<PAGE>
As filed with the Securities and Exchange Commission on October 13, 2000
Registration No. _________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM S-2
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
---------------
KeraVision, Inc.
(Exact name of registrant as specified in its charter)
---------------
<TABLE>
Delaware 3851 77-0328942
<S> <C> <C>
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
48630 Milmont Drive
Fremont, California 94538
(510) 353-3000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------
Thomas M. Loarie
Chief Executive Officer and Chairman of the Board
KeraVision, Inc.
48630 Milmont Drive
Fremont, California 94538
(510) 353-3000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copy to:
Michael W. Hall, Esq.
Latham & Watkins
135 Commonwealth Drive
Menlo Park, CA 94025
(650) 328-4600
--------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement is declared effective.
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, 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, 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(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering.[_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================================================
Proposed Maximum Proposed Maximum
Title of each class of Securities to Amount to be Offering Price Aggregate Offering Amount of
be Registered Registered Per Share(1) Price(1) Registration Fee
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock ($0.001 par value)................. 3,760,706 shares $2.8125 $10,576,985.63 $2,792.32
====================================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of computing the amount of registration
fee, based on the average ($2.8125) of the high ($3.25) and low ($2.6875) prices
for the common stock as reported on Nasdaq National Market on October 6, 2000,
in accordance with Rule 457(c) promulgated under the Securities Act of 1933.
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>
The Information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities, and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED OCTOBER 13, 2000
PROSPECTUS
KeraVision, Inc.
3,760,706 Shares of Common Stock
--------------
This prospectus will allow us to issue common stock over time. This means
. we will provide a prospectus supplement each time we issue common
stock;
. the prospectus supplement will inform you about the specific
terms of that offering and may also add, update or change
information contained in this document; and
. you should read this document and any prospectus supplement
carefully before you invest.
Our common stock is listed on the Nasdaq National Market under the symbol
"KERA." On October 12, 2000 the last reported sale price for our common stock on
the Nasdaq National Market was $2.03 per share.
Investing in our common stock involves a high degree of risk. See "Risk Factors"
beginning on page 5 to read about risks that you should consider carefully
before buying shares of our common stock.
Neither the Securities and Exchange Commission nor any other regulatory body has
approved or disapproved these securities or passed upon the accuracy or adequacy
of this prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is October 13, 2000
================================================================================
<PAGE>
PROSPECTUS SUMMARY
This summary highlights certain information found in greater detail
elsewhere in this prospectus. In addition to this summary, we urge you to read
the entire prospectus carefully, especially the risks of investing in our common
stock discussed under "Risk Factors," before you decide to buy our common stock.
KeraVision, Inc.
KeraVision, Inc. was incorporated in California in 1986 and
reincorporated in Delaware in 1995. Our executive offices are located at 48630
Milmont Drive, Fremont, California 94538, and our telephone number is (510) 353-
3000.
Our websites are not part of this prospectus. INTACS is a protected
trademark of KeraVision, Inc. in the U.S. and in foreign countries.
2
<PAGE>
The Offering
Common stock offered ..................... 3,760,706 shares
Common stock outstanding after
this offering ......................... 22,658,730 shares
Use of proceeds .......................... See "Use of Proceeds."
Nasdaq National Market symbol............. KERA
------------
Both the number of shares of common stock offered in this offering and
the number of shares of common stock outstanding after this offering assume
issuance of all 3,760,706 shares of common stock being registered in this
offering. Because these shares are being offered on a delayed or continuous
basis pursuant to Rule 415 under the Securities Act of 1933, as amended, we
cannot be sure that any of the 3,760,706 shares will be issued in this offering.
Furthermore, we cannot be sure of the price at which any of the shares may be
issued. The number of shares of common stock outstanding after this offering is
based on shares outstanding at June 30, 2000. This calculation excludes:
. 1,877,050 shares of common stock issuable upon exercise of
outstanding stock options at a weighted average exercise price of
$8.50 per share and 1,400,192 shares reserved for future grants
under our stock option plans;
. 55,492 shares of common stock issuable upon exercise of a
warrant held by a financial institution with an exercise price
of $10.81 per share; and
. 3,229,463 shares of common stock issuable upon conversion of
Redeemable Convertible Series B preferred stock.
Please see "Description of Securities."
3
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table sets forth summary consolidated financial data for
our company. You should read this information together with our financial
statements and the notes to those statements appearing elsewhere in this
prospectus and the information under "Selected Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Please see the financial statements and the notes to such statements
appearing elsewhere in this prospectus for the determination of shares used in
computing basic and diluted and pro forma basic and diluted net loss per common
share.
<TABLE>
<CAPTION>
Six months ended
Year Ended December 31, June 30,
------------------------------------ --------------------
1999 1998 1997 2000 1999
---- ---- ---- ---- ----
(in thousands, except per share data)
(unaudited)
<S> <C> <C> <C> <C> <C>
Consolidated Statement of Operations
Data
Net sales............................... $ 10,494 $ 835 $ 355 $ 1,707 $ 4,381
Costs and expenses
Cost of sales and manufacturing
expenses........................... 9,945 4,386 3,701 3,336 4,615
Research and development............. 8,844 11,356 10,774 4,610 4,201
Selling, general and administrative.. 19,491 9,693 6,405 14,531 8,171
------ ----- ----- ------ -----
Total costs and expenses................ 38,280 25,435 20,880 22,477 16,987
------ ------ ------ ------ ------
Operating loss.......................... (27,786) (24,600) (20,525) (20,770) (12,606)
Interest income and other, net.......... 1,377 683 1,303 1,170 (5)
Interest expense........................ (935) (120) (174) (549) (310)
----- ----- ----- ----- -----
Net loss................................ ($27,344) ($24,037) ($19,396) (20,149) ($12,921)
========= ========= ========= ======== =========
Net loss applicable to common
stockholders........................... ($28,847) ($27,414) ($19,396) ($20,904) ($13,697)
========= ========= ========= ======== =========
Basic and diluted net loss per share
Applicable to common stockholders....... ($1.88) ($2.16) ($1.55) ($1.11) ($1.05)
Shares used in calculation of net
loss per share.......................... 15,343 12,686 12,528 18,842 13,088
</TABLE>
<TABLE>
<CAPTION>
December 31, June 30, 2000
-------------- --------------------
(unaudited)
As
1999 Actual Adjusted
---- ------ --------
(in thousands)
<S> <C> <C> <C>
Balance Sheet Data
Cash, cash equivalents and
Available-for-sale investments.......... $ 49,770 $ 30,306 $
Working capital......................... 42,769 22,416
Total assets............................ 57,139 37,566
Capital lease obligations, noncurrent... 1,030 658
Redeemable convertible preferred stock.. 16,964 17,718
Accumulated deficit..................... (118,939) (139,842)
Total stockholders' equity
(net capital deficiency)................ 28,013 7,731
</TABLE>
The as adjusted amounts reflect the issuance by KeraVision of _______
shares at an assumed offering price of $____ per share and the application of
the net proceeds from this offering.
4
<PAGE>
RISK FACTORS
Any investment in our common stock involves a high degree of risk. You
should consider carefully the following information about these risks, together
with the other information contained in this prospectus, before you decide to
buy our common stock. If any of the following risks actually occur, our
business, results of operations or financial condition would likely suffer. In
any such case, the market price of our common stock could decline, and you may
lose all or part of the money you paid to buy our common stock.
KeraVision is incurring operating losses and may not achieve profitability in
the future.
KeraVision has generated only limited revenues to date and has
experienced significant operating losses every year since its inception in 1986.
We expect to continue to experience increasing expenses as we expand our sales
and marketing efforts, and we expect to continue to incur substantial operating
losses until sufficient revenues can be generated to offset these expenses. We
cannot predict the amount of our future operating losses or the length of time
required for us to achieve and sustain profitability or if we will be able to
achieve profitability.
KeraVision needs market acceptance of INTACS inserts and other products to be
successful.
KeraVision's future performance depends upon the degree of market
acceptance of INTACTS/(TM)/ micro-thin prescription inserts for correction of
myopia, and on KeraVision's ability to successfully manufacture, market, deliver
and support INTACS inserts. We cannot assure you that INTACS inserts or any
future product that KeraVision develops will achieve or maintain acceptance in
their target markets. To be successful, INTACS inserts will have to be accepted
by ophthalmic surgeons as well as by patients. Until April 1999, KeraVision has
sold its product primarily in Canada, France and Germany and generated only
limited revenues. KeraVision began selling INTACS inserts in the United States
in the second quarter of 1999. Many surgeons have already invested significant
time and resources in developing expertise in other corrective ophthalmic
surgical techniques and may be unwilling to devote the time and resources
necessary to incorporate the procedure for INTACS inserts placement into their
practices.
We intend to market our products to people whose vision can be
corrected with eyeglasses or contact lenses. We cannot assure you that these
persons will elect to undergo surgical insertion of INTACS inserts when
nonsurgical vision-correction alternatives are available. KeraVision believes
that the inability of some patients to afford the procedure and the
psychological aversion of some patients to refractive surgery may further limit
the potential market for INTACS inserts. The extent of, and rate at which,
INTACS inserts and our future products achieve market acceptance and penetration
is a function of many variables including price, safety, efficacy, reliability
and sales and marketing efforts.
We have limited sales and marketing experience and may not be able to
successfully sell or market our products.
We have only sold products in the United States since April 1999, in
Canada since mid-1998 and in Europe since late 1996 and to date have generated
only limited revenues. Most of the revenue recognized to date is from the sales
of instruments used to perform the procedure for the placement of INTACS. Our
revenues have declined since the second quarter of 1999 as we have shifted our
sales focus from instruments to seeking to build up our sales of INTACS inserts.
To successfully market and sell our products, we will need to develop
and maintain a sales force which has established relationships with surgeons and
which has consumer marketing skills. We recently changed over a large portion of
the sales force. We will need significant resources to recruit and retain
skilled sales management, direct sales persons and distributors. To the extent
that KeraVision has established or enters into distribution arrangements for the
sale of its products, KeraVision is and will be dependent on the efforts of
third parties. We cannot assure you that our sales and marketing efforts will be
successful.
KeraVision may not be able to execute its business plan if a significant amount
of capital is not available to it in the near future.
KeraVision will be required to commit substantial resources to
establish production, marketing and sales capabilities to successfully
commercialize INTACS inserts. In addition, KeraVision will be required to commit
additional resources to conduct the research and development, clinical studies
and regulatory activities necessary to bring additional products to market. We
currently anticipate that cash from operations will be sufficient to fund
KeraVision's operations through March 31, 2001. We will be required to seek
additional sources for funding our business operations, and we cannot assure you
that other sources of funding will be available when needed or available on
terms favorable or acceptable to KeraVision. We cannot be sure that any of the
3,760,706 shares being registered hereunder will be issued in this offering. If
we fail to obtain sufficient funds to continue our operations, we may need to
delay, scale back or eliminate some or all of our sales and marketing efforts,
research and
5
<PAGE>
product development programs, clinical studies or regulatory activities or
license third parties to commercialize products or technologies that we would
otherwise seek to develop. These actions would adversely affect our ability to
execute our business plan.
KeraVision may not, in the future, continue to meet the requirements for
continued listing on the Nasdaq National Market.
KeraVision's stock price has been, and is likely to continue to be,
volatile. The market price of our common stock has fluctuated substantially,
from a high of $29.13 on July 8, 1999 to a low of $2.03 on October 12, 2000.
As a result of this volatility, we may not, in the future, continue to meet the
requirements for continued listing on the Nasdaq National Market. Our inability
to satisfy the continued listing requirements of the Nasdaq National Market
could have a material adverse effect on the trading price and liquidity of our
stock. The market price of the shares of our common stock may be significantly
affected by factors such as actual or anticipated fluctuations in our operating
results, announcements of technological innovations, new products or new
contracts by KeraVision or its competitors, developments with respect to patents
or proprietary rights, conditions and trends in the medical device and other
technology industries, adoption of new accounting standards affecting the
medical device industry, changes in financial estimates by securities analysts,
general market conditions, and other factors. In addition, the stock market has
experienced extreme price and volume fluctuations that have particularly
affected the market price for many high technology companies and that have often
been unrelated to the operating performance of these companies. These broad
market fluctuations may adversely affect the market price of our common stock,
and there can be no assurance that the market price of our common stock will not
decline. In the past, following periods of volatility in the market price of a
particular company's securities, securities class action litigation has often
been brought against that company. Such litigation, if brought against
KeraVision, could result in substantial costs and a diversion of management's
attention and resources.
KeraVision has limited manufacturing experience and may be unable to develop
commercial-scale manufacturing capabilities.
To be successful, we must manufacture our products and potential
products in commercial quantities in compliance with regulatory requirements at
acceptable costs. At the present time, although we have sufficient manufacturing
capacity, we have limited experience in manufacturing medical devices and other
products. We cannot assure you that KeraVision will be able to develop
commercial-scale manufacturing capabilities at acceptable costs or enter into
agreements with third parties with respect to these activities. Production of
commercial-scale quantities will involve technical challenges for us. As we
establish our own commercial-scale manufacturing capability for INTACS inserts,
we could incur significant scale-up expenses including the need to expand our
facilities and hire additional personnel. We may seek collaborative arrangements
with other companies to manufacture products and potential products, including
INTACS inserts. If we are dependent upon third parties for the manufacture of
our products, our profit margins and ability to develop and deliver such
products on a timely basis may be adversely affected. Moreover, we cannot assure
you that such third parties will adequately perform, and any failures by these
parties may impair our ability to deliver products on a timely basis or
otherwise impair our competitive position.
KeraVision may not be able to obtain additional regulatory approvals or maintain
current approvals, which could delay the sale and distribution of current and
future products and adversely affect our revenues.
The research, manufacture, sale and distribution of medical devices,
including KeraVision's current and planned products, is subject to regulations
imposed by numerous governmental authorities, principally the FDA and
corresponding state and foreign agencies. Securing regulatory approval for
KeraVision's additional products and new uses of existing products may entail a
lengthy, expensive and uncertain process involving, for example, submission to
the FDA of extensive clinical data and other supporting information. Unless an
exemption applies, each medical device that we wish to market in the U.S. must
receive either "510(k) clearance" or "PMA approval" in advance from the FDA
pursuant to the Federal Food, Drug, and Cosmetic Act. The current PMA approval
for INTACS inserts is limited to mild myopia. A separate PMA approval or PMA
supplement approval supported by clinical data will be required to expand the
indications for use of INTACS inserts to new ranges of myopia, and to hyperopia
and astigmatism.
To generate revenue growth, KeraVision must continue to develop, obtain
regulatory approval for, and successfully commercialize new products. The time
frame to develop and successfully commercialize additional products and
modifications of existing products is long and uncertain. Although KeraVision
has received regulatory approval to market INTACS inserts in the United States,
the European Union and Canada, we cannot assure you that we will successfully
complete our efforts to secure regulatory approval for this product to be
marketed elsewhere. Furthermore, we cannot assure you that KeraVision will
successfully obtain regulatory approval in the U.S. or elsewhere for marketing
our future new or modified products or indications.
Having received approval from the FDA for the correction of mild
myopia, INTACS inserts are subject to additional post-market testing, extensive
record keeping and other device follow up required by the FDA and other
regulatory agencies. In addition, to the extent KeraVision continues to perform
the manufacturing function, we will be required to adhere to additional FDA
requirements for the manufacture and distribution of INTACS inserts.
KeraVision's ongoing compliance with the Quality System Regulation, labeling and
other applicable regulatory requirements is monitored through periodic
inspections by federal and state agencies, including the FDA, and comparable
agencies in other countries. Current FDA enforcement policy strictly prohibits
the marketing of medical devices for unapproved ("off label") uses. Product
approvals can be withdrawn due to unforeseen safety or effectiveness problems
following initial marketing. Failure to comply with the applicable regulatory
requirements can, among other things, result in fines, injunctions, civil
penalties, suspensions or withdrawal of regulatory approvals, product recalls,
product seizures, including cessation of manufacturing and sales, operating
restrictions and criminal prosecution. Any such FDA enforcement actions could
have a material adverse effect on KeraVision's business, financial condition and
results of operations.
KeraVision will need to find a new supplier for the raw material we use in
manufacturing our products.
Our sole supplier of polymethylmethacrylate (PMMA), the polymer raw
material used in manufacturing INTACS inserts, no longer provides the particular
material we use for INTACS inserts, and has notified us that the material may be
purchased by special order only. We currently have what we estimate is at least
a three-year supply of PMMA. We have not yet made arrangements to obtain
additional PMMA beyond this supply. We have stored our current supply of PMMA in
two separate locations. Should the PMMA at either or both of these locations be
damaged or destroyed, our ability to continue to manufacture
6
<PAGE>
and distribute INTACS inserts or additional products may be seriously impaired.
We would be required to find an alternate source of PMMA or a similar polymer
material, or commence manufacturing the raw material ourselves. We would need to
obtain FDA regulatory approval for the use of new raw materials in any of our
products or to qualify a new PMMA supplier. If we elected to manufacture PMMA
ourselves, we would need to establish manufacturing facilities for this purpose,
hire additional personnel, and obtain additional regulatory approvals, processes
which could take up to several years and require additional expenditures. We
cannot assure you that:
. our supplier will be able to fulfill future special orders for
PMMA;
. interruptions in supplies will not occur in the future;
. we will be able to obtain a new source for the supply of PMMA or
establish facilities to manufacture PMMA, both of which would
require approval of additional regulatory submissions; or
. our current supply will last as long as we anticipate.
We have identified an alternative material for use in manufacturing
INTACS inserts. We have begun the qualification efforts required to obtain
regulatory approval, but we cannot assure that the alternate material will be
approved or useful for manufacturing our products. In the event we are unable to
obtain alternative supplies of materials upon the depletion of our current
supply we will experience delays in the production of INTACS inserts and will
need to obtain other alternate materials. If we are required to manufacture
INTACS inserts using alternate materials we will also be required to obtain FDA
approval of this material, a process that could take several years and cause us
to incur substantial costs. Furthermore, we cannot assure you that we will be
able to obtain FDA approval of a new material at all. Any interruption of supply
would have a material adverse effect on KeraVision's ability to manufacture
INTACS inserts or future products which could have a material adverse effect on
our business, financial condition or results of operations.
KeraVision may not have the ability to obtain and maintain patents on INTACS
inserts and our technology which could permit others to develop similar products
or more easily compete with our business.
KeraVision's commercial success depends in part on acquiring and
maintaining patent and trade secret protection of INTACS inserts technology,
INTACS inserts and any other potential products we seek to develop. We cannot
assure you that KeraVision will be successful in obtaining additional necessary
patents or license rights; KeraVision's processes or products will not infringe
patents or proprietary rights of others; or that any issued patents will provide
KeraVision with any competitive advantages or will withstand challenges by third
parties.
KeraVision is aware of ongoing academic research on both solid and
injectable forms of corneal inserts. We cannot assure you that others will not
independently develop similar products or design products that circumvent any
patents owned or licensed by KeraVision.
In addition, KeraVision could incur substantial costs in defending
against patent litigation or in bringing suits to protect its patents against
infringement. If the outcome of any such litigation is adverse to KeraVision,
our business could be adversely affected.
KeraVision also relies on trade secrets and proprietary knowledge which
it seeks to protect by confidentiality agreements with its employees,
consultants, investigators and advisors. We cannot assure you that these
agreements will not be breached, that KeraVision will have adequate remedies for
any breach, or that competitors will not otherwise discover KeraVision's trade
secrets and proprietary knowledge.
KeraVision may not be able to successfully compete in the highly competitive
field of vision correction.
KeraVision is engaged in a rapidly evolving field. Many public and
private companies, universities and research laboratories engage in activities
relating to research on vision correction alternatives. Our competitors could
develop technologies, procedures or products that are more effective or
economical than those KeraVision is developing or that would render our
technology and products obsolete or noncompetitive.
Most of the other companies in the vision correction market are larger
and better financed than KeraVision. Several companies have received approval to
market their laser systems for refractive surgery in the United States,
including VISX, Summit Technology, Inc. (recently purchased by Alcon, a division
of Nestle Corporation), Bausch & Lomb, and Nidek, and others may receive similar
approvals in the future.
These companies and institutions represent significant long-term
competition for KeraVision. In comparison to KeraVision, they may have:
7
<PAGE>
. substantially greater resources and better facilities;
. larger research and development staffs and more experience in
research and development;
. more experience in preclinical and human clinical studies;
. more experience obtaining regulatory approval;
. more experience manufacturing medical device products; and
. more experience in marketing, selling and developing a market for
medical device products.
Moreover, several companies are developing other non-laser approaches
to vision correction, including the use of radio frequency energy to reshape the
cornea, phakic intraocular lenses, and the use of enzymes to alter the shape of
the cornea. See "Business--Competition."
Long-term follow-up data may not demonstrate that INTACS inserts are safe and
effective.
INTACS inserts represent a relatively new technology, clinical data for
which dates back to 1991. KeraVision has developed only limited long-term
clinical data to date on the safety and efficacy of INTACS inserts in correcting
mild myopia. The FDA is requiring KeraVision to provide data to assess the
effects of INTACS inserts on the corneal endothelium after two years of
implantation. If these and other long-term data show that INTACS inserts are not
safe and effective, our ability to commercialize INTACS inserts may be adversely
affected. We cannot assure you that INTACS inserts will prove to be safe or
effective over the long term in correcting vision. If INTACS inserts fail to
perform as anticipated our revenue growth will be limited. Complications
associated with INTACS inserts may affect KeraVision's ability to gain market
acceptance for INTACS inserts or to obtain additional regulatory approvals.
Some patients who have received INTACS inserts have experienced various
complications. These complications include infection, shallow placement,
anterior chamber perforation, overcorrection, reduction in central corneal
sensation, difficulty with night vision, undercorrection, induced astigmatism,
blurry vision, double vision, halos, glare, corneal blood vessels and
fluctuating distance vision. We cannot assure you that these complications or
side effects will not be serious or lasting, will not impair or preclude
acceptance of the product by patients or ophthalmologists, will not preclude
KeraVision from obtaining regulatory approval for additional products or will
not cause withdrawal of approval for INTACS inserts.
In addition, negative publicity surrounding complications associated
with other surgical vision correction procedures could negatively impact market
acceptance for our product.
Our ability to operate our business may be adversely affected if we are unable
to retain our key personnel or to hire additional key personnel.
Our success depends in large part on our ability to attract and retain
key management, technical, manufacturing, sales and marketing and other
operating personnel. We cannot assure you that KeraVision will be able to
attract and retain the qualified personnel or develop the expertise in these
areas as needed for our business. The loss of the services of one or more
members of these groups or the inability to hire additional personnel and
develop expertise as needed could limit our ability to successfully
commercialize INTACS inserts and additional products. Such persons are in high
demand and often receive competing employment offers.
KeraVision is subject to the risk of product liability litigation, and product
liability insurance may be unavailable.
KeraVision faces a risk of exposure to product liability claims and product
recalls if the use of INTACS inserts or any future product is alleged to have
resulted in serious adverse effects. We cannot assure you that the precautions
we take with respect to these risks will prevent KeraVision from incurring
significant liability. We also cannot assure you that our current product
liability insurance policies will cover any or all material liabilities or that
the coverage we have obtained will continue to be available at an acceptable
cost, if at all, before or after commercialization of any of KeraVision's
products. A product liability claim, product recall or other claims with respect
to uninsured liabilities or in excess of insured liabilities could have a
material adverse effect on KeraVision's business and financial condition.
8
<PAGE>
Forward-looking statements contained in this prospectus may not be realized.
This prospectus contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those anticipated
in these forward-looking statements as a result of the risks faced by us
described above and elsewhere in this prospectus. We undertake no obligation
after the date of this prospectus to update publicly any forward-looking
statements for any reason, even if new information becomes available or other
events occur in the future.
9
<PAGE>
USE OF PROCEEDS
We cannot guarantee that we will receive any proceeds in connection with
this offering.
We intend to use the net proceeds of this offering, if any, to fund sales
and marketing, research and development, marketing capabilities and product
manufacturing, to provide working capital and for general corporate purposes.
The principal purposes of this offering are to increase our capitalization
and our operating and financial flexibility. As of the date of this prospectus,
we cannot specify with certainty all of the particular uses for the net proceeds
we will have upon completion of this offering. Accordingly, our management will
have broad discretion in the application of net proceeds, if any.
DIVIDEND POLICY
We have never paid cash dividends on our common stock and have no plans to
do so in the foreseeable future. In addition, the terms of our Redeemable
Convertible Series B preferred stock contain restrictions on our ability to pay
cash dividends on our common stock. The declaration and payment of any dividends
in the future will be determined by our board of directors, at its discretion,
and will depend on a number of factors, including our earnings, capital
requirements and overall financial condition.
To date, we have paid dividends on our Series B preferred stock by issuing
additional shares of Series B preferred stock. In the future, we may elect to
pay dividends on the Series B preferred stock in cash or additional shares of
Series B preferred stock.
CAPITALIZATION
The following table sets forth, as of June 30, 2000, the capitalization
of our company
. on an actual basis; and
. on an as adjusted basis to give effect to the sale of the shares
and our receipt of the net proceeds of this offering.
This information assumes issuance of shares of common stock being
registered in this offering at a price of $ . This information should be
read in conjunction with our financial statements and the notes relating to such
statements appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
At June 30, 2000
(unaudited)
------------------------------------
Actual As Adjusted
------ -----------
<S> <C> <C>
Short-term debt..................................................... $ 4,653 $ ----
====================================
Capital lease obligations, less current portion..................... $ 658 $
Series B redeemable convertible preferred stock, $0.001 par value;
662,500 shares authorized; 579,285 shares issued and outstanding
actual and as adjusted........................................... 18,265
Stockholder's equity:
Common stock, $0.001 par value; 30,000,000 shares authorized;
18,898,024 shares issued and outstanding actual and ____________
shares issued and outstanding as adjusted......................... 19
Additional paid-in capital.......................................... 148,253
Accumulated other comprehensive income.............................. 122
Accumulated deficit................................................. (139,842)
Notes receivable from stockholders.................................. (821)
------------------------------------
Total stockholders' equity........................................ 7,731
------------------------------------
Total capitalization............................................ $ 26,654 $
====================================
</TABLE>
10
<PAGE>
PLAN OF DISTRIBUTION
We may offer the common stock:
. directly to purchasers;
. to or through underwriters;
. through dealers, agents or institutional investors; or
. through a combination of such methods.
Regardless of the method used to sell the common stock, we will provide
a prospectus supplement that will disclose:
. the identity of any underwriters, dealers or agents who purchase the
common stock;
. the material terms of the distribution, including the number of
shares sold and the consideration paid;
. the amount of any compensation, discounts or commissions to be
received by the underwriters, dealers or agents;
. the terms of any indemnification provisions, including
indemnification from liabilities under the federal securities laws;
and
. the nature of any transaction by an underwriter, dealer or agent
during the offering that is intended to stabilize or maintain the
market price of the common stock.
We will bear the expenses incident to the registration of the shares,
other than selling discounts and commissions. These expenses are estimated to be
approximately $157,000.
11
<PAGE>
DILUTION
The net tangible book value of our company as of June 30, 2000 was
$7.7 million, or $0.41 per share of common stock. Net tangible book value per
share is equal to the amount of our company's total tangible assets (total
assets less intangible assets) less total liabilities, divided by the number of
shares of common stock outstanding as of June 30, 2000. Assuming the sale by us
of the shares offered by this prospectus at an assumed public offering price of
$____ per share and after deducting the estimated offering expenses payable, the
pro forma net tangible book value of our company as of June 30, 2000 would have
been $________, or $_____ per share of common stock. This represents an
immediate increase in pro forma net tangible book value of $___ per share to
existing stockholders and an immediate dilution in net tangible book value of
$_____ per share to new investors. That is, after this offering the excess of
the tangible assets of KeraVision over its liabilities calculated on a per share
basis will be less than the purchase price paid for those shares by investors in
this offering. The following table illustrates this per share dilution:
<TABLE>
<CAPTION>
Per Share
<S> <C> <C>
Assumed offering price.................................................. $
----
Net tangible book value as of June 30, 2000.......................... $0.41
Increase attributable to new investors in this offering..............
----
Net tangible book value per share after this offering................
----
Dilution per share to new investors.................................. $
====
</TABLE>
The following table summarizes, as of June 30, 2000, the total number
of shares of common stock purchased from us, the total consideration paid to us
and the average price per share paid by existing stockholders and by new
investors purchasing shares in this offering:
. excluding the effect of 978,498 shares issued in connection with
the acquisition of Transcend Therapeutics, Inc. in May 1999; and
. including the effect of 667,295 shares issued in exchange for
stockholder notes receivable of $803,000.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
------------------ -------------------
Average Price
Number Percent Amount Percent Per Share
(in thousands)
---------- ------- -------------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders ......... 18,898,024 148,272 $ 7.85
Investors in this offering.....
Total.......................
</TABLE>
The foregoing tables are based on the number of shares of Common Stock
outstanding as of June 30, 2000 and exclude:
. 1,877,050 shares of common stock issuable upon exercise of
outstanding stock options outstanding at June 30, 2000 at a
weighted average exercise price of $8.50 per share and 1,400,192
shares reserved for future grants under our stock option plans;
. 55,492 shares of common stock issuable upon exercise of a
warrant held by a financial institution with an exercise price
of $10.81 per share; and
. 3,229,463 shares of common stock issuable upon conversion of
Redeemable Convertible Series B preferred stock.
12
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
In the table below, we provide you with summary historical financial
data of KeraVision, Inc. We have prepared this information using the
consolidated financial statements of KeraVision, Inc. for the five years ended
December 31, 1999 and the six-month period ended June 30, 1999 and 2000. The
financial statements for the five years ended December 31, 1999 have been
audited. The financial statements for the six-month periods ended June 30, 1999
and 2000 have not been audited.
When you read this summary historical financial data, it is important
that you read it along with the historical financial statements and related
notes in our annual and interim financial statements incorporated by reference
in this prospectus, as well as the section titled "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
Six months ended
Year Ended December 31, June 30,
----------------------------------------------------------- --------------------
1999 1998 1997 1996 1995 2000 1999
---- ---- ---- ---- ---- ---- ------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statement of Operations
Data
Net sales............................... $ 10,494 $ 835 $ 355 $ 137 $ -- $ 1,707 $ 4,381
Costs and expenses
Cost of sales and manufacturing
expense............................ 9,945 4,386 3,701 319 -- 3,336 4,615
Research and development............. 8,844 11,356 10,774 10,888 6,527 4,610 4,201
Selling, general and administrative.. 19,491 9,693 6,405 3,930 1,725 14,531 8,171
------ ----- ----- ----- ----- ------ -----
Total costs and expenses................ 38,280 25,435 20,880 15,137 8,252 22,477 16,897
------ ------ ------ ------ ----- ------ ------
Operating loss.......................... (27,786) (24,600) (20,525) (15,000) (8,252) (20,770) (12,606)
Interest income and other, net.......... 1,377 683 1,303 2,146 1,203 1,170 (5)
Interest expense........................ (935) (120) (174) (25) (57) (549) (310)
----- ----- ----- ---- ---- ----- ------
Net loss................................ ($27,344) ($24,037) ($19,396) ($12,879) ($7,106) (20,149) ($12,921)
======== ======== ======== ======== ======= ======== ========
Net loss applicable to common
stockholders.......................... ($28,847) ($27,414) ($19,396) ($12,879) ($7,106) ($20,904) ($13,697)
======== ======== ======== ======== ======= ======== ========
Basic and diluted net loss per share
applicable to common stockholders..... ($1.88) ($2.16) ($1.55) ($1.04) ($1.05) ($1.11) ($1.05)
Shares used in calculation of net
loss per share........................ 15,343 12,686 12,528 12,342 6,757 18,842 13,088
</TABLE>
<TABLE>
<CAPTION>
December 31, June 30,
------------------------------------------------------------------------------
1999 1998 1997 1996 1995 2000
---- ---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C>
Balance Sheet Data
Cash, cash equivalents and
available-for-sale investments......... $ 49,770 $ 7,728 $ 14,113 $ 32,065 $ 44,703 $ 30,306
Working capital.......................... 42,769 4,915 11,820 30,435 43,205 22,416
Total assets............................. 57,139 11,981 17,345 35,485 45,919 37,566
Capital lease obligations, noncurrent.... 1,030 821 850 793 114 658
Redeemable convertible preferred stock... 16,964 17,489 -- -- -- 17,718
Accumulated deficit...................... (118,939) (90,092) (62,678) (43,282) (30,403) (139,842)
Total stockholders' equity
(net capital deficiency)................. 28,013 (10,650) 12,937 31,765 44,035 7,731
</TABLE>
13
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve
substantial risks and uncertainties. You can identify these statements by
forward-looking words such as "may," "will," "expect," "intend," "anticipate,"
"believe," "estimate" and "continue" or similar words. You should read
statements that contain these words carefully because they discuss our future
expectations, contain projections of our future results of operations or of our
financial condition or state other forward-looking information. We believe that
it is important to communicate our future expectations to our investors.
However, there may be events in the future that we are not able to accurately
predict or control. The factors listed in the sections captioned "Risk Factors"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations," as well as any cautionary language in this prospectus, provide
examples of risks, uncertainties and events that may cause our actual results to
differ materially from the expectations we describe in our forward-looking
statements. Before you invest in our common stock, you should be aware that the
occurrence of the events described in the "Risk Factors" section and the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" section and elsewhere in this prospectus could have a material
adverse effect on our business, operating results and financial condition.
14
<PAGE>
BUSINESS
Our Business
KeraVision notes that certain of the statements in this report are
forward looking. You can identify these statements by forward-looking words such
as "may," '"will," "expect," "anticipate," "believe," "estimate," and "continue"
or similar words. Forward-looking statements may also use different phrases.
Forward-looking statements address, among other things: (1) our future
expectations; (2) projections of our future results of operations or of our
financial condition; or (3) our "forward-looking" information. We believe it is
important to communicate our expectations to our investors. However, there may
be events in the future that we are not able to accurately predict or which we
do not fully control that could cause actual results to differ materially from
those expressed or implied by our forward-looking statements. Actual results may
differ materially due to a variety of factors including, but not limited to (i)
lack of market acceptance of KeraVision's INTACS inserts, (ii) determinations by
the FDA or foreign regulatory bodies that the clinical data collected are
insufficient to support the safety and efficacy of KeraVision INTACS inserts
(iii) changes in regulatory review guidelines, procedures, regulations or
administrative interpretations, (iv) complications relating to KeraVision INTACS
inserts or the surgical procedure, (v) competitive products and technology, (vi)
unavailability of capital, and (vii) other risk factors described under the
heading "Risk Factors" as set forth beginning on page 5.
General
Since being founded in 1986, KeraVision has been developing a new
category of non-laser vision correction products for the treatment of common
vision disorders, including myopia (nearsightedness), hyperopia (farsightedness)
and astigmatism, to offer an alternative to eyeglasses, contact lenses and other
vision correction surgical procedures. INTACS micro-thin prescription inserts
have been approved by the FDA for correcting mild myopia. INTACS inserts are the
first surgical vision correction technology to be approved by the FDA for
distribution and sales that is designed to permanently correct a patient's
vision while providing the option of removability. The currently FDA approved
INTACS inserts are composed of two thin half-circles of polymer material that
are inserted into the periphery of the cornea to reshape the curvature of the
cornea to correct vision. The polymer material has been used in intraocular
lenses to treat patients with cataracts since 1952. The procedure for placement
of INTACS inserts is a simple outpatient procedure that typically can be
performed in 15 minutes or less. KeraVision believes that the INTACS inserts
represent the first technology specifically designed to surgically treat
patients with low degrees of nearsightedness, a group estimated at approximately
20 million people in the U.S. KeraVision is currently developing other potential
products to treat other vision correction disorders including higher and lower
levels of nearsightedness, as well as farsightedness and astigmatism.
We have positioned our INTACS inserts to address the growing market for
refractive surgery by offering an alternative to laser-based vision correction.
While laser-based technologies require the permanent removal of corneal tissue,
INTACS inserts can be removed if desired. Patients' refractions return generally
to pre-operative levels by three months following removal, in most instances. We
believe that INTACS inserts technology offers several potential benefits to
patients including:
. long-term, convenient vision correction with predictable results;
. rapid visual recovery;
. a simple, minimally invasive out-patient procedure with minimal
post-operative pain; and
. easy to remove and replace in an outpatient procedure.
Background
Vision and Vision Impairment
The eye functions much like a camera, incorporating a lens system
consisting of a cornea and a lens that focuses light, the iris which functions
as an aperture that regulates the amount of light that passes through the
central zone of the cornea, and the retina, a light-sensitive surface that, like
film, records the image. The cornea, lens and iris operate to focus light rays
on the retina, which contains the light-sensitive receptors that transmit the
image through the optic nerve to the brain. Nearly all light that reaches the
retina passes through the central portion of the cornea, called the optical
zone. Approximately 75% of the refractive, or focusing, power of the eye is
provided by the curvature of the cornea.
Most common refractive problems result from an inability of the optical
system to focus images on the retina properly. This inability to focus is known
as a refractive error. For instance, in the myopic (nearsighted) eye, light rays
focus in front of the retina when the curvature of the cornea is too steep.
People with myopia see nearby objects clearly, but distant objects appear
blurry. Conversely, in the hyperopic (farsighted) eye, light rays focus behind
the retina when the curvature of the cornea is too flat.
15
<PAGE>
People with hyperopia see distant objects clearly, but may need correction so
that nearby objects do not appear blurry. In the astigmatic eye, the curvature
of the cornea is not uniform. This lack of uniform curvature makes it difficult
for a person to focus clearly on an object. Refractive surgery changes the
cornea's refractive power by altering the curvature of the cornea, so that light
passing through the eye can be properly focused on the retina, thereby improving
vision.
Vision Correction Market
KeraVision estimates that over one-half of the world's population
suffers from common vision problems such as myopia, hyperopia or astigmatism. In
the United States alone, approximately 160 million people currently use
eyeglasses or contact lenses to correct these common vision problems, with over
$16 billion spent on corrective eyewear products annually. It is estimated that
over 70 million people of all ages are affected by myopia. Of these, an
estimated 20 million people with mild myopia fall within the currently approved
range of indications for INTACS inserts.
Surgical techniques to correct common vision problems, known as
refractive surgery, or vision correction surgery, include laser assisted in-situ
keratomileusis ("LASIK"), photorefractive keratectomy ("PRK") and radial
keratotomy ("RK"). LASIK is currently the most commonly performed refractive
surgery technique used in the United States. Generally these procedures have
been used to treat myopia; however, laser-based technologies to treat hyperopia
have recently been approved by the FDA, and other procedures are under
development. LASIK and PRK both require the use of a laser system to remove
corneal tissue to achieve a flattening of the cornea to treat nearsightedness,
and a steepening of the cornea to treat farsightedness. Each procedure
represents one eye and requires permanent cutting or tissue removal in the
central cornea.
KeraVision estimates that existing refractive procedure costs in the
United States averaged $2,100 per eye for a LASIK procedure and $1,800 per eye
for a PRK procedure in 1999, with a fairly wide range for each procedure. We
believe, however, overall average prices are declining rapidly. Ophthalmic
surgeons generally set the prices of refractive surgery procedures performed at
their medical offices. KeraVision anticipates that the procedure for placement
of INTACS inserts will be competitively priced with existing laser-based
procedures. Consumers generally pay directly for currently available refractive
surgery procedures, including the procedure for placement of INTACS inserts, and
are generally not reimbursed by third-party payors.
Refractive Surgery Techniques
RK, developed in the 1970's, was the first refractive surgical
technique for vision correction. In RK, a diamond knife is used to make from
four to eight radial incisions that penetrate beyond 90% of the depth of the
cornea. The procedure is generally conducted using topical anesthesia in an
outpatient setting. As the incisions heal, the curvature of the cornea is
altered and vision may be improved. RK results can vary with the skill and
experience of the surgeon and can be relatively unpredictable for patients
requiring greater degrees of correction. In addition, the procedure can result
in the instability of the eye over a period of months to years. Because RK
entails making cuts in or near the optical zone of the eye, unwanted side
effects, such as halos, reduced night vision and other visual distortions may
occur.
In both PRK and LASIK, a laser is used to permanently remove tissue
within the central optical zone to reshape the cornea, with the amount of tissue
to be removed based upon the level of intended change sought. In PRK, the top
layer of the central cornea, known as the epithelium, is manually removed to
expose the stromal tissue. The patient is then asked to fixate on a light to
minimize eye movement while the laser removes or ablates tissue from the stromal
tissue in the central area of the cornea. While vision improvement is achieved,
PRK depends in part on a healing response to reach the desired level of
flattening of the cornea, which generally occurs over a three-month period. The
equipment required to conduct this procedure is significantly more than the
equipment required for use in RK. Because PRK, like RK, surgically alters tissue
in the central optical zone, haze, halos, reduced night vision and other vision
problems have been observed in patients who have undergone the PRK procedure.
LASIK involves using an automated cutting device called a microkeratome
to cut a thin corneal flap, which is then pulled back to expose the underlying
stromal tissue. A laser is then used to remove corneal tissue to either flatten
the cornea in the case of myopia or steepen the cornea in the case of hyperopia
to achieve vision correction. The corneal flap is then placed back on the
stromal tissue where it adheres back onto the eye. Primary complications with
this procedure arise from cutting of the corneal flap, including incorrect flap
thickness, as well as haze, halos, reduced night vision and other vision
problems. The LASIK procedure offers several advantages over PRK, including
reduced post-operative pain and a shorter visual recovery time. Both PRK and
LASIK are performed in an outpatient setting under topical anesthetic.
16
<PAGE>
Quality of Vision
The most common measurement of vision utilizes an eye chart. One of the
recent developments in ophthalmology involves the concept of quality of vision.
It has been observed that patients can attain 20/20 vision, as measured with an
eye chart, and still be dissatisfied with their quality of vision. This issue
may play a role in the future in modifying current refractive surgery
techniques, which are known to affect the smooth shape of the cornea and to
create corneal scarring in ways that may induce unwanted visual aberrations.
Typical vision complaints include haze, halos, reduced night vision and other
visual distortions. At the current time, most assessments attribute undesirable
visual side-effects of refractive procedures either to a disturbance of corneal
tissue within the central optical zone or to the interruption or distortion of
the smooth shape of the cornea. New measurement techniques, including corneal
topography, contrast sensitivity and night-vision testing, are emerging to
better analyze the quality of vision beyond the assessment available using
standardized eye charts.
KeraVision Technology
In response to the perceived market need for an alternative to
eyeglasses, contact lenses and existing laser-based surgical procedures,
KeraVision has developed a proprietary technology to treat a broad range of
vision disorders. INTACS inserts are a proprietary product designed to reduce or
eliminate the need for corrective eyewear by reshaping the curvature of the
patient's cornea. INTACS inserts are inserted between the layers of the corneal
stroma through a small incision made in the periphery of the cornea. The
presence of INTACS inserts in the periphery of the cornea creates a flattening
of the central cornea, thereby improving the focus of light rays onto the retina
to correct myopia. The procedure for the placement of INTACS inserts does not
cut or remove tissue from the central optical zone of the cornea and therefore
may reduce the risk of unwanted visual side-effects such as haze, halos and
reduced night vision.
KeraVision believes that INTACS inserts provide the following potential
benefits for the treatment of myopia:
. Long term, convenient vision correction with predictable results.
INTACS inserts provide a predictable long-term correction of mild
myopia in a form more convenient than eyeglasses or contacts lenses
and without the risks associated with laser alternatives that
permanently remove tissue from the cornea.
. Rapid visual recovery. Patients achieve significant vision
improvements almost immediately. U.S. clinical trials showed that
81% of patients achieved vision of 20/40 or better within 24 hours
and 92% of patients achieved vision of 20/40 or better within 30
days.
. A simple, minimally invasive outpatient procedure with minimal
post-operative pain. The INTACS inserts corneal ring segment
placement procedure was designed to promote ease of surgery
utilizing standard instrumentation, with minimal trauma to the eye,
and can typically be performed in less than 15 minutes.
Post-operative pain experienced in the clinical trials was modest
and was typically treated with only non-prescription pain
relievers.
. Easy to remove and replace. INTACS inserts can be easily removed in
a brief, outpatient procedure. When removed during clinical trials,
the patients' refractions returned to approximately the same level
as measured prior to the INTACS inserts placement by three months
following removal, in most cases.
INTACS(TM) Micro-Thin Prescription Inserts and Related Instruments
On April 9, 1999, KeraVision obtained FDA approval to distribute and
sell INTACS inserts in the United States for the treatment of mild myopia in the
range of -1.0 to -3.0 diopters in patients who are 21 years of age or older, who
have a stable refraction and who have up to +1.0 diopter of astigmatism.
The initial design of INTACS inserts consisted of an optically clear
split ring made of PMMA. In order to simplify the surgical procedure, KeraVision
modified the design of INTACS inserts in 1995 into two, thin half-circles of
PMMA, each with an arc measurement of 150 degrees. The two half-circles are
placed in the periphery of the cornea at a diameter of approximately eight
millimeters. KeraVision has extensively studied the relationship between
physical parameters of INTACS inserts and corneal curvature change. As a result
of these studies, KeraVision believes that a small number of INTACS inserts
sizes, with minor variations in their dimensions, can produce a wide range of
corneal curvature change and could provide treatment for a substantial segment
of those people with myopia. KeraVision has developed INTACS inserts in six
different thicknesses ranging from 0.21 mm to 0.45 mm. At present, the FDA has
approved three of these thicknesses (0.25, 0.30 and 0.35 mm) for commercial use
in the U.S.
KeraVision has developed proprietary surgical instruments to be used
for the insertion of INTACS inserts. These stainless steel and titanium
instruments include a marking instrument, a centering guide and stromal
separators. KeraVision's instruments have been designed to standardize the
INTACS inserts placement procedure and reduce the variability associated with
17
<PAGE>
differing levels of surgical skill by showing the surgeon where to make the
corneal incision. The purchase of KeraVision's instruments represents a
relatively small capital investment compared to the cost of equipment required
for surgeons performing LASIK or PRK procedures.
The Procedure for Placement of INTACS Inserts
The procedure for placement of INTACS inserts is a simple, minimally
invasive procedure that can be performed on an outpatient basis typically in 15
minutes or less. The procedure is usually performed using topical anesthetic
eyedrops. The procedure in part includes surgical techniques and ophthalmic
surgical instruments that are widely used by and familiar to ophthalmic
surgeons. The procedure requires a single incision of less than two millimeters
outside of the central optical zone of the cornea. The incision is located at
the top of the eye under the eyelid.
The INTACS inserts placement procedure consists of the following steps.
The ophthalmic surgeon uses a guide to mark the geometric center of the cornea.
Using the reference mark, a marking instrument is used to mark the line of
incision on the cornea outside the central optical zone and the location where
the ring segments are to be placed. A small entry incision is then made to
approximately two-thirds of the depth of the cornea and the layers of the stroma
at the bottom of the incision are separated. The stroma, which comprises 90% of
the cornea, consists of 500 to 700 overlapping layers of tissue that can be
easily separated. The surgeon places the centering guide over the eye,
introduces each stromal separator through the small entry incision and rotates
each stromal separator, spreading the layers of the stroma to create a circular
subsurface tunnel in the periphery of the cornea. The surgeon then removes the
stromal separator and the centering guide. INTACS inserts are introduced into
the tunnel and rotated into place. Patients generally experience substantial and
immediate improvement in vision. The amount of postoperative pain experienced by
patients in INTACS inserts clinical trials has been minimal for most patients
and is typically treated only with nonprescription pain relievers. Most patients
resume their normal activities within two to three days. In addition, since
INTACS inserts are inserted below the nerve endings of the cornea, patients do
not feel the presence of INTACS inserts in the eye.
Clinical Trials Results
Myopia. Since 1991, ophthalmic surgeons have utilized INTACS inserts
------
for the treatment of myopia in more than 2,000 patient eyes in clinical trials
conducted in the United States and throughout the world. KeraVision's clinical
trials have been designed to demonstrate the safety and efficacy of INTACS
inserts and the safety of the surgical procedure used to insert INTACS inserts.
The safety and efficacy of INTACS inserts was evaluated using standard
ophthalmic techniques. KeraVision initiated clinical trials using the initial
design of INTACS inserts in 1991 in both the United States and Brazil. In
September 1994, KeraVision completed enrollment of a 90-patient FDA Phase II
myopia trial using the initial design of INTACS inserts. In September 1996,
KeraVision completed enrollment of the group of 150 U.S. Phase II myopia
patients with a modified design of INTACS inserts. In November 1996, KeraVision
initiated an expanded Phase II myopia trial involving 59 patient eyes to
evaluate moderate myopia (-3.5 to -5.0 diopters). In October 1996, KeraVision
received FDA approval to commence a ten-center, 360-patient Phase III clinical
trial for myopia in the United States and began that trial in December 1996.
KeraVision completed the enrollment for the trial in May 1997. Our initial
Pre-Market Approval (PMA) application was based on data from the PMA cohort, a
group of 452 patients enrolled in the INTACS inserts Phase II and Phase III
clinical trials. Three thicknesses (0.25, 0.30 and 0.35mm) of INTACS inserts
were evaluated. INTACS inserts were successfully placed in 449 eyes out of 454
surgical attempts. After 12 months of follow-up, data were available for 97.6%
of the PMA cohort patients. In January 1998, KeraVision received FDA approval to
expand the Phase III trial to evaluate three additional thicknesses (0.21, 0.40,
and 0.45 mm). This approval permitted KeraVision to implant INTACS inserts into
one eye of each of 120 patients (40 patient eyes for each thickness), but
required KeraVision to obtain additional approval from the FDA before implanting
the second eye in those patients or enrolling any additional patients. In 82 of
the enrolled 118 patients, KeraVision inadvertently implanted INTACS inserts
into the patients' second eye prior to obtaining the required approval. In July
1999, KeraVision reported these unauthorized implantations in the patients'
second eye to the FDA in a filing that requested permission to enroll an
additional 240 patients and approval to implant the second eyes of the 118
patients already enrolled. In August 1999, the FDA approved the proposed
supplement. KeraVision has also conducted two myopia clinical trials in Europe.
The results from these trials are comparable with KeraVision's clinical trials
in the United States. In addition, KeraVision is conducting a trial for myopia
in Singapore.
As of July 1999, INTACS inserts have been removed from 39 patient eyes
from the PMA cohort. INTACS inserts can be easily removed in a brief, outpatient
procedure. The INTACS inserts removal rate for the Phase III trial was 4.3% as
compared to 9.6% from the earlier Phase II trial. Reasons for INTACS inserts
removals included: one for infection, 15 for patient dissatisfaction with
correction achieved (undercorrection, overcorrection or induced astigmatism), 19
for patient dissatisfaction with visual symptoms (glare, halos, difficulty with
night vision, etc.) and four for other reasons. There have been no clinically
significant complications associated with removal of INTACS inserts. The removal
results demonstrate that the refractions returned to preoperative
18
<PAGE>
levels by three months following removal, in most instances. Best spectacle-
corrected visual acuity was 20/20 or better in all cases following removal.
The first procedure for the treatment of myopia using INTACS inserts
was performed in 1991, and to date more than 2,000 procedures have been
conducted using INTACS inserts corneal ring segment technology in clinical
trials. Although KeraVision has developed eight-year clinical data on the safety
and efficacy of INTACS inserts in correcting myopia, it has limited long-term
safety and efficacy data. We cannot assure you that long-term safety and
efficacy data when collected will be consistent with these clinical trial
results and will demonstrate that INTACS inserts can be used safely and
successfully to treat myopia in a broad segment of the population or on a long-
term basis.
All surgical procedures, including the procedure for the placement of
INTACS inserts, involve some inherent risk of complications. For the PMA cohort,
five patients experienced safety-related complications for an overall incident
rate of 1.1%. All five patients recovered with no clinically significant
effects. Adverse events include: one infection, one shallow INTACS inserts
corneal ring segment placement, one temporary loss of 2 lines of best corrected
visual acuity and two corneal perforations. During the 12 months of follow up,
there was a 4.3% incidence of removal and a 0.9% incidence of exchange
procedures. Other complications included: overcorrection, reduction in central
corneal sensation, difficulty with night vision, undercorrection, induced
astigmatism, blurry vision, double vision, halos, glare, corneal blood vessels,
and fluctuating distance vision. No patient has had a lasting injury to the eye
or sustained any material loss of best corrected vision. In many patients,
deposits have been observed in the stromal tunnel next to the INTACS inserts. In
all cases, the deposits were confined to the stromal tunnel with no effect on
patients' vision. Although KeraVision believes that these deposits are not
complications, we cannot assure you that this will be the case on a long-term
basis.
All of these complications have also been observed in connection with
other refractive surgery techniques. Although KeraVision believes these
complications may be mitigated, KeraVision cannot assure you that these or other
complications will not be serious or lasting or will not impair or preclude
KeraVision from retaining existing regulatory approvals or obtaining regulatory
approvals for our products or the acceptance of these products by patients or
ophthalmologists.
Hyperopia. Treatment for correction of hyperopia consists of implanting
---------
up to eight rectangular segments made of PMMA placed in the periphery of the
cornea. These segments steepen the center of the cornea and flatten the
periphery. Each segment is the same dimension. Patients requiring +1.0 to +3.0
diopters of hyperopia correction have experienced significant improvement in
their vision. As reported at the May, 1999 American Society for Cataract and
Refractive Surgeons, after 12 months following the placement procedure, 40% of
patients achieved vision of 20/20 or better, 90% saw 20/25 or better, and 100%
saw 20/40 or better in one study. Because only a limited number of patients to
date have received the treatment for hyperopia, KeraVision will need to treat
additional patients to characterize the range and predictability of correction
prior to moving to a large scale trial. We are conducting a second feasibility
trial at several additional sites in Europe.
Astigmatism. KeraVision has studied a potential product that uses arc
-----------
segments to treat pure astigmatism. This device utilizes the core INTACS inserts
technology for the treatment of myopia and the segments are manufactured from
the same material as INTACS inserts. A similar surgical technique is used to
implant the segments in the eye. In August 1994 and March 1995, KeraVision
implanted arc segments in eight astigmatic patients. Clinical results showed
that these patients exhibited improvement in their vision. KeraVision is
pursuing broader experimentation and analysis, but has not enrolled further
patients due to the perceived smaller size of the potential market compared to
the markets for myopia and hyperopia. In October 1999, regulatory approval was
obtained to initiate a feasibility trial at two centers in Europe. No patients
have been enrolled to date.
Keratoconus. KeraVision has begun a clinical study in Europe using the
-----------
Company's INTACS inserts as a possible treatment for keratoconus, a progressive
thinning-of-the-cornea disorder.
Marketing and Sales
United States
Our U.S. marketing roll-out objective is to gain acceptance of INTACS
inserts by both ophthalmic surgeons and consumers. We have begun the initial
marketing efforts to the estimated 8,000 ophthalmic surgeons, of which an
estimated 3,200 are currently performing refractive surgery. We have added
refractive surgery business specialists and manufacturers' representatives to
market directly to ophthalmic surgeons. We are also obtaining limited assistance
from refractive surgery provider groups. These groups have emerged primarily to
market laser-based refractive surgery procedures.
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Surgeon Acceptance. Our marketing program for ophthalmic surgeons
------------------
involves several key elements, including a skills transfer program and a
practice integration program. We believe our success depends on well-trained
surgeons to ensure successful outcomes from their first patients onward. It is
expected that high levels of patient satisfaction will develop the critical mass
of patients required to start and sustain the word-of-mouth process, a driver of
refractive procedure volume growth. Prior to performing the procedure for the
placement of INTACS inserts, ophthalmologists are required to go through
KeraVision surgeon training. Our training program is guided by six leading
ophthalmologists who are part of the KeraVision's senior training faculty and
are highly experienced with the INTACS inserts. The classes include a
comprehensive lecture and a surgical wet lab that can accommodate up to 20
ophthalmologists. A detailed training manual is provided to each of the program
attendees. Following the initial training, we provide experienced personnel to
provide on-site guidance for the ophthalmologists through their first series of
procedures.
KeraVision's marketing program includes post-training efforts to assist
in the integration of INTACS inserts into each surgeon's practice. Our
integration process includes education of the office staff, development of
patient education materials, including collateral material, and seminars with
optometrists in the region.
Doctors can purchase an initial kit, consisting of two instrument sets,
a vacuum system and 18 INTACS inserts. If desired, the instrumentation may be
leased. We have derived our initial revenues from kit sales while we are working
to build underlying procedure volumes to maintain and grow future revenues.
Consumer Acceptance. In addition to personal referrals, we intend to
-------------------
increase awareness of INTACS inserts through several other approaches. We have
engaged in a public relations strategy that has resulted in coverage on over 400
TV news programs and 3,300 print articles since January 1999. Many ophthalmic
practices currently use extensive marketing efforts to market laser procedures.
We believe that practices which integrate INTACS inserts will use their own
resources to advertise and perform other activities to build procedure volume an
addition be supplemented with advertising support from KeraVision. We may elect
to conduct co-operative advertising in conjunction with these practices. Fourth,
once there is a sufficient number of doctors trained and an adequate level of
interest in INTACS inserts established within a region, we believe that a
regional consumer marketing campaign may be used to increase further market
acceptance. Part of our strategy is to create the INTACS brand micro-thin
prescription inserts, which is the first branded product within the refractive
surgery market. We believe the development of a brand identity can facilitate
consumer adoption by allowing consumers to ask for the product by name, enabling
focused advertising and fostering general awareness.
Our initial marketing effort will focus on the estimated 20 million
Americans who are within the treatment range of our first product. Our efforts
have focused on enhancing consumer awareness, with a goal of increasing the
volume of the procedure for the placement of INTACS inserts to drive sales of
INTACS inserts. We are also seeking to expand the market for refractive surgery
to reach those consumers who have an interest in refractive surgery but are
concerned with other vision correction surgical procedures that do not allow for
the option of removal and replacement.
International Markets
Canada
------
KeraVision received approval in Canada in May 1998 to sell INTACS
inserts for the treatment of myopia in the range of -1.0 to -5.0 diopters of
correction, along with related instruments. KeraVision focused its initial
marketing efforts on developing seven sites to become proficient in the
procedure for the placement of INTACS inserts, to be able to discuss the
Canadian experience with INTACS inserts and to potentially serve as training
centers. KeraVision then formally announced the product launch in October 1998.
KeraVision targeted the Vancouver area for the purpose of training a high
percentage of the refractive surgeons in the region and testing the effect of
consumer advertising on patient flow to those Canadian centers. As KeraVision
was in the process of then obtaining US FDA approval, the focus of sales efforts
was shifted from Canada to the United States.
Europe/Other
------------
Upon obtaining the right in November 1996 to market INTACS inserts in
European Union countries, KeraVision commenced a sales and marketing program
concentrated in parts of France, Germany and Austria. As part of this program,
KeraVision established a European headquarters in Paris, France. A small sales
office in France handles sales of INTACS inserts in the French market. A
distributor sells KeraVision's products in Germany and Austria.
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From information obtained in the course of conducting the training
sessions and from consumer marketing studies, KeraVision determined that the
overall refractive surgery market in France and Germany was significantly less
than that of the United States on a per capita basis, and that the refractive
surgery markets in those countries do not appear to be growing at a substantial
rate, if at all. This lack of growth may be related in part to the lack of a
delivery or referral channel whereby potential patients can easily reach the
ophthalmic surgeon, rather than the non-surgical ophthalmologists and opticians
who may tend to recommend that a patient not consider refractive surgery.
Further, restrictions on direct broad scale advertising hinders the expansion of
consumer awareness of refractive surgery. It is expected that because of these
and other factors the refractive surgery market and the market for INTACS
inserts will be slow to develop in Europe. KeraVision, however, is seeking to
expand its reach to other European countries by adding additional distributors.
KeraVision has concluded agreements with distributors that cover more than 25
countries in Europe, the Middle East and Mexico.
Asia
----
In July 1998, KeraVision commenced our first clinical trial in Asia,
with the initiation of a myopia trial in Singapore. We have signed a
distribution agreement with a South Korean distributor to begin the work on
product registration in South Korea. We have also signed agreements with
distributors in Taiwan, Hong Kong and Singapore.
Patents and Proprietary Rights
One of KeraVision's primary strategies has been to develop a strong
proprietary patent position with respect to INTACS inserts and related
technology. KeraVision has over 130 pending patent applications worldwide and
has been awarded 29 United States patents and over 60 foreign patents as of
September 30, 2000. These issued patents and pending applications cover various
aspects of KeraVision's vision correction technology including INTACS inserts
and related materials, INTACS instruments for the placement of the inserts in
the cornea (which includes surgical and metrological instruments), and related
methods of use as well as other vision correction technologies including
electrosurgical and laser treatment of the cornea. KeraVision's policy is to
protect its technology by, among other things, filing patent applications
relating to important aspects of its INTACS inserts technology and other vision
correction technology. KeraVision has entered into confidentiality agreements
with its contract manufacturers to protect the proprietary nature of its
technology.
Manufacturing
KeraVision manufactures INTACS inserts in its facility in Fremont,
California using a computer-controlled machining process. KeraVision has
sufficient manufacturing capacity for INTACS inserts and is building experience
in manufacturing medical devices and other products. To be successful, we must
manufacture our products and potential products in commercial quantities in
compliance with regulatory requirements at acceptable costs. Production of
commercial-scale quantities will involve technical challenges for us. As we
establish our own commercial-scale manufacturing capability for INTACS inserts,
we could incur significant scale-up expenses including the need to expand our
facilities and personnel. KeraVision may seek collaborative arrangements with
other companies to manufacture products and potential products, including INTACS
inserts. The manufacturer of KeraVision's potential products will be subject to
periodic inspection by regulatory authorities. Any such operations must undergo
compliance inspections conducted by the FDA and equivalent inspections conducted
by state and foreign officials. We cannot assure you that any KeraVision
manufacturer will be able to successfully pass these inspections on a timely
basis or at all. In addition, we cannot assure you that KeraVision will be able
to develop clinical or commercial-scale manufacturing capabilities at acceptable
costs or enter into agreements with third parties with respect to these
activities. In many cases, instruments and other purchased materials critical
for production are sole-sourced.
KeraVision has several sole-sources for sterilization, tools and
equipment, the PMMA raw material and other elements necessary to manufacture
INTACS inserts and the related instrumentation. If we are dependent upon third
parties for the manufacture of our products, our profit margins and ability to
develop and deliver such products on a timely basis may be adversely affected.
Moreover, we cannot assure you that such third parties will adequately perform,
and any failures by these parties may impair our ability to deliver products on
a timely basis or otherwise impair our competitive position.
INTACS inserts are made from PMMA, a polymer widely used in implantable
intraocular lenses since 1952. PMMA cast sheet is purchased from a sole supplier
and is stored at KeraVision prior to release to production. KeraVision believes
it could develop the capability over a significant time period to manufacture
PMMA cast sheet internally if this sole-source were to become unavailable. Any
change in materials used for INTACS inserts would require additional testing,
regulatory review and approval, which could result in significant manufacturing
and shipping delays. See "Risk Factors--KeraVision will need to find a new
supplier for the raw material we use in manufacturing our products."
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Research and Development
KeraVision has been engaged in the research and development of INTACS
inserts and related technology since its inception in 1986. The development
effort has incorporated both extensive clinical testing as well as laboratory
testing to determine the effect of various configurations and insertion
techniques for INTACS inserts and related technology. Some of the analytical
techniques employed include computer modeling using finite element analysis,
optical ray tracing and various corneal topography measurement instruments.
These approaches aid in determining the expected change in the shape of the
cornea, the pattern of light distribution through the cornea and curvature of
the cornea achieved with various designs. The analytical approaches are used in
conjunction with information determined from both feasibility studies and
expanded clinical trials to determine the best design to move forward in the
testing cycle. For each of the years ended December 31, 1999, 1998 and 1997 our
expenditures for research and development were approximately $8.8 million, $11.4
million, and $10.8 million, respectively. For each of the six-month periods
ended June 30, 2000 and 1999 our expenditures for research and development were
approximately $4.6 million and $4.2 million, respectively.
KeraVision has also used these approaches to begin work on potential
products for astigmatism, hyperopia and keratoconus corneal thinning disease.
KeraVision has begun investigations into refinements for the existing product
for myopia, including myopia concurrent with high level of astigmatism and
potential treatments for higher and lower levels of myopic correction.
Competition
INTACS inserts compete with other treatments for refractive problems,
including eyeglasses, contact lenses, and other refractive surgery procedures
such as PRK and LASIK. In addition, other refractive surgery technologies are
currently under development, including the intraocular contact lens ("ICL"),
radio frequency keratoplasty ("RFK"), and "refractive" intraocular lenses. The
ICL seeks to correct refractive errors by placing a lens inside the eye between
the natural lens and the iris. The ICL is currently available for sale in
Europe. RFK uses radio-frequency energy to change the shape of the cornea.
Currently, this treatment has been approved for use in Canada but has not been
approved for use in the United States. Refractive intraocular lenses ("IOL")
involve the placement of an intraocular lens behind the cornea for the
correction of vision problems. Significant competitive factors in the industry
include efficacy of vision correction, safety, reliability, convenience and
price. The healthcare field is characterized by extensive research and rapid
technological change. At any time, competitors may develop and bring to market
new products or surgical techniques with vision correction capabilities superior
to those of INTACS inserts or which would otherwise render INTACS inserts
corneal ring segment technology obsolete.
Other companies, most of which are larger than KeraVision and have
greater financial resources, are engaged in the refractive surgery market.
Several companies, including Summit Technology, Inc. (recently purchased by
Alcon, a division of Nestle Corporation), VISX, Nidek, Inc. and Bausch & Lomb
have received approval to market their products in the United States. In
addition to these companies, there are other large entities that currently
market and sell laser systems overseas for use in refractive surgery, some of
whom are seeking to obtain approval with the FDA to sell their products in the
United States.
KeraVision's competition will be determined in part by current or
potential future refractive surgery products that are approved for sale by
regulatory authorities. The relative speed at which KeraVision is able to
develop its potential products, complete the necessary governmental and
regulatory approval processes for those products and manufacture and market
commercial quantities of the products will be important competitive factors.
Government Regulation
FDA's Premarket Clearance and Approval Requirements. Unless an
exemption applies, each medical device that we wish to market in the U.S. must
receive either "510(k) clearance" or "PMA approval" in advance from the U.S.
Food and Drug Administration pursuant to the Federal Food, Drug, and Cosmetic
Act. The FDA's 510(k) clearance process usually takes from four to 12 months,
but it can last longer. The process of obtaining PMA approval is much more
costly, lengthy and uncertain and generally takes from one to three years or
even longer.
The FDA decides whether a device must undergo either the 510(k)
clearance or PMA approval process based upon statutory criteria. These criteria
include the level of risk that the agency perceives is associated with the
device and a determination whether the product is a type of device that is
similar to devices that are already legally marketed. Devices deemed to pose
relatively less risk are placed in either class I or II, which requires the
manufacturer to submit a premarket notification requesting 510(k) clearance,
unless an exemption applies. The premarket notification must demonstrate that
the proposed device is "substantially equivalent" in intended use and in safety
and effectiveness to a legally marketed "predicate device" that is either in
class I, class II, or is a "preamendment" class III device (i.e., one that was
in commercial distribution before May 28, 1976) for which the FDA has not yet
decided whether to require PMA approval.
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After a device receives 510(k) clearance, any modification that could
significantly affect its safety or effectiveness, or that would constitute a
major change in its intended use, requires a new 510(k) clearance. The FDA
requires each manufacturer to make this determination in the first instance, but
the FDA can review any such decision. If the FDA disagrees with a manufacturer's
decision not to seek a new 510(k) clearance, the agency may retroactively
require the manufacturer to submit a premarket notification requiring 510(k)
clearance. The FDA also can require the manufacturer to cease marketing and/or
recall the modified device until 510(k) clearance is obtained.
Devices deemed by the FDA to pose the greatest risk, such as life-
sustaining, life-supporting or implantable devices, or devices deemed not
substantially equivalent to a legally marketed predicate device, are placed in
class III. INTACS inserts are regulated by the FDA as a class III device. Such
devices are required to undergo the PMA approval process in which the
manufacturer must prove the safety and effectiveness of the device to the FDA's
satisfaction. A PMA application must provide extensive preclinical and clinical
trial data and also information about the device and its components regarding,
among other things, manufacturing and labeling.
Upon submission, the FDA determines if the PMA application is
sufficiently complete to permit a substantive review, and, if so, the
application is accepted for filing. The FDA then commences an in-depth review of
the PMA application. The review time is often significantly extended as a result
of the FDA asking for more information or clarification of information already
provided. The FDA also may respond with a "not approvable" determination based
on deficiencies in the application and require additional clinical trials that
are often expensive and time consuming and can delay approval for months or even
years. During the review period, an FDA advisory committee, typically a panel of
clinicians, likely will be convened to review the application and recommend to
the FDA whether, or upon what conditions, the device should be approved.
Although the FDA is not bound by the advisory panel decision, the panel's
recommendation is important to the FDA's overall decision making process.
If the FDA's evaluation of the PMA application is favorable, the FDA
typically issues an "approvable letter" requiring the applicant's agreement to
specific conditions (e.g., changes in labeling) or specific additional
information (e.g., submission of final labeling) in order to secure final
approval of the PMA application. Once the approvable letter is satisfied, the
FDA will issue a PMA for the approved indications, which can be more limited
than those originally sought by the manufacturer. The PMA can include post
approval conditions that the FDA believes necessary to ensure the safety and
effectiveness of the device including, among other things, restrictions on
labeling, promotion, sale and distribution. Failure to comply with the
conditions of approval can result in material adverse enforcement action,
including the loss or withdrawal of the approval.
After the approval of a PMA, a new PMA or PMA supplement is required in
the event of a modification to the device, its labeling or its manufacturing
process. Supplements to a PMA application often require the same type of
information as a premarket approval application, except that the supplement is
limited to the information needed to support any changes from the product
covered by the original PMA application, and may not require the submission of
clinical data or the convening of an advisory committee. A new PMA or PMA
supplement will be required to expand the INTACS inserts approval beyond mild
myopia to new ranges of myopia, and to hyperopia and astigmatism.
A clinical trial may be required in support of a 510(k) submission or
PMA application. Such trials generally require an Investigational Device
Exemption application approved in advance by the FDA for a limited number of
patients, unless the product is deemed a nonsignificant risk device eligible for
more abbreviated IDE requirements. The IDE application must be supported by
appropriate data, such as animal and laboratory testing results. Clinical trials
may begin if the IDE application is approved by the FDA and the appropriate
institutional review boards at the clinical trial sites.
Pervasive and Continuing FDA Regulation. A number of regulatory
---------------------------------------
requirements apply to marketed devices, including INTACS inserts. These
requirements include labeling regulations, the Quality System Regulation (which
requires manufacturers to follow elaborate design, testing, control,
documentation and other quality assurance procedures), the Medical Device
Reporting regulation (which requires that manufacturers report to the FDA
certain types of adverse events involving their products), and the FDA's general
prohibition against promoting products for unapproved or "off label" uses. Class
II devices also can have special controls such as performance standards,
postmarket surveillance, patient registries, and FDA guidelines that do not
apply to class I devices.
Other Regulation
KeraVision is also subject to regulation by the Occupational Safety and
Health Administration and the Environmental Protection Agency and to regulation
under the Toxic Substances Control Act, the Resource Conservation and Recovery
Act, the National Environmental Policy Act and other regulatory statutes, and
may in the future be subject to other federal, state or local regulations. In
addition, new or modified regulations may be promulgated governing INTACS
inserts or KeraVision's potential products that may be more restrictive or that
may otherwise alter or affect KeraVision's research and development programs. We
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cannot assure you that KeraVision will not be required to incur significant
costs to comply with these laws and regulations in the future or that such laws
and regulations will not have a materially adverse effect upon KeraVision's
ability to do business. KeraVision is unable to predict whether any agency will
adopt any regulation that would have a material adverse effect on KeraVision's
operations.
All of the above described government regulation and product approval
risks apply to INTACS inserts and will apply to any future potential product of
KeraVision. Government regulation may become more restrictive in the future. We
cannot assure you that KeraVision will not be required to incur significant
costs to comply with such laws and regulations in the future or that such laws
and regulations will not have a material adverse effect upon KeraVision's
ability to conduct business.
European Government Regulation and Product Testing
Sales of medical devices outside the United States are subject to
foreign regulatory requirements that vary widely from country to country. The
time required to obtain approvals required by foreign countries may be longer or
shorter than that required for FDA approval, and requirements for licensing may
differ from FDA requirements. Export sales of investigational devices that have
not received FDA marketing approval may be subject to FDA export permit
requirements. As KeraVision begins to sell products in additional foreign
markets it will be required to obtain an FDA export permit and comply with
foreign regulations for each of these markets. A delay in obtaining the
necessary approvals or failing to comply with regulatory requirements could have
a material adverse effect on KeraVision's business, financial condition and
results of operations.
The regulatory environment in Europe for medical devices differs
significantly from that in the United States. A total of 19 European countries
are grouped in a union with the objective of establishing a single market
without internal borders among the member countries and eliminating divergent
national requirements. The members of the European Union include Austria,
Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,
The Netherlands, Portugal, Spain, Sweden, the United Kingdom, Iceland, Norway,
Switzerland and Lichtenstein.
Products that comply with the requirements of a specified EC medical
directive are entitled to bear CE marking. Since July 14, 1998, all commercial
medical device products have been required to bear CE marking. It is illegal to
market these products in the European Union without a CE marking.
To obtain a CE marking, the product must be assessed and found to
conform to the applicable directive. This assessment is carried out by the
manufacturer, in most cases with the assistance of a third party certification
organization known as a "notified body." The notified body assessment may
consist of an audit of the manufacturer's quality system or specific testing of
the product. A manufacturer can sell a product throughout the European Union
once it secures an assessment by a notified body in one of the European Union
countries.
The European Union has adopted two directives to regulate medical
devices, including the "Active Implantable Medical Devices Directive" ("AIMDD")
and the "Medical Devices Directive," ("MDD") and has proposed a third directive,
the "In Vitro Diagnostic Directive," ("IVDD") to harmonize the regulatory
requirements for medical devices.
Medical devices such as INTACS inserts are regulated under the MDD. A
manufacturer may affix CE marking after a determination that the product
complies with the essential requirements of this directive and completion of the
appropriate conformity assessment procedure as specified by the directive. The
conformity assessment requirements are based upon a given product's
classification within the directive. Products within the scope of the directive
are grouped within four classes: Class I, IIA, IIB and III. A product with a
higher classification is considered to have higher risk, and will therefore be
subject to more controls in order to obtain CE marking. INTACS inserts have been
designated as a Class IIB device. Essential requirements under the directive
include substantiating that the device meets the manufacturer's performance
claims and that any undesirable side effects of the device constitute an
acceptable medical risk when weighed against the intended benefits of the
device.
There are two basic options for assessing conformity of devices
designated as Class IIB. The first option allows a manufacturer to seek a
decision from the notified body that the processes employed in the design and
manufacture of a device qualify as a full quality system. Alternatively,
manufacturers can seek product certification based on various control schemes.
KeraVision obtained qualification of its processes as a full quality system.
Approval of KeraVision's full quality system has been achieved through ISO 9001
and EN 46001 certification by an approved notified body. The full quality system
encompasses the organizational structure, responsibilities, procedures,
processes and resources necessary to assure quality assurance in design,
development, production, installation and servicing of its medical devices.
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The Medical Devices Directive also covers the instrumentation supplied
by KeraVision for the purpose of implanting INTACS inserts. These instruments
are classified as Class I and therefore are not subject to full quality
assurance system requirements.
Once a manufacturer has satisfactorily completed the regulatory
compliance tasks required by the directive and received a favorable decision
from the notified body, it may affix CE marking to its product. Based on the
current regulatory laws, no additional premarket approvals in the individual
European Union countries are required. Custom-made devices and devices intended
for clinical investigation do not bear CE marking and are subject to particular
requirements under the Directive. Manufacturers are required to report serious
adverse incidents concerning CE marked devices to the authorities of the
countries where the incidents take place. If such incidents occur, the
manufacturer may have to take remedial action, perhaps including withdrawal of
the product from the European market.
The directives must be transposed into national law in order to be
applied. All member states of the European Union have completed this
transposition. This transposition process has not created significant
differences among the member states of the European Union with respect to
compliance with the essential requirements and the conformity assessment
process. However, meaningful differences have emerged in at least the following
areas: authorities' evaluation of proposed clinical investigation, notification
of products and activities, handling of adverse event reporting and language
requirements for labels and instructions for use. As the directive does not
cover distribution practices, healthcare financing and purchasing, it is
expected that there will be significant regulatory variances from country to
country in these areas.
KeraVision obtained conformity certification under Annex II of the MDD
in October 1996 from a notified body and thus achieved the right to affix the CE
marking to INTACS inserts in November 1996. The right to affix the CE mark can
be withdrawn by the notified body and no assurance can be given that it will be
obtained again in a timely fashion or at all. Furthermore, there can be no
assurance that KeraVision's notified body will retain its status as a "notified
body."
Data and Safety Monitoring Board
KeraVision has established an independent Data and Safety Monitoring
Board to serve in a medical monitoring capacity and to review the collective
safety and efficacy data generated from KeraVision's various clinical trials. In
addition, the members of the Monitoring Board examine representative patients
from the United States investigational sites, provide medical advice to the
clinical investigators, review any safety-related complications and provide
suggested guidelines for patient management to the investigators. The Monitoring
Board currently consists of three prominent ophthalmologists. Additional
individuals may be added to the Monitoring Board, as required. The members of
the Monitoring Board are not allowed to be clinical investigators for INTACS
inserts.
Employees
As of August 31, 2000, KeraVision had 125 full-time employees
consisting of 29 in manufacturing, 25 in research and development, 47 in sales
and marketing, and 24 in general and administration. KeraVision also has
contracts with outside consultants. KeraVision considers relations with its
employees to be good. None of KeraVision's employees are covered by a collective
bargaining agreement.
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DESCRIPTION OF SECURITIES
The following description of the material terms of the capital stock of
KeraVision is qualified by reference to the amended and restated certificate of
incorporation of KeraVision, the certificate of designation of rights,
preferences and privileges of Series A participating preferred stock, the
certificate of designation of rights, preferences and privileges of Series B
redeemable convertible preferred stock and the Preferred Shares Rights
Agreement, dated as of August 18, 1997. See "Where You Can Find More
Information."
The authorized capital stock of KeraVision currently consists of
30,000,000 shares of common stock, par value $0.001 per share, and 2,000,000
shares of preferred stock, par value $0.001 per share. Each share of KeraVision
common stock trades with KeraVision rights. See "--Stockholder Rights Plan." As
of October 9, 2000, there were outstanding 18,898,024 shares of KeraVision
common stock, no shares of KeraVision Series A preferred stock and 602,654
shares of KeraVision Series B preferred stock.
KeraVision Common Stock
-----------------------
Holders of KeraVision common stock are entitled to receive dividends or
distributions that are lawfully declared by the KeraVision board, to have notice
of any authorized meeting of stockholders, and to one vote for each share of
KeraVision common stock on all matters which are properly submitted to a vote of
KeraVision stockholders. As a Delaware corporation, KeraVision is subject to
statutory limitations on the declaration and payment of dividends. In the event
of a liquidation or other dissolution of KeraVision, holders of KeraVision
common stock will have the right to a ratable portion of the assets that remain
after the full payment of amounts owed to KeraVision's creditors, the payment of
all KeraVision liabilities and the aggregate liquidation preferences of any
outstanding shares of KeraVision preferred stock. The holders of KeraVision
common stock have no conversion, redemption, preemptive or cumulative voting
rights. All outstanding shares of KeraVision common stock are, and the shares of
KeraVision common stock proposed to be issued in this offering will be, validly
issued, fully paid and non-assessable.
KeraVision Preferred Stock
--------------------------
KeraVision's charter authorizes the KeraVision board to issue preferred
stock in one or more series, to establish the number of shares in any Series and
to set the designation, preferences, rights, qualifications and restrictions on
each series of preferred stock.
In connection with the adoption of the rights plan, the KeraVision
board has designated 30,000 shares of preferred stock as Series A participating
preferred stock. The Series A preferred shares purchasable upon exercise of the
KeraVision Rights will not be redeemable. Each share of Series A preferred stock
will be entitled to an aggregate dividend of 1,000 times the dividend declared
per KeraVision common share. If KeraVision is liquidated, the holders of the
Series A preferred shares will be entitled to a preferential liquidation payment
equal to accrued but unpaid dividends plus the greater of $1,000 per share and
1,000 times the aggregate per share amount to be distributed to the holders of
KeraVision common stock. Each Series A preferred share will have 1,000 votes,
voting together with the holders of the KeraVision common stock, except as
required by law or the certificate of designation relating to the Series A
preferred stock. In a merger, consolidation or other transaction in which
KeraVision common stock is changed or exchanged, each Series A preferred share
will be entitled to receive 1,000 times the amount received per share of
KeraVision common stock. These rights are protected by customary anti-dilution
provisions. Because of the nature of the dividend, liquidation and voting rights
of the Series A preferred shares, the value of the one one-thousandth interest
in a share of Series A preferred stock purchasable upon exercise of each
KeraVision right should approximate the value of one share of common stock.
KeraVision's board of directors designated 662,500 shares of preferred
stock as Series B convertible preferred stock. The Series B preferred stock is
entitled to receive preferential quarterly dividends at the rate of seven
percent per annum. These quarterly dividends are payable, at the election of
KeraVision, in either cash or additional shares of Series B preferred stock. No
dividends may be paid to the holders of KeraVision common stock, other than
dividends paid in KeraVision common stock, until all accrued but unpaid
dividends have been paid to the holders of the Series B preferred stock. As of
September 30, 2000, there were accrued dividends in the amount of $324,400,
calculated at a rate of $2.24 per share of Series B preferred stock per annum,
which will be paid in the form of 23,369 additional shares of Series B preferred
stock. The preferential nature of the Series B preferred shares may impair
KeraVision's ability to pay dividends on its common stock in the future.
26
<PAGE>
Each Series B preferred share is convertible at the option of the
holder into four shares of common stock at $5.74 per share. The Series B
preferred shares are redeemable at the option of the holders after June 12, 2003
for $32.00 per share plus all accrued and unpaid dividends.
Holders of the Series B shares are entitled to have notice of any
authorized meeting of stockholders. At a meeting of stockholders, holders of the
Series B preferred stock are entitled to vote together with holders of
KeraVision common stock on all matters upon which holders of KeraVision common
stock are entitled to vote. Each share of Series B preferred stock is entitled
to one vote for each share of KeraVision common stock into which a share of
Series B preferred stock is convertible. In addition, so long as there are
300,000 shares of Series B preferred stock outstanding, the holders of Series B
preferred shares are entitled to elect one member of the KeraVision board.
Certain Anti-Takeover, Limited Liability and Indemnification Provisions
-----------------------------------------------------------------------
Delaware Anti-Takeover Law. We are a Delaware corporation subject to
Section 203 of the Delaware General Corporation Law ("DGCL"). Under Section 203,
certain "business combinations" between a Delaware corporation whose stock
generally is publicly traded or held of record by more than 2,000 stockholders
and an "interested stockholder" are prohibited for a three-year period following
the date that such stockholder became an interested stockholder, unless (i) the
corporation has elected in its certificate of incorporation not to be governed
by Section 203 (we have not made such an election), (ii) the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder was approved by the board of directors of the corporation
before such stockholder became an interested stockholder, (iii) upon
consummation of the transaction that made such stockholder an interested
stockholder, the interested stockholder owned at least 85% of the voting stock
of the corporation outstanding at the commencement of the transaction (excluding
voting stock owned by directors who are also officers or held in employee
benefit plans in which the employees do not have a confidential right to tender
stock held by the plan in a tender or exchange offer) or (iv) the business
combination is approved by the board of directors of the corporation and
authorized at a meeting by two-thirds of the voting stock which the interested
stockholder did not own. The three-year prohibition also does not apply to
certain business combinations proposed by an interested stockholder following
the announcement or notification of certain extraordinary transactions involving
the corporation and a person who had not been an interested stockholder during
the previous three years or who became an interested stockholder with the
approval of a majority of the corporation's directors. The term "business
combination" is defined generally to include mergers or consolidations between a
Delaware corporation and an interested stockholder, transactions with an
interested stockholder involving the assets or stock of the corporation or its
majority-owned subsidiaries, and transactions which increase an interested
stockholder's percentage ownership of stock. The term "interested stockholder"
is defined generally as a stockholder who becomes a beneficial owner of 15% or
more of a Delaware corporation's voting stock, together with the affiliates or
associates of that stockholder.
Limitation of Officer and Director Liability and Indemnification Arrangements
-----------------------------------------------------------------------------
Our Amended and Restated Certificate of Incorporation provides that an
officer or director of ours will not be personally liable to us or our
stockholders for monetary damages for any breach of his fiduciary duty as an
officer or director, except in certain cases where liability is mandated by the
DGCL. The provision has no effect on any non-monetary remedies that may be
available to us or our stockholders, nor does it relieve us or our officers or
directors from compliance with federal or state securities laws. The certificate
also generally provides that we shall indemnify, to the fullest extent permitted
by law, any person who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit, investigation, administrative
hearing or any other proceeding by reason of the fact that he is or was a
director or officer of ours, or is or was serving at our request as a director,
officer, employee or agent of another entity, against expenses incurred by him
in connection with such proceeding. An officer or director shall not be entitled
to indemnification by us if (i) the officer or director did not act in good
faith and in a manner reasonably believed to be in, or not opposed to, our best
interests, or (ii) with respect to any criminal action or proceeding, the
officer or director had reasonable cause to believe his conduct was unlawful.
Transfer Agent and Registrar
----------------------------
Boston EquiServe, L.P. is the transfer agent and registrar for the
common stock.
Stockholder Rights Plan
-----------------------
The KeraVision board has adopted a rights plan. The rights plan is
designed to help our board maximize stockholder value in the event of a change
of control of KeraVision and otherwise to resist actions that the board
considers likely to injure our stockholders. KeraVision believes that the rights
plan will permit us to develop our business and foster our long-term growth
without disruptions caused by the threat of a takeover not deemed by our board
to be in our stockholder's best interests.
27
<PAGE>
Generally, the rights plan will encourage any potential acquirer to negotiate
directly with our board. As a result, the rights plan may have the effect of
deterring third parties from making proposals involving an acquisition or change
of control of KeraVision, although such proposals, if made, might be considered
desirable and beneficial by a majority of our stockholders. The rights plan
could have the further anti-takeover effect of making it more difficult for
third parties to acquire a majority of our common stock or to cause the
replacement of our board.
In August 1997, the KeraVision board declared a dividend of one
preferred share purchase right for each outstanding share of common stock. Each
KeraVision right entitles the holder to purchase one one-thousandth of a share
of Series A preferred stock, at a price of $60.00 per share. The KeraVision
rights are not now exercisable, and may never be exercisable. The KeraVision
rights will expire on the earlier of (i) August 17, 2007, unless extended, or
(ii) their redemption or exchange as described below. Until a KeraVision right
is exercised, it confers no rights to a stockholder.
In general, until the KeraVision rights are exercisable, redeemed or
exchanged, each KeraVision Right will trade together with and cannot be
separated from the underlying share of common stock on which the right was
declared.
The KeraVision rights will separate from the common stock if there is a
"distribution date." A distribution date would occur on the tenth day after the
earlier of (i) a public announcement that someone has obtained the right to
acquire beneficial ownership of 20% or more of the outstanding shares of
KeraVision common stock or (ii) the commencement or public announcement of a
tender offer that would result in someone acquiring such ownership. If a
distribution date occurs, the KeraVision rights would become exercisable and
separately tradeable, and KeraVision would issue certificates for the KeraVision
rights as soon as possible. Any KeraVision rights which belong to an acquiring
person are null and void.
KeraVision rights will attach to and be evidenced by each share of
KeraVision common stock which is issued prior to a distribution date.
Accordingly, the shares of KeraVision common stock issued by KeraVision in this
offering, will evidence the related KeraVision rights and certificates
representing these shares will contain a notation incorporating the rights plan
by reference.
The amount of Series A preferred stock that the holder of a KeraVision
right is entitled to receive upon exercise of the KeraVision right and the
purchase price payable upon exercise of the KeraVision right are both subject to
adjustment.
The KeraVision board may redeem the KeraVision rights in whole, but not
in part, at a redemption price of $0.01 per KeraVision right, at any time before
a distribution date. After a distribution date, the KeraVision rights may be
redeemed only in very limited circumstances.
Listing
-------
Our common stock is listed on the Nasdaq National Market under the
symbol "KERA."
28
<PAGE>
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be
passed upon for KeraVision, Inc. by Latham & Watkins, Menlo Park, California.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedule included in our Annual Report on Form 10-K/A
for the year ended December 31, 1999, as set forth in their report, which is
incorporated by reference in this prospectus and elsewhere in the registration
statement. Our financial statements and schedule are incorporated by reference
in reliance on Ernst & Young LLP's report, given on their authority as experts
in accounting and auditing.
29
<PAGE>
ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form S-2
(including the exhibits, schedules and amendments thereto) under the Securities
Act with respect to the shares of common stock to be sold in this offering. As
permitted by the SEC's rules and regulations, this prospectus does not contain
all the information set forth in the registration statement. For further
information regarding our company and the shares of common stock to be sold in
this offering, please refer to the registration statement and the contracts,
agreements and other documents filed as exhibits to the registration statement.
Additionally, we file annual, quarterly and special reports, proxy statements
and other information with the SEC.
You may read and copy all or any portion of the registration statement
or any other information that we file at the SEC's public reference room at 450
Fifth Street, N.W., Washington, D.C. 20549. You can request copies of these
documents, upon payment of a duplicating fee, by writing to the SEC. Please call
the SEC at 1-800-SEC-0330 for further information on the operation of the public
reference rooms. Our SEC filings, including the registration statement, are also
available to you on the SEC's website (http://www.sec.gov).
The SEC allows us to "incorporate by reference" the information
contained in documents that 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. Information in this prospectus supersedes information incorporated
by reference that we filed with the SEC before the date of this prospectus. We
incorporate by reference the documents listed below:
1. our Annual Report on Form 10-K/A for the fiscal year ended
December 31, 1999, a copy of which accompanies this prospectus as Exhibit 13.1;
2. our Quarterly Report on Form 10-Q for the fiscal quarter ending
March 31, 2000;
3. our Quarterly Report on Form 10-Q for the fiscal quarter ending
June 30, 2000, a copy of which accompanies this prospectus as Exhibit 13.2; and
3. our Current Reports on Form 8-K, dated April 19, 2000, May 5, 2000
and May 23, 2000.
You may request copies of these filings, at no cost, by writing or
telephoning us at:
KeraVision, Inc.
48639 Milmont Drive
Fremont, California 94538
(510) 353-3000
30
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* * *
[INSIDE BACK COVER]
================================================================================
<PAGE>
================================================================================
Prospective investors may rely only on the information contained in this
prospectus. We have not authorized anyone to provide prospective investors with
different or additional information. This prospectus is not an offer to sell nor
is it seeking an offer to buy these securities in any jurisdiction where the
offer or sale is not permitted. The information contained in this prospectus is
correct only as of the date of this prospectus, regardless of the time of the
delivery of this prospectus or any sale of these securities.
No action is being taken in any jurisdiction outside the United States to permit
a public offering of the common stock or possession or distribution of this
prospectus in any such jurisdiction. Persons who come into possession of this
prospectus in jurisdictions outside the United States are required to inform
themselves about and to observe the restrictions of that jurisdiction related to
this offering and the distribution of this prospectus.
------------------------------------
TABLE OF CONTENTS
-------------------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary............................. 2
Risk Factors................................... 5
Use of Proceeds................................ 10
Dividend Policy................................ 10
Capitalization................................. 10
Plan of Distribution........................... 11
Dilution....................................... 12
Selected Consolidated Financial Data........... 13
Forward Looking Statements..................... 14
Business....................................... 15
Description of Securities...................... 26
Legal Matters.................................. 29
Experts........................................ 29
Additional Information......................... 30
</TABLE>
================================================================================
================================================================================
KeraVision, Inc.
3,760,706 Shares
Common Stock
______________
______________________
PROSPECTUS
______________________
OCTOBER 13, 2000
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than the
underwriting discount, payable by the Registrant in connection with the sale of
the common stock being registered. All amounts are estimates except the SEC
registration fee, the NASD filing fees and the Nasdaq National Market listing
fee.
Securities and Exchange Commission Fee......................... $ 2,792.32
Legal Fees and Expenses........................................ $ 75,000
Accounting Fees and Expenses................................... $ 50,000
Printing Expenses.............................................. $ 4,000
Miscellaneous.................................................. $ 25,000
-----------
Total.................................................... $156,792.32
===========
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware
("Section 145") permits a Delaware corporation to indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal, administrative,
or investigative (other than an action by or in the right of the corporation) by
reason of the fact that such person is or was a director, officer, employee, or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee, or agent of another corporation, partnership,
joint venture, trust, or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit, or
proceeding if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe such person's conduct was unlawful.
In the case of an action by or in the right of the corporation, Section 145
permits the corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that such person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorneys'
fees) actually and reasonably incurred by such person in connection with the
defense or settlement of such action or suit if he acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interest of the corporation. No indemnification may be made in respect of any
claim, issue, or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
To the extent that a present or former director or officer of a corporation
has been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in the preceding two paragraphs, Section 145 requires
that such person be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection therewith; and
that indemnification provided by, or granted pursuant to, Section 145 shall not
be deemed exclusive of any other rights to which those seeking indemnification
may be entitled.
II-1
<PAGE>
Section 145 provides that expenses (including attorneys' fees) incurred by
an officer or director in defending any civil, criminal, administrative, or
investigative action, suit or proceeding may be paid by the corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of any undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that such person is not entitled to
be indemnified by the corporation as authorized in Section 145.
Section 145 further empowers the corporation to purchase and maintain
insurance on behalf of any person who is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against any liability
asserted against him and incurred by him in any such capacity, or arising our of
his status as such, whether or not the corporation would have the power to
indemnify him against such liabilities under Section 145.
The Registrant's Amended and Restated Certificate of Incorporation limits
the liability of directors for monetary damages arising from breach of their
fiduciary duty to the maximum extent permitted by the Delaware General Corporate
Law ("the Law") and provides for the indemnification of directors, officers and
employees of the Registrant to the fullest extent permitted by the Law.
The Registrant's Amended and Restated Bylaws also provide that Registrant
shall indemnify its directors and officers to the fullest extent permitted by
the Law, including circumstances in which indemnification is otherwise
discretionary under the Law.
The Registrant has entered into indemnification agreements with its
directors containing provisions which are in some respects broader than the
specific indemnification provisions contained in the Law. The indemnification
agreements may require the Registrant to indemnify its directors against certain
liabilities that may arise by reason of their status or service as directors
(other than liabilities arising from willful misconduct of a culpable nature),
to advance their expenses incurred as a result of any proceeding against them as
to which they could be indemnified, and to obtain director's insurance if
available on reasonable terms.
The Registrant believes that the limitation provision in its Amended and
Restated Certificate of Incorporation and the indemnification provisions in its
Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws
and indemnification agreements will facilitate the Registrant's ability to
continue to attract and retain qualified individuals to serve as directors of
the Registrant. It is the opinion of the Securities and Exchange Commission that
indemnification provisions such as those contained in the Certificate, the
Bylaws and these agreements have no effect on a directors' or officers' ability
under the federal securities laws. The Registrant has also obtained directors'
and officers' liability insurance covering, subject to exceptions, actions taken
by the Registrant's directors and officers in their capacities as such.
ITEM 16. EXHIBITS
Number Description
------ -----------
4.1 Preferred Shares Rights Agreement, dated as of August 18, 1997,
between Registrant and Bank Boston, N.A. (7)
5.1 Option of Latham & Watkins.
10.1 Form of Indemnification Agreements for directors and officers. (1)
10.2 1997 Employee Stock Option Plan. (1)(2)
10.3 1987 Stock Option Plan and forms of agreements thereunder. (1)(2)
10.4 Form of Change of Control Agreement entered into between
Registrant and Chief Executive Officer in May 1997. (2)(8)
10.5 Form of Change of Control Agreement entered into between
Registrant and Executive Officers in May 1997. (2)(8)
10.6 Form of Amendment to Change of Control Agreement entered into
between Registrant and Executive Officers in August 2000.
II-2
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10.7 1995 Stock Plan, as amended. (2)(9)
10.8 1995 Directors' Option Plan and form of subscription agreement.
(4)(2)
10.9 401(k) Plan. (1)(2)
10.10 Fremont Office Lease dated August 20, 1993 and all amendments
thereto. (1)
10.11 Kilmer License Agreement, dated December 31, 1992. (1)
10.12 Manufacturing Agreement dated October 1, 1992. (1)(3)
10.13 Promissory Notes, dated January 29, 1988, March 8, 1988, March 8,
1989, October 30, 1991, April 12, 1993 and November 7, 1993,
executed by Thomas Loarie in favor of Registrant and all
amendments thereto. (9)
10.14 Promissory Notes, dated September 17, 1990, October 30, 1991,
October 30, 1991, and November 7, 1993, executed by Thomas
Silvestrini in favor of Registrant and all amendments thereto. (9)
10.15 Promissory Note, dated November 7, 1993, executed by Mark Fischer-
Colbrie in favor of Registrant and all amendments thereto. (10)
10.16 Promissory Notes, dated March 8, 1988, March 8, 1988, March 8,
1989, October 30, 1991, and November 7, 1993, executed by Darlene
Crockett-Billig in favor of Registrant and all amendments thereto.
(9)
10.17 Employment Agreement dated January 1997 between Registrant and
Thomas M. Loarie. (2)(6)
10.18 Distribution Agreement dated as of October 31, 1996 by and between
Registrant and AM Peschke, a German corporation. (5)(6)
10.19 Promissory notes, dated April 1, 1998, executed by Thomas Loarie
in favor of Registrant. (11)
10.20 Promissory note, dated April 1, 1998, executed by Mark Fischer-
Colbrie in favor of Registrant. (11)
10.21 Promissory note, dated April 1, 1998, executed by Thomas
Silvestrini in favor of Registrant. (11)
10.22 Promissory notes dated September 1, 1998 executed by Thomas Loarie
in favor of Registrant. (12)
10.23 Promissory notes, dated September 1, 1998 executed by Darlene
Crockett-Billig in favor of Registrant. (12)
10.24 Promissory notes, dated September 1, 1998 executed by Thomas
Silvestrini in favor of Registrant. (12)
10.25 Promissory notes, dated September 1, 1998 executed by Mark
Fischer-Colbrie in favor of Registrant. (12)
10.26 Master loan and security agreement dated March 25, 1999 between
Registrant in favor of Transamerica Business Credit Corporation.
(13)
10.27 Agreement with A.M. Pappas & Associates dated January 20, 1998.
(13)
13.1 Annual Report on Form 10-K/A for the fiscal year ended December
31, 1999.
13.2 Quarterly Report on Form 10-Q for the fiscal quarter ended June
30, 2000.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Latham & Watkins (included in Exhibit 5.1).
24.1 Power of Attorney (See Signature Page).
_____________
(1) Incorporated by reference to identically numbered exhibits filed in
Registrant's Registration Statement on Form S-1 and Amendment No. 1, Amendment
No. 2 and Amendment No. 3 thereto (File No. 33-92880), which became effective on
July 27, 1995.
(2) Management contract or compensatory plan or arrangement.
(3) Confidential treatment has been granted with respect to certain portions of
this Exhibit by the Securities and Exchange Commission by order dated July 27,
1995.
(4) Incorporated by reference to identically numbered exhibits filed in
Registrant's Form 10-K for the year ended December 31, 1995.
(5) Confidential treatment has been sought with respect to certain portions of
this Exhibit.
(6) Incorporated by reference to identically numbered exhibits filed in
Registrant's Form 10-K for the year ended December 31, 1996.
(7) Incorporated by reference to identically numbered exhibit filed in
Registrant's Registration on Form 8-A which became effective on August 25, 1997.
II-3
<PAGE>
(8) Incorporated by reference to exhibits 10.23 and 10.24 filed in Registrant's
Form 10-K for the year ended December 31, 1997.
(9) Incorporated by reference to identically numbered exhibits filed in
Registrant's Registration Statement on Form S-1 (File No. 33-92880), which
became effective on July 27, 1995, and Form 10-K for the year ended December 31,
1996.
(10) Incorporated by reference to identically numbered exhibits filed in
Registrant's Registration Statement on Form S-1 (File No. 33-92880), which
became effective on July 27, 1995, and Form 10-K for the year ended December 31,
1997.
(11) Incorporated by reference to Exhibits 10.25 through 10.27 filed in
Registrant's Form 10-Q for the quarterly period ended March 31, 1998.
(12) Incorporated by reference to Exhibits 10.28 through 10.31 filed in
Registrant's Form 10-Q for the quarterly period ended September 30, 1998.
(13) Incorporated by reference to identically numbered Exhibits filed in
Registrant's Form 10-K for the year ended December 31, 1998.
ITEM 17. UNDERTAKINGS
A. Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer, or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
B. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
C. The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
D. 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;
(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% 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
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
II-4
<PAGE>
Signatures
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Fremont,
State of California, on this 13th day of October, 2000.
KeraVision, Inc.
/s/ THOMAS M. LOARIE
By: _______________________________
Name: Thomas M. Loarie
Title: Chief Executive Officer
Power of Attorney
Each person whose signature appears below constitutes and appoints Thomas
M. Loarie and Mark Fischer-Colbrie, and each of them individually, as attorney-
in-fact, with the power of substitution, for him or her in any and all
capacities, to sign any amendment to this Registration Statement (including
post-effective amendments and registration statements filed pursuant to Rule 462
and otherwise), and to file the same, with exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission, granting
to said attorneys-in-fact, and each of the individually, 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 her
or she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact or each of them individually, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
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 and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
Chief Executive Officer and Chairman of the October 13, 2000
/s/ THOMAS M. LOARIE Board of Directors
____________________________
Thomas M. Loarie (Principal Executive Officer)
/s/ MARK FISCHER-COLBRIE Chief Financial Officer October 13, 2000
____________________________
Mark Fischer-Colbrie (Principal Financial and Accounting Officer)
/s/ LAWRENCE A. LEHMKUHL
____________________________ Director October 13, 2000
Lawrence A. Lehmkuhl
____________________________ Director
Kshitij Mohan, Ph.D.
/s/ ARTHUR M. PAPPAS
____________________________ Director October 13, 2000
Arthur M. Pappas
____________________________ Director
Peter Wilson
</TABLE>
II-5
<PAGE>
Exhibit Index
EXHIBITS
Number Description
------ -----------
4.1 Preferred Shares Rights Agreement, dated as of August 18, 1997,
between Registrant and Bank Boston, N.A. (7)
5.1 Opinion of Latham & Watkins.
10.1 Form of Indemnification Agreements for directors and officers. (1)
10.2 1997 Employee Stock Option Plan. (1)(2)
10.3 1987 Stock Option Plan and forms of agreements thereunder. (1)(2)
10.4 Form of Change of Control Agreement entered into between
Registrant and Chief Executive Officer in May 1997. (2)(8)
10.5 Form of Change of Control Agreement entered into between
Registrant and Executive Officers in May 1997. (2)(8)
10.6 Form of Amendment to Change of Control Agreement entered into
between Registrant and Executive Officers in August 2000.
10.7 1995 Stock Plan, as amended. (2)(9)
10.8 1995 Directors' Option Plan and form of subscription agreement.
(4)(2)
10.9 401(k) Plan. (1)(2)
10.10 Fremont Office Lease dated August 20, 1993 and all amendments
thereto. (1)
10.11 Kilmer License Agreement, dated December 31, 1992. (1)
10.12 Manufacturing Agreement dated October 1, 1992. (1)(3)
10.13 Promissory Notes, dated January 29, 1988, March 8, 1988, March 8,
1989, October 30, 1991, April 12, 1993 and November 7, 1993,
executed by Thomas Loarie in favor of Registrant and all
amendments thereto. (9)
10.14 Promissory Notes, dated September 17, 1990, October 30, 1991,
October 30, 1991, and November 7, 1993, executed by Thomas
Silvestrini in favor of Registrant and all amendments thereto. (9)
10.15 Promissory Note, dated November 7, 1993, executed by Mark Fischer-
Colbrie in favor of Registrant and all amendments thereto. (10)
10.16 Promissory Notes, dated March 8, 1988, March 8, 1988, March 8,
1989, October 30, 1991, and November 7, 1993, executed by Darlene
Crockett-Billig in favor of Registrant and all amendments thereto.
(9)
10.17 Employment Agreement dated January 1997 between Registrant and
Thomas M. Loarie. (2)(6)
10.18 Distribution Agreement dated as of October 31, 1996 by and between
Registrant and AM Peschke, a German corporation. (5)(6)
10.19 Promissory notes, dated April 1, 1998, executed by Thomas Loarie
in favor of Registrant. (11)
10.20 Promissory note, dated April 1, 1998, executed by Mark Fischer-
Colbrie in favor of Registrant. (11)
10.21 Promissory note, dated April 1, 1998, executed by Thomas
Silvestrini in favor of Registrant. (11)
10.22 Promissory notes, dated September 1, 1998 executed by Thomas
Loarie in favor of Registrant. (12)
10.23 Promissory notes, dated September 1, 1998 executed by Darlene
Crockett-Billig in favor of Registrant. (12)
10.24 Promissory notes, dated September 1, 1998 executed by Thomas
Silvestrini in favor of Registrant. (12)
10.25 Promissory notes, dated September 1, 1998 executed by Mark
Fischer-Colbrie in favor of Registrant. (12)
10.26 Master loan and security agreement dated March 25, 1999 between
Registrant in favor of Transamerica Business Credit Corporation.
(13)
10.27 Agreement with A.M. Pappas & Associates dated January 20, 1998.
(13)
13.1 Annual Report on Form 10-K/A for the fiscal year ended December
31, 1999.
13.2 Quarterly Report on Form 10-Q for the fiscal quarter ended June
30, 2000.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Latham & Watkins (included in Exhibit 5.1).
<PAGE>
24.1 Power of Attorney (See Signature Page II-5).
_______________
(1) Incorporated by reference to identically numbered exhibits filed in
Registrant's Registration Statement on Form S-1 and Amendment No. 1, Amendment
No. 2 and Amendment No. 3 thereto (File No. 33-92880), which became effective on
July 27, 1995.
(2) Management contract or compensatory plan or arrangement.
(3) Confidential treatment has been granted with respect to certain portions of
this Exhibit by the Securities and Exchange Commission by order dated July 27,
1995.
(4) Incorporated by reference to identically numbered exhibits filed in
Registrant's Form 10-K for the year ended December 31, 1995.
(5) Confidential treatment has been sought with respect to certain portions of
this Exhibit.
(6) Incorporated by reference to identically numbered exhibits filed in
Registrant's Form 10-K for the year ended December 31, 1996.
(7) Incorporated by reference to identically numbered exhibit filed in
Registrant's Registration on Form 8-A which became effective on August 25, 1997.
(8) Incorporated by reference to exhibits 10.23 and 10.24 filed in Registrant's
Form 10-K for the year ended December 31, 1997.
(9) Incorporated by reference to identically numbered exhibits filed in
Registrant's Registration Statement on Form S-1 (File No. 33-92880), which
became effective on July 27, 1995, and Form 10-K for the year ended December 31,
1996.
(10) Incorporated by reference to identically numbered exhibits filed in
Registrant's Registration Statement on Form S-1 (File No. 33-92880), which
became effective on July 27, 1995, and Form 10-K for the year ended December 31,
1997.
(11) Incorporated by reference to Exhibits 10.25 through 10.27 filed in
Registrant's Form 10-Q for the quarterly period ended March 31, 1998.
(12) Incorporated by reference to Exhibits 10.28 through 10.31 filed in
Registrant's Form 10-Q for the quarterly period ended September 30, 1998.
(13) Incorporated by reference to identically numbered Exhibits filed in
Registrant's Form 10-K for the year ended December 31, 1998.
