stockholder meetings. These provisions
could make it more difficult for a third party to acquire our business.
Product Liability and Insurance
Our business exposes us to potential product liability risks in the
event that the use of our products is alleged to have resulted in physical harm
or other adverse effect. Product liability insurance for the medical device
industry is expensive. We currently carry product liability coverage of $3
million per occurrence, with coverage in the aggregate of $3 million for all
claims made in any policy year. In addition, we maintain umbrella liability
insurance, including product liability coverage, of $10 million per occurrence,
with coverage in the aggregate of $10 million for all claims made in any policy
year. Although to date we have not been the subject of any product liability
claims, we cannot assure you that our insurance will provide adequate coverage
against potential claims or that we will be able to maintain product liability
insurance on acceptable terms, or at all. If a product liability claim exceeds
the coverage of our insurance policy, our business, financial condition, results
of operations, and cash flows will be materially and adversely affected.
Shares Eligible for Future Sale
If our stockholders sell substantial amounts of our common stock,
including shares issued upon the exercise of outstanding options and warrants,
in the public market, the market price of our common stock could fall. Such
sales also might make it difficult for us to sell equity or equity-related
securities in the future at a time and price that we deem appropriate. As of
April 30, 1999, there were 12,743,900 shares of common stock outstanding as
follows:
o 820,000 shares of common stock, which are held by Smith & Nephew
and are covered by a registration statement that has been filed
with the SEC but not declared effective;
o approximately 2.4 million shares, which are held by affiliates
and are subject to the volume restrictions of Rule 144; and
o the remaining outstanding shares of common stock, which are
freely tradeable.
The possible sale of a significant number of the above shares of common stock
may cause the price of our common stock to fall.
<PAGE>
We have registered for resale 1,350,000 shares of common stock reserved
for issuance under our 1995 Stock Option/Stock Issuance Plan, as amended. As of
April 30, 1999, options to purchase 1,103,998 shares of common stock were
outstanding and will be eligible for sale in the public market from time to
time, subject to vesting. In addition, 159,632 shares of common stock are
available under Exogen's employee stock purchase plan, as amended. Also, there
are 125,000 shares of common stock issuable upon exercise of warrants, which may
be sold in accordance with Rule 144 one year after their date of issuance. The
possible sale of a significant number of the shares issuable upon exercise of
stock options and warrants, or under the employee stock purchase plan, may cause
the price of our common stock to fall.
Smith & Nephew has Certain Rights to Purchase Shares of Common Stock
Under the August 1998 agreements between Smith & Nephew and us, Smith &
Nephew has an option to acquire exclusive worldwide distribution rights, except
Japan, to the SAFHS device. This worldwide distribution option is limited to a
three-year period. If Smith & Nephew exercises this option, it has a one-time
right to purchase from us additional shares of our common stock, up to 19%,
including the shares already acquired by Smith & Nephew, of the outstanding
shares of our common stock, after giving effect to the shares issuable upon
exercise of the right. The price per share to be paid would equal the stock's
average fair market value over a 20-day period preceding the date Smith & Nephew
announces, to Exogen, its election to exercise the stock purchase option. Any of
these additional shares of our common stock sold to Smith & Nephew under these
agreements would require that we file a registration statement with the
Securities and Exchange Commission to register the shares. The possible sale of
a significant number of these shares may cause the price of our common stock to
fall.
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<PAGE>
No Intention to Pay Dividends
We have never declared or paid any cash dividends on our capital stock.
We currently intend to retain any future earnings for funding growth, and
therefore, do not expect to pay any dividends in the foreseeable future.
FORWARD-LOOKING INFORMATION
An investment in the shares of common stock offered hereby involves a
high degree of risk and should not be made by any investors who cannot afford
the loss of their entire investment. In addition, this prospectus includes
"forward-looking statements" regarding future events or our future performance
within the meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act. All statements other than statements of historical facts included
in this prospectus or incorporated by references regarding our financial
position and business strategy may constitute forward-looking statements.
Although we believe that the expectations reflected in these forward-looking
statements are reasonable, we cannot guarantee that these expectations will
prove to be correct. Important factors that could cause actual results to differ
materially from our expectations are listed in this prospectus, and they include
the forward-looking statements under "risk factors." All subsequent written and
oral forward-looking statements attributable to us or persons acting on our
behalf are expressly qualified in their entirety by these statements
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares. All
proceeds will be received by the selling stockholders. See "Selling
Stockholders."
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<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
Set forth below are the selected consolidated financial data for the
five fiscal years ended September 30, 1998. The following data should be read in
conjunction with our financial and their related notes statements and with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the Annual Report on Form 10-K/A for the fiscal year ended
September 30, 1998. Loss per share data for fiscal years 1995 and 1994 have been
restated in accordance with Statement of Financial Accounting Standards No. 128,
"Earnings per Share."
SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data)
<TABLE>
<CAPTION>
For the years ended September 30,
------------------------------------------------------------
1998 1997 1996 1995 1994
-------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues:
Product sales.................................. $ 11,201 $ 7,081 $ 5,777 $ 1,852 $ -
Revenues from development agreements........... 400 400 1,100 - -
-------- --------- ---------- -------- --------
Total revenues............................... 11,601 7,481 6,877 1,852 -
-------- --------- ---------- -------- --------
Operating costs and expenses:
Cost of product sales.......................... 4,585 3,864 3,661 1,128 -
Research and development....................... 2,792 3,124 3,988 2,545 1,432
Selling, general, and administrative........... 11,885 12,291 11,030 5,775 1,782
Nonrecurring charge for international 800 - - - -
doubtful accounts............................
-------- --------- ---------- -------- --------
Total operating costs and expenses........... 20,062 19,279 18,679 9,448 3,214
-------- --------- ---------- -------- --------
Operating loss.................................... (8,461) (11,798) (11,802) (7,596) (3,214)
Other income (expense):
Interest income (expense), net................. 710 701 1,438 604 (185)
License fee.................................... 1,000 - - - -
Litigation settlement.......................... (851) - - - -
Other, net..................................... 19 (51) (224) (59) (2)
-------- --------- ---------- -------- --------
Total other income (expense), net............ 878 650 1,214 545 (187)
-------- --------- ---------- -------- --------
Loss before income taxes.......................... (7,583) (11,148) (10,588) (7,051) (3,401)
Provision for income taxes........................ 2 4 - - -
-------- --------- ---------- -------- --------
Net loss.......................................... $ (7,585) $ (11,152) $(10,588) $ (7,051) $ (3,401)
======== ========= ========== ======== ========
Basic net loss per common share................... $ (0.64) $ (1.12) $ (1.07) $ (0.94) $ (2.70)
======== ========= ========== ======== ========
Diluted net loss per common share................. $ (0.64) $ (1.12) $ (1.07) $ (0.94) $ (2.70)
======== ========= ========== ======== ========
Wghtd. avg. shares outstanding, basic and diluted. 11,860 9,946 9,875 7,489 1,261
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
September 30,
1998 1997 1996 1995 1994
-------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents and short- and long-term $ 15,582 $ 8,544 $ 19,534 $ 31,061 $ 640
investments....................................
Working capital................................... 15,525 11,042 17,235 30,054 301
Total assets...................................... 20,796 14,789 25,511 34,886 1,773
Redeemable Preferred Stock........................ - - - - 6,002
Total Stockholders' equity (deficit).............. 16,297 12,091 23,077 33,342 (5,487)
</TABLE>
16
<PAGE>
PLAN OF DISTRIBUTION
Exogen is registering all 125,000 shares on behalf of the selling
stockholders. All of the shares will be issued by us upon exercise by the
selling stockholders of warrants to acquire shares of our common stock, issued
by us to one selling stockholder on September 30, 1998 and to the other selling
stockholder on October 9, 1998 in settlement of royalty claims brought by the
selling stockholders against us. The warrants entitle each of the selling
stockholders to purchase their respective allotment of shares at $3.12 per
share. The selling stockholders named in the table below or pledgees, donees,
transferees or other successors-in-interest selling shares received from a named
selling stockholder as a gift, partnership distribution or other
non-sale-related transfer after the date of this prospectus may sell the shares
from time to time. The selling stockholders will act independently of Exogen in
making decisions with respect to the timing, manner and size of each sale. The
sales may be made on one or more exchanges or in the over-the-counter market or
otherwise, at prices and at terms then prevailing or at prices related to the
then current market price, or in negotiated transactions. The selling
stockholders may effect such transactions by selling the shares to or through
broker-dealers. The shares may be sold by one or more of, or a combination of,
the following:
o a block trade in which the broker-dealer so engaged will attempt
to sell the shares as agent but may position and resell a portion
of the block as principal to facilitate the transaction,
o purchases by a broker-dealer as principal and resale by such
broker-dealer for its account pursuant to this prospectus,
o an exchange distribution in accordance with the rules of such
exchange,
o ordinary brokerage transactions and transactions in which the
broker solicits purchasers, and
o in privately negotiated transactions.
To the extent required, this prospectus may be amended or supplemented
from time to time to describe a specific plan of distribution. In effecting
sales, broker-dealers engaged by the selling shareholders may arrange for other
broker-dealers to participate in the resales.
The selling stockholders may enter into hedging transactions with
broker-dealers in connection with distributions of the shares or otherwise. In
such transactions, broker-dealers may engage in short sales of the shares in the
course of hedging the positions they assume with selling stockholders. The
selling stockholders also may sell shares short and redeliver the shares to
close out such short positions. The selling stockholders may enter into option
or other transactions with broker-dealers which require the delivery to the
broker-dealer of the shares. The broker-dealer may then resell or otherwise
transfer such shares pursuant to this prospectus. The selling stockholders also
may loan or pledge the shares to a broker-dealer. The broker-dealer may sell the
shares so loaned, or upon a default the broker-dealer may sell the pledged
shares pursuant to this prospectus.
<PAGE>
Broker-dealers or agents may receive compensation in the form of
commissions, discounts or concessions from selling stockholders. Broker-dealers
or agents may also receive compensation from the purchasers of the shares for
whom they act as agents or to whom they sell as principals, or both.
Compensation as to a particular broker-dealer might be in excess of customary
commissions and will be in amounts to be negotiated in connection with the sale.
Broker-dealers or agents and any other participating broker-dealers or the
selling stockholders may be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act in connection with sales of the shares.
Accordingly, any such commission, discount or concession received by them and
any profit on the resale of the shares purchased by them may be deemed to be
underwriting discounts or commissions under the Securities Act. Because selling
stockholders may be deemed to be "underwriters" within the meaning of Section
2(11) of the Securities Act, the selling stockholders will be subject to the
prospectus delivery requirements of the Securities Act. In addition, any
securities covered by this prospectus which qualify for sale pursuant to Rule
144 promulgated under the Securities Act may be sold under Rule 144 rather than
pursuant to this prospectus. The selling stockholders have advised Exogen that
they have not entered into any agreements, understandings or arrangements with
any underwriters or broker-dealers regarding the sale of their securities. There
is no underwriter or coordinating broker acting in connection with the proposed
sale of shares by the selling stockholders.
17
<PAGE>
The shares will be sold only through registered or licensed brokers or
dealers if required under applicable state securities laws. In addition, in
certain states the shares may not be sold unless they have been registered or
qualified for sale in the applicable state or an exemption from the registration
or qualification requirement is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the shares may not simultaneously engage
in market making activities with respect to our common stock for a period of two
business days before the commencement of such distribution. In addition, each
selling Shareholder will be subject to applicable provisions of the Exchange Act
and the associated rules and regulations under the Exchange Act, including
Regulation M, which provisions may limit the timing of purchases and sales of
shares of our common stock by the selling stockholders. Exogen will make copies
of this prospectus available to the selling stockholders and has informed them
of the need for delivery of copies of this prospectus to purchasers at or prior
to the time of any sale of the shares.
Exogen will file a supplement to this prospectus, if required, pursuant
to Rule 424(b) under the Securities Act upon being notified by a selling
Shareholder that any material arrangement has been entered into with a
broker-dealer for the sale of shares through a block trade, special offering,
exchange distribution or secondary distribution or a purchase by a broker or
dealer. Such supplement will disclose:
o the name of each such selling stockholder and of the
participating broker-dealer(s),
o the number of shares involved,
o the price at which such shares were sold,
o the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable,
o that such broker-dealer(s) did not conduct any investigation to
verify the information set out or incorporated by reference in
this prospectus, and
o other facts material to the transaction.
In addition, upon being notified by a selling stockholder that a donee
or pledgee intends to sell more than 500 shares, Exogen will file a supplement
to this prospectus.
Exogen will bear all costs, expenses and fees in connection with the
registration of the shares. The selling stockholders will bear all commissions
and discounts, if any, attributable to the sales of the shares. The selling
stockholders may agree to indemnify any broker-dealer or agent that participates
in transactions involving sales of the shares against certain liabilities,
including liabilities arising under the Securities Act. Exogen and the selling
stockholders have agreed to indemnify each other against some liabilities in
connection with the offering of the shares, including liabilities arising under
the Securities Act.
<PAGE>
SELLING STOCKHOLDERS
The following table shows the maximum number of shares of common stock
issuable to each selling stockholder upon the exercise of their respective
warrant. The selling stockholders have not had a material relationship with
Exogen within the past three years other than as a result of the selling
stockholders' ownership of the shares or other securities of Exogen. No estimate
can be given as to the number of shares that will be held by the selling
stockholders after completion of this offering because the selling stockholders
may offer all or some of the shares and because there currently are no
agreements, arrangements or understandings with respect to the sale of any of
the shares. The shares offered by this prospectus may be offered from time to
time by the selling stockholders named below. See "Plan of Distribution."
18
<PAGE>
<TABLE>
<CAPTION>
Beneficial Ownership
Number of Shares Number of Shares After Offering
Beneficially Owned Registered for Number of
Names of Selling Stockholders Prior to Offering Sale Hereby Shares Percent
- ----------------------------- ----------------- ----------- ------ -------
<S> <C> <C> <C> <C>
Alessandro Chiabrera............... 45,000 45,000 -- --
Arthur A. Pilla.................... 80,000 80,000 -- --
</TABLE>
Exogen has agreed to prepare and file such amendments and supplements
to the registration statement as may be necessary to keep this registration
statement effective until the earlier of five years from the date the
registration statement is declared effective by the SEC or the time when all of
the shares have been sold pursuant to the terms hereof and the shares could be
sold under Rule 144(k).
LEGAL MATTERS
The validity of the shares offered hereby will be passed upon for
Exogen by Brobeck, Phleger & Harrison LLP, New York, New York. Ellen B.
Corenswet, a partner of Brobeck, Phleger & Harrison LLP, owns 2,000 shares of
common stock of Exogen. Luci Staller Altman, a partner of Brobeck, Phleger &
Harrison LLP, owns 500 shares of common stock of Exogen.
EXPERTS
The financial statements and schedule incorporated by reference from
Exogen's Annual Report on Form 10-K/A for the fiscal year ended September 30,
1998, filed on May 28, 1999, in this prospectus and elsewhere in the
registration statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto and are
included herein in reliance upon the authority of said firm as experts in giving
said report.
19
<PAGE>
No person has been authorized
to give any information or to make any
representations other than those
contained in this prospectus in
connection with the offering made
hereby, and if given or made, such
information or representations must not
be relied upon as having been authorized
by Exogen, any selling stockholder or by
any other person. Neither the delivery 125,000 Shares
of this prospectus nor any sale made
hereunder shall, under any
circumstances, create any implication
that the information herein is correct
as of any time subsequent to the date
hereof. This prospectus does not EXOGEN, INC.
constitute an offer to sell or a
solicitation of an offer to buy any
security other than the securities
covered by this prospectus, nor does it
constitute an offer to or solicitation
of any person in any jurisdiction in Common Stock
which such offer or solicitation may not
lawfully be made.
-----------------
PROSPECTUS
Table of Contents -----------------
Page
----
Where You Can Find More Information.. 2
The Company.......................... 2
Risk Factors......................... 3 June 7, 1999
Forward-Looking Information.......... 15
Use of Proceeds...................... 15
Selected Consolidated Financial Data. 16
Plan of Distribution................. 17
Selling Stockholders................. 18
Legal Matters........................ 19
Experts.............................. 19
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth an estimate of the expenses to be
incurred by Exogen in connection with the issuance and distribution of the
securities being registered:
Amount to
Be Paid
---------
Registration Fee - SEC................................................ $83
Nasdaq National Market Listing Fee.................................... 2,500
Legal Fees and Expenses............................................... 10,000
Accounting Fees and Expenses.......................................... 10,000
Miscellaneous......................................................... 2,417
Total................................................................. $25,000
Item 15. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law authorizes a court
to award or a corporation's Board of Directors to grant indemnification to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Securities Act"). Articles 8 and 9 of the Registrant's Second
Amended and Restated Certificate of Incorporation provide for indemnification of
its directors and officers and permissible indemnification of employees and
other agents to the maximum extent permitted by the Delaware General Corporation
Law. The selling stockholders have agreed to indemnify officers, directors and
controlling persons of the Registrant against certain liabilities, including
liabilities under the Securities Act under certain circumstances. Exogen has
obtained liability insurance for its directors and officers.
Item 16. Exhibits
The following is a list of Exhibits filed as part of the Registration
Statement:
4.1 Specimen certificate for shares of the Registrant's Common Stock,
incorporated herein by reference to Exhibit 4.1 to Registration
Statement No. 33-92740.
4.2 Provisions of the Certificate of Incorporation and Bylaws of the
Registrant defining rights of holders of Common Stock of the
Registrant, incorporated herein by reference to Exhibits 3.2 and 3.3 to
Registration Statement No. 33-92740.
5. Opinion and Consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Arthur Andersen LLP, independent public accountants.
23.2 Consent of Brobeck, Phleger & Harrison LLP (included in the opinion
filed as Exhibit 5).
24. Powers of Attorney.
<PAGE>
Item 17. Undertakings
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, Delaware General Corporation
Law, the Certificate of Incorporation, the Bylaws of the Registrant, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission (the "Commission") such indemnification is against
public policy as expressed in the Act, and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-1
<PAGE>
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement.
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933, as amended.
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under the Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act") (and, where applicable, each filing of
an employee benefit plan's annual report pursuant to Section 15(d) of the
Exchange Act) that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Piscataway, State of New Jersey, on this 7th day
of June, 1999.
EXOGEN, INC.
By: /s/ Patrick A. McBrayer
---------------------------------------------
Patrick A. McBrayer, Chief Executive Officer,
President and Director
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Patrick A. McBrayer and Richard H.
Reisner, and each of them, as his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this registration statement, and to
file same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, and any of them, or their or his substitutes, may lawfully do or
cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on June 7, 1999:
Signature
By: /s/ John P. Ryaby
------------------------------------------
John P. Ryaby, Chairman of the Board, Vice
President, and Chief Scientific Officer
By: /s/ Patrick A. McBrayer
------------------------------------------
Patrick A. McBrayer, Chief Executive Officer, President, and
Director (Principal Executive Officer)
By /s/ Richard H. Reisner
------------------------------------------
Richard H. Reisner, Vice President, Chief Financial Officer,
and Secretary (Principal Financial Officer and Principal
Accounting Officer)
By: /s/ Buzz Benson
------------------------------------------
Buzz Benson, Director
<PAGE>
By: /s/ Donald J. Lothrop
------------------------------------------
Donald J. Lothrop, Director
By: /s/ Peter C. Madeja
------------------------------------------
Peter C. Madeja, Director
By: /s/ David J. Ottensmeyer
------------------------------------------
David J. Ottensmeyer, M.D., Director
By: /s/ Terence D. Wall
------------------------------------------
Terence D. Wall, Director
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description Page
--- ----------- ----
4.1 Specimen certificate for shares of the Registrant's Common Stock,
incorporated herein by reference to Exhibit 4.1 to Registration
Statement No. 33-92740 ..........................................
4.2 Provisions of the Certificate of Incorporation and By-Laws of the
Registrant defining rights of holders of Common Stock of the
Registrant, incorporated herein by reference to Exhibits 3.2 and
3.3 to Registration Statement No.33-92740 .......................
5.1 Opinion and Consent of Brobeck, Phleger & Harrison
LLP .............................................................
23.1 Consent of Arthur Andersen LLP, independent public
accountants .....................................................
23.2 Consent of Brobeck, Phleger & Harrison LLP (included in the
opinion filed as Exhibit 5) .....................................
24. Powers of Attorney...............................................
EXHIBIT 5.1
June 7, 1999
Exogen, Inc.
10 Constitution Avenue
Piscataway, New Jersey 08855
Re: Exogen, Inc. Registration Statement on Form S-3 for
resale of 125,000 Shares of Common Stock
Ladies and Gentlemen:
We have acted as counsel to Exogen, Inc., a Delaware
corporation (the "Company"), in connection with the registration for resale of
125,000 shares of the Company's Common Stock (the "Shares") as described in the
Company's Registration Statement on Form S-3 (the "Registration Statement")
filed with the Securities and Exchange Commission under the Securities Act of
1933, as amended (the "Act").
This opinion is being furnished in accordance with the
requirements of Item 16 of Form S-3.
We have reviewed the Company's charter documents and the
corporate proceedings taken by the Company in connection with the issuance and
sale of the Shares. Based on such review, we are of the opinion that the Shares
have been duly authorized, and if, as and when issued in accordance with the
Registration Statement and the related prospectus (as amended and supplemented
through the date of issuance) will be legally issued, fully paid and
nonassessable.
We consent to the filing of this opinion letter as Exhibit 5.1
to the Registration Statement and to the reference to this firm under the
caption "Legal Matters" in the prospectus which is part of the Registration
Statement. In giving this consent, we do not thereby admit that we are within
the category of persons whose consent is required under Section 7 of the Act,
the rules and regulations of the Securities and Exchange Commission promulgated
thereunder, or Item 509 of Regulation S-K.
This opinion letter is rendered as of the date first written
above and we disclaim any obligation to advise you of facts, circumstances,
events or developments which hereafter may be brought to our attention and which
may alter, affect or modify the opinion expressed herein. Our opinion is
expressly limited to the matters set forth above and we render no opinion,
whether by implication or otherwise, as to any other matters relating to the
Company or the Shares.
Very truly yours,
BROBECK, PHLEGER & HARRISON LLP
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference of our report dated November 3, 1998 included in the Exogen, Inc.
Form 10-K/A for the year ended September 30, 1998 (and to all references to our
Firm) included in or made a part of this Form S-3 Registration Statement.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
New York, New York
June 4, 1999
