SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED COMMISSION FILE NO. 0-26224
DECEMBER 31, 2002
INTEGRA LIFESCIENCES HOLDINGS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 51-0317849
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
311 ENTERPRISE DRIVE
PLAINSBORO, NEW JERSEY 08536
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(ADDRESS OF PRINCIPAL (ZIP CODE)
EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (609) 275-0500
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, PAR VALUE $.01 PER SHARE
(TITLE OF CLASS)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes |X| No |_|
As of June 28, 2002, the aggregate market value of the registrant's common stock
held by non-affiliates was approximately $356,962,914, based upon the closing
sales price of the registrant's common stock on NASDAQ on such date. For
purposes of this calculation only, all directors, executive officers and holders
of more than 10% of the registrant's outstanding common stock as of such date
were deemed to be "affiliates" of the registrant.
The number of shares of the registrant's Common Stock outstanding as of March
14, 2003 was 27,325,902.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the registrant's definitive proxy statement relating to its
scheduled May 21, 2003 Annual Meeting of Stockholders are incorporated by
reference in Part III of this report.
PART I
ITEM 1. BUSINESS
The terms "we," "our," "us," "Company" and "Integra" refer to Integra
LifeSciences Holdings Corporation and its subsidiaries unless the context
suggests otherwise.
Integra develops, manufactures, and markets medical devices, implants and
biomaterials primarily for use in neurosurgery, orthopedics and soft tissue
repair. Our business operates globally and is divided into two segments, which
we sometimes refer to as divisions: Integra NeuroSciences(TM) and Integra
LifeSciences(TM).
Integra was founded in 1989 and over the next decade developed technologies and
a product portfolio directed toward tissue regeneration. In 1999, we entered the
neurosurgery market through an acquisition and the launch of our DuraGen(R)
Dural Graft Matrix product for the repair of the dura mater. Since 1999, Integra
NeuroSciences has grown to comprise more than 77% of our total revenues. During
that period, we have increased our revenues from $40.0 million to $117.8
million, for an average annual growth rate of 41%, and we have broadened our
product offerings to include more than 10,000 products. We have achieved this
growth in our overall business through eleven acquisitions, the development and
introduction of new products, and the expansion of Integra NeuroSciences' direct
sales force.
Integra is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended, which we refer to as the "Exchange Act". In accordance
with the Exchange Act, we file annual, quarterly and special reports, proxy
statements and other information with the Securities and Exchange Commission.
You may view our financial information, including the information contained in
this report, and other reports we file with the Securities and Exchange
Commission, on the Internet in the "SEC Filings" page of the Investor Relations
section of our website at www.Integra-LS.com. You may also obtain a copy of any
of these reports, without charge, from our investor relations department, 311
Enterprise Drive, Plainsboro, NJ 08536. Alternatively, you may view or obtain
reports filed with the Securities and Exchange Commission at the SEC Public
Reference Room at 450 Fifth Street, N.W. in Washington, D.C. 20549, or at the
SEC's Internet site at www.sec.gov. Please call the Securities and Exchange
Commission at 1-800-SEC-0330 for further information on the operation of the
public reference facilities.
Integra NeuroSciences Segment
Our Integra NeuroSciences segment comprises our businesses that primarily sell
directly to healthcare providers. Through our Integra NeuroSciences segment we
are a leading provider of implants, devices, and systems used in neurosurgery,
neurotrauma, and related critical care, a marketer of surgical instruments and
devices, and a distributor of disposables and supplies used in the diagnosis and
monitoring of neurological disorders.
We market the majority of these products directly to neurosurgeons and critical
care units. We believe that we are able to access this focused group of
hospital-based practitioners cost effectively through our direct sales and
marketing infrastructure in the United States and Europe and our distribution
network elsewhere. Integra NeuroSciences' direct selling effort in the United
States and Europe currently involves more than 100 professionals, including
direct salespeople (called neurospecialists in the United States), sales
management, and clinical educators who educate and train both our salespeople
and customers in the use of our products. A national sales manager and seven
regional managers lead the United States sales force. We increased the number
of our domestic sales territories from 44 to 63 in 2002. We believe our
expanded sales force allows for smaller, more focused territories, better
coverage of our customers, greater participation in trade shows and more
extensive marketing efforts.
We market surgical instruments and other devices directly to plastic and
reconstructive surgeons, burn surgeons, hand surgeons, ear, nose and throat
(ENT) surgeons and other physicians through a separate eight-person sales force
in the United States and a network of distributors outside the United States. We
also market a broad range of disposables and supplies used in the diagnosis and
monitoring of neurological, ENT and pulmonary disorders directly to
neurologists, hospitals and sleep clinics through our Integra NeuroSupplies
catalog business.
Integra LifeSciences Segment
Our Integra LifeSciences segment comprises our businesses that primarily sell
through intermediaries, such as strategic partners and original equipment
manufacturer customers. Through our Integra LifeSciences segment we develop and
manufacture a variety of medical products and devices, including products based
on our proprietary tissue regeneration technology. We partner with market
leaders for the development and marketing of most of our Integra LifeSciences
products. We believe that because these products address large, diverse markets,
we can promote them more cost-effectively through leveraging the sales
capabilities of our marketing partners than through developing our own sales
infrastructure. This strategy allows us to achieve our growth objectives cost-
effectively while enabling us to focus our management efforts on developing new
products. Our strategic partners include Ethicon, Inc. (a division of Johnson &
Johnson), Wyeth Biopharma, Medtronic Sofamor Danek, and Centerpulse.
Financial information about our segments and geographical areas, is set forth in
our financial statements under Notes to Consolidated Financial Statements, Note
13 - Segment and Geographic Information. We do not disaggregate nonoperating
revenues and expenses nor identifiable assets on a segment basis.
Recent Development
On March 17, 2003, we acquired JARIT(R) Surgical Instruments, Inc. (JARIT)
for $44.5 million in cash, subject to a working capital adjustment and other
adjustments with respect to certain income tax elections. For more than 30
years, JARIT has marketed a wide variety of high quality, reusable surgical
instruments to virtually all surgical disciplines. JARIT sells its products to
more than 5,200 hospitals and surgery centers worldwide. In the United
States, JARIT sells through a 20 person sales management force that works
with over 100 distributor sales representatives.
With more than 5,000 instrument patterns and a 98% order fill rate, JARIT has
developed a strong reputation as a leading provider of high-quality surgical
instruments. JARIT manages its vendor relationships and purchases, packages
and labels its products directly from instrument manufacturers through its
facility in Tuttlingen, Germany.
The acquisition of JARIT broadens Integra's existing customer base and
surgical instrument product offering and provides an opportunity to achieve
operating costs savings, including the procurement of Integra's Redmond(TM)-
Ruggles(TM) and Padgett Instruments Inc.(R) products directly from the
instrument manufacturers.
The acquired business generated approximately $30.9 million in revenues and
$7.8 million in income before income taxes for the year ended December 31, 2002.
We expect to report the results of JARIT in the Integra NeuroSciences segment.
STRATEGY
Our goal is to become a global leader in the development, manufacturing and
marketing of medical devices, implants and biomaterials in the markets in which
we compete. Key elements of our strategy include the following:
Expand Integra NeuroSciences. Through acquisitions and internal growth, we have
rapidly grown Integra NeuroSciences into a leading provider of products used in
the diagnosis, monitoring and treatment of chronic diseases and acute injuries
involving the brain, spine and nervous system. We believe that additional growth
potential in the Integra NeuroSciences segment exists through
* expanding our product portfolio and market reach through additional
acquisitions;
* increasing the penetration of our existing products into closely related
markets, such as the ENT, neurology, and spine markets;
* continuing the development and promotion of innovative new products, such as
the NeuraGen(TM) Nerve Guide and the LICOX(R) Brain Tissue Oxygen Monitoring
System; and
* expanding our sales force and product offerings focused on plastic
and reconstructive surgeons.
Additional Strategic Acquisitions. Since 1999 we have completed twelve
acquisitions focused primarily in the Integra NeuroSciences division. We
regularly evaluate potential acquisition candidates in this market and in other
specialty medical technology markets characterized by high margins, fragmented
competition and focused target customers.
Continue To Form Strategic Alliances For Integra LifeSciences' Products. We have
collaborated with well-known medical device companies to develop and market the
majority of our non-neurosurgical product lines. Significant ongoing strategic
alliances include those with Ethicon to market our INTEGRA(R) Dermal
Regeneration Template and Wyeth BioPharma and Medtronic Sofamor Danek to develop
products for use in orthopedics. We intend to pursue additional strategic
alliances selectively.
Continue To Develop New And Innovative Medical Products. As evidenced by our
development of the INTEGRA(R) Dermal Regeneration Template, biomaterials for the
orthopedic implant market, Biomend(R) and Biomend(R) Extend Absorbable Collagen
Membrane, DuraGen(R) Dural Graft Matrix and the NeuraGen(TM) Nerve Guide, we
have a leading proprietary absorbable implant franchise. We currently are
developing a variety of innovative neurosurgical and other medical products and
are seeking expanded applications for our existing products.
BUSINESS SEGMENTS
[INTEGRA NEUROSCIENCES LOGO]
OVERVIEW
The Integra NeuroSciences segment sells medical devices, implants, systems and
instruments used in the diagnosis, monitoring and treatment of chronic diseases
and acute injuries involving the brain, spine and nervous system, and disposable
medical supplies, such as electrodes, used in neurological testing. These
products are used primarily by neurosurgeons and nurses in the intensive care
unit and the operating room and by neurologists in hospital and outpatient
settings. We also sell products that vascular surgeons use to divert blood to
vital organs, such as the brain, during surgical procedures involving blood
vessels. Additionally, our Padgett Instruments, Inc. subsidiary sells
instruments and other devices through a separate direct sales force to plastic
and reconstructive surgeons, burn surgeons, ENT surgeons and other physicians.
According to industry sources and our estimates, our Integra NeuroSciences
products address markets that exceed $400 million in the aggregate and are
expected to grow at an annual rate of 6-8%.
Integra NeuroSciences offers one of the most comprehensive product lines serving
the neuro intensive care unit and operating room. We have established market
positions in intracranial monitoring, dural repair, tumor ablation,
neurosurgical shunting,surgical instrumentation, carotid shunting, peripheral
nerve repair and central nervous system diagnostic and monitoring supplies.
Integra NeuroSciences' products can be divided by use into the following
functional areas: i) the neuro intensive care unit, ii) the neurosurgical
operating room, and iii) all other. The table below provides a summary of
Integra NeuroSciences' products:
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PRODUCT LINES APPLICATION
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NEURO INTENSIVE CARE UNIT
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Camino(R) and Ventrix(R) fiber Access, drainage and continuous
optic-based intracranial monitoring of intracranial pressure,
Monitoring systems, LICOX(R) oxygen and temperature following
oxygen monitoring Systems, injury or neurosurgical procedures
Integra Systems of CSF Drainage and
Cranial Access
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NEUROSURGICAL OPERATING ROOM
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DuraGen(R) Dural Graft Matrix Graft to close brain and spine membrane
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PRODUCT LINES APPLICATION
NeuraGen(TM) Nerve Guide Repair of peripheral nerves
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Selector(R) Integra Ultrasonic Use of ultrasonic energy to
Aspirator; Dissectron(R) ablate tissue
Ultrasonic Aspirator
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Neurosurgical shunts, including the Specifically designed for the
Orbis-Sigma II(R), and the H-V Lumbar, management of hydrocephalus, a chronic
Novus and Equi-Flow(R) Valves condition involving excess
cerebrospinal fluid in the brain
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Redmond(TM)-Ruggles(TM) neurosurgical Specialized surgical instruments for
and spinal instruments use in brain or spinal surgery
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Integra epilepsy monitoring electrodes Electrodes for the intraoperative
monitoring of epileptic seizures
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ALL OTHER
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JARIT(R) Surgical Instruments Instruments for general, plastic, neuro
ENT cardiovascular, ob-gyn, and
ophthalmic surgery
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Padgett Instruments Devices and instruments used in burn,
reconstructive and plastic surgery
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Integra NeuroSupplies(TM) Disposables and supplies used in the
diagnosis and monitoring of
neurological, ENT and pulmonary
disorders
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Sundt(TM) and other carotid shunts For shunting blood during surgical
procedures involving blood vessels
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MARKETS AND PRODUCTS
Neuro Intensive Care Unit
The Monitoring Of Brain Parameters. Neurosurgeons use intracranial monitors to
diagnose and treat cases of severe head trauma and other diseases. There are
approximately 400,000 cases of head trauma each year in the United States, and
the market for monitoring and intervention is estimated to be approximately $40
million.
Integra NeuroSciences sells the Camino(R) and Ventrix(R) lines of intracranial
pressure and temperature monitoring systems and the LICOX(R) Brain Tissue Oxygen
Monitoring System. Integra NeuroSciences currently has over 3,000 intracranial
monitors installed worldwide. The Camino(R) and Ventrix(R) systems measure the
intracranial pressure and temperature in the brain and ventricles, and the
LICOX(R) system allows for continuous qualitative regional monitoring of
dissolved oxygen in cerebral tissues. Core technologies underlying the brain
parameter monitoring product line include the design and manufacture of the
disposable catheters used in the monitoring systems, pressure transducer
technology, optical detection/fiber optic transmission technology, sensor
characterization and calibration technology and monitor design.
External Drainage And Cranial Access. Neurosurgeons use external drainage
systems and cranial access kits to gain access to the cranial cavity and to
drain excess cerebrospinal fluid from the ventricles of the brain into an
external container. Integra NeuroSciences manufactures and markets a broad line
of cranial access kits and ventricular and lumbar external drainage systems
under the Integra CSF Drainage and Cranial Access Systems brand names.
Neurosurgical Operating Room
Repair Of The Dura Mater. The dura mater is the thick membrane that contains the
cerebrospinal fluid within the brain and the spine. The dura mater often must be
penetrated during brain surgery and is often damaged during spinal surgery. In
either case, surgeons may close or repair the dura mater with a graft. The graft
may consist of tissue taken from elsewhere in the patient's body, or it may be
one of the dural substitute products currently on the market, which are made of
synthetic materials, processed human cadaver, or bovine pericardium. The
worldwide market for dural repair, including cranial and spinal applications, is
estimated to be $80 million.
The DuraGen(R) Dural Graft Matrix is an absorbable collagen matrix indicated for
the repair of the dura mater surrounding the brain and spine. We believe that
the DuraGen(R) Dural Graft Matrix addresses the shortcomings from which other
methods for repairing the dura mater suffer. Clinical trials have shown our
DuraGen(R) product to be an effective means for closing the dura mater without
the need for suturing, which allows the neurosurgeon to conclude the operation
more efficiently. In addition, because the human body ultimately absorbs the
DuraGen(R) product and replaces it with new natural tissues, the patient avoids
some of the risks associated with a permanent implant inside the cranium or
spinal cavity.
Repair Of Peripheral Nerves. Peripheral nerves may become severed through
traumatic accidents or surgical injuries, often resulting in the permanent loss
of motor and sensory function. Although severed peripheral nerves regenerate
spontaneously, they do not establish functional connections unless the nerve
stumps are surgically reconnected. We estimate the market for the repair of
severed peripheral nerves to be $40 million.
The NeuraGen(TM) Nerve Guide is an absorbable implant for the repair of severed
peripheral nerves. The NeuraGen(TM) product is a collagen tube designed to
provide a protective environment for the regenerating nerve and to provide a
conduit through which regenerating nerves can bridge the gap caused by the
injury. The NeuraGen(TM) Nerve Guide offers a rapid method for rejoining severed
peripheral nerves. In addition to targeting the neurosurgical operating room, we
are also marketing the NeuraGen(TM) product to Integra NeuroSupplies' customer
base of non-hospital and private practice-based neurologists and to Padgett
Instruments' customer base of hand and reconstructive surgeons.
Neurosurgical Systems For Tissue Ablation. More than 145,000 primary and
metastatic brain tumors are diagnosed annually in the United States. Our
Selector(R) Integra Ultrasonic Aspirator and Dissectron(R) Ultrasonic Surgical
Aspirator systems address the market for the surgical destruction and removal of
malignant and non-malignant tumors and other tissue.
The Selector(R) Integra Ultrasonic Aspirator and Dissectron(R) Ultrasonic
Surgical Aspirator use very high frequency sound waves to pulverize cancer
tumors and allow the surgeon to remove the damaged tumor tissue by aspiration.
Unlike other surgical techniques, ultrasonic surgery selectively dissects and
fragments soft tissue leaving fibrous tissues such as nerves and blood vessels
intact. Ultrasonic aspiration facilitates the removal of unwanted tissue
adjacent or attached to vital structures. In September 2002, we received FDA
510(k) clearance to market the Selector(R) product for use in general,
gynecological, urological, plastic and reconstructive, orthopedic, thoracic and
thorascopic surgery procedures. We offer the Dissectron(R) product only outside
the United States.
Hydrocephalus Management. Hydrocephalus is an incurable condition resulting from
an imbalance between the amount of cerebrospinal fluid produced by the brain and
the rate at which the body absorbs cerebrospinal fluid. This condition causes
the ventricles of the brain to enlarge and the pressure inside the head to
increase. Hydrocephalus often is present at birth, but may also result from head
trauma, spina bifida, intraventricular hemorrhage, intracranial tumors and
cysts. Hydrocephalus is most commonly treated by inserting a shunt into the
ventricular system of the brain to divert the flow of cerebrospinal fluid out of
the brain and using a pressure valve to maintain a normal level of cerebrospinal
fluid within the ventricles.
According to the Hydrocephalus Association, hydrocephalus affects approximately
one in 500 children born in the United States. We estimate that approximately
80% of total cerebrospinal fluid shunt sales address birth-related
hydrocephalus, and the remaining 20% address surgical procedures involving
excess cerebrospinal fluid due to head trauma. Based on industry sources, we
believe that the total United States market for hydrocephalus management,
including monitoring, shunting and drainage, is approximately $70 million. Of
that amount, it is estimated that a little more than half consists of sales of
monitoring products, and the balance consists of sales of shunts and drains for
the management of hydrocephalus.
In 2002 we strengthened our offering of hydrocephalus management products
through our acquisition of the neurosciences division of NMT Medical, Inc. and
certain assets of the Radionics business, a division of Tyco Healthcare Group.
Those acquisitions added a range of leading pressure valves, including the
Orbis-Sigma(R), Integra Hakim(R) horizontal-vertical ("H-V"), Equiflow(R) and
Contour Flex(R) valves to our existing line of hydrocephalus management shunting
products. We have sold the Heyer-Schulte(R), Novus(R), LPV(R) and Pudenz(TM)
shunts, ventricular, peritoneal and cardiac catheters, physician-specified
hydrocephalus management shunt kits, Ommaya(R) cerebrospinal fluid reservoirs
and Spetzler(R) lumbar and syringo-peritoneal shunts since our acquisition of
the NeuroCare group of companies in 1999.
In recent years, neurosurgeons have increased their use of programmable valves,
which allow the neurosurgeon to adjust the pressure settings of the shunt while
it is implanted in the patient. Shunts that do not incorporate programmable
valve technology must be removed from the patient for subsequent pressure
adjustments, a process that requires an additional surgical procedure. We do not
market hydrocephalus management shunts with programmable valves and believe that
the increasing use of programmable valves may negatively affect the future sales
of our shunt products.
Neurosurgical And Spinal Instrumentation. We provide neurosurgeons and spine
surgeons with a full line of specialty hand-held spinal and neurosurgical
instruments sold under the Redmond(TM) and Ruggles(TM) brand names and a line
of disposable neuroendoscopy products sold under the Neuro Navigational(R)
brand name.
The Redmond(TM)-Ruggles(TM) products include retractors, kerrisons, dissectors,
and curettes. Major product segments include spinal instruments, microsurgical
neuro instruments, and products customized by Integra NeuroSciences and sold
through other companies and distributors. Specialty surgical steel fabricators
in Germany manufacture most of the Redmond(TM) and Ruggles(TM) products to our
specifications. The Neuro Navigational(R) product line consists of fiber optic
instruments used to facilitate minimally invasive neurosurgery, including third
ventriculostomies, which are increasingly substituted for shunt placement for
patients who meet the criteria.
Epilepsy Electrodes. We sell a line of electrodes for the intraoperative
monitoring of epileptic seizures through our NeuroSciences sales force. We
acquired these products and other assets in December 2002 from Radionics, a
division of the Tyco Healthcare Group, and are transferring the manufacture of
these products to our facility in Biot, France.
All Other
Neurological Supplies. Through our Integra NeuroSupplies business, we distribute
a wide variety of disposables and supplies, including surface electrodes, needle
electrodes, recording transducers and stimulators, and respiratory sensors, that
are used in the diagnosis and monitoring of neurological disorders. These
products are designed to monitor and perform tests of the nervous system and
brain, including electromyography (EMG), evoked potential (EP) and
electroencephalography (EEG) tests, and to test sleep disorders.
We sell these products under the Integra NeuroSupplies(TM) name primarily
through a catalog to more than 6,000 neurologists, hospitals, sleep clinics, and
other physicians. Neurologists are the referring physicians for Integra's
existing neurosurgeon customers and participate in the decision to use our line
of epilepsy monitoring electrodes.
Padgett Instruments. Padgett Instruments , Inc.(R) markets a wide variety of
high quality, reusable surgical instruments to plastic and reconstructive
surgeons, burn surgeons, ENT surgeons, hospitals, surgery centers, and other
physicians. We sell these products in the United States through an eight-person
direct sales force and through certain distributors and original equipment
manufacturer accounts. We sell these products internationally through
distributors. Padgett's customer base represents an attractive potential market
for certain of our other products, such as the NeuraGen(TM) Nerve Guide.
Hemodynamic Shunts. Our Sundt(TM) and other carotid shunts are used to divert
blood to vital organs, such as the brain, during surgical procedures involving
blood vessels. The Integra NeuroSciences sales force sells these products
directly in the United States for use by vascular surgeons and neurosurgeons.
[INTEGRA LIFESCIENCES LOGO]
OVERVIEW
The Integra LifeSciences segment develops and manufactures implants and other
medical devices used primarily for the treatment of defects, diseases and
injuries involving soft tissue and bone and for infection control. Many of the
current products of Integra LifeSciences are built on our expertise in
absorbable collagen products.
The Integra LifeSciences segment comprises our businesses that sell primarily
through intermediaries, such as strategic partners and original equipment
manufacturer customers. Because its products generally address large, diverse
markets, we have constructed Integra LifeSciences segment's marketing, research
and development programs around strategic alliances with leading medical device
companies. We believe that we can promote these products more cost-effectively
through leveraging our marketing partners' sales capabilities than through
developing our own sales force. According to industry sources and our estimates,
the aggregate size of the markets addressed by Integra LifeSciences' products
exceeds $1 billion.
We have established a reputation as a value-added and dependable development and
manufacturing partner. In addition, we have expertise in the development,
manufacture and supply of a variety of absorbable materials and can provide
experienced personnel to support product quality and regulatory review efforts.
Although the Integra LifeSciences products serve a wide variety of markets, they
can be segmented into two general groups: i) tissue repair products and ii)
other medical devices. The table below provides a summary of our Integra
LifeSciences products, their application, and marketing/development partner:
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PRODUCT LINES APPLICATION MARKETING/DEVELOPMENT PARTNER
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TISSUE REPAIR PRODUCTS
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INTEGRA(R) Dermal Regenerate dermis Ethicon, Inc., a division of
Regeneration Template and repair skin Johnson & Johnson, and Century
defects Medical, Inc. in Japan
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BioMend(R) and Used in guided tissue Centerpulse
BioMend(R) Extend regeneration in
Absorbable Collagen periodontal surgery
Membrane
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Absorbable Collagen Fracture management/ Wyeth BioPharma; Medtronic
Sponge and other matrices enabling spinal Sofamor Danek
for use with bone fusion
morphogenetic protein
(rhBMP-2)
______________________________________________________________________________
OTHER MEDICAL DEVICES
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VitaCuff(R) catheter Provides protection Arrow International, Inc.,
access infection against infection Bard Access Systems, Inc.,
control device arising from Tyco HealthCare,
long-term catheters
BioPatch(R)(1) Antimicrobial wound Ethicon, Inc.
Antimicrobial Wound dressing
Dressing
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PRODUCT LINES APPLICATION MARKETING/DEVELOPMENT PARTNER
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CollaCote(R), Used to control Centerpulse
CollaTape(R) and bleeding in dental
CollaPlug(R) absorbable surgery
wound dressings
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Instat(R)(1),Helistat(R) Control of bleeding Ethicon, Inc. and various
and Helitene(R) distributors
Absorbable Collagen
Hemostats
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Spembly Medical Allows surgeon to Various distributors
cryosurgery products use low temperature
moreto easily extract
diseased tissue
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Cranial fixation Allows neurosurgeon Medtronic
fixation devices; to repair injuries
custom cranial plates to the cranium
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(1) BioPatch and Instat are registered trademarks of Johnson & Johnson.
MARKETS AND PRODUCTS
Tissue Repair Products
Skin Replacement. Integra LifeSciences' skin replacement products address the
market need created by severe burns, reconstructive surgery, and chronic wounds.
INTEGRA(R) Dermal Regeneration Template is designed to enable the human body to
regenerate functional dermal tissue. The FDA initially approved the product
under a Premarket Approval application ("PMA") for the post-excisional treatment
of life-threatening deep or full-thickness dermal injury where sufficient
autograft is not available at the time of excision or not desirable due to the
physiological condition of the patient. In 2002, the FDA approved a PMA
supplement to permit the marketing of the INTEGRA(R) Dermal Regeneration
Template for the repair of scar contractures in patients who have already
recovered from their initial wound. In 2002, we also received FDA 510(k)
clearance to sell a related product, Integra(TM) Bilayer Matrix Wound Dressing
and Integra(TM) Matrix Wound Dressing, for the dressing of wounds, including
chronic wounds.
The Ethicon division of Johnson & Johnson is the exclusive seller of the
INTEGRA(R) Dermal Regeneration Template and the Integra(TM) BiLayer Wound Matrix
worldwide, except in Japan where Century Medical, Inc. has rights to distribute
the INTEGRA(R) Dermal Regeneration Template.
In 2002, we sold $4.2 million of INTEGRA(r) Dermal Regeneration Template to
Ethicon and received $2.0 million in research payments and $1.0 million in
clinical and regulatory event payments that were recorded in other revenue.
Ethicon has not been successful in selling the minimum amounts of INTEGRA(R)
Dermal Regeneration Template specified in its agreement with us. In addition,
we have notified Ethicon that certain clinical and regulatory events have
been achieved under the agreement and that payments for the achievement of
those events is due to us. Ethicon has informed us that it disagrees that the
clinical and regulatory events in question have been achieved, and that it
does not intend to make the payments we have demanded. In addition, Ethicon
has informed us that if we do not agree to substantial amendments to its
agreement with us, it will consider alternatives that may include exercising
its right to terminate the agreement.
The agreement requires Ethicon to give us notice one year in advance of a
termination of the agreement, during which time Ethicon is required to continue
to comply with the terms of the contract. At the end of that period, Ethicon
may be required to pay additional amounts based on the termination provisions
of the agreement and is required to cooperate in the transfer of the business
back to Integra. Additionally, Ethicon may apply the value of any minimum
payments in excess of actual product purchases against future purchases of
products for sale on a non-exclusive basis for a specified period of time.
If Ethicon does terminate the agreement or if we determine that Ethicon is in
breach of the agreement and we terminate the agreement, there is no assurance
that we will be able to recover the money that we believe Ethicon is obligated
to pay us under the agreement. If Ethicon does give us notice that it will
terminate the agreement, it is possible that Ethicon will diminish its
sales and marketing efforts for the product during the one-year notice period
and that its sales will decline as a result. In addition, we may not be
successful in sustaining or restoring the sales of the INTEGRA(R) Dermal
Regeneration Template at current levels after the termination date. Finally,
if Ethicon terminates the agreement it is possible that we may become
involved in litigation with Ethicon, which could also impair our ability to
sell products under our other agreements with Ethicon, including the
BioPatch(R) and Instat(R) products.
Guided Tissue Regeneration In Periodontal Surgery. Our BioMend(R) Absorbable
Collagen Membrane is used for guided tissue regeneration in periodontal surgery.
The BioMend(R) membrane is inserted between the gum and the tooth after surgical
treatment of periodontal disease, preventing the gum tissue from interfering
with the regeneration of the periodontal ligament that holds the tooth in place.
The body absorbs the BioMend(R) product after approximately four to seven weeks,
avoiding the requirement for additional surgical procedures to remove a
non-absorbable membrane. The BioMend(R) Extend product has the same indication
for use as the BioMend(R) product, except that it absorbs in approximately 16
weeks. The BioMend(R) and BioMend(R) Extend Absorbable Collagen Membranes are
sold through Centerpulse.
Orthopedic Biomaterials. Integra LifeSciences supplies Wyeth BioPharma with
Absorbable Collagen Sponges for use in developing bone regeneration implants.
Since 1994, we have supplied Absorbable Collagen Sponges for use with Wyeth
BioPharma's recombinant human bone morphogenetic protein-2 (rhBMP-2), a
manufactured version of human protein naturally present in very small quantities
in the body. Wyeth BioPharma is developing rhBMP-2 for clinical evaluation in
several areas of bone repair and augmentation, including orthopedic, oral and
maxillofacial surgery applications.
We are selling Absorbable Collagen Sponges for spinal applications through a
related collaboration with Medtronic Sofamor Danek in North America. In July
2002, the FDA approved Medtronic Sofamor Danek's InFUSE(TM) Bone Graft used with
the LT-CAGE(TM) Lumbar Tapered Fusion Device for use in spinal fusion
procedures. The InFUSE(TM) Bone Graft uses rhBMP-2 applied to our Absorbable
Collagen Sponge in place of a painful secondary procedure to harvest small
pieces of bone from the patient's own hip (autograft). When used with the
LT-CAGE Lumbar Tapered Fusion Device, the InFUSE(TM) Bone Graft is indicated to
treat certain types of spinal degenerative disc disease, a common cause of low
back pain.
Wyeth BioPharma has filed a PMA application with the FDA seeking approval for
the use of InductOs(TM), rhBMP-2 used in conjunction with our Absorbable
Collagen Sponge, for use in the treatment of acute long-bone fractures requiring
open surgical management. In November 2002, the Orthopedic and Rehabilitation
Panel of the FDA Medical Devices Advisory Committee recommended that the FDA
approve, with conditions, Wyeth BioPharma's PMA application.
We receive development funding and other payments from Medtronic Sofamor Danek
and Wyeth BioPharma related to the development of additional matrices for
various applications. Although the agreement provides for no milestone or other
contingent payments, Wyeth BioPharma pays us to assist with regulatory affairs
and research.
In addition, we are continuing to develop additional biomaterial technologies,
such as a new class of absorbable polycarbonates created through the
polymerization of tyrosine, that enhance the rate and quality of healing and
tissue regeneration with synthetic biodegradable scaffolds that support cell
attachment and growth. No medical device containing these materials has yet been
approved for sale.
Other Medical Devices
Other current products of Integra LifeSciences include the VitaCuff(R) catheter
access infection control device, the BioPatch(R) anti-microbial wound dressing,
a wide range of absorbable collagen products for hemostasis for use in dental
surgery sold under the names CollaCote(R), CollaTape(R) and CollaPlug(R), the
Helistat(R) Absorbable Collagen Hemostatic Agent, the Instat(R) Absorbable
Collagen Hemostat and cranial fixation devices for use in craniomaxillofacial
surgery. Our Spembly Medical cryosurgery products allow surgeons to use low
temperatures to more easily extract diseased tissue in ophthalmic, general,
gynecological, urological and cardiac applications.
RESEARCH AND DEVELOPMENT STRATEGY
Our research and development programs focus on developing new products based on
our materials and collagen engineering technologies and our expertise in
fiber optics. Contract development revenues from strategic alliance partners and
governmen grants fund a portion of our research and development activities. We
spent approximately $10.6 million, $8.0 million, and $7.5 million in 2002, 2001,
and 2000, respectively, on research and development activities. The 2002 amount
includes $2.3 million of acquired in-process research and development charges
recorded in connection with acquisitions. Research and development activities
funded by contract development and government grant revenues amounted to $3.5
million, $3.9 million, and $2.8 million in 2002, 2001, and 2000, respectively.
We have either acquired or secured the proprietary rights to several important
technological and scientific platforms, including collagen matrix, peptide,
biomaterials, and intracranial monitoring technologies. These technologies
provide support for our critical applications in neurosciences and tissue
regeneration and additional opportunities for generating near-term and long-term
revenues from medical applications. We have been able to identify and bring
together critical platform technology components from which we work to develop
products for both tissue regeneration and neuroscience applications. These
efforts have led to the successful development of new products, such as the
NeuraGen(TM) Nerve Guide and DuraGen(R) Dural Graft Matrix.
We regularly review our research and development programs to ensure that they
remain consistent with and supportive of our growth strategies. To that end, in
2002 we expanded our product development staff to increase the focus on our
Integra NeuroSciences product development efforts and to seek additional
strategic alliances and applications for our Integra LifeSciences products and
technologies.
GOVERNMENT REGULATION
As a manufacturer of medical devices, we are subject to extensive regulation by
the Food and Drug Administration (FDA) and, in some jurisdictions, by state and
foreign governmental authorities. These regulations govern the introduction of
new medical devices, the observance of certain standards with respect to the
design, manufacture, testing, labeling and promotion of the devices, the
maintenance of certain records, the ability to track devices, the reporting of
potential product defects, the export of devices and other matters. We believe
that we are in substantial compliance with these governmental regulations.
From time to time, we have recalled certain of our products. We have recalled
defective components or devices supplied by other vendors, kits assembled by us
that included incorrect combinations of products and defective devices
manufactured by us. None of these recalls resulted in material direct expense to
us or a long-term disruption of an important customer or supplier relationship.
However, a future voluntary or involuntary recall of one of our major products,
particularly if it involved a potential or actual risk to patients, could have
an adverse financial impact on us, as a result both of direct expenses and
disrupted customer relationships.
The FDA requires, as a condition of marketing a medical device in the United
States, that we secure a Premarket Notification clearance pursuant to Section
510(k) of the Federal Food, Drug and Cosmetic Act, an approved PMA application
or a supplemental PMA application. Alternatively, we may seek United States
market clearance through a Product Development Protocol approved by the FDA.
Establishing and completing a Product Development Protocol, or obtaining a PMA
application or supplemental PMA application, can take up to several years and
can involve preclinical studies and clinical testing. To perform clinical
testing in the United States on an unapproved product, we are also required to
obtain an Investigational Device Exemption from the FDA. In addition to
requiring clearance for new products, FDA rules may require a filing and FDA
approval, usually through a PMA application supplement or a 510(k) Premarket
Notification clearance, prior to marketing products that are modifications of
existing products or new indications for existing products. The FDA Medical
Device User Fee and Modernization Act of 2002 (MDUFMA) imposes user fees
payable to FDA for submission of Premarket Notifications, PMA applications,
Product Development Protocols, and certain supplemental PMA applications. The
regulatory process of obtaining product approvals/clearances can be onerous and
costly.
We may not receive the necessary regulatory approvals, including approval
for product improvements and new products, on a timely basis, if at all.
Delays in receipt of, or failure to receive, regulatory approvals could
have a material adverse effect on our business. Moreover, after clearance is
given, if the product is shown to be hazardous or defective, the FDA and foreign
regulatory agencies have the power to withdraw the clearance or require us to
change the device, its manufacturing process or its labeling, to supply
additional proof of its safety and effectiveness or to recall, repair, replace
or refund the cost of the medical device. In addition, federal, state and
foreign regulations regarding the manufacture and sale of medical devices are
subject to future changes. We cannot predict what impact, if any, these changes
might have. However, the changes could have a material impact on
our business.
We have received or acquired more than 190 Premarket Notification 510(k)
clearances, five approved PMA applications and 54 supplemental PMA applications.
We expect to file new applications during the next year to cover new products
and variations on existing products.
We are also required to register with the FDA as a device manufacturer. As such,
we are subject to periodic inspection by the FDA for compliance with the FDA's
Quality Systems Regulations. These regulations require that we manufacture our
products and maintain our documents in a prescribed manner with respect to
design, manufacturing, testing and control activities. Further, we are required
to comply with various FDA requirements for labeling and promotion. The Medical
Device Reporting regulations require that we provide information to the FDA
whenever there is evidence to reasonably suggest that one of our devices may
have caused or contributed to a death or serious injury or, if a malfunction
were to recur, could cause or contribute to a death or serious injury. In
addition, the FDA prohibits us from promoting a medical device before marketing
clearance has been received or promoting an approved device for unapproved
indications. Under FDA regulations, we are required to submit reports of certain
voluntary recalls and corrections to FDA. If the FDA believes that a company is
not in compliance with applicable regulations, it can institute proceedings to
detain or seize products, issue a warning letter, issue a recall order, impose
operating restrictions, enjoin future violations and assess civil penalties
against that company, its officers or its employees and can recommend criminal
prosecution to the Department of Justice. These actions could have a material
impact on our business. Other regulatory agencies may have similar powers.
Medical Device Regulations also are in effect in many of the countries outside
the United States in which we do business. These laws range from comprehensive
device approval and quality system requirements for some or all of our medical
device products to simpler requests for product data or certifications. The
number and scope of these requirements are increasing. In June 1998, the
European Union Medical Device Directive became effective, and all medical
devices must meet the Medical Device Directive standards and receive CE Mark
certification. CE Mark certification requires a comprehensive Quality System
program, and submission of data on a product to the Notified Body in Europe. The
Medical Device Directive, and ISO 9000; 2000, ISO 13485 and EN46001 are
recognized international quality standards that are designed to ensure that
we develop and manufacture quality medical devices. A recognized Notified Body
(an organization designated by the national governments of the European Union
member states to make independent judgments about whether or not a product
complies with the protection requirements established by each CE marking
directive) audits each of our facilities annually to verify our compliance with
these standards. In 2002, each of our certified facilities was audited, and we
have maintained our certification to these standards.
In addition, we are required to notify the FDA if we export specified medical
devices manufactured in the United States that have not been approved by the FDA
for distribution in the United States. We are also required to maintain certain
records relating to exports and make the records available to the FDA for
inspection, if required. We do not currently export medical devices manufactured
in the United States that have not been approved by the FDA, although we have in
the past.
OTHER UNITED STATES REGULATORY REQUIREMENTS
In addition to the regulatory framework for product approvals, we are and may be
subject to regulation under federal and state laws, including requirements
regarding occupational health and safety; laboratory practices; the maintenance
of personal health information; sales and marketing practices, including product
discounting practices; and the use, handling and disposal of toxic or hazardous
substances. We may also be subject to other present and possible future local,
state, federal and foreign regulations.
Our research, development and manufacturing processes involve the controlled use
of certain hazardous materials. We are subject to federal, state and local laws
and regulations governing the use, manufacture, storage, handling and disposal
of these materials and certain waste products. Although we believe that our
safety procedures for handling and disposing of these materials comply with the
standards prescribed by the controlling laws and regulations, the risk of
accidental contamination or injury from these materials cannot be eliminated. In
the event of this type of an accident, we could be held liable for any damages
that result and any liability could exceed our resources. Although we believe
that we are in compliance in all material respects with applicable environmental
laws and regulations, we could incur significant costs to comply with
environmental laws and regulations in the future, and our operations, business
or assets could be materially adversely affected by current or future
environmental laws or regulations.
PATENTS AND INTELLECTUAL PROPERTY
We pursue a policy of seeking patent protection of our technology, products and
product improvements both in the United States and in selected foreign
countries. When determined appropriate, we have enforced and plan to continue to
enforce and defend our patent rights. In general, however, we do not rely on our
patent estate to provide us with any significant competitive advantages as it
relates to our existing product lines. We rely upon trade secrets and continuing
technological innovations to develop and maintain our competitive position. In
an effort to protect our trade secrets, we have a policy of requiring our
employees, consultants and advisors to execute proprietary information and
invention assignment agreements upon commencement of employment or consulting
relationships with us. These agreements provide that all confidential
information developed or made known to the individual during the course of their
relationship with us must be kept confidential, except in specified
circumstances.
BioMend(R), Camino(R), CollaCote(R), CollaPlug(R), CollaStat(TM), CollaTape(R),
Dissectron(R), DuraGen(R), EquiFlow(R), Helistat(R), Helitene(R),
Heyer-Schulte(R), INTEGRA(R) Dermal Regeneration Template, Integra Life-
Sciences(TM), Integra NeuroSciences(TM), Integra NeuroSupplies(TM), JARIT(R),
LICOX(R), NeuraGen(TM), NeuroNavigational(R), Novus(R), LPV(R), Ommaya(R),
Orbis-Sigma(R), Padgett Instruments, Inc(R), Pudenz(TM), Redmond(TM),
Ruggles(TM), Selector(R), Spetzler(R), Sundt(TM), Ventrix(R), VitaCuff(R) are
some of the trademarks of Integra and its subsidiaries. All other brand names,
trademarks and service marks appearing in this report are the property of their
respective holders.
COMPETITION
The largest competitors of Integra NeuroSciences in the neurosurgery markets are
the Medtronic Neurotechnologies division of Medtronic, Inc., the Codman division
of Johnson & Johnson, the Aesculap division of B. Braun and the Valleylab
division of Tyco International Ltd. In addition, various of the Integra
NeuroSciences product lines compete with smaller specialized companies or larger
companies that do not otherwise focus on neurosurgery. The products of Integra
LifeSciences face diverse and broad competition, depending on the market
addressed by the product. Finally, in certain cases our products compete
primarily against medical practices that treat a condition without using a
medical device, rather than any particular product (such as autograft tissue as
a substitute for INTEGRA(R) Dermal Regeneration Template). Depending on the
product line, we compete on the basis of our products' features, strength of our
sales organization or marketing partner, sophistication of our technology, and
cost effectiveness of our solution to the customer's medical requirements.
EMPLOYEES
At December 31, 2002, we had approximately 760 regular employees engaged in
production and production support (including warehouse, engineering, and
facilities personnel), quality assurance/quality control, research and
development, regulatory and clinical affairs, sales, marketing, administration
and finance. Except for certain employees at our Biot, France facility, none of
our current employees are subject to a collective bargaining agreement.
Many of our employees, including those holding senior positions in our
regulatory, operations, research and development, and sales and marketing
departments, were recruited from large pharmaceutical or medical technology
companies. Our sales representatives and regional sales managers attend in-depth
product training meetings throughout the year, and our clinical development team
consists of medical professionals who specialize in specific therapeutic areas
that our Integra NeuroSciences products serve. We believe that our clinical
development team differentiates us from our competition, as their knowledge and
experience as medical professionals allows them to more effectively educate and
train both our sales force and the customers who use our products. This team is
especially valuable in communicating the clinical benefits of new products.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
We have made statements in this report, including statements under "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business", which constitute forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. These forward-looking statements are subject to a number
of risks, uncertainties and assumptions about Integra, including, among other
things:
* general economic and business conditions, both nationally and in our
international markets;
* our expectations and estimates concerning future financial performance,
financing plans and the impact of competition;
* anticipated trends in our business;
* existing and future regulations affecting our business;
* our ability to obtain additional debt and equity financing to fund capital
expenditures and working capital requirements and acquisitions;
* our ability to complete acquisitions and integrate operations
post-acquisition; and
* other risk factors described in the section entitled "Risk Factors" in this
report.
You can identify these forward-looking statements by forward-looking words such
as believe, may, could, will, estimate, continue, anticipate, intend, seek,
plan, expect, should, would and similar expressions in this report.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks and uncertainties, the forward-looking events and
circumstances discussed in this report may not occur and actual results could
differ materially from those anticipated or implied in the forward-looking
statements.
RISK FACTORS
We believe that the following important factors, among others, have affected,
and in the future could affect, our business, financial condition, and results
of operations and could cause our future results to differ materially from our
historical results and those anticipated in any forward-looking statements made
by us. Such factors are not meant to represent an exhaustive list of the risks
and uncertainties associated with our business. These and other factors may
affect our future results and our stock price, particularly on a quarterly
basis.
Our Operating Results May Fluctuate.
Our operating results may fluctuate from time to time, which could affect our
stock price. Our operating results have fluctuated in the past and can be
expected to fluctuate from time to time in the future. Some of the factors that
may cause these fluctuations include:
* the impact of acquisitions;
* the timing of significant customer orders;
* market acceptance of our existing products, as well as products in
development;
* the timing of regulatory approvals;
* the timing of payments received and the recognition of those payments as
revenue under collaborative arrangements and strategic alliances;
* expenses incurred and business lost in connection with product field
corrections or recalls;
* our ability to manufacture our products efficiently; and
* the timing of our research and development expenditures.
The Industry And Market Segments In Which We Operate Are Highly Competitive, And
We May Be Unable To Compete Effectively With Other Companies.
In general, the medical technology industry is characterized by intense
competition. We compete with established medical technology and pharmaceutical
companies. Competition also comes from early stage companies that have
alternative technological solutions for our primary clinical targets, as well as
universities, research institutions and other non-profit entities. Many of our
competitors have access to greater financial, technical, research and
development, marketing, manufacturing, sales, distribution services and other
resources than we do. Further, our competitors may be more effective at
implementing their technologies to develop commercial products.
Our competitive position will depend on our ability to achieve market acceptance
for our products, implement production and marketing plans, secure regulatory
approval for products under development, obtain patent protection and secure
adequate capital resources. We may need to develop new applications for our
products to remain competitive. Technological advances by one or more of our
current or future competitors could render our present or future products
obsolete or uneconomical. Our future success will depend upon our ability to
compete effectively against current technology as well as to respond effectively
to technological advances. Competitive pressures could adversely affect our
profitability.
The largest competitors of Integra NeuroSciences in the neurosurgery markets are
the Medtronic Neurotechnologies division of Medtronic, Inc., the Codman division
of Johnson & Johnson, the Aesculap division of B. Braun, and the Valleylab
division of Tyco International Ltd. In addition, various of the Integra
NeuroSciences product lines compete with smaller specialized companies or larger
companies that do not otherwise focus on neurosurgery. The products of Integra
LifeSciences face diverse and broad competition, depending on the market
addressed by the product. Finally, in certain cases our products compete
primarily against medical practices that treat a condition without using a
device, rather than any particular product, such as autograft tissue as a
substitute for INTEGRA(R) Dermal Regeneration Template.
Our Current Strategy Involves Growth Through Acquisitions, Which Requires Us To
Incur Substantial Costs And Potential Liabilities For Which We May Never Realize
The Anticipated Benefits.
In addition to internal growth, our current strategy involves growth through
acquisitions. Since 1999, we have acquired twelve businesses or product lines at
a total cost of approximately $107 million.
We may be unable to continue to implement our growth strategy, and this strategy
may be ultimately unsuccessful. A significant portion of our growth in revenues
has resulted from, and is expected to continue to result from, the acquisition
of businesses complementary to our own. We engage in evaluations of potential
acquisitions and are in various stages of discussion regarding possible
acquisitions, certain of which, if consummated, could be significant to us. Any
potential acquisitions may result in material transaction expenses, increased
interest and amortization expense, increased depreciation expense and increased
operating expense, any of which could have a material adverse effect on our
operating results. As we grow by acquisitions, we must integrate and manage the
new businesses to realize economies of scale and control costs. In addition,
acquisitions involve other risks, including diversion of management resources
otherwise available for ongoing development of our business and risks associated
with entering new markets with which our marketing and sales force has limited
experience or where experienced distribution alliances are not available. Our
future profitability will depend in part upon our ability to develop further our
resources to adapt to these new products or business areas and to identify and
enter into satisfactory distribution networks. We may not be able to identify
suitable acquisition candidates in the future, obtain acceptable financing or
consummate any future acquisitions. If we cannot integrate acquired operations,
manage the cost of providing our products or price our products appropriately,
our profitability could suffer. In addition, as a result of our acquisitions of
other healthcare businesses, we may be subject to the risk of unanticipated
business uncertainties or legal liabilities relating to those acquired
businesses for which the sellers of the acquired businesses may not indemnify
us. Future acquisitions may also result in potentially dilutive issuances of
securities.
To Market Our Products Under Development We Will First Need To Obtain Regulatory
Approval. Further, If We Fail To Comply With The Extensive Governmental
Regulations That Affect Our Business, We Could Be Subject To Penalties And Could
Be Precluded From Marketing Our Products.
Our research and development activities and the manufacturing, labeling,
distribution and marketing of our existing and future products are subject to
regulation by numerous governmental agencies in the United States and in other
countries. The FDA and comparable agencies in other countries impose mandatory
procedures and standards for the conduct of clinical trials and the production
and marketing of products for diagnostic and human therapeutic use.
Our products under development are subject to FDA approval or clearance prior to
marketing for commercial use. The process of obtaining necessary FDA approvals
or clearances can take years and is expensive and full of uncertainties. Our
inability to obtain required regulatory approval on a timely or acceptable basis
could harm our business. Further, approval or clearance may place substantial
restrictions on the indications for which the product may be marketed or to whom
it may be marketed. Further studies, including clinical trials and FDA
approvals, may be required to gain approval for the use of a product for
clinical indications other than those for which the product was initially
approved or cleared or for significant changes to the product. In addition, for
products with an approved PMA application, the FDA requires annual reports and
may require post-approval surveillance programs to monitor the products' safety
and effectiveness. Results of post-approval programs may limit or expand the
further marketing of the product.
We believe that the most significant risk of our recent applications to the FDA
relates to the regulatory classification of certain of our new products or
proposed new uses for existing products. In the filing of each application, we
make a legal judgment about the appropriate form and content of the application.
If the FDA disagrees with our judgment in any particular case and, for example,
requires us to file a PMA application rather than allowing us to market for
approved uses while we seek broader approvals or requires extensive additional
clinical data, the time and expense required to obtain the required approval
might be significantly increased or approval might not be granted.
Approved products are subject to continuing FDA requirements relating to quality
control and quality assurance, maintenance of records, reporting of adverse
events, and product recalls, documentation, and labeling and promotion of
medical devices.
The FDA and foreign regulatory authorities require that our products be
manufactured according to rigorous standards. These regulatory requirements may
significantly increase our production or purchasing costs and may even prevent
us from making or obtaining our products in amounts sufficient to meet market
demand. If a third-party manufacturer or we change our approved manufacturing
process, the FDA may require a new approval before that process may be used.
Failure to develop our manufacturing capability may mean that even if we develop
promising new products, we may not be able to produce them profitably, as a
result of delays and additional capital investment costs. Manufacturing
facilities, both international and domestic, are also subject to inspections by
or under the authority of the FDA. In addition, failure to comply with
applicable regulatory requirements could subject us to enforcement action,
including product seizures, recalls, withdrawal of clearances or approvals,
restrictions on or injunctions against marketing our product or products based
on our technology, and civil and criminal penalties. See "Business -- Government
Regulation".
Certain Of Our Products Contain Materials Derived From Animal Sources And May
Become Subject To Additional Regulation.
Certain of our products, including the DuraGen(R) Dural Graft Matrix and the
INTEGRA(R) Dermal Regeneration Template, contain material derived from bovine
tissue. Products, including food as well as pharmaceuticals and medical devices,
that contain materials derived from animal sources are increasingly subject to
scrutiny in the press and by regulatory authorities. Regulatory authorities are
concerned about the potential for the transmission of disease from animals to
humans via those materials. This public scrutiny has been particularly acute in
Japan and Western Europe with respect to products derived from cattle, because
of concern that materials infected with the agent that causes bovine spongiform
encephalopathy, otherwise known as BSE or mad cow disease, may, if ingested or
implanted, cause a variant of the human Creutzfeldt-Jakob Disease, an ultimately
fatal disease with no known cure.
We take great care to provide that our products are safe, and free of agents
that can cause disease. In particular, the collagen used in the manufacture of
our products is derived only from the Achilles tendon of cattle from the United
States, where no cases of BSE have been reported. Scientists and regulatory
authorities classify the Achilles tendon as having a negligible risk of
containing the agent that causes BSE (an improperly folded protein known as a
prion) compared with other parts of the body. Additionally, we use processes in
the manufacturing of our products that are believed to inactivate prions.
Nevertheless, products that contain materials derived from animals, including
our products, may become subject to additional regulation, or even be banned in
certain countries, because of concern over the potential for prion transmission.
Accordingly, new regulation, or a ban of our products, could have a significant
adverse effect on our current business or our ability to expand our business.
Lack Of Market Acceptance For Our Products Or Market Preference For Technologies
That Compete With Our Products Could Reduce Our Revenues And Profitability.
We cannot be certain that our current products or any other products that we may
develop or market, will achieve or maintain market acceptance. Certain of the
medical indications that can be treated by our devices can also be treated by
other medical devices or by medical practices that do not include a device. The
medical community widely accepts many alternative treatments, and certain of
these other treatments have a long history of use. For example, the use of
autograft tissue is a well-established means for repairing the dermis, and it
may interfere with the widespread acceptance in the market for INTEGRA(R) Dermal
Regeneration Template.
We cannot be certain that our devices and procedures will be able to replace
those established treatments or that either physicians or the medical community
in general will accept and utilize our devices or any other medical products
that we may develop. For example, we cannot be certain that the medical
community will accept the NeuraGen(TM) Nerve Guide over conventional
microsurgical techniques for connecting severed peripheral nerves.
In addition, our future success depends, in part, on our ability to develop
additional products. Even if we determine that a product candidate has medical
benefits, the cost of commercializing that product candidate may be too high to
justify development. Competitors may develop products that are more effective,
cost less, or are ready for commercial introduction before our products. For
example, our sales of shunt products could decline if neurosurgeons increase
their use of programmable valves and we fail to introduce a competitive product.
If we are unable to develop additional, commercially viable products, our future
prospects could be adversely affected.
Market acceptance of our products depends on many factors, including our ability
to convince prospective collaborators and customers that our technology is an
attractive alternative to other technologies, to manufacture products in
sufficient quantities and at acceptable costs, and to supply and service
sufficient quantities of our products directly or through our strategic
alliances. In addition, limited funding available for product and technology
acquisitions by our customers, as well as internal obstacles to customer
approvals of purchases of our products, could harm acceptance of our products.
The industry is subject to rapid and continuous change arising from, among other
things, consolidation and technological improvements. One or more of these
factors may vary unpredictably, which could materially adversely affect our
competitive position. We may not be able to adjust our contemplated plan of
development to meet changing market demands.
Our Business Depends Significantly On Key Relationships With Third Parties,
Which We May Be Unable To Establish And Maintain.
Our revenue stream and our business strategy depend in part on our entering into
and maintaining collaborative or alliance agreements with third parties
concerning product marketing, as well as research and development programs. Our
most important strategic alliances are our agreement with Ethicon, Inc., a
division of Johnson & Johnson, relating to INTEGRA(R) Dermal Regeneration
Template, and our agreement with the Wyeth BioPharma division of Wyeth for the
development of collagen matrices to be used in conjunction with Wyeth
BioPharma's recombinant bone protein, a protein that stimulates the growth of
bone in humans. Termination of these alliances would require us to develop other
means to distribute the affected products and could adversely affect our
expectations for the growth of our Integra LifeSciences segment.
Ethicon has informed us that if we do not agree to substantial amendments to its
agreement with us, it will consider alternatives that may include exercising its
right to terminate the agreement.
Our ability to enter into agreements with collaborators depends in part on
convincing them that our technology can help them achieve their goals and
execute their strategies. This may require substantial time, effort and expense
on our part with no guarantee that a strategic relationship will result. We may
not be able to establish or maintain these relationships on commercially
acceptable terms. Our future agreements may not ultimately be successful. Even
if we enter into collaborative or alliance agreements, our collaborators could
terminate these agreements, or these agreements could expire before meaningful
developmental milestones are reached. The termination or expiration of any of
these relationships could have a material adverse effect on our business.
Much of the revenue that we may receive under these collaborations will depend
upon our collaborators' ability to successfully introduce, market and sell new
products derived from our products. Our success depends in part upon the
performance by these collaborators of their responsibilities under these
agreements. Some collaborators may not perform their obligations as we expect.
Some of the companies we currently have alliances with or are targeting as
potential allies offer products competitive with our products or may develop
competitive production technologies or competitive products outside of their
collaborations with us that could have a material adverse effect on our
competitive position.
In addition, our role in the collaborations is mostly limited to the production
aspects. As a result, we may also be dependent on collaborators for other
aspects of the development, preclinical and clinical testing, regulatory
approval, sales, marketing and distribution of our products. If our current or
future collaborators fail to market our products effectively or to develop
additional products based on our technology, our sales and other revenues could
significantly be reduced.
Finally, we have received and may continue to receive payments from
collaborators that may not be immediately recognized as revenue and therefore
may not contribute to reported profits until further conditions are satisfied.
Our Intellectual Property Rights May Not Provide Meaningful Commercial
Protection For Our Products, Which Could Enable Third Parties To Use Our
Technology Or Very Similar Technology And Could Reduce Our Ability To Compete In
The Market.
Our ability to compete effectively depends in part, on our ability to maintain
the proprietary nature of our technologies and manufacturing processes, which
includes the ability to obtain, protect and enforce patents on our technology
and to protect our trade secrets. We own or have licensed patents that cover
significant aspects of many of our product lines. However, you should not rely
on our patents to provide us with any significant competitive advantage. Others
may challenge our patents and, as a result, our patents could be narrowed,
invalidated or rendered unenforceable. Competitors may develop products similar
to ours that our patents do not cover. In addition, our current and future
patent applications may not result in the issuance of patents in the United
States or foreign countries. Further, there is a substantial backlog of patent
applications at the U.S. Patent and Trademark Office, and the approval or
rejection of patent applications may take several years.
Our Competitive Position Depends, In Part, Upon Unpatented Trade Secrets Which
We May Be Unable To Protect.
Our competitive position is also dependent upon unpatented trade secrets. Trade
secrets are difficult to protect. We cannot assure you that others will not
independently develop substantially equivalent proprietary information and
techniques or otherwise gain access to our trade secrets, that our trade secrets
will not be disclosed, or that we can effectively protect our rights to
unpatented trade secrets.
In an effort to protect our trade secrets, we have a policy of requiring our
employees, consultants and advisors to execute proprietary information and
invention assignment agreements upon commencement of employment or consulting
relationships with us. These agreements provide that, except in specified
circumstances, all confidential information developed or made known to the
individual during the course of their relationship with us must be kept
confidential. We cannot assure you, however, that these agreements will provide
meaningful protection for our trade secrets or other proprietary information in
the event of the unauthorized use or disclosure of confidential information.
Our Success Will Depend Partly On Our Ability To Operate Without Infringing Or
Misappropriating The Proprietary Rights Of Others.
We may be sued for infringing the intellectual property rights of others. In
addition, we may find it necessary, if threatened, to initiate a lawsuit seeking
a declaration from a court that we do not infringe the proprietary rights of
others or that their rights are invalid or unenforceable. If we do not prevail
in any litigation, in addition to any damages we might have to pay, we would be
required to stop the infringing activity or obtain a license. Any required
license may be unavailable to us on acceptable terms, or at all. In addition,
some licenses may be nonexclusive, and allow our competitors to access the same
technology we license. If we fail to obtain a required license or are unable to
design our product so as not to infringe on the proprietary rights of others, we
may be unable to sell some of our products, which could have a material adverse
effect on our revenues and profitability.
It May Be Difficult To Replace Some Of Our Suppliers.
Outside vendors, some of whom are sole-source suppliers, provide key components
and raw materials used in the manufacture of our products. Although we believe
that alternative sources for many of these components and raw materials are
available, any supply interruption in a limited or sole source component or raw
material could harm our ability to manufacture our products until a new source
of supply is identified and qualified. In addition, an uncorrected defect or
supplier's variation in a component or raw material, either unknown to us or
incompatible with our manufacturing process, could harm our ability to
manufacture products. We may not be able to find a sufficient alternative
supplier in a reasonable time period, or on commercially reasonable terms, if at
all, and our ability to produce and supply our products could be impaired. We
believe that these factors are most likely to affect our Camino(R) and
Ventrix(R) lines of intracranial pressure monitors and catheters, which we
assemble using many different electronic parts from numerous suppliers. While we
are not dependent on sole-source suppliers, if we were suddenly unable to
purchase products from one or more of these companies, we could need time a
significant period of time to qualify a replacement, and the production of any
affected products could be disrupted. While it is our policy to maintain
sufficient inventory of components so that our production will not be
significantly disrupted even if a particular component or material is not
available for a period of time, we remain at risk that we will not be able to
qualify new components or materials quickly enough to prevent a disruption if
one or more of our suppliers ceases production of important components or
materials.
If Any Of Our Manufacturing Facilities Were Damaged And/Or Our Manufacturing
Processes Interrupted, We Could Experience Lost Revenues And Our Business Could
Be Seriously Harmed.
We manufacture our products in a limited number of facilities. Damage to our
manufacturing, development or research facilities due to fire, natural disaster,
power loss, communications failure, unauthorized entry or other events could
cause us to cease development and manufacturing of some or all of our products.
In particular, our San Diego, California facility that manufactures our
Camino(R) and Ventrix(R) product line is as susceptible to earthquake damage and
power losses from electrical shortages as are other businesses in the Southern
California area. Our silicone manufacturing plant in Anasco, Puerto Rico is
vulnerable to hurricane damage. Although we maintain property damage and
business interruption insurance coverage on these facilities, we may not be able
to renew or obtain such insurance in the future on acceptable terms with
adequate coverage or at reasonable costs.
We May Be Involved In Lawsuits To Protect Or Enforce Our Intellectual Property
Rights, Which May Be Expensive.
In order to protect or enforce our intellectual property rights, we may have to
initiate legal proceedings against third parties, such as infringement suits or
interference proceedings. Intellectual property litigation is costly, and, even
if we prevail, the cost of that litigation could affect our profitability. In
addition, litigation is time consuming and could divert management attention and
resources away from our business. We may also provoke these third parties to
assert claims against us.
We Are Exposed To A Variety Of Risks Relating To Our International Sales And
Operations, Including Fluctuations In Exchange Rates, Local Economic Conditions,
And Delays In Collection Of Accounts Receivable.
We generate significant revenues outside the United States, a substantial
portion of which are U.S. dollar-denominated transactions conducted with
customers who generate revenue in currencies other than the U.S. dollar. As a
result, currency fluctuations between the U.S. dollar and the currencies in
which those customers do business may have an impact on the demand for our
products in foreign countries where the U.S. dollar has increased in value
compared to the local currency. We cannot predict the effects of exchange rate
fluctuations upon our future operating results because of the number of
currencies involved, the variability of currency exposure and the potential
volatility of currency exchange rates.
Because we have operating subsidiaries based in Europe and we generate certain
revenues and incur certain operating expenses in British Pounds and the Euro, we
experience currency exchange risk with respect to those foreign currency
denominated revenues or expenses.
Our sales to foreign markets may be affected by local economic conditions.
Relationships with customers and effective terms of sale frequently vary by
country, often with longer-term receivables than are typical in the United
States.
Changes In The Health Care Industry May Require Us To Decrease The Selling Price
For Our Products Or Could Result In A Reduction In The Size Of The Market For
Our Products, And Limit The Means By Which We May Discount Our Products, Each Of
Which Could Have A Negative Impact On Our Financial Performance.
Trends toward managed care, health care cost containment, and other changes in
government and private sector initiatives in the United States and other
countries in which we do business are placing increased emphasis on the delivery
of more cost-effective medical therapies that could adversely affect the sale
and/or the prices of our products. For example:
* major third-party payors of hospital services, including Medicare, Medicaid
and private health care insurers, have substantially revised their payment
methodologies, which has resulted in stricter standards for reimbursement of
hospital charges for certain medical procedures;
* Medicare, Medicaid and private health care insurer cutbacks could create
downward price pressure on our products;
* numerous legislative proposals have been considered that would result in major
reforms in the U.S. health care system that could have an adverse effect on
our business;
* there has been a consolidation among health care facilities and purchasers of
medical devices in the United States who prefer to limit the number of suppliers
from whom they purchase medical products, and these entities may decide to stop
purchasing our products or demand discounts on our prices;
* there is economic pressure to contain health care costs in international
markets;
* there are proposed and existing laws and regulations in domestic and
international markets regulating the sales and marketing practices and the
pricing and profitability of companies in the health care industry; and
* there have been initiatives by third-party payors to challenge the prices
charged for medical products that could affect our ability to sell products on
a competitive basis.
Both the pressures to reduce prices for our products in response to these trends
and the decrease in the size of the market as a result of these trends could
adversely affect our levels of revenues and profitability of sales.
In addition, there are laws and regulations that regulate the means by which
companies in the health care industry may market their products to health care
professionals and may compete by discounting the prices of their products.
Although we exercise care in structuring our sales and marketing practices and
customer discount arrangements to comply with those laws and regulations, we
cannot assure you that:
* government officials charged with responsibility for enforcing those laws will
not assert that our sales and marketing practices or customer discount
arrangements are in violation of those laws or regulations, or
* government regulators or courts will interpret those laws or regulations in a
manner consistent with our interpretation.
We May Have Significant Product Liability Exposure And Our Insurance May Not
Cover All Potential Claims.
We are exposed to product liability and other claims in the event that our
technologies or products are alleged to have caused harm. We may not be able to
obtain insurance for the potential liability on acceptable terms with adequate
coverage or at reasonable costs. Any potential product liability claims could
exceed the amount of our insurance coverage or may be excluded from coverage
under the terms of the policy. Our insurance may not be renewed at a cost and
level of coverage comparable to that then in effect.
We Are Subject To Other Regulatory Requirements Relating To Occupational Health
And Safety And The Use Of Hazardous Substances Which May Impose Significant
Compliance Costs On Us.
We are subject to regulation under federal and state laws regarding occupational
health and safety, laboratory practices, and the use, handling and disposal of
toxic or hazardous substances. Our research, development and manufacturing
processes involve the controlled use of certain hazardous materials. Although we
believe that our safety procedures for handling and disposing of those materials
comply with the standards prescribed by the applicable laws and regulations, the
risk of accidental contamination or injury from these materials cannot be
eliminated. In the event of such an accident, we could be held liable for any
damages that result and any related liability could exceed the limits or fall
outside the coverage of our insurance and could exceed our resources. We may not
be able to maintain insurance on acceptable terms or at all. We may incur
significant costs to comply with environmental laws and regulations in the
future. We may also be subject to other present and possible future local,
state, federal and foreign regulations.
The Loss Of Key Personnel Could Harm Our Business.
We believe our success depends on the contributions of a number of our key
personnel, including Stuart M. Essig, our President and Chief Executive Officer.
If we lose the services of key personnel, those losses could materially harm
our business. We maintain key person life insurance on Mr. Essig.
Our Stock Price May Continue To Be Highly Volatile And You May Not Be Able To
Resell Your Shares At Or Above The Price You Paid For Them.
The stock market in general, and the stock prices of medical device companies,
biotechnology companies and other technology-based companies in particular, have
experienced significant volatility that often has been unrelated to the
operating performance of and beyond the control of any specific public company.
The market price of our common stock has fluctuated widely in the past and is
likely to continue to fluctuate in the future. Factors that may have a
significant impact on the market price of our common stock include:
* our actual financial results differing from guidance provided by management;
* our actual financial results differing from that expected by securities
analysts;
* future announcements concerning us or our competitors, including the
announcement of acquisitions;
* changes in the prospects of our business partners or suppliers;
* developments regarding our patents or other proprietary rights or those of
our competitors;
* quality deficiencies in our products;
* competitive developments, including technological innovations by us or our
competitors;
* government regulation, including the FDA's review of our products
and developments;
* changes in recommendations of securities analysts and rumors that may be
circulated about us or our competitors;
* public perception of risks associated with our operations;
* conditions or trends in the medical device and biotechnology industries;
* additions or departures of key personnel; and
* sales of our common stock.
Any of these factors could immediately, significantly and adversely affect the
trading price of our common stock.
Our Major Stockholders Could Make Decisions Adverse To Your Interests.
Our directors and executive officers and affiliates of certain directors own or
control more than one-third of our outstanding voting securities and generally
have significant influence over the election of all directors, the outcome of
any corporate action requiring stockholder approval, and other aspects of the
business. The ability of the board of directors to issue preferred stock, while
providing flexibility in connection with financing, acquisitions and other
corporate purposes, could have the effect of discouraging, deferring or
preventing a change in control or an unsolicited acquisition proposal, since the
issuance of preferred stock could be used to dilute the share ownership of a
person or entity seeking to obtain control of us. This significant influence
could preclude any unsolicited acquisition of Integra and consequently adversely
affect the market price of the common stock. Furthermore, we are subject to
Section 203 of the Delaware General Corporation Law, which could have the effect
of delaying or preventing a change of control.
ITEM 2. PROPERTIES
Our principal executive offices are located in Plainsboro, New Jersey. Principal
manufacturing and research facilities are located in Plainsboro, New Jersey,
Biot, France, San Diego, California, Anasco, Puerto Rico, Andover, England and
Mielkendorf, Germany. Our primary distribution centers are located in Cranbury,
New Jersey, Hawthorne, New York, Andover, England and Biot, France. In addition,
we lease several smaller facilities to support additional administrative,
assembly, and distribution operations. We lease all of our facilities other than
our facilities in Biot, France, and Tuttlingen, Germany, which we own.
All of our manufacturing and distribution facilities are registered with the
FDA. Our facilities are subject to FDA inspection to assure compliance with
Quality System Regulations. We believe that our manufacturing facilities are in
substantial compliance with Quality System Regulations, suitable for their
intended purposes and have capacities adequate for current and projected needs
for existing products. Some capacity of the plants is being converted, with any
needed modification, to meet the current and projected requirements of existing
and future products.
ITEM 3. LEGAL PROCEEDINGS
In July 1996, we filed a patent infringement lawsuit in the United States
District Court for the Southern District of California (the "Court") against
Merck KGaA, a German corporation, Scripps Research Institute, a California
nonprofit corporation, and David A. Cheresh, Ph.D., a research scientist with
Scripps, seeking damages and injunctive relief. The complaint charged, among
other things, that the defendant Merck KGaA willfully and deliberately induced,
and continues willfully and deliberately to induce, defendants Scripps Research
Institute and Dr. Cheresh to infringe certain of our patents. These patents are
part of a group of patents granted to The Burnham Institute and licensed by us
that are based on the interaction between a family of cell surface proteins
called integrins and the arginine-glycine-aspartic acid ("RGD") peptide sequence
found in many extracellular matrix proteins. The defendants filed a countersuit
asking for an award of defendants' reasonable attorney fees.
In March 2000, a jury returned a unanimous verdict in our favor and awarded us
$15,000,000 in damages, finding that Merck KGaA had willfully infringed and
induced the infringement of our patents. The Court dismissed Scripps and Dr.
Cheresh from the case.
In October 2000, the Court entered judgment in our favor and against Merck KGaA
in the case. In entering the judgment, the Court also granted to us pre-judgment
interest of approximately $1,350,000, bringing the total award to approximately
$16,350,000, plus post-judgment interest. Merck KGaA filed various post-trial
motions requesting a judgment as a matter of law notwithstanding the verdict or
a new trial, in each case regarding infringement, invalidity and damages. In
September 2001, the Court entered orders in favor of us and against Merck KGaA
on the final post-judgment motions in the case, and denied Merck KGaA's motions
for judgment as a matter of law and for a new trial.
Merck KGaA and we have each appealed various decisions of the Court. The court
of appeals heard arguments in the appeal in November 2002, and we expect the
court to issue its opinion in 2003. We have not recorded any gain in connection
with this matter.
In addition to the Merck KGaA matter, we are subject to various claims, lawsuits
and proceedings in the ordinary course of our business, including claims by
current or former employees and distributors and with respect to our products.
In the opinion of management, such claims are either adequately covered by
insurance or otherwise indemnified, or are not expected, individually or in the
aggregate, to result in a material adverse effect on our financial condition.
However, it is possible that our results of operations, financial position and
cash flows in a particular period could be materially affected by these
contingencies.
In September, 2001, three subsidiaries of the recently acquired neurosciences
division of NMT Medical, Inc. received a tax reassessment notice from the French
tax authorities seeking in excess $1.5 million in back taxes, interest and
penalties. NMT Medical, Inc., the former owner of these entities, has agreed to
specifically indemnify Integra against any liability in connection with these
tax claims. In addition, NMT Medical, Inc. has agreed to provide the French tax
authorities with payment of the tax liabilities on behalf of each of these
subsidiaries.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
ADDITIONAL INFORMATION:
The following information is furnished in this Part I pursuant to Instruction 3
to Item 401(b) of Regulation S-K.
Executive Officers
The executive officers of Integra are elected annually and serve at the
discretion of the Board of Directors. The only family relationship between any
of the executive officers and our Board of Directors is that Mr. Holtz is the
nephew of Richard E. Caruso, Ph.D., who is Chairman of the Board of Directors.
The following information indicates the position and age of our executive
officers as of the date of this report and their previous business experience.