SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-K

 

 

 

For the fiscal year ended December 31, 2001

 

or

 

 

For the transition period from             to              

 

Commission file number 000-31923

 

HARVARD BIOSCIENCE, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

 

Securities registered pursuant to Section 12(b) of the Act:  None

 

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.01 par value 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.

ý   YES                 o  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.

 

The aggregate market value of 17,652,352 shares of voting stock held by non-affiliates of the registrant as of  March 22, 2002 was approximately $158,695,000  based on the last sale price of such stock on such date.

 

Common Stock Outstanding as of March 22, 2002: 26,759,946 shares.

 

DOCUMENTS INCORPORATED BY REFERENCE.

 

PART I

 

This Annual Report on Form 10-K contains statements that are not statements of historical fact and are 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.  The forward-looking statements are principally contained in “Item 1:  Business” and “Item 7:  Management’s Discussion and Analysis of Financial Condition and Results of Operations.”  These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.  Forward-looking statements include, but are not limited to, statements about our business strategy, the market opportunity for our products, our estimates regarding our capital requirements, the timing of future product introductions, our expectations in connection with current litigation, and our plans, objectives, expectations and intentions that are not historical facts.  In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could, “ “would,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “intends,” “potential” and similar expressions intended to identify forward-looking statements.  These statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties.  Given these uncertainties, you should not place undue reliance on these forward-looking statements.  We discuss many of these risks in detail under the heading “Important Factors That May Affect Future Operating Results” beginning on page 25.  You should carefully review all of these factors, and you should be aware that there may be other factors, including factors of which we are not currently aware, that could cause these differences.  Also, these forward-looking statements represent our estimates and assumptions only as of the date of this report.  We may not update these forward-looking statements, even though our situation may change in the future, unless we have obligations under the Federal securities laws to update and disclose material developments related to previously disclosed information.

 

Item 1.  Business.

 

Overview

 

We are a global provider of innovative, research enabling tools that solve problems in drug discovery. We provide a broad array of tools designed to accelerate the speed and to reduce the cost at which our customers can introduce new drugs. We focus on alleviating bottlenecks in the drug discovery process including target validation, assay development and ADMET (absorption, distribution, metabolism, elimination and toxicology) screening.

 

To address these critical bottlenecks, we have recently introduced several new proprietary tools. For target validation, these tools include novel pipette tips, micro-dialyzers, plate readers and COPAS™ high throughput/high relevance model organism screening systems. For ADMET screening, these tools include NaviCyte diffusion chambers for drug absorption testing, 96 well equilibrium dialysis plates for drug distribution testing, MitoScan high throughput toxicology assays and COPAS™ high throughput/high relevance model organism toxicology testing systems.

 

We have an established product base in target validation. This product base consists of DNA/RNA/protein calculators, life science spectrophotometers and amino acid analysis systems.  We also have an established product base in ADMET screening which includes precision infusion pumps, organ testing systems, ventilators, cell biology and electrophysiology products.

 

The names Harvard Bioscience and Harvard Apparatus and our logo are names and trademarks that we believe belong to us. We have the rights to numerous trademarks and trade names including AmiKa, Biochrom, COPAS™, CPK, GeneQuant, GeneQuant Pro, MitoScan, NaviCyte, NovaSpec, PrepTip, PureTip, Stronghold, UltroSpec, Union Biometrica and Warner Instruments. This Annual Report on Form 10-K also contains the trademarks and trade names of other entities that are the property of their respective owners.

 

Our History

 

Our business began in 1901 and has grown over the intervening years with the development and evolution of modern drug discovery tools. Our inventions include the mechanical syringe pump in the 1950s for drug infusion and the microprocessor controlled syringe pump in the 1980s.

 

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In March 1996, a group of investors led by our current management team acquired a majority of the then existing business of our predecessor, Harvard Apparatus. Following this acquisition, we redirected the focus of the Company to participate in the high growth areas (bottlenecks) within drug discovery by acquiring and licensing innovative technologies while continuing to grow the existing business through internal product development and marketing, partnerships and acquisitions. Through December 31, 2001, we have completed eleven business acquisitions, licensed key new technology for in vitro toxicology assays and drug absorption measurement, internally developed new product lines including new generation syringe pumps, DNA/RNA/protein calculators, spectrophotometers and plate readers, and mailed expanded new catalogs.

 

Our Strategy

 

Our strategy is to become the leading provider of innovative, enabling technologies and products for target validation  and screening research in the drug discovery process. Key elements of our strategy are to be innovative by developing new products; to acquire businesses that we believe will either strengthen our core business or provide major breakthroughs for drug discovery research; and to partner with people who have expertise we do not.

 

Innovative New Tools For Drug Discovery

 

We have focused on becoming a leading provider of tools for target validation and ADMET screening. We believe that there is a demand for new and innovative tools that reduce drug discovery time and expense. Since 1996, we have introduced several new tools for target validation and ADMET screening such as our protein and DNA purification pipette tips, protein purification dialyzers, NaviCyte diffusion chambers and the COPAS™ model organism screening systems.  In 2001, we introduced new plate readers, new spectrophotometers, a new high throughput toxicology assay called MitoScan™, a new ventilator, and COPAS™ technology for high throughput model organism research.  We intend to continue our efforts to identify, develop and introduce new tools to alleviate bottlenecks in all stages of the drug discovery process.

 

Acquire Complementary Technologies

 

We intend to selectively acquire companies and technologies that we believe will strengthen our product offering, particularly in the areas of target validation and ADMET screening.  Since 1996, we have completed nine acquisitions involving the integration of acquired products and technology into our existing manufacturing base or distribution channels, and five technology acquisition or licensing transactions. In 2001, we acquired Asys Hitech in Austria for its plate readers and low volume dispensers; Scie-Plas in England for its electrophoresis and DNA analysis products; International Market Supply in England for its anesthesiology products; Warner Instruments in the United States for its cell and tissue electrophysiology products; and Union Biometrica in the United States for its high throughput/high content model organism technology.  In the future, we may pursue acquisitions of new products and technologies through business acquisitions, partnerships or licensing arrangements.

 

Partnerships

 

We intend to leverage our technologies through collaborations with people who have expertise and capabilities we do not. In 2001, we partnered with a major pharmaceutical company for the development of low volume dispensers; two major pharmaceutical companies for the further development of COPAS™ technology; and Amersham Biosciences (formerly Amersham Pharmacia Biotech) for distribution of many of our products for DNA, RNA and protein analysis.

 

Our Products

 

Our product lines consist of both proprietary and non-proprietary products. Our broad array of proprietary products consist of those set forth in the table below and those described in the “Other Proprietary Products” section below the table:

 

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Product Category		Representative Product Areas		Description		Number of Products
TARGET VALIDATION
RNA/DNA ANALYSIS		Molecular Biology Spectrophotometers		Range of Spectrophotometers		6
		DNA/RNA Protein Calculators		Spectrophotometers with application software		2
		Multi-Well Plate Readers		Range of automated readers
				• absorbance		3
				• luminescence
				• flourescence
		Amino Acid Analysis Systems		Ninhydrin-based amino acid detection systems		2
		Liquid Dispensers		Low volume high throughput		3
COPAS™		Model Organism Testing		High throughput screening and sorting
				• Fruit flies		1
				• Worms		1
PURIFICATION		Purification Pipette Tips		Disposable pipette tips • coated with     purification media • loaded with     purification media		50
		Equilibrium Dialyzers		Membrane separating two plastic chambers		9
				• disposable
				• plates with 96 wells
HIGH THROUGHPUT/ HIGH CONTENT SCREENING
ADMET SCREENING
Absorption (in vitro)		NaviCyte Diffusion Chambers		Simulated digestive tract / blood stream interfaces		6
Distribution		Equilibrium Dialysis Plate		Membrane separating two chambers		9
Metabolism/Elimination		Organ Testing Systems		Chambers with stimulators, perfusion and recording devices		8
Toxicology		MitoScanÔ Assay		High throughput toxicology assay		1
		Precision Infusion Pumps		Syringe pumps		80
		COPAS™ Reflex		Zebrafish		1
ASSAY DEVELOPMENT/ EFFICACY SCREENING		COPAS™ Reflex		Compound library screening
				• Fruit flies		1
				• Worms		1
				• Zebrafish		1

 

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Target Validation-RNA/DNA Analysis

 

Molecular Biology Spectrophotometers

 

A spectrophotometer is an instrument widely used in molecular biology and cell biology to quantify the amount of a compound in a sample by shining a beam of white light through a prism or grating to divide it into component wavelengths. Each wavelength in turn is shone through a liquid sample and the spectrophotometer measures the amount of light absorbed at each wavelength. This enables the quantification of the amount of a compound in a sample. We sell a wide range of spectrophotometers under the names UltroSpec and NovaSpec. These products are manufactured by our Biochrom subsidiary and sold primarily through our distribution arrangement with Amersham Biosciences.

 

DNA/RNA/Protein Calculators

 

A DNA/RNA/protein calculator is a bench top instrument dedicated to quantifying the amount of DNA, RNA or protein in a sample. It uses a process similar to that of a molecular biology spectrophotometer. These are sold under the names GeneQuant and GeneQuant Pro. Launched in 1993, we believe that it was the first such instrument sold. These products are manufactured by our Biochrom subsidiary and sold primarily through Amersham Biosciences.

 

Multi-Well Plate Readers

 

Multi-well plate readers are widely used for high throughput screening assays in the drug discovery process. The most common format is 96 wells. Plate readers use light to detect chemical interactions. We introduced a range of these products in 2001 beginning with absorbance readers and followed by luminescence readers.  These products are sold primarily through Amersham Biosciences.

 

Amino Acid Analysis Systems

 

An amino acid analysis system uses chromatography to separate the amino acids in a sample and then uses a chemical reaction to detect each one in turn as they flow out of the chromatography column. Amino acids are the building blocks of proteins. In June 2000, we acquired substantially all of the amino acid analysis systems business of the Biotronik subsidiary of Eppendorf-Netheler-Hinz GmbH and integrated it with the existing amino acid analysis systems business in our Biochrom subsidiary.

 

Low volume, High Throughput Liquid Dispensers

 

A liquid dispenser dispenses low volumes of liquids into high density microtitre plates used in high throughput screening processes in drug discovery.  Our unique technology enables dispensing to take place without the need for contact between the droplet and the liquid already present in the plate, thereby removing any risk of cross-contamination from the process.  We acquired Asys Hitech in December 2001 through our Biochrom subsidiary.  Asys Hitech developed and markets both the liquid dispensers and a line of OEM plate readers.

 

Target Validation-COPAS™

 

COPAS™ Systems

 

The COPAS™   system uses large bore flow cytometry and a novel proprietary technique to rapidly analyze and sort the model organisms C. elegans (worm), D. melanogaster (fly), and D. rerio (Zebra fish).  Automation of the handling of these organisms through the use of the COPAS™ system provides scientists a complete integrated solution to rapidly produce and evaluate model organisms.  In May 2001, we acquired Union Biometrica, the inventor and developer of the COPAS™ technology.

 

Target Validation-Protein Purification

 

Protein Purification Pipette Tips

 

Our proprietary PrepTip consists of a standard disposable pipette tip coated on the inside with the same chromatography media used in packed bed columns. This coating selectively binds proteins, but not the salts, detergents,

 

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