sv3
As
filed with the Securities and Exchange Commission on August 8, 2008
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
NxSTAGE MEDICAL, INC.
(Exact Name of Registrant as Specified in Its Charter)
|
|
|
Delaware
(State or Other Jurisdiction of Incorporation or Organization)
|
|
04-3454702
(I.R.S. Employer Identification Number) |
439
S. Union Street, 5th Floor, Lawrence, Massachusetts 01843
(978) 687-4700
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrants Principal Executive Offices)
Winifred L. Swan
Senior Vice President and General Counsel
NxStage Medical, Inc.
439 S. Union Street,
5th Floor
Lawrence, Massachusetts 01843
(978) 687-4700
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)
Copy to:
Sam Zucker, Esq.
OMelveny & Myers LLP
2765 Sand Hill Road
Menlo Park, California 94025
Telephone: (650) 473-2600
Fax: (650) 473-2601
Approximate date of commencement of proposed sale to the public: From time to time after this
registration statement becomes effective.
If the only securities being registered on this Form are being offered pursuant to dividend or
interest reinvestment plans, please check the following box. o
If any of the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities
offered only in connection with dividend or interest reinvestment plans, check the following
box. þ
If this Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, please check the following box and list the Securities Act
registration statement number of the earlier effective registration
statement for the same
offering. o
____
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities
Act, check the following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same
offering. o
____
If this Form is a registration statement pursuant to General Instruction I.D. or a
post-effective amendment thereto that shall become effective upon filing with the Commission
pursuant to Rule 462(e) under the Securities Act, check the following box. o
If this Form is a post-effective amendment to a registration statement filed pursuant to
General Instruction I.D. filed to register additional securities or additional classes of
securities pursuant to Rule 413(b) under the Securities Act, check the following
box. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.
|
|
|
|
|
|
|
Large accelerated filer o
|
|
Accelerated filer þ
|
|
Non-accelerated filer o
|
|
Smaller reporting company o |
|
|
|
|
(Do not check if a smaller reporting company) |
|
|
CALCULATION OF REGISTRATION FEE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Title of each class of |
|
|
|
|
|
Proposed maximum |
|
|
Proposed maximum |
|
|
|
|
|
securities to be |
|
|
Amount to be |
|
|
offering price per unit |
|
|
aggregate offering |
|
|
Amount of registration |
|
|
registered |
|
|
registered (1) |
|
|
(2) |
|
|
price (2) |
|
|
fee |
|
|
Common Stock,
$0.001 par value
per share |
|
|
9,555,556 |
|
|
$4.065 |
|
|
$38,843,335.14 |
|
|
$ |
1,526.55 |
|
|
|
Common Stock,
$0.001 par value per share,
underlying warrants |
|
|
1,911,111 |
|
|
$4.065 |
|
|
$7,768,666.22 |
|
|
$ |
305.31 |
|
|
|
(1) Pursuant to Rule 416 under the Securities Act, this registration statement also covers such
additional number of shares of common stock issuable upon stock splits, stock dividends,
distributions, recapitalizations or similar events with respect to the 9,555,556 shares of common
stock and the 1,911,111 shares of common stock issuable upon exercise of warrants being registered
pursuant to this registration statement.
(2) Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(c) under
the Securities Act, based on average of high and low price per share of the common stock as
reported on the NASDAQ Global Market on August 6, 2008.
The registrant hereby amends this registration statement on such date or dates as may be necessary
to delay its effective date until the registrant shall file a further amendment which specifically
states that this registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. Neither we nor the selling
stockholders named in this prospectus may sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to
sell these securities and is not soliciting an offer to buy these securities in any state where the
offer or sale is not permitted.
Subject
to completion, dated August 8, 2008
PROSPECTUS
11,466,667 SHARES
NxSTAGE MEDICAL, INC.
COMMON STOCK, PAR VALUE $0.001 PER SHARE
NxStage Medical, Inc. (NxStage or we) has prepared this prospectus to register for resale by
certain of our stockholders up to 11,466,667 shares of our common stock. This prospectus relates
solely to the resale of (i) up to an aggregate of 9,555,556 shares of our common stock that we sold
to certain selling stockholders pursuant to the private placement described on page 1 of this
prospectus and (ii) up to an aggregate of 1,911,111 shares of our common stock that are issuable
upon exercise of warrants to purchase common stock issued to certain selling stockholders pursuant
to the private placement described on page 1 of this prospectus.
The selling stockholders identified in this prospectus, or their permitted pledgees, donees,
transferees or other successors-in-interest, may offer the shares from time to time through public
or private transactions at prevailing market prices, at prices related to prevailing market prices
or at privately negotiated prices. We are not selling any shares of common stock and will not
receive any proceeds from the sale of the shares under this prospectus. Upon the exercise of the
warrants for 1,911,111 shares of common stock by payment of cash, however, we will receive the
exercise price of the warrants, which is initially $5.50 per share (subject to potential
adjustments to $3.00 or $6.50 per share based upon performance targets). The warrants covered by
the registration statement of which this prospectus is a part have a net exercise provision that
allows the holders to receive a reduced number of shares of our common stock, which have an
aggregate fair value equal to the total exercise price of the warrant shares being purchased upon
conversion, without paying the exercise price in cash.
We have agreed to bear all of the expenses incurred in connection with the registration of these
shares. The selling stockholders will pay or assume brokerage commissions and similar charges
incurred for the sale of these shares of our common stock.
Our common stock is listed on the NASDAQ Global Market
under the symbol NXTM. On August 6, 2008,
the reported last sale price of our common stock on the NASDAQ Global
Market was $3.88 per share.
You are urged to obtain current market quotations for the common stock.
Investing in our common stock involves a high degree of risk. See Risk Factors beginning on
page 3 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is , 2008.
TABLE OF CONTENTS
Our principal executive offices are located at 439 S. Union Street, 5th Floor,
Lawrence, Massachusetts 01843 and our telephone number at that address is (978) 687-4700.
Our website is located at www.nxstage.com. We have not incorporated by reference into this
prospectus the information on our website and you should not consider it to be a part of this
document. Our website address is included as an inactive textual reference only.
Unless the context otherwise requires, references in this prospectus to NxStage, we, us,
and our refer to NxStage Medical, Inc. and its subsidiaries.
We have not authorized anyone to provide you with information different from that contained or
incorporated by reference in this prospectus. The selling stockholders are offering to sell, and
seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of the date of this
prospectus, regardless of the time of delivery of this prospectus or of any sale of common stock.
PROSPECTUS SUMMARY
This summary highlights important features of this offering and the information included or
incorporated by reference in this prospectus. This summary does not contain all of the information
that you should consider before investing in our common stock. You should read the entire
prospectus carefully, especially the risks of investing in our common stock discussed under Risk
Factors.
Our Business
We are a medical device company that develops, manufactures and markets innovative systems for
the treatment of end-stage renal disease, or ESRD, and acute kidney failure. Our primary product,
the NxStage System One, is a small, portable, easy-to-use hemodialysis system designed to provide
physicians and patients improved flexibility in how hemodialysis therapy is prescribed and
delivered. Given its design, the System One is particularly well-suited for home hemodialysis and
more frequent, or daily, dialysis, which clinical literature suggests provides patients better
clinical outcomes and improved quality of life. The System One is specifically cleared by the
United States Food and Drug Administration, or FDA, for home hemodialysis as well as hospital and
clinic-based dialysis. We believe the largest market opportunity for our product is the home
hemodialysis market for the treatment of ESRD.
2008 Private Placement
On May 22, 2008, we entered into Securities Purchase Agreements with certain investors,
including investors affiliated with one of the directors of NxStage or hold more than 5% of our
outstanding shares of common stock. These Securities Purchase Agreements provided for the issuance
and sale by us to these investors of shares of our common stock and warrants exercisable for shares
of our common stock. Pursuant to the Securities Purchase Agreements, we agreed to sell to the
investors, and they agreed to purchase from us, in two closings, an aggregate of 9,555,556 shares
of common stock at $4.50 per share and warrants exercisable for 1,911,111 shares of common stock at
an initial exercise price of $5.50 per share (subject to potential adjustment either to $3.00 per
share or $6.50 per share depending upon whether NxStage achieves certain targets relating to the
number of ESRD patients prescribed to receive therapy with the NxStage System One as of December
31, 2008), which are exercisable from the date of grant through the earlier of (i) five years from
the grant date or (ii) the consummation of a change of control event, subject to the fulfillment of
certain terms and conditions. In the first closing of the private placement, which occurred on
May 28, 2008, an aggregate of 5,555,556 shares of our common stock and warrants to purchase
1,111,111 shares of our common stock were issued and sold by us and purchased by investors not
affiliated with NxStage or with any of NxStages officers, directors or stockholders or any party
acting for or on behalf of the foregoing. In the second closing of the private placement, which
took place on August 1, 2008, following the special meeting of NxStages stockholders during which
the stockholders approved the second closing, an aggregate of 4,000,000 shares of our common stock
and warrants to purchase 800,000 shares of our common stock were issued and sold by us and
purchased by (a) unaffiliated investors and (b) investors who are affiliates of NxStage, including
one investor affiliated with a member of our Board of Directors. Other than the different closing
dates and the stockholder approval requirement for the second closing, all other terms of the
private placement are identical in the two closings.
Forms of the Securities Purchase Agreements and the warrants issued pursuant thereto have been
filed by NxStage as exhibits to the Current Report on Form 8-K filed with the Securities and
Exchange Commission on May 23, 2008, and the above description is qualified in its entirety by
reference to these documents.
We issued these shares of common stock and the warrants in reliance on an exemption from
registration pursuant to Section 4(2) of the Securities Act of 1933, as amended, or Rule 506 of
Regulation D promulgated thereunder. We are now registering for resale under this prospectus the
shares of common stock issued to the investors in the private placement and the shares of common
stock underlying the warrants issued in the private placement.
1
THE OFFERING
|
|
|
|
|
|
Common stock offered by selling stockholders (1)
|
|
11,466,667 shares |
|
|
|
|
|
|
Use of proceeds
|
|
We will not receive any
proceeds from the sale of
the shares in the
offering. |
|
|
|
|
|
Upon the exercise of the
warrants for 1,911,111
shares of common stock by
payment of cash, however,
we will receive the
exercise price of the
warrants, which is
initially $5.50 per share
(subject to potential
adjustments to $3.00 or
$6.50 per share based
upon performance
targets). The warrants have a net exercise provision that allows
the holders to receive a reduced number of shares of common stock,
which have an aggregate fair value equal to the total exercise price
of the warrant shares being purchased upon conversion, without paying
the exercise price in cash. We have agreed
to bear all of the
expenses incurred in
connection with the
registration of these
shares. |
|
|
|
Risk Factors
|
|
See Risk Factors
beginning on page 3 and
other information
included in this
prospectus for a
discussion of factors you
should carefully consider
before deciding to invest
in the shares. |
|
|
|
|
|
|
NASDAQ Global Market symbol
|
|
NXTM |
|
|
|
(1) |
|
Consists of 9,555,556 shares of common stock held by the selling stockholders and 1,911,111
shares of common stock issuable under warrants held by the selling stockholders. |
2
RISK FACTORS
Investing in our common stock involves a high degree of risk. You should carefully consider
the risks and uncertainties described below before purchasing our common stock. The risks and
uncertainties described below are not the only ones facing our company. Additional risks and
uncertainties may also impair our business operations. If any of the following risks actually
occur, our business, financial condition or results of operations would likely suffer. In that
case, the trading price of our common stock could fall, and you may lose all or part of the money
you paid to buy our common stock.
Risks Related to our Business
We expect to derive a significant percentage of our future revenues from the rental or sale of our
System One and a limited number of other products.
Since our inception, we have devoted substantially all of our efforts to the development of
the System One and the related products used with the System One. We commenced marketing the System
One and the related disposable products to the critical care market in February 2003. We commenced
marketing the System One for chronic hemodialysis treatment in September 2004. Prior to the
acquisition of Medisystems Corporation and various related entities, collectively the MDS Entities,
nearly 100% of our revenues were derived from the rental or sale of our System One and the sale of
related disposables. Although the Medisystems acquisition broadens our product offerings, we expect
that nearly all of our revenues will be derived from the sale of a limited number of key products
primarily applicable to the dialysis business. We expect that in 2008 and in the foreseeable
future, we will continue to derive a significant percentage of our revenues from the System One,
and that we will derive the remainder of our revenues from the sale of a few key Medisystems
disposable products, including blood tubing sets and needles. To the extent that any of our primary
products is not commercially successful or is withdrawn from the market for any reason, our
revenues will be adversely impacted, and we do not have other significant products in development
that could replace these revenues.
We cannot accurately predict the size of the home hemodialysis market, and it may be smaller, and
may develop more slowly than we expect.
We believe our largest future product market opportunity is the home hemodialysis market.
However this market is presently very small and adoption of the home hemodialysis treatment options
has been limited. The most widely adopted form of dialysis therapy used in a setting other than a
dialysis clinic is peritoneal dialysis. Based on the most recently available data from the United
States Renal Data System, or USRDS, the number of patients receiving peritoneal dialysis was
approximately 26,000 in 2005, representing approximately 8% of all patients receiving dialysis
treatment for ESRD in the United States. Very few ESRD patients receive hemodialysis treatment
outside of the clinic setting. Because the adoption of home hemodialysis has been limited to date,
the number of patients who desire to, and are capable of, administering their own hemodialysis
treatment with a system such as the System One is unknown and there is limited data upon which to
make estimates. Further, the number of nephrologists and dialysis clinics able or willing to
prescribe home hemodialysis or establish and support home hemodialysis programs is also unknown.
Many dialysis clinics do not presently have the infrastructure in place to support home
hemodialysis and most dont have the infrastructure in place to support a significant home
hemodialysis patient population. Our long-term growth will depend on the number of patients who
adopt home-based hemodialysis and how quickly they adopt it, which in turn is driven by the number
of physicians willing to prescribe home hemodialysis and the number of dialysis clinics able or
willing to establish and support home hemodialysis therapies. We do not know whether the number of
home-based dialysis patients will be greater or fewer than the number of patients performing
peritoneal dialysis.
Because nearly all our home hemodialysis patients are also receiving more frequent dialysis,
meaning dialysis delivered five or more times a week, the market adoption of our System One for
home hemodialysis is also dependent upon the penetration and market acceptance of more frequent
hemodialysis. Given the increased costs associated with providing more frequent dialysis, market
acceptance will be impacted, especially for Medicare patients, at least in part by whether dialysis
clinics are able to obtain reimbursement for additional dialysis treatments provided in excess of
three times a week. Presently, we understand that a number of our customers are unable to obtain
such additional reimbursement, and that there are increased administrative burdens associated with
articulating the medical justification for treatments beyond three times per week. Both of these
facts will likely negatively impact the rate and extent of any further market expansion of our
System One for home hemodialysis. Expanding Medicare reimbursement over time to predictably cover
more frequent therapy, with less administrative burden for our customers, may be critical to our
ability to significantly expand the market penetration of the
3
System One in the home market and to grow our revenue in the future.
New regulations particularly impacting home hemodialysis technologies can also negatively
impact the rate and extent of any further market expansion of our System One for home hemodialysis.
In 2008, the Centers for Medicare and Medicaid Services released new Conditions for Coverage
applicable to our customers. Among other things, the new Conditions for Coverage impose additional
water testing requirements on our patients using our PureFlow SL product. These additional water
testing requirements increase the burden of our therapy for our patients and may impair market
adoption, especially for our PureFlow SL product. To the extent additional regulations are
introduced unique to the home environment, market adoption could be even further impaired.
Finally we are still early in the market launch of the System One for home hemodialysis. We
received our home use clearance for the System One from the FDA in June 2005 and we will need to
continue to devote significant resources to developing the market. We cannot be certain that this
market will develop, how quickly it will develop or how large it will be.
We will require significant capital to build our business, and financing may not be available to us
on reasonable terms, if at all.
We have experienced negative operating margins and cash flows from operations and we expect to
continue to incur net losses in the foreseeable future. In addition, our System One home market
relies heavily upon a rental sales model whereby a significant percentage of our home customers
rent rather than purchase System One equipment. This sales model requires significant amounts of
working capital to manufacture System One equipment for rental to dialysis clinics. Our agreement
with DaVita signed in early 2007 departs from the rental model, which helps us to conserve cash
flow. However, it is not clear whether we will be able to replicate this sales model with a
significant number of other customers in the future. In addition to these cash requirements, we
will need to begin paying down the principal in February 2009 on the debt we borrowed under our GE
credit facility.
We believe that we have the required resources to fund current operating requirements at least
through 2009. In addition, we believe, based on current projections, that we have the required
resources to fund operating requirements beyond 2009 provided that we
restructure our repayment
schedule on our current GE credit facility. Future capital requirements will depend on many
factors, including the rate of revenue growth, continued progress on improving gross margins, the
expansion of selling and marketing activities and research and
development activities, the timing and extent of expansion into new
geographies or territories, the timing of new product introductions and enhancement to existing
products, the continuing market acceptance of products, and potential investments in, or
acquisitions of complementary businesses, services or technologies. There is no assurance that
additional capital will be available to us on favorable terms, if at all.
We have limited operating experience, a history
of net losses and an accumulated deficit of $208.5 million at June 30, 2008. We cannot guarantee if, when and the extent that we will become
profitable, or that we will be able to maintain profitability once it is achieved.
Since inception,
we have incurred losses every quarter and at June 30, 2008, we had an
accumulated deficit of approximately $208.5 million. We expect to incur increasing operating
expenses as we continue to grow our business. Additionally, although we have achieved positive
gross margins for our products, in aggregate, as of June 30, 2008, we cannot provide assurance that
our gross margins will remain positive, continue to improve or, if they do improve, the rate at
which they will improve. We cannot provide assurance that we will achieve profitability, when we
will become profitable, the sustainability of profitability should it occur, or the extent to which
we will be profitable. Our ability to become profitable is dependent principally upon implementing
design and process improvements to lower our costs of manufacturing our products, accessing lower
labor cost markets for the manufacture of our products, increasing our reliability, improving our
field equipment utilization, achieving efficiencies in manufacturing and supply chain overhead
costs, achieving efficient distribution of our products, achieving a sufficient scale of
operations, and obtaining better purchasing terms and prices.
Our PureFlow SL hardware, introduced into the market in July 2006, is intended to improve our
profitability. PureFlow SL is an accessory module to the System One that allows for the preparation
of high purity dialysate in the patients home using ordinary tap water and dialysate concentrate,
allowing patients with ESRD to more conveniently and effectively manage their home hemodialysis
therapy by eliminating the need for bagged fluids. The gross margin of this product is expected to
be more favorable to NxStage than the gross margin on our bagged fluids and is an important part of
our strategy to achieve profitability. Since its launch, PureFlow SL penetration has reached
approximately 70% of all of our home patients.
4
The product is still early in its commercial launch and we continue to work to improve product
reliability, and to introduce PureFlow SL product design enhancements that will improve utilization
of disposables and user experience. Any failure to further improve reliability and user experience,
and to reduce the utilization of disposables, each of which is critical to achieving improved
margins for PureFlow SL, would impair our ability to achieve profitability. Failure to further
improve reliability will also negatively impact our distribution costs, which would adversely
affect our ability to achieve profitability.
We have completed the transition of manufacturing of our Cycler and PureFlow equipment to
Mexico and continue to transfer servicing to Mexico in order to take advantage of lower labor
costs. Any failure or unforeseen difficulties in transitioning additional servicing to Mexico or to
maintain or improve product reliability in the process, would adversely affect our ability to
achieve profitability.
We entered into a secured credit facility in November 2007, and as of June 30, 2008, we had
borrowed $30 million there under. We may not be able to borrow the full amount available under that
credit facility, and we will need to begin repaying principal on the amounts we have already
borrowed under that credit facility in February 2009. Further, if we fail to comply with all terms
and covenants under our credit agreement, we may go into default under the credit facility which
could trigger, among other things, the acceleration of all of our indebtedness there under or the
sale of our assets.
On November 21, 2007 we obtained a $50.0 million credit and security agreement from a group of
lenders led by Merrill Lynch Capital, which was acquired by GE, for a term of 42 months. The credit
facility is secured by nearly all of our assets, other than intellectual property and consists of a
$30.0 million term loan and a $20.0 million revolving credit facility. We borrowed $25.0 million
under the term loan in November 2007, and borrowed the remaining $5.0 million in March 2008. We
used $4.9 million of the proceeds from the term loan to repay all amounts owed under a term loan
dated May 15, 2006 with Silicon Valley Bank. Borrowings under the term loan bear interest equal to
LIBOR plus 6% per annum, fixed on November 21 for our first borrowings (at a rate of 10.77% per
annum) and fixed on March 25 for our second borrowings (at a rate of 8.61% per annum). Interest on
the term loan must be paid on a monthly basis. Beginning on February 1, 2009, we must repay
principal under the term loan in 29 equal monthly installments. We will also be required to pay a
maturity premium of $0.9 million at the time of loan payoff. Our borrowing capacity under the
revolving credit facility is subject to the satisfaction of certain conditions and calculation of
the borrowing amount. There is no guarantee that we will be able to borrow the full amount, or any
funds under the revolving credit facility. Any borrowings under the revolving credit facility will
bear interest at LIBOR plus 4.25% per annum. There is an unused line fee of 0.75% per annum and
descending deferred revolving credit facility commitment fees, which are charged in the event the
revolving credit facility is terminated prior to May 21, 2011 of 4% in year one, 2% in year two,
and 1% thereafter.
The credit facility includes covenants that (a) require us to achieve certain minimum net
revenue and certain minimum EBITDA targets relating to the acquired MDS Entities, (b) place
limitations on our and our subsidiaries ability to incur debt, (c) place limitations on our and
our subsidiaries ability to grant or incur liens, carry out mergers, and make investments and
acquisitions, and (d) place limitations on our and our subsidiaries ability to pay dividends, make
other restricted payments, enter into transactions with affiliates, and amend certain contracts.
The credit agreement contains customary events of default, including nonpayment, misrepresentation,
breach of covenants, material adverse effects, and bankruptcy. In the event we fail to satisfy our
covenants, or otherwise go into default, GE has a number of remedies, including sale of our assets,
control of our cash and cash equivalents, and acceleration of all outstanding indebtedness. Any of
these remedies would likely have a material adverse effect on our business.
We are required to register for resale shares of our common stock. If we fail to register the
shares or the stockholders are unable to sell their shares under the registration statement after
it becomes effective, we may be obligated to pay damages to the stockholders which could harm our
financial condition.
We recently sold an aggregate of 9,555,556 shares of our common stock and warrants to purchase
an additional 1,911,111 shares of our common stock in a private placement. We are required to
register the common stock and the common stock issuable upon exercise of the warrants with the
Securities and Exchange Commission no later than 120 days after the second closing which occurred
on August 1, 2008. If the shares are not registered within 120 days of the second closing or if
the holders of the shares sold in the first or second tranche or the accompanying warrant shares
are unable to sell such shares or warrant shares under the registration statement for more than 30
days in any 365 day period after the effectiveness of a
registration statement, we may be obligated to
pay damages equal to up to 1% of the share purchase price per month that the registration statement
is not effective or the investors are unable to sell their shares.
We compete against other dialysis equipment manufacturers with much greater financial resources and
established products and customer relationships, which may make it difficult for us to penetrate
the market and achieve significant sales of our products.
Our product lines
compete directly against products produced by Fresenius Medical Care AG, Baxter Healthcare, Gambro AB, B. Braun and others, each of which markets one or more
FDA-cleared medical devices for the treatment of acute or chronic kidney failure. Each of these
competitors offers products that have been in use for a longer time than our System One, and in
some instances many of our Medisystems products, and are more widely recognized by physicians,
patients and providers. These competitors have significantly more financial and human
resources, more established sales, service and customer support infrastructures and spend more on
product development and marketing than we do. Many of our competitors also have established
relationships with the providers of dialysis therapy and, Fresenius owns and operates a chain of
dialysis clinics.
5
The product lines of most of these companies are broader than ours, enabling them to offer a
broader bundle of products and have established sales forces and distribution channels that may
afford them a significant competitive advantage. Finally, one of our competitors, Gambro AB, has
been, until recently, subject to an import hold imposed by the FDA on its acute and chronic
dialysis machines. Since the import hold has lifted, competition from Gambro has increased, which
could impair our performance in the future in the critical care market.
The market for our products is competitive, subject to change and affected by new product
introductions and other market activities of industry participants, including increased
consolidation of ownership of clinics by large dialysis chains. If we are successful, our
competitors are likely to develop products that offer features and functionality similar to our
products, including our System One. Improvements in existing competitive products or the
introduction of new competitive products may make it more difficult for us to compete for sales,
particularly if those competitive products demonstrate better reliability, convenience or
effectiveness or are offered at lower prices. Fresenius and Baxter have each made public statements
that they are either contemplating or actively developing new and/or improved systems for home
hemodialysis. Fresenius made these statements in connection with their recent acquisition of Renal
Solutions, Inc., and Baxter made them in connection with the announcement of a research and
development collaboration with DEKA Research & Development Corporation and HHD, LLC. We are unable
to predict if or when products from these or other companies may attain regulatory clearance and
appear in the market, or how successful they may be should they be introduced, but if additional
viable products are introduced to the market, it would adversely affect our sales and growth. Our
ability to successfully market our products could also be adversely affected by pharmacological and
technological advances in preventing the progression of ESRD and/or in the treatment of acute
kidney failure or fluid overload. If we are unable to compete effectively against existing and
future competitors and existing and future alternative treatments and pharmacological and
technological advances, it will be difficult for us to penetrate the market and achieve significant
sales of our products.
The success and growth of our business will depend upon our ability to achieve expanded market
acceptance of our System One and Streamline products.
Our System One products still have limited product and brand recognition and have only been
used at a limited number of dialysis clinics and hospitals. In the home market, we have to convince
four distinct constituencies involved in the choice of dialysis therapy, namely operators of
dialysis clinics, nephrologists, dialysis nurses and patients, that our system provides an
effective alternative to other existing dialysis equipment. Each of these constituencies use
different considerations in reaching their decision. Lack of acceptance by any of these
constituencies will make it difficult for us to grow our business. We may have difficulty gaining
widespread or rapid acceptance of the System One for a number of reasons including:
|
|
|
the failure by us to demonstrate to patients, operators of dialysis clinics,
nephrologists, dialysis nurses and others that our product is equivalent or superior to
existing therapy options, or that the cost or risk associated with use of our product is
not greater than available alternatives; |
|
|
|
|
competition from products sold by companies with longer operating histories and greater
financial resources, more recognizable brand names and better established distribution
networks and relationships with dialysis clinics; |
|
|
|
|
the failure by us to continue to improve product reliability and the ease of use of our
products; |
|
|
|
|
limitations on the existing infrastructure in place to support home hemodialysis,
including without limitation, home hemodialysis training nurses, and the willingness, cost
associated with, and ability of dialysis clinics to build that infrastructure; |
|
|
|
|
the ownership and operation of some dialysis providers by companies that also
manufacture and sell competitive dialysis products; |
|
|
|
|
the introduction of competing products or treatments that may be more effective, easier
to use or less expensive than ours; |
|
|
|
|
regulations that impose additional burden on patients and their caregivers, such as the
newly adopted Medicare conditions for coverage which impose additional water testing
requirements in connection with the use of our PureFlow SL; |
6
|
|
|
the number of patients willing and able to perform therapy independently, outside of a
traditional dialysis clinic, may be smaller than we estimate; and |
|
|
|
|
the continued availability of satisfactory reimbursement from healthcare payors,
including Medicare. |
In addition, the future growth of our business depends, to a lesser degree, upon the
successful launch and market acceptance of our latest generation blood tubing set product,
Streamline. Streamline is designed to be a high-quality, high-performance blood tubing set that
promises to yield valuable savings and improved patient outcomes for those clinics that adopt it
for use. Market penetration of this product is quite limited to date, and it is not possible to
predict whether and to what extent current and future customers will elect to use this product
instead of more established or competitive blood tubing sets. If we are unable to convert customers
to the Streamline product and receive more widespread commercial acceptance of this product, our
ability to achieve our growth objectives could be impaired.
Current Medicare reimbursement rates, at three times per week, limit the price at which we can
market our home products, and adverse changes to reimbursement would likely negatively affect the
adoption or continued sale of our home products.
Our ability to attain profitability will be driven in part by our ability to set or maintain
adequate pricing for our products. As a result of legislation passed by the U.S. Congress more than
30 years ago, Medicare provides comprehensive and well-established reimbursement in the United
States for ESRD. With over 80% of U.S. ESRD patients covered by Medicare, the reimbursement rate is
an important factor in a potential customers decision to use the System One or our other products
and limits the fee for which we can rent or sell our products. Additionally, current Centers for
Medicare and Medicaid Services, or CMS, rules limit the number of hemodialysis treatments paid for
by Medicare to three times a week, unless there is medical justification for additional treatments.
Most patients using the System One in the home treat themselves, with the help of a partner, up to
six times per week. To the extent that Medicare contractors elect not to pay for the additional
treatments, adoption of the System One would likely be impaired. The determination of medical
justification must be made at the local Medicare contractor level on a case-by-case basis, based on
documentation provided by our customers. If daily therapy is prescribed, a clinics decision as to
how much it is willing to spend on dialysis equipment and services will be at least partly
dependent on whether Medicare will reimburse more than three treatments per week for the clinics
patients. In the next two years, Medicare will be switching from intermediaries to Medicare
authorized contractors. This change in the reviewing entity for Medicare claims could lead to a
change in whether a customer receives Medicare reimbursement for additional treatments. If an
adverse change to historical payment practices occurs, market adoption of our System One in the
home market may be impaired. Presently, we understand that a number of our customers are unable to
obtain additional reimbursement for more frequent therapy, and that there are increased
administrative burdens associated with articulating the medical justification for treatments beyond
three times a week. Both of these facts will likely negatively impact the rate and extent of any
further market expansion of our System One for home hemodialysis. Expanding Medicare reimbursement
over time to more predictably cover more frequent therapy, with less administrative burden for our
customers, may be critical to our ability to significantly expand the market penetration of the
System One in the home market and to our revenue growth in the future.
Additionally, any adverse changes in the rate paid by Medicare for ESRD treatments in general
would likely negatively affect demand for our products in the home market and the prices we charge
to them.
As we continue to commercialize the System One, Streamline and our other products, we may have
difficulty managing our growth and expanding our operations successfully.
As the commercial launch of the System One and Streamline continues, we will need to expand
our regulatory, manufacturing, sales and marketing and on-going development capabilities or
contract with other organizations to provide these capabilities for us. As our operations expand,
we expect that we will need to manage additional relationships with various partners, suppliers,
manufacturers and other organizations. Our ability to manage our operations and growth requires us
to continue to improve our information technology infrastructure, operational, financial and
management controls and reporting systems and procedures. Such growth could place a strain on our
administrative and operational infrastructure. We may not be able to make improvements to our
management information and control systems in an efficient or timely manner and may discover
deficiencies in existing systems and controls.
7
If we are unable to improve on the product reliability of our System One product, our ability to
grow our business and achieve profitability could be impaired.
Our System One is still early in its product launch, and our PureFlow SL hardware was only
introduced during the third quarter of 2006. We continue to experience product reliability issues
associated with these products that are higher than we expect long-term, and have led us to incur
increased service and distribution costs, as well as increase the size of our field equipment base.
This, in turn, negatively impacts our gross margins and increases our working capital requirements.
Additionally, product reliability issues can also lead to decreases in customer satisfaction and
our ability to grow or maintain our revenues. We continue to work to improve product reliability
for these products, and have achieved some improvements to date. If we are unable to continue to
improve product reliability of our System One products, our ability to achieve our growth
objectives as well as profitability could be significantly impaired.
We have a significant amount of System One field equipment, and our ability to effectively manage
this asset could negatively impact our working capital requirements and future profitability.
Because a significant percentage of our System One home care business continues to rely upon
an equipment rental model, our ability to manage System One equipment is important to minimizing
our working capital requirements. In addition, our gross margins may be negatively impacted if we
have excess equipment deployed, and unused, in the field. If we are unable to successfully track,
service and redeploy equipment, we could (1) incur increased costs, (2) realize increased cash
requirements and/or (3) have material write-offs of equipment. This barrier would negatively impact
our working capital requirements and future profitability.
Our national service provider agreement with DaVita confers certain geographic market rights to
DaVita and limits our ability to sell the System One in the home market to Fresenius, both of which
may present a barrier to adoption of the System One in the home.
Fresenius and DaVita own and operate the two largest chains of dialysis clinics in the United
States. Fresenius controls approximately 33% of the U.S. dialysis clinics and is the largest
worldwide manufacturer of dialysis systems. DaVita controls approximately 27% of the U.S. dialysis
clinics, and has entered into a preferred supplier agreement with Gambro pursuant to which Gambro
will provide a significant majority of DaVitas dialysis equipment and supplies for a period of at
least 10 years. Each of Fresenius and DaVita may choose to offer their dialysis patients only the
dialysis equipment manufactured by them or their affiliates, to offer the equipment they
contractually agreed to offer or to otherwise limit access to the equipment manufactured by
competitors.
Our recent agreement with DaVita confers certain market rights for the System One and related
supplies for home hemodialysis therapy. DaVita is granted exclusive rights in a small percentage of
geographies, which geographies collectively represent less than 10% of the U.S. ESRD patient
population, and limited exclusivity in the majority of all other U.S. geographies, subject to
DaVitas meeting certain requirements, including patient volume commitments and new patient
training rates. Under the agreement, we can continue to sell to other clinics in the majority of
geographies. If certain minimum patient numbers or training rates are not achieved, DaVita can lose
all or part of its preferred geographic rights. The agreement further limits, but does not
prohibit, the sale by NxStage of the System One for chronic home patient hemodialysis therapy to
any provider that is under common control or management of a parent entity that collectively
provides dialysis services to more than 25% of U.S. chronic dialysis patients and that also
supplies dialysis products. Therefore, our ability to sell the System One for chronic home patient
hemodialysis therapy to Fresenius is presently limited.
As
of June 30, 2008, over 40% of our home hemodialysis patients in the home
market received treatment through clinics owned by DaVita. Although we expect that DaVita will
continue to be a significant customer of ours, the agreement imposes no purchase obligations upon
DaVita and we cannot be certain whether DaVita will continue to purchase and/or rent the System One
from us in the future. We believe that any future decision by DaVita to stop or limit the use of
the System One would adversely affect our business, at least in the near term.
We rely heavily upon DaVita as a key customer for our System One and Medisystems product lines. The
partial or complete loss of DaVita as a customer would materially impair our financial results, at
least in the near term.
DaVita is our most significant customer. Sales through distributors to DaVita of products
accounted for nearly half of In-Center segment revenues in the quarter ended June 30, 2008, and
direct sales to DaVita accounted for approximately 20% of
8
our System One segment revenues in the quarter ended June 30, 2008. Our contract for Medisystems
blood tubing sets and needles with DaVita includes certain minimum order requirements; however,
these can be reduced significantly under certain circumstances. Further, DaVitas commitments to
purchase Medisystems blood tubing sets expire in September 2008. We cannot guarantee we will be
able to negotiate an extension of this agreement with DaVita on favorable terms, if at all, or the
extent to which DaVita will purchase Medisystems products. DaVitas preferred supplier agreement
with Gambro may impair our ability to obtain DaVitas blood tubing set business beyond September
2008. NxStages national service provider agreement with DaVita does not impose minimum purchase
requirements, and expires as early as the end of 2009. The partial or complete loss of DaVita as a
customer for either of these product lines would adversely affect our business, at least in the
near term. Further, given the significance of DaVita as a customer, any change in DaVitas ordering
or clinical practices can have a significant impact on our revenues, especially in the near term.
If kidney transplantation becomes a viable treatment option for more patients with ESRD, or if
medical or other solutions for renal replacement become viable, the market for our products may be
limited.
While kidney transplantation is the treatment of choice for most ESRD patients, it is not
currently a viable treatment for most patients due to the limited number of donor kidneys, the high
incidence of kidney transplant rejection and the higher surgical risk associated with older ESRD
patients. According to the most recent USRDS data, in 2004, approximately 17,000 patients received
kidney transplants in the United States. The development of new medications designed to reduce the
incidence of kidney transplant rejection, progress in using kidneys harvested from genetically
engineered animals as a source of transplants or any other advances in kidney transplantation could
limit the market for our products. The development of viable medical or other solutions for renal
replacement may also limit the market for our products.
If we are unable to convince additional hospitals and healthcare providers of the benefits of our
products for the treatment of acute kidney failure and fluid overload, we will not be successful in
increasing our market share in the critical care market.
We sell the System One for use in the treatment of acute kidney failure and fluid overload
associated with, among other conditions, congestive heart failure. Physicians currently treat most
acute kidney failure patients using conventional hemodialysis systems or dialysis systems designed
specifically for use in the intensive care unit, or ICU. We will need to convince hospitals and
healthcare providers that using the System One is as effective as using conventional hemodialysis
systems or ICU specific dialysis systems for treating acute kidney failure and that it provides
advantages over conventional systems or other ICU specific systems because of its significantly
smaller size, ease of operation and clinical flexibility. One of our competitors in the critical
care market, Gambro AB, has been subject to an FDA import hold that was recently lifted. Since the
import hold has lifted, competition from Gambro has increased, which could impair our performance
in the future in the critical care market.
We could be subject to costly and damaging product liability claims and may not be able to maintain
sufficient product liability insurance to cover claims against us.
If any of our products is found to have caused or contributed to injuries or deaths, we could
be held liable for substantial damages. Claims of this nature may also adversely affect our
reputation, which could damage our position in the market. While we maintain insurance, including
product and excess liability insurance, claims may be brought against us that could result in court
judgments or settlements in amounts that are in excess of the limits of our insurance coverage. Our
insurance policies also have various exclusions, and we may be subject to a product liability claim
for which we have no coverage. We will have to pay any amounts awarded by a court or negotiated in
a settlement that exceed our coverage limitations or that are not covered by our insurance.
Any product liability claim brought against us, with or without merit, could result in the
increase of our product liability insurance rates or the inability to secure additional insurance
coverage in the future. A product liability claim, whether meritorious or not, could be time
consuming, distracting and expensive to defend and could result in a diversion of management and
financial resources away from our primary business, in which case our business may suffer.
We maintain insurance at levels deemed adequate by management; however, future claims could exceed
our applicable insurance coverage.
We maintain insurance for property and general liability, directors and officers liability,
workers compensation, and
9
other coverage in amounts and on terms deemed adequate by management based on our expectations for
future claims. Future claims could, however, exceed our applicable insurance coverage, or our
coverage could not cover the applicable claims.
We face risks associated with having international manufacturing operations, and if we are unable
to manage these risks effectively, our business could suffer.
In addition to our operations in Massachusetts, we operate manufacturing facilities in
Germany, Italy and Mexico. We also purchase components and supplies from foreign vendors. We are
subject to a number of risks and challenges that specifically relate to these international
operations, and we may not be successful if we are unable to meet and overcome these challenges.
Significant among these risks are risks relating to foreign currency, in particular the Thai Baht,
Euro and Peso. The U.S. dollar has weakened materially against the Thai Baht and Euro over the last
five years and may continue to do so. To the extent we fail to control our exchange rate risk, our
profitability could suffer and our ability to maintain mutually beneficial and profitable
relationships with foreign vendors could be impaired. In addition to these risks, through our
international operations, we are exposed to costs associated with sourcing and shipping goods
internationally, difficulty managing operations in multiple locations and local regulations that
may restrict or impair our ability to conduct our operations.
We currently rely upon a third-party manufacturer to manufacture a significant percentage of our
blood tubing set products using our supplied components and all of our needles. Kawasumis
contractual obligation to manufacture blood tubing sets expires on January 2010 and its obligation
to supply needles expires in February 2011. In the event these agreements are not renewed or
extended upon favorable terms, if at all, or in the event we are unable to sufficiently expand our
manufacturing capabilities, or obtain alternative third party supply prior to the expiration of
these agreements, our growth and ability to meet customer demand would be impaired.
Historically, Medisystems has relied upon a third-party manufacturer, Kawasumi, to manufacture
a significant percentage of its blood tubing set products using Medisystems supplied components.
This third party has a strong history of manufacturing high-quality product for Medisystems. In May
2008, we negotiated a new agreement with Kawasumi extending their obligation to supply blood tubing
sets to us through January 31, 2010. We cannot be certain that this agreement will be renewed or
extended beyond this term on favorable terms, if at all, that we would be able to manufacture
independently the volume of products currently manufactured by Kawasumi, and therefore whether we
would have sufficient capacity to meet all of our customer demand, that we would be able to
manufacture products at the same cost at which we currently purchase products from Kawasumi or that
we could find a third party to supply blood tubing sets on favorable terms, if at all, the failure
of any of which could impair our business. We also depend solely on Kawasumi for all of our
finished goods needles. Kawasumis obligation to supply needles to us expires in February 2011. In
the event this agreement is not renewed or extended upon favorable terms, if at all, if we are
unable to manufacture comparable needles for ourselves prior to the contract expiration, or if we
are unable to obtain comparable needles from another third party on favorable terms, if at all, the
revenues and profitability of our business will be impaired.
Our In-Center business relies heavily upon third-party distributors.
We sell the majority of our In-Center products through three distributors, which collectively
accounted for substantially all of our In-Center revenues for the quarter ended June 30, 2008, with
our primary distributor, Schein, accounting for approximately 80% of In-Center revenues for the
quarter ended June 30, 2008. Schein recently agreed to extend their distribution relationship with
us through July 2009. The contracts with the other two distributors of our products are scheduled
to expire in October 2008 and July 2009. Our relationship with Schein, in particular, is very
significant for our business and any failure to continue this relationship would be harmful to our
business, because our current sales force has limited experience selling blood tubing sets or
needles.
Unless we can demonstrate sufficient product differentiation in our blood tubing set business
through Streamline or products that we introduce in the future, we will continue to be susceptible
to further pressures to reduce product pricing and more vulnerable to the loss of our blood tubing
set business to competitors in the dialysis industry.
Our blood tubing set business has historically been a commodities business. Prior to the
Medisystems acquisition, Medisystems competed favorably and gained share through the development of
a high quality, low-cost, standardized blood tubing set, which could be used on several different
dialysis machines. Our products continue to compete favorably in the dialysis blood tubing set
business, but are increasingly subject to pricing pressures, especially given recent market
10
consolidation in the U.S. dialysis services industry, with Fresenius and DaVita collectively
controlling approximately 60% of U.S. dialysis services business. Unless we can successfully
demonstrate to customers the differentiating features of the Streamline product or products that we
introduce in the future, we may be susceptible to further pressures to reduce our product pricing
and more vulnerable to the loss of our blood tubing set business to competitors in the dialysis
industry. In addition, DaVitas preferred supplier agreement with Gambro may impair our ability to
obtain DaVitas blood tubing set business beyond the expiration of our blood tubing set agreement
with DaVita that expires in September 2008.
The activities of our business involve the import of finished goods into the United States from
foreign countries, subject to customs inspections and duties, and the export of components and
certain other products from other countries into Mexico and Thailand. If we misinterpret or violate
these laws, or if laws governing our exemption from certain duties changes, we could be subject to
significant fines, liabilities or other adverse consequences.
We import into the United States disposable medical supplies from Thailand and Mexico. We also
import into the United States disposable medical components from China, Germany and Italy and
export components and assemblies into Mexico, Thailand and Italy. The import and export of these
items are subject to extensive laws and regulations with which we will need to comply. To the
extent we fail to comply with these laws or regulations, or fail to interpret our obligations
accurately, we may be subject to significant fines, liabilities and a disruption to our ability to
deliver product, which could cause our combined businesses and operating results to suffer. To the
extent there are modifications to the Generalised System of Preferences or cancellation of the
Nairobi Protocol Classification such that our products would be subject to duties, our
profitability would also be negatively impacted.
The inability to successfully integrate the operations and personnel of Medisystems and NxStage, or
any significant delay in achieving integration, could have a material adverse effect on our
business.
Integrating the operations and personnel of Medisystems and NxStage has required, and
continues to require, a significant investment of managements time and effort as well as the
investment of capital, particularly with respect to information systems. The continued successful
integration of Medisystems and NxStage will require, among other things, coordination of certain
manufacturing operations and sales and marketing operations and the integration of Medisystems
operations into our existing organization. The diversion of the attention of our senior management
and any difficulties encountered in the process of combining the companies could cause the
disruption of, or a loss of momentum in, the activities of our business. The inability to
successfully integrate the operations and personnel of Medisystems and NxStage, or any significant
delay in achieving integration, could have a material adverse effect on our business and, as a
result, on the market price of our common stock.
The success of our business depends on the services of each of our senior executives as well as
certain key engineering, scientific, manufacturing, clinical and marketing personnel, the loss of
whom could negatively affect the combined businesses.
Our success has always depended upon the skills, experience and efforts of our senior
executives and other key personnel, including our research and development and manufacturing
executives and managers. Much of our expertise is concentrated in relatively few employees, the
loss of whom for any reason could negatively affect our business. Competition for our highly
skilled employees is intense and we cannot prevent the future resignation of any employee. We
maintain key person insurance for only one of our executives, Jeffrey Burbank, our Chief Executive
Officer.
Risks Related to the Regulatory Environment
We are subject to significant regulation, primarily by the FDA. We cannot market or commercially
distribute our products without obtaining and maintaining necessary regulatory clearances or
approvals.
Our products are medical devices subject to extensive regulation in the United States, and in
foreign markets we may wish to enter. To market a medical device in the United States, approval or
clearance by the FDA is required, either through the pre-market approval process or the 510(k)
clearance process. We have obtained the FDA clearances necessary to sell our current products under
the 510(k) clearance process. Medical devices may only be promoted and sold for the indications for
which they are approved or cleared. In addition, even if the FDA has approved or cleared a product,
it can take action affecting such product approvals or clearances if serious safety or other
problems develop in the marketplace. We may be required to obtain 510(k) clearances or pre-market
approvals for additional products, product modifications, or for new
11
indications for our products. Presently, we are pursuing a nocturnal indication for the System One
under an IDE study started in the first quarter of 2008. We cannot provide assurance that this or
other clearances or approvals will be forthcoming, or, if forthcoming, what the timing and expense
of obtaining such clearances or approvals might be. Delays in obtaining clearances or approvals
could adversely affect our ability to introduce new products or modifications to our existing
products in a timely manner, which would delay or prevent commercial sales of our products.
Modifications to our marketed devices may require new regulatory clearances or pre-market
approvals, or may require us to cease marketing or recall the modified devices until clearances or
approvals are obtained.
Any modifications to a 510(k) cleared device that could significantly affect its safety or
effectiveness, or would constitute a major change in its intended use, requires the submission of
another 510(k) pre-market notification to address the change. Although in the first instance we may
determine that a change does not rise to a level of significance that would require us to make a
pre-market notification submission, the FDA may disagree with us and can require us to submit a
510(k) for a significant change in the labeling, technology, performance specifications or
materials or major change or modification in intended use, despite a documented rationale for not
submitting a pre-market notification. We have modified various aspects of our products and have
filed and received clearance from the FDA with respect to some of the changes in the design of our
products. If the FDA requires us to submit a 510(k) for any modification to a previously cleared
device, or in the future a device that has received 510(k) clearance, we may be required to cease
marketing the device, recall it, and not resume marketing until we obtain clearance from the FDA
for the modified version of the device. Also, we may be subject to regulatory fines, penalties
and/or other sanctions authorized by the Federal Food, Drug, and Cosmetic Act. In the future, we
intend to introduce new products and enhancements and improvements to existing products. We cannot
provide assurance that the FDA will clear any new product or product changes for marketing or what
the timing of such clearances might be. In addition, new products or significantly modified
marketed products could be found to be not substantially equivalent and classified as products
requiring the FDAs approval of a pre-market approval application, or PMA, before commercial
distribution would be permissible. PMAs usually require substantially more data than 510(k)
submissions and their review and approval or denial typically takes significantly longer than a
510(k) decision of substantial equivalence. Also, PMA products require approval supplements for any
change that affects safety and effectiveness before the modified device may be marketed. Delays in
our receipt of regulatory clearance or approval will cause delays in our ability to sell our
products, which will have a negative effect on our revenues growth.
Even if we obtain the necessary FDA clearances or approvals, if we or our suppliers fail to comply
with ongoing regulatory requirements our products could be subject to restrictions or withdrawal
from the market.
We are subject to the FDAs Medical Device Reporting Regulations that require us to report to
the FDA if our products may have caused or contributed to patient death or serious injury, or if
our device malfunctions and a recurrence of the malfunction would likely result in a death or
serious injury. We must also file reports of device corrections and removals and adhere to the
FDAs rules on labeling and promotion. Our failure to comply with these or other applicable
regulatory requirements could result in enforcement action by the FDA, which may include any of the
following:
|
|
|
untitled letters, warning letters, fines, injunctions and civil penalties; |
|
|
|
|
administrative detention, which is the detention by the FDA of medical devices believed
to be adulterated or misbranded; |
|
|
|
|
customer notification, or orders for repair, replacement or refund; |
|
|
|
|
voluntary or mandatory recall or seizure of our products; |
|
|
|
|
operating restrictions, partial suspension or total shutdown of production; |
|
|
|
|
refusal to review pre-market notification or pre-market approval submissions; |
|
|
|
|
rescission of a substantial equivalence order or suspension or withdrawal of a
pre-market approval; and |
|
|
|
|
criminal prosecution. |
12
Our products are subject to market withdrawals or product recalls after receiving FDA clearance or
approval, and market withdrawals and product recalls could cause the price of our stock to decline
and expose us to product liability or other claims or could otherwise harm our reputation and
financial results.
Medical devices can experience performance problems in the field that require review and
possible corrective action by us or the product manufacturer. We cannot provide assurance that
component failures, manufacturing errors, design defects and/or labeling inadequacies, which could
result in an unsafe condition or injury to the operator or the patient will not occur. These could
lead to a government mandated or voluntary recall by us. The FDA has the authority to require the
recall of our products in the event a product presents a reasonable probability that it would cause
serious adverse health consequences or death. Similar regulatory agencies in other countries have
similar authority to recall devices because of material deficiencies or defects in design or
manufacture that could endanger health. We believe that the FDA would request that we initiate a
voluntary recall if a product was defective or presented a risk of injury or gross deception. Any
recall would divert management attention and financial resources, could cause the price of our
stock to decline and expose us to product liability or other claims and harm our reputation with
customers.
If we or our contract manufacturers fail to comply with FDAs Quality System regulations, our
manufacturing operations could be interrupted, and our product sales and operating results could
suffer.
Our finished goods manufacturing processes, and those of some of our contract manufacturers,
are required to comply with the FDAs Quality System Regulations, or QSRs, which cover the
procedures and documentation of the design, testing, production, control, quality assurance,
labeling, packaging, sterilization, storage and shipping of our devices. The FDA enforces its QSRs
through periodic unannounced inspections of manufacturing facilities. We and our contract
manufacturers have been, and anticipate in the future being, subject to such inspections. Our
Lawrence, Massachusetts, U.S.A., manufacturing facility has previously had three FDA QSR
inspections. The first resulted in one observation, which was rectified during the inspection and
required no further response from us. Our last two inspections, including our most recent
inspection in March 2006, resulted in no observations. Medisystems has been inspected by the FDA on
eight occasions, and all inspections resulted in no action indicated. We cannot provide assurance
that we can maintain a comparable level of regulatory compliance in
the future at our facilities.
We cannot provide assurance that any future inspections would have the same result. If one of
our manufacturing facilities or those of any of our contract manufacturers fails to take
satisfactory corrective action in response to an adverse QSR inspection, FDA could take enforcement
action, including issuing a public warning letter, shutting down our manufacturing operations,
embargoing the import of components from outside of the United States, recalling our products,
refusing to approve new marketing applications, instituting legal proceedings to detain or seize
products or imposing civil or criminal penalties or other sanctions, any of which could cause our
business and operating results to suffer.
Changes in reimbursement for acute kidney failure could negatively affect the adoption of our
critical care products and the level of our future critical care product revenues.
Unlike Medicare reimbursement for ESRD, Medicare only reimburses healthcare providers for
acute kidney failure and fluid overload treatment if the patient is otherwise eligible for
Medicare, based on age or disability. Medicare and many other third-party payors and private
insurers reimburse these treatments provided to hospital inpatients under a traditional
diagnosis-related grouping, or DRG, system. Under this system, reimbursement is determined based on
a patients primary diagnosis and is intended to cover all costs of treating the patient. The
presence of acute kidney failure or fluid overload increases the severity of the primary diagnosis
and, accordingly, may increase the amount reimbursed. For care of these patients to be
cost-effective, hospitals must manage the longer hospitalization stays and significantly more
nursing time typically necessary for patients with acute kidney failure and fluid overload. If we
are unable to convince hospitals that our System One provides a cost-effective treatment
alternative under this diagnosis related group reimbursement system, they may not purchase our
product. In addition, changes in Medicare reimbursement rates for hospitals could negatively affect
demand for our products and the prices we charge for them.
Legislative or regulatory reform of the healthcare system may affect our ability to sell our
products profitably.
In both the United States and foreign countries, there have been legislative and regulatory
proposals to change the healthcare system in ways that could affect our ability to sell our
products profitably. The federal government and some states
13
have enacted healthcare reform legislation, and further federal and state proposals are likely. We
cannot predict the exact form this legislation may take, the probability of passage, or the
ultimate effect on us. Our business could be adversely affected by future healthcare reforms or
changes in Medicare.
Failure to obtain regulatory approval in foreign jurisdictions would prevent us from marketing our
products outside the United States.
Presently we do not sell or market the System One outside the United States and Canada, but we
intend to look to other markets in the future. Our Medisystems products are presently sold in the
United States as well as in several other countries through distributors. In order to market
directly our products in the European Union or other foreign jurisdictions, we must obtain separate
regulatory approvals and comply with numerous and varying regulatory requirements. The approval
procedure varies from country to country and can involve additional testing. The time required to
obtain approval abroad may be longer than the time required to obtain FDA clearance. The foreign
regulatory approval process includes many of the risks associated with obtaining FDA clearance and
we may not obtain foreign regulatory approvals on a timely basis, if at all. FDA clearance does not
ensure approval by regulatory authorities in other countries, and approval by one foreign
regulatory authority does not ensure approval by regulatory authorities in other foreign countries.
We may not be able to file for regulatory approvals and may not receive necessary approvals to
commercialize our products in any market outside the United States, which could negatively effect
our overall market penetration.
We currently have obligations under our contracts with dialysis clinics and hospitals to protect
the privacy of patient health information.
In the course of performing our business we obtain, from time to time, confidential patient
health information. For example, we learn patient names and addresses when we ship our System One
supplies to home hemodialysis patients. We may learn patient names and be exposed to confidential
patient health information when we provide training on our products to our customers staff. Our
home hemodialysis patients may also call our customer service representatives directly and, during
the call, disclose confidential patient health information. U.S. Federal and state laws protect the
confidentiality of certain patient health information, in particular individually identifiable
information, and restrict the use and disclosure of that information. At the federal level, the
Department of Health and Human Services promulgated health information and privacy and security
rules under the Health Insurance Portability and Accountability Act of 1996, or HIPAA. At this
time, we are not a HIPAA covered entity and consequently are not directly subject to HIPAA.
However, we have entered into several business associate agreements with covered entities that
contain commitments to protect the privacy and security of patients health information and, in
some instances, require that we indemnify the covered entity for any claim, liability, damage, cost
or expense arising out of or in connection with a breach of the agreement by us. If we were to
violate one of these agreements, we could lose customers and be exposed to liability and/or our
reputation and business could be harmed. In addition, conduct by a person that is not a covered
entity could potentially be prosecuted under aiding and abetting or conspiracy laws if there is an
improper disclosure or misuse of patient information.
Many state laws apply to the use and disclosure of health information, which could affect the
manner in which we conduct our business. Such laws are not necessarily preempted by HIPAA, in
particular those laws that afford greater protection to the individual than does HIPAA. Such state
laws typically have their own penalty provisions, which could be applied in the event of an
unlawful action affecting health information.
We are subject to federal and state laws prohibiting kickbacks and false and fraudulent claims
which, if violated, could subject us to substantial penalties. Additionally, any challenges to or
investigation into our practices under these laws could cause adverse publicity and be costly to
respond to, and thus could harm our business.
The Medicare/ Medicaid anti-kickback laws, and several similar state laws, prohibit payments
that are intended to induce physicians or others either to refer patients or to acquire or arrange
for or recommend the acquisition of healthcare products or services. These laws affect our sales,
marketing and other promotional activities by limiting the kinds of financial arrangements,
including sales programs, we may have with hospitals, physicians or other potential purchasers or
users of medical devices. In particular, these laws influence, among other things, how we structure
our sales and rental offerings, including discount practices, customer support, education and
training programs and physician consulting and other service arrangements. Although we seek to
structure such arrangements in compliance with applicable requirements, these laws are broadly
written, and it is often difficult to determine precisely how these laws will be applied in
specific circumstances. If one of our sales representatives were to offer an inappropriate
inducement to purchase our products to a customer, we could
14
be subject to a claim under the Medicare/ Medicaid anti-kickback laws.
Other federal and state laws generally prohibit individuals or entities from knowingly
presenting, or causing to be presented, claims for payments from Medicare, Medicaid or other
third-party payors that are false or fraudulent, or for items or services that were not provided as
claimed. Although we do not submit claims directly to payors, manufacturers can be held liable
under these laws if they are deemed to cause the submission of false or fraudulent claims by
providing inaccurate billing or coding information to customers, or through certain other
activities. In providing billing and coding information to customers, we make every effort to
ensure that the billing and coding information furnished is accurate and that treating physicians
understand that they are responsible for all billing and prescribing decisions, including the
decision as to whether to order dialysis services more frequently than three times per week.
Nevertheless, we cannot provide assurance that the government will regard any billing errors that
may be made as inadvertent or that the government will not examine our role in providing
information to our customers concerning the benefits of daily therapy. Anti-kickback and false
claims laws prescribe civil, criminal and administrative penalties for noncompliance, which can be
substantial. Moreover, an unsuccessful challenge or investigation into our practices could cause
adverse publicity, and be costly to respond to, and thus could harm our business and results of
operations.
Foreign governments tend to impose strict price controls, which may adversely affect our future
profitability.
Although we have not initiated any marketing efforts in jurisdictions outside of the United
States and Canada, we intend in the future to market our products in other markets. Certain
products of ours are distributed outside the United States and Canada via distributors and
customers. In some foreign countries, particularly in the European Union, the pricing of medical
devices is subject to governmental control. In these countries, pricing negotiations with
governmental authorities can take considerable time after the receipt of marketing approval for a
product. To obtain reimbursement or pricing approval in some countries, we may be required to
supply data that compares the cost-effectiveness of our products to other available therapies. If
reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at
unsatisfactory levels, it may not be profitable to sell our products outside of the United States,
which would negatively affect the long-term growth of our business.
Our business activities involve the use of hazardous materials, which require compliance with
environmental and occupational safety laws regulating the use of such materials. If we violate
these laws, we could be subject to significant fines, liabilities or other adverse consequences.
Our research and development programs as well as our manufacturing operations involve the
controlled use of hazardous materials. Accordingly, we are subject to federal, state and local laws
governing the use, handling and disposal of these materials. Although we believe that our safety
procedures for handling and disposing of these materials comply in all material respects with the
standards prescribed by state and federal regulations, we cannot completely eliminate the risk of
accidental contamination or injury from these materials. In the event of an accident or failure to
comply with environmental laws, we could be held liable for resulting damages, and any such
liability could exceed our insurance coverage.
Risks Related to Operations
We obtain some of our raw materials or components from a single source or a limited group of
suppliers. We also obtain sterilization services from a single supplier. The partial or complete
loss of one of these suppliers could cause significant production delays, an inability to meet
customer demand and a substantial loss in revenues.
We depend on a number of single-source suppliers for some of the raw materials and components
we use in its products. We also obtain sterilization services from a single supplier. Presently, B.
Braun Avitum AG is our only supplier of bicarbonate-based dialysate used with the System One;
Membrana GmbH is our only supplier of the fiber used in our filters; PISA is our sole supplier of
lactate-based dialysate, and Kawasumi is our only supplier of needles. We also obtain certain other
components from other single source suppliers or a limited group of suppliers. Our dependence on
single source suppliers of components, subassemblies and finished goods exposes us to several
risks, including disruptions in supply, price increases, late deliveries, and an inability to meet
customer demand. This could lead to customer dissatisfaction, damage to our reputation, or
customers switching to competitive products. Any interruption in supply could be particularly
damaging to our customers using the System One to treat chronic ESRD and who need access to the
System One and related disposables.
Finding alternative sources for these components and subassemblies would be difficult in many
cases and may entail a
15
significant amount of time and disruption. In the
case of Membrana,
for fiber, we are contractually prevented from obtaining an alternative source of supply, except in
certain limited instances. In the case of other suppliers, we would need to change the components
or subassemblies if we sourced them from an alternative supplier. This, in turn, could require a
redesign of our System One or other products and, potentially, further FDA clearance or approval of
any modification, thereby causing further costs and delays.
Resin is a key input material to the manufacture of our products and System One cartridge. Rising
oil prices affect both the pricing and availability of this material. Continued escalation of oil
prices could affect our ability to obtain sufficient supply of resin at the prices we need to
manufacture our products at current rates of profitability.
We currently source resin from a small number of suppliers. Rising oil prices over the last
several years have resulted in significant price increases for this material. We cannot guarantee
that prices will not continue to increase. Our contracts with customers restrict our ability to
immediately pass on these price increases, and we cannot guarantee that future pricing to customers
will be sufficient to accommodate increasing input costs.
Distribution costs represent a significant percentage of our overall costs, and these costs are
dependent upon fuel prices. Increases in fuel prices could lead to increases in our distribution
costs, which, in turn, could impair our ability to achieve profitability.
We currently incur significant inbound and outbound distribution costs. Our distribution costs
are dependent upon fuel prices. Further increases in fuel prices could lead to increases in our
distribution costs, which could impair our ability to achieve profitability.
We have labor agreements with our production employees in Italy and in Mexico. We cannot guarantee
that we will not in the future face strikes, work stoppages, work slowdowns, grievances,
complaints, claims of unfair labor practices, other collective bargaining disputes or in Italy,
anti-union behavior, that may cause production delays and negatively impact our ability to deliver
our products on a timely basis.
MDS Italy has a national labor contract with Contratto collettivo nazionale di lavoro per gli
addetti allindustria della gomma cavi elettrici ed affini e allindustria delle materie plastiche,
and MDS Mexico has entered into a collective bargaining agreement with a Union named Mexico Moderno
de Trabajadores de la Baja California C.R.O.C. Medisystems has not to date experienced strikes,
work stoppages, work slowdowns, grievances, complaints, claims of unfair labor practices, other
collective bargaining disputes, or in Italy, anti-union behavior, however we cannot guarantee that
we will not be subject to such activity in the future. Any such activity would likely cause
production delays, and negatively affect our ability to deliver our production commitments to
customers, which could adversely affect our reputation and cause our combined businesses and
operating results to suffer. Additionally, some of our key single source suppliers have labor
agreements. We cannot guarantee that we will not have future disruptions, which could adversely
affect our reputation and cause our business and operating results to suffer.
We do not have long-term supply contracts with many of our third-party suppliers.
We purchase raw materials and components from third-party suppliers, including some single
source suppliers, through purchase orders and do not have long-term supply contracts with many of
these third-party suppliers. Many of our third-party suppliers, therefore, are not obligated to
perform services or supply products for any specific period, in any specific quantity or at any
specific price, except as may be provided in a particular purchase order. We do not maintain large
volumes of inventory from most of our suppliers. If we inaccurately forecast demand for finished
goods, our ability to meet customer demand could be delayed and our competitive position and
reputation could be harmed. In addition, if we fail to effectively manage our relationships with
these suppliers, we may be required to change suppliers, which would be time consuming and
disruptive and could lead to disruptions in product supply, which could permanently impair our
customer base and reputation.
Certain of our products are recently developed and we have recently transitioned the manufacturing
of certain of these products to new locations. We, and certain of our third party manufacturers,
have limited manufacturing experience with these products.
We continue to develop new products and make improvements to existing products. We have also
recently relocated the manufacture of certain of our products to Mexico. As such, we and certain of
our third party manufacturers, have limited
16
manufacturing experience with certain of our products, including key products such as the PureFlow
SL, related disposables and our Streamline. We are, therefore, more exposed to risks relating to
product quality and reliability until the manufacturing processes for these new products mature.
Risks Related to Intellectual Property
If we are unable to protect our intellectual property and prevent its use by third parties, we will
lose a significant competitive advantage.
We rely on patent protection, as well as a combination of copyright, trade secret and
trademark laws to protect our proprietary technology and prevent others from duplicating our
products. However, these means may afford only limited
protection and may not:
|
|
|
prevent our competitors from duplicating our products; |
|
|
|
|
prevent our competitors from gaining access to our proprietary information and
technology; or |
|
|
|
|
permit us to gain or maintain a competitive advantage. |
Any of our patents, including those we license, may be challenged, invalidated, circumvented
or rendered unenforceable. We cannot provide assurance that we will be successful should one or
more of our patents be challenged for any reason. If our patent claims are rendered invalid or
unenforceable, or narrowed in scope, the patent coverage afforded our products could be impaired,
which could make our products less competitive.
As of June 30, 2008, we had 44 pending patent applications, including foreign, international
and U.S. applications, and 34 U.S. and international issued patents. Under our license agreement
with DSU Medical Corporation, we also license approximately 100 pending patent applications, including foreign,
international and U.S. applications, and approximately 30 U.S. and international issued patents. We cannot
specify which of these patents individually or as a group will permit us to gain or maintain a
competitive advantage. We cannot provide assurance that any pending or future patent applications
we hold will result in an issued patent or that if patents are issued to us, that such patents will
provide meaningful protection against competitors or against competitive technologies. The issuance
of a patent is not conclusive as to its validity or enforceability. The United States federal
courts or equivalent national courts or patent offices elsewhere may invalidate our patents or find
them unenforceable. Competitors may also be able to design around our patents. Our patents and
patent applications cover particular aspects of our products. Other parties may develop and obtain
patent protection for more effective technologies, designs or methods for treating kidney failure.
If these developments were to occur, it would likely have an adverse effect on our sales.
The laws of foreign countries may not protect our intellectual property rights effectively or
to the same extent as the laws of the United States. If our intellectual property rights are not
adequately protected, we may not be able to commercialize our technologies, products or services
and our competitors could commercialize similar technologies, which could result in a decrease in
our revenues and market share.
Our products could infringe the intellectual property rights of others, which may lead to
litigation that could itself be costly, could result in the payment of substantial damages or
royalties, and/or prevent us from using technology that is essential to our products.
The medical device industry in general has been characterized by extensive litigation and
administrative proceedings regarding patent infringement and intellectual property rights. Products
to provide kidney replacement therapy have been available in the market for more than 30 years and
our competitors hold a significant number of patents relating to kidney replacement devices,
therapies, products and supplies. Although no third party has threatened or alleged that our
products or methods infringe their patents or other intellectual property rights, we cannot provide
assurance that our products or methods do not infringe the patents or other intellectual property
rights of third parties. If our business is successful, the possibility may increase that others
will assert infringement claims against us.
Infringement and other intellectual property claims and proceedings brought against us,
whether successful or not, could result in substantial costs and harm to our reputation. Such
claims and proceedings can also distract and divert management and key personnel from other tasks
important to the success of the business. In addition, intellectual property litigation or
17
claims could force us to do one or more of the following:
|
|
|
cease selling or using any of our products that incorporate the asserted intellectual
property, which would adversely affect our revenues; |
|
|
|
|
pay substantial damages for past use of the asserted intellectual property; |
|
|
|
|
obtain a license from the holder of the asserted intellectual property, which license
may not be available on reasonable terms, if at all and which could reduce profitability;
and |
|
|
|
|
redesign or rename, in the case of trademark claims, our products to avoid infringing
the intellectual property rights of third parties, which may not be possible and could be
costly and time-consuming if it is possible to do so. |
Confidentiality agreements with employees and others may not adequately prevent disclosure of trade
secrets and other proprietary information.
In order to protect our proprietary technology and processes, we also rely in part on
confidentiality agreements with our corporate partners, employees, consultants, outside scientific
collaborators and sponsored researchers, advisors and others. These agreements may not effectively
prevent disclosure of confidential information and trade secrets and may not provide an adequate
remedy in the event of unauthorized disclosure of confidential information. In addition, others may
independently discover or reverse engineer trade secrets and proprietary information, and in such
cases we could not assert any trade secret rights against such party. Costly and time consuming
litigation could be necessary to enforce and determine the scope of our proprietary rights, and
failure to obtain or maintain trade secret protection could adversely affect our competitive
position.
We may be subject to damages resulting from claims that our employees or we have wrongfully used or
disclosed alleged trade secrets of other companies.
Many of our employees were previously employed at other medical device companies focused on
the development of dialysis products, including our competitors. Although no claims against us are
currently pending, we may be subject to claims that these employees or we have inadvertently or
otherwise used or disclosed trade secrets or other proprietary information of their former
employers. Litigation may be necessary to defend against these claims. If we fail in defending such
claims, in addition to paying monetary damages, we may lose valuable intellectual property rights.
Even if we are successful in defending against these claims, litigation could result in substantial
costs, damage to our reputation and be a distraction to management.
Risks Related to our Common Stock
Our stock price is likely to be volatile, and the market price of our common stock may drop.
The market price of our common stock could be subject to significant fluctuations. Market
prices for securities of early stage companies have historically been particularly volatile. As a
result of this volatility, you may not be able to sell your common stock at or above the price you
paid for the stock. Some of the factors that may cause the market price of our common stock to
fluctuate include:
|
|
|
timing of market acceptance of our products; |
|
|
|
|
timing of achieving profitability and positive cash flow from operations; |
|
|
|
|
changes in estimates of our financial results or recommendations by securities analysts
or the failure to meet or exceed securities analysts expectations; |
|
|
|
|
actual or anticipated variations in our quarterly operating results; |
|
|
|
|
future debt or equity financings; |
|
|
|
|
developments or disputes with key vendors or customers; |
|
|
|
|
disruptions in product supply for any reason, including product recalls, our failure to
appropriately forecast supply |
18
|
|
|
or demand, difficulties in moving products across the border, or the failure of third party
suppliers to produce needed products or components; |
|
|
|
|
reports by officials or health or medical authorities, the general media or the FDA
regarding the potential benefits of the System One or of similar dialysis products
distributed by other companies or of daily or home dialysis; |
|
|
|
|
announcements by the FDA of non-clearance or non-approval of our products, or delays in
the FDA or other foreign regulatory agency review process; |
|
|
|
|
product recalls; |
|
|
|
|
regulatory developments in the United States and foreign countries; |
|
|
|
|
changes in third-party healthcare reimbursements, particularly a decline in the level of
Medicare reimbursement for dialysis treatments; |
|
|
|
|
litigation involving our company or our general industry or both; |
|
|
|
|
announcements of technical innovations or new products by us or our competitors; |
|
|
|
|
developments or disputes concerning our patents or other proprietary rights; |
|
|
|
|
our ability to manufacture and supply our products to commercial standards; |
|
|
|
|
significant acquisitions, strategic partnerships, joint ventures or capital commitments
by us or our competitors; |
|
|
|
|
departures of key personnel; and |
|
|
|
|
investors general perception of our company, our products, the economy and general
market conditions. |
The stock markets in general have experienced substantial volatility that has often been
unrelated to the operating performance of individual companies. These broad market fluctuations may
adversely affect the trading price of our common stock.
In the past, following periods of volatility in the market price of a companys securities,
stockholders have often instituted class action securities litigation against those companies. Such
litigation, if instituted, could result in substantial costs and diversion of management attention
and resources, which could significantly harm our profitability and reputation.
Anti-takeover provisions in our restated certificate of incorporation and amended and restated
bylaws and under Delaware law could make an acquisition of us more difficult and may prevent
attempts by our stockholders to replace or remove our current management.
Provisions in our restated certificate of incorporation and our amended and restated bylaws
may delay or prevent an acquisition of us. In addition, these provisions may frustrate or prevent
attempts by our stockholders to replace or remove members of our board of directors. Because our
board of directors is responsible for appointing the members of our management team, these
provisions could in turn affect any attempt by our stockholders to replace current members of our
management team. These provisions include:
|
|
|
a prohibition on actions by our stockholders by written consent; |
|
|
|
|
the ability of our board of directors to issue preferred stock without stockholder
approval, which could be used to institute a poison pill that would work to dilute the
stock ownership of a potential hostile acquirer, effectively preventing acquisitions that
have not been approved by our board of directors; |
19
|
|
|
advance notice requirements for nominations of directors or stockholder proposals; and |
|
|
|
|
the requirement that board vacancies be filled by a majority of our directors then in
office. |
In addition, because we are incorporated in Delaware, we are governed by the provisions of
Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess of
15% of our outstanding voting stock from merging or combining with us for a period of three years
after the date of the transaction in which the person acquired in excess of 15% of our outstanding
voting stock, unless the merger or combination is approved in a prescribed manner. These provisions
would apply even if the offer may be considered beneficial by some stockholders.
If there are substantial sales of our common stock in the market by our existing stockholders, our
stock price could decline.
If our existing stockholders sell a large number of shares of our common stock or the public
market perceives that existing stockholders might sell shares of common stock, the market price of
our common stock could decline significantly. We have 46,443,487 shares of common stock outstanding
as of August 1, 2008. Shares held by our affiliates may only be sold in compliance with the volume
limitations of Rule 144. These volume limitations restrict the number of shares that may be sold by
an affiliate in any three-month period to the greater of 1% of the number of shares then
outstanding, which approximates 464,435 shares, or the average weekly trading volume of our common
stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to
the sale.
At
August 1, 2008, subject to certain conditions, holders of an aggregate of approximately
24,280,888 shares of our common stock have rights with respect to the registration of these shares
of common stock with the Securities and Exchange Commission, or SEC. If we register their shares
of common stock following the expiration of the lock-up agreements, they can sell those shares in
the public market.
As of June 30, 2008, 7,264,654 shares of common stock are authorized for issuance under our
stock incentive plan, employee stock purchase plan and outstanding stock options. As of June 30,
2008, 5,341,189 shares were subject to outstanding options, of which
2,378,688 were exercisable
and which can be freely sold in the public market upon issuance, subject to the lock-up agreements
referred to above and the restrictions imposed on our affiliates under Rule 144.
Our costs have increased significantly as a result of operating as a public company, and our
management is required to devote substantial time to comply with public company regulations.
As a public company, we incur significant legal, accounting and other expenses that we did not
incur as a private company. In addition, the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act,
as well as new rules subsequently implemented by the SEC and the NASDAQ Global Market, have imposed
various new requirements on public companies, including changes in corporate governance practices.
Our management and other personnel now need to devote a substantial amount of time to these new
requirements. Moreover, these rules and regulations increase our legal and financial compliance
costs and make some activities more time-consuming and costly.
In addition, the Sarbanes-Oxley Act requires, among other things, that we maintain effective
internal controls for financial reporting and disclosure controls and procedures. In particular, we
must perform system and process evaluation and testing of our internal controls over financial
reporting to allow management and our independent registered public accounting firm to report on
the effectiveness of our internal controls over financial reporting, as required by Section 404 of
the Sarbanes-Oxley Act. Our compliance with Section 404 will require that we incur substantial
accounting expense and expend significant management efforts. By the end of this year, our
independent registered public accounting firm must report on the effectiveness of our internal
controls over financial reporting for the businesses we acquired in the Medisystems acquisition. If
we are not able to comply with the requirements of Section 404 in a timely manner, or if we or our
independent registered public accounting firm identify deficiencies in our internal controls over
financial reporting that are deemed to be material weaknesses, the market price of our stock could
decline and we could be subject to sanctions or investigations by the NASDAQ Global Market, SEC or
other regulatory authorities.
20
We do not anticipate paying cash dividends, and accordingly stockholders must rely on stock
appreciation for any return on their investment in us.
We anticipate that we will retain our earnings for future growth and therefore do not
anticipate paying cash dividends in the future. As a result, only appreciation of the price of our
common stock will provide a return to investors. Investors seeking cash dividends should not invest
in our common stock.
Our executive officers, directors and current and principal stockholders own a large percentage of
our voting common stock and could limit new stockholders influence on corporate decisions or could
delay or prevent a change in corporate control.
Our directors, executive officers and current holders of more than 5% of our outstanding
common stock, together with their affiliates and related persons, beneficially own, in the
aggregate, approximately 65% of our outstanding common stock. David S. Utterberg, one of our
directors, holds approximately 18% of our outstanding common stock. As a result, these
stockholders, if acting together, may have the ability to determine the outcome of matters
submitted to our stockholders for approval, including the election and removal of directors and any
merger, consolidation or sale of all or substantially all of our assets and other extraordinary
transactions. The interests of this group of stockholders may not always coincide with our
corporate interests or the interests of other stockholders, and they may act in a manner with which
you may not agree or that may not be in the best interests of other stockholders. This
concentration of ownership may have the effect of:
|
|
|
delaying, deferring or preventing a change in control of our company; |
|
|
|
|
entrenching our management and/or board; |
|
|
|
|
impeding a merger, consolidation, takeover or other business combination involving our
company; or |
|
|
|
|
discouraging a potential acquirer from making a tender offer or otherwise attempting to
obtain control of our company. |
We may grow through additional acquisitions, which could dilute our existing shareholders and could
involve substantial integration risks.
As part of our business strategy, we may acquire other businesses and/or technologies in the
future. We may issue equity securities as consideration for future acquisitions that would dilute
our existing stockholders, perhaps significantly depending on the terms of the acquisition. We may
also incur additional debt in connection with future acquisitions, which, if available at all, may
place additional restrictions on our ability to operate our business. Acquisitions may involve a
number of risks, including:
|
|
|
difficulty in transitioning and integrating the operations and personnel of the acquired
businesses, including different and complex accounting and financial reporting systems; |
|
|
|
|
potential disruption of our ongoing business and distraction of management; |
|
|
|
|
potential difficulty in successfully implementing, upgrading and deploying in a timely
and effective manner new operational information systems and upgrades of our finance,
accounting and product distribution systems; |
|
|
|
|
difficulty in incorporating acquired technology and rights into our products and
technology; |
|
|
|
|
unanticipated expenses and delays in completing acquired development projects and
technology integration; |
|
|
|
|
management of geographically remote units both in the United States and internationally; |
|
|
|
|
impairment of relationships with partners and customers; |
|
|
|
|
customers delaying purchases of our products pending resolution of product integration
between our existing and |
21
|
|
|
our newly acquired products; |
|
|
|
|
entering markets or types of businesses in which we have limited experience; |
|
|
|
|
potential loss of key employees of the acquired company; and |
|
|
|
|
inaccurate assumptions of acquired companys product quality and/or product reliability. |
As a result of these and other risks, we may not realize anticipated benefits from our
acquisitions. Any failure to achieve these benefits or failure to successfully integrate acquired
businesses and technologies could seriously harm our business.
Purchase accounting treatment of acquisitions could decrease our net income in the foreseeable
future, which could have a material and adverse effect on the market value of our common stock.
Under U.S. generally accepted accounting principals, we account for acquisitions using the
purchase method of accounting. Under purchase accounting, we record the consideration issued in
connection with the acquisition and the amount of direct transaction costs as the cost of acquiring
the company or business. We allocate that cost to the individual assets acquired and liabilities
assumed, including various identifiable intangible assets such as acquired technology, acquired
trade names and acquired customer relationships based on their respective fair values. Intangible
assets generally will be amortized over a three to fifteen year period. Goodwill and certain
intangible assets with indefinite lives are not subject to amortization but are subject to at least
an annual impairment analysis, which may result in an impairment charge if the carrying value
exceeds their implied fair value. These potential future amortization and impairment charges may
significantly reduce net income, if any, and therefore may adversely affect the market value of our
common stock.
22
SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION
This prospectus includes and incorporates forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of
the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements, other than
statements of historical facts, included or incorporated in this prospectus regarding our strategy,
future operations, financial position, future revenues, projected costs, prospects, plans and
objectives of management are forward-looking statements. The words anticipates, believes,
estimates, expects, intends, may, plans, projects, will, would and similar
expressions are intended to identify forward-looking statements, although not all forward-looking
statements contain these identifying words. We cannot guarantee that we actually will achieve the
plans, intentions or expectations disclosed in our forward-looking statements and you should not
place undue reliance on our forward-looking statements. Actual results or events could differ
materially from the plans, intentions and expectations disclosed in the forward-looking statements
we make. We have included important factors in the cautionary statements included or incorporated
in this prospectus, particularly under the heading Risk Factors, that we believe could cause
actual results or events to differ materially from the forward-looking statements that we make. Our
forward-looking statements do not reflect the potential impact of any future acquisitions, mergers,
dispositions, joint ventures or investments we may make. Any such forward-looking statements
represent managements views as of the date of the document in which such forward-looking statement
is contained. While we may elect to update such forward-looking statements at some point in the
future, we disclaim any obligation to do so, even if subsequent events cause our views to change.
23
USE OF PROCEEDS
We are filing the registration statement of which this prospectus is a part to permit holders
of the shares of our common stock described in the section entitled Selling Stockholders to
resell such shares. We will not receive any proceeds from the resale of shares by the selling
stockholders.
Of the 11,466,667 shares of common stock covered by the registration statement of which this
prospectus is a part, 1,911,111 shares are, prior to their resale pursuant to this prospectus,
issuable upon exercise of warrants. We may receive the exercise price upon cash exercise of such
warrants, which have an initial exercise price of $5.50 per share (subject to potential adjustments
to $3.00 or $6.50 per share based upon performance targets), or approximately $10,511,111 in the
aggregate. The warrants have a net exercise provision that allows the
holders to receive a reduced number of shares of common stock, which
have an aggregate fair value equal to the total exercise price of the
warrant shares being purchased upon conversion, without paying the
exercise price in cash. We have agreed to bear all of the expenses incurred in connection with the registration
of these shares. To the extent we receive any cash upon any exercise of warrants, we expect to use
that cash for general corporate purposes.
24
SELLING STOCKHOLDERS
The following table sets forth the number of shares beneficially owned by each selling
stockholder and certain other information regarding such stockholders, as of immediately after the
second closing of our private placement, which took place on August 1, 2008. Other than as
footnoted below and as described herein, none of the selling stockholders has had a material
relationship with us within the past three years other than as a result of their ownership of our
securities. The shares offered by this prospectus may be offered from time to time by each selling
stockholder. The following table assumes that each selling stockholder will sell all of the shares
being offered for their respective accounts by this prospectus. However, we are unable to determine
the exact number of shares that actually will be sold. We do not know how long the selling
stockholders will hold the shares of our common stock before selling them and we currently have no
agreements, arrangements or understandings with any of the selling stockholders regarding the sale
of any of the shares of our common stock. The information in the table below is current only as of
the date of this prospectus. If any of the selling stockholders identified below transfers some or
all of such stockholders securities to a pledgee, donee, transferee or other
successor-in-interest, we may be required to file a prospectus supplement or a post-effective
amendment to the registration statement of which this prospectus is a part.
In the following table, beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission, or SEC, and includes voting or investment power with respect to
shares. Except as otherwise indicated in the footnotes below, we believe that each of the selling
stockholders named in this table has sole voting and investment power over the shares of our common
stock indicated.
In determining the number of shares of our common stock beneficially owned by a selling
stockholder and the percentage ownership of such selling stockholder, we include any shares as to
which the selling stockholder has sole or shared voting power or investment power. In addition,
any shares subject to warrants, options or other convertible securities held by such selling
stockholder that are immediately exercisable or exercisable within 60 days of June 24, 2008,
including the warrants issued in the private placement, are considered outstanding and beneficially
owned by a selling stockholder who holds those warrants, options or other convertible securities
for the purpose of computing the percentage ownership of that selling stockholder but are not
treated as outstanding for the purpose of computing the percentage ownership of any other selling
stockholder.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
|
|
|
Shares |
|
Number of |
|
|
|
|
Beneficially |
|
Shares |
|
Shares Owned After |
|
|
Owned Prior |
|
Registered for |
|
Sale of Registered |
Selling Stockholders |
|
to Offering (1) |
|
Sale (2) |
|
Shares (1)(2) |
|
|
|
|
|
|
|
|
|
|
Number |
|
Percentage(3) |
Caduceus Private Investments III, LP(a) |
|
|
6,603,774 |
(4) |
|
|
6,603,774 |
(4) |
|
|
0 |
|
|
|
* |
|
OrbiMed Associates III, LP(b) |
|
|
62,893 |
(5) |
|
|
62,893 |
(5) |
|
|
0 |
|
|
|
* |
|
Sprout Capital VII, L.P.(c) |
|
|
1,003,079 |
(6) |
|
|
172,642 |
(6) |
|
|
830,437 |
|
|
|
1.8 |
% |
Sprout Capital VIII, L.P.(c) |
|
|
2,546,276 |
(7) |
|
|
438,242 |
(7) |
|
|
2,108,034 |
|
|
|
4.5 |
% |
Sprout Capital IX, L.P.(c) |
|
|
2,850,078 |
(8) |
|
|
490,531 |
(8) |
|
|
2,359,547 |
|
|
|
5.1 |
% |
Sprout CEO Fund, L.P.(c) |
|
|
11,674 |
(9) |
|
|
2,008 |
(9) |
|
|
9,666 |
|
|
|
* |
|
Sprout Entrepreneurs Fund, L.P.(c) |
|
|
11,356 |
(10) |
|
|
1,954 |
(10) |
|
|
9,402 |
|
|
|
* |
|
Sprout Venture Capital, L.P.(c) |
|
|
152,819 |
(11) |
|
|
26,302 |
(11) |
|
|
126,517 |
|
|
|
* |
|
Sprout IX Plan Investors, L.P.(c) |
|
|
135,357 |
(12) |
|
|
23,296 |
(12) |
|
|
112,061 |
|
|
|
* |
|
Sprout Plan Investors, L.P.(c) |
|
|
57,015 |
(13) |
|
|
9,812 |
(13) |
|
|
47,203 |
|
|
|
* |
|
DLJ ESC II, L.P.(c) |
|
|
163,644 |
(14) |
|
|
28,164 |
(14) |
|
|
135,480 |
|
|
|
* |
|
DLJ Capital Corporation(c) |
|
|
208,560 |
(15) |
|
|
33,715 |
(15) |
|
|
174,845 |
|
|
|
* |
|
MFS Variable Insurance Trust, on behalf of one of its
series, MFS Core Equity Series (VVSK)(d) |
|
|
121,936 |
(16) |
|
|
40,596 |
(16) |
|
|
81,340 |
|
|
|
* |
|
MFS Variable Insurance Trust II, on behalf of one of its
series, MFS Core Equity Portfolio (RGS)(d) |
|
|
246,127 |
(17) |
|
|
81,857 |
(17) |
|
|
164,270 |
|
|
|
* |
|
MFS Series Trust I, on behalf of one of its series, MFS
Core Equity Fund (RGI)(d) |
|
|
1,240,790 |
(18) |
|
|
410,880 |
(18) |
|
|
829,910 |
|
|
|
1.8 |
% |
Deerfield Special Situations Fund International Limited(e) |
|
|
1,525,282 |
(19) |
|
|
630,692 |
(19) |
|
|
894,590 |
|
|
|
1.9 |
% |
Deerfield Special Situations Fund, L.P.(e) |
|
|
828,558 |
(20) |
|
|
342,616 |
(20) |
|
|
485,942 |
|
|
|
1.0 |
% |
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
|
|
|
Shares |
|
Number of |
|
|
|
|
Beneficially |
|
Shares |
|
Shares Owned After |
|
|
Owned Prior |
|
Registered for |
|
Sale of Registered |
Selling Stockholders |
|
to Offering (1) |
|
Sale (2) |
|
Shares (1)(2) |
|
|
|
|
|
|
|
|
|
|
Number |
|
Percentage(3) |
Deerfield Private Design International, LP(e) |
|
|
329,056 |
(21) |
|
|
329,056 |
(21) |
|
|
0 |
|
|
|
* |
|
Deerfield Private Design Fund, LP(e) |
|
|
204,303 |
(22) |
|
|
204,303 |
(22) |
|
|
0 |
|
|
|
* |
|
Cross Creek Capital Employees Fund, L.P.(f) |
|
|
44,691 |
(23) |
|
|
40,565 |
(23) |
|
|
4,126 |
|
|
|
* |
|
Cross Creek Capital, L.P.(f) |
|
|
454,753 |
(24) |
|
|
412,769 |
(24) |
|
|
41,984 |
|
|
|
* |
|
Redmile Capital Fund, LP(g) |
|
|
285,620 |
(25) |
|
|
147,440 |
(25) |
|
|
138,180 |
|
|
|
* |
|
Redmile Capital Offshore Fund, Ltd.(g) |
|
|
281,196 |
(26) |
|
|
143,770 |
(26) |
|
|
137,426 |
|
|
|
* |
|
Redmile Capital Offshore Fund II, Ltd.(g) |
|
|
308,827 |
(27) |
|
|
162,124 |
(27) |
|
|
146,703 |
|
|
|
* |
|
BVCF IV, L.P. |
|
|
746,903 |
(28) |
|
|
146,666 |
(28) |
|
|
600,237 |
|
|
|
1.3 |
% |
Crosslink Crossover Fund V, LP(h) |
|
|
587,168 |
(29) |
|
|
125,166 |
(29) |
|
|
462,002 |
|
|
|
1.0 |
% |
Crosslink Emerging Growth Fund, LP(h) |
|
|
88,583 |
(30) |
|
|
18,883 |
(30) |
|
|
69,700 |
|
|
|
* |
|
Crosslink Crossover Fund IV, LP(h) |
|
|
160,295 |
(31) |
|
|
34,170 |
(31) |
|
|
126,125 |
|
|
|
* |
|
Delta Growth Fund, LP(h) |
|
|
102,182 |
(32) |
|
|
21,782 |
(32) |
|
|
80,400 |
|
|
|
* |
|
HSMR Advisors, LLC |
|
|
361,666 |
(33) |
|
|
146,666 |
(33) |
|
|
215,000 |
|
|
|
* |
|
Broadfin Healthcare Master Fund, Ltd. |
|
|
333,333 |
(34) |
|
|
133,333 |
(34) |
|
|
200,000 |
|
|
|
* |
|
TOTALS |
|
|
22,057,795 |
|
|
|
11,466,667 |
|
|
|
10,591,128 |
|
|
|
21.9 |
% |
|
|
|
* |
|
Less than one percent |
|
(1) |
|
Prior to the Offering means prior to the offering by the selling stockholders of the
securities registered under this prospectus for resale and assumes full exercise of all warrants
held by the selling stockholders. |
|
(2) |
|
Assumes that the selling stockholders dispose of all the shares of common stock covered by this
prospectus and does not acquire or dispose of any additional shares of common stock. |
|
(3) |
|
The percentage of shares beneficially owned is based on 46,356,011 shares of our common stock
outstanding immediately after the second closing of the private placement (based upon 42,356,011
shares of common stock outstanding as of June 24, 2008). |
|
(4) |
|
Includes 1,100,629 shares of common stock issuable upon exercise of a warrant held by the
selling stockholder that is immediately exercisable. |
|
(5) |
|
Includes 10,482 shares of common stock issuable upon exercise of a warrant held by the selling
stockholder that is immediately exercisable. |
|
(6) |
|
Includes 28,774 shares of common stock issuable upon exercise of a warrant held by the selling
stockholder that is immediately exercisable. |
|
(7) |
|
Includes 73,040 shares of common stock issuable upon exercise of a warrant held by the selling
stockholder that is immediately exercisable. |
|
(8) |
|
Includes 81,755 shares of common stock issuable upon exercise of a warrant held by the selling
stockholder that is immediately exercisable. |
|
(9) |
|
Includes 335 shares of common stock issuable upon exercise of a warrant held by the selling
stockholder that is immediately exercisable. |
|
(10) |
|
Includes 326 shares of common stock issuable upon exercise of a warrant held by the selling
stockholder that is immediately exercisable. |
|
(11) |
|
Includes 4,384 shares of common stock issuable upon exercise of a warrant held by the selling
stockholder that is immediately exercisable. |
|
(12) |
|
Includes 3,883 shares of common stock issuable upon exercise of a warrant held by the selling
stockholder that is immediately exercisable. |
|
(13) |
|
Includes 1,635 shares of common stock issuable upon exercise of a warrant held by the selling
stockholder that is |
26
|
|
|
|
|
immediately exercisable. |
|
(14) |
|
Includes 4,694 shares of common stock issuable upon exercise of a warrant held by the selling
stockholder that is immediately exercisable. |
|
(15) |
|
Includes 5,619 shares of common stock issuable upon exercise of a warrant held by the selling
stockholder that is immediately exercisable. |
|
(16) |
|
Includes 6,766 shares of common stock issuable upon exercise of a warrant held by the selling
stockholder that is immediately exercisable. |
|
(17) |
|
Includes 13,643 shares of common stock issuable upon exercise of a warrant held by the selling
stockholder that is immediately exercisable. |
|
(18) |
|
Includes 68,480 shares of common stock issuable upon exercise of a warrant held by the selling
stockholder that is immediately exercisable. |
|
(19) |
|
Includes 105,115 shares of common stock issuable upon exercise of a warrant held by the
selling stockholder that is immediately exercisable. |
|
(20) |
|
Includes 57,103 shares of common stock issuable upon exercise of a warrant held by the selling
stockholder that is immediately exercisable. |
|
(21) |
|
Includes 54,843 shares of common stock issuable upon exercise of a warrant held by the selling
stockholder that is immediately exercisable. |
|
(22) |
|
Includes 34,050 shares of common stock issuable upon exercise of a warrant held by the selling
stockholder that is immediately exercisable. |
|
(23) |
|
Includes 6,761 shares of common stock issuable upon exercise of a warrant held by the selling
stockholder that is immediately exercisable. |
|
(24) |
|
Includes 68,795 shares of common stock issuable upon exercise of a warrant held by the selling
stockholder that is immediately exercisable. |
|
(25) |
|
Includes 24,573 shares of common stock issuable upon exercise of a warrant held by the selling
stockholder that is immediately exercisable. |
|
(26) |
|
Includes 23,962 shares of common stock issuable upon exercise of a warrant held by the selling
stockholder that is immediately exercisable. |
|
(27) |
|
Includes 27,021 shares of common stock issuable upon exercise of a warrant held by the selling
stockholder that is immediately exercisable. |
|
(28) |
|
Includes 24,444 shares of common stock issuable upon exercise of a warrant held by the selling
stockholder that is immediately exercisable. The registrant has been advised by the selling
stockholder that Adams Street Partners, LLC is the administrative member of BVCF IV, L.P. and Mr.
Thomas D. Berman is a partner of Adams Street Partners, LLC, who may be deemed to have voting and
investment control over shares held by the selling stockholder. Mr. Berman disclaims beneficial
ownership of shares held by the selling stockholder except to the extent of his proportionate
pecuniary interest therein. |
|
(29) |
|
Includes 20,861 shares of common stock issuable upon exercise of a warrant held by the selling
stockholder that is immediately exercisable. |
|
(30) |
|
Includes 3,147 shares of common stock issuable upon exercise of a warrant held by the selling
stockholder that is immediately exercisable. |
27
|
|
|
(31) |
|
Includes 5,695 shares of common stock issuable upon exercise of a warrant held by the selling
stockholder that is immediately exercisable. |
|
(32) |
|
Includes 3,630 shares of common stock issuable upon exercise of a warrant held by the selling
stockholder that is immediately exercisable. |
|
(33) |
|
Includes 24,444 shares of common stock issuable upon exercise of a warrant held by the selling
stockholder that is immediately exercisable. The registrant has been advised by the selling
stockholder that HSMR Advisors, LLC and Richard van den Broek share
voting and dispositive power with respect to these shares. |
|
(34) |
|
Includes 22,222 shares of common stock issuable upon exercise of a warrant held by the selling
stockholder that is immediately exercisable. The registrant has been advised by the selling
stockholder that Kevin Kotler has voting and investment power over
the shares held by Broadfin Healthcare Master Fund, Ltd. |
(a) The registrant has been advised by the selling stockholder that OrbiMed Capital GP III LLC is
the general partner of Caduceus and may be deemed to beneficially own the shares held by the
selling stockholder and share the voting and investment power with the selling stockholder. In
addition, Mr. Samuel D. Isaly is the owner of a controlling interest in OrbiMed Capital GP III LLC.
Thus, OrbiMed Capital GP III LLC and Mr. Isaly may be deemed directly or indirectly, including by
reason of their mutual affiliation, to be the beneficial owners of the shares held by the selling
stockholder and share the voting and investment power with the selling stockholder.
(b) The registrant has been advised by the selling stockholder that OrbiMed Advisors LLC is the
General Partner of the selling stockholder and may be deemed to beneficially own the shares held by
the selling stockholder and share the voting and investment power with the selling stockholder. In
addition, Mr. Samuel D. Isaly is the owner of a controlling interest in OrbiMed Advisors LLC. Thus,
OrbiMed Advisors LLC and Mr. Isaly may be deemed directly or indirectly, including by reason of
their mutual affiliation, to be the beneficial owners of the shares held by the selling stockholder
and share the voting and investment power with the selling stockholder.
(c) The registrant has been advised that Credit Suisse and its affiliates, the Sprout Entities, may
be deemed to beneficially own the shares held by the selling stockholder and share the voting and
investment power with the selling stockholder. Dr. Philippe O. Chambon, the chairman of our board,
is a managing director of New Leaf Venture Partners, L.L.C, or NLVP, and is a limited partner of
DLJ Associates IX, L.P., which is a general partner of Sprout Capital IX, L.P. NLVP has entered
into a sub-management agreement with DLJ Capital Corporation, or DLJCC, whereby NLVP and its
principals, including Dr. Chambon, provide DLJCC with investment management services on the
investments held by various of the Sprout Entities. Dr. Chambon expressly disclaims beneficial
ownership of the shares held by the selling stockholders except to the extent of his pecuniary
interest therein. The registrant has been advised that the selling stockholders are affiliates of
a broker-dealer, acquired the securities to be resold in the ordinary course of business and did
not, at the time of the acquisition of such securities, have any agreements, understandings or
arrangements with any other persons, either directly or indirectly, to dispose of the securities.
(d) The registrant has been advised that these selling stockholders have appointed Massachusetts
Financial Services Company, d/b/a MFS Investment Management (MFS) as their investment adviser.
As investment adviser, MFS has sole voting and investment power over all of the shares beneficially
held by these selling stockholders. As of June 30, 2008, MFS or a subsidiary of MFS, as investment
adviser and not beneficially, also had sole or shared voting and/or investment power over 2,316,630
shares of NxStage Medical, Inc. common stock on behalf of other mutual funds and other client
accounts for which MFS or a subsidiary of MFS act as investment adviser.
(e) The registrant has been advised that Deerfield Management Co. and its affiliated entities
(Deerfield) may be deemed to beneficially own the shares held by the selling stockholder and
share the voting and investment power with the selling stockholder. In addition, Mr. James E.
Flynn holds controlling interests in all Deerfield entities and may be deemed to beneficially own
the shares held by the selling stockholder and share the voting and investment power with the
selling stockholder.
28
(f) The registrant has been advised that Cross Creek Capital L.P. and Cross Creek Capital
Employees Fund, L.P. are affiliated entities. In addition, Wasatch Advisors, Inc. is the sole
member of Cross Creek Capital, LLC, which is the general partner of both Cross Creek Capital, L.P.
and Cross Creek Capital Employees Fund, L.P. Wasatch Advisors, Inc., through a four-person
investment committee, has voting and dispositive authority over the shares held by Cross Creek
Capital L.P., and Cross Creek Capital Employees Fund, L.P. Decisions by the investment committee
are made by a vote of a majority of its members. Karey Barker, Sam Stewart, Robert Gardiner and
Greg Bohlen are the members of the investment committee and each disclaims beneficial ownership of
these shares, except to the extent of their pecuniary interest therein.
(g) The registrant has been advised by the selling stockholder that these shares are indirectly
beneficially owned by Redmile Group, LLC. Redmile Group, LLC is a Delaware limited liability
company and is registered with the Securities and Exchange Commission (SEC) as Registered
Investment Adviser. Redmile Group, LLC is the Investment Manager to each of the pooled investment
vehicles; Redmile Capital Fund, LP, Redmile Capital Offshore Fund, Ltd., and Redmile Capital
Offshore Fund II, Ltd. Shares held by Redmile Capital Fund, LP are also indirectly beneficially
owned by its General Partner, Redmile Group (GP), LLC, a Delaware limited liability company. As
such, Redmile Group, LLC, and where applicable, Redmile Group (GP), LLC, shares the voting and
investment power with the selling stockholder.
(h) The registrant has been advised by each of these selling stockholders that these shares are
indirectly beneficially owned by Crosslink Capital, Inc., a Delaware corporation (Crosslink)
registered with the SEC as an investment adviser, as the investment adviser to that selling
stockholder. The shares being sold by Crosslink Crossover Fund V, L.P., also are indirectly
beneficially owned by its general partner, Crossover Fund V Management, L.L.C., a Delaware limited
liability company. The shares being sold by Crosslink Emerging Growth Fund, L.P. and Delta Growth
Fund, L.P. also are indirectly beneficially owned by Delta Growth Management, LLC, a Delaware
limited liability company that is the general partner of each of those selling stockholders. The
shares being sold by Crosslink Crossover Fund IV, L.P. are also indirectly beneficially owned by
its general partner, Crossover Fund IV Management, L.L.C, a Delaware limited liability company. The
control person of Crosslink and each selling stockholders general partner is Michael J. Stark. As
such, Crosslink, each selling stockholders general partner and Mr. Stark share voting and
dispositive power over such shares.
29
PLAN OF DISTRIBUTION
The shares covered by this prospectus may be offered and sold from time to time by the selling
stockholder. The term selling stockholders includes donees, pledgees, transferees or other
successors-in-interest selling shares received after the date of this prospectus from the selling
stockholders as a gift, pledge, distribution or other non-sale related transfer. The selling
stockholders will act independently of us in making decisions with respect to the timing, manner
and size of each sale. Such sales may be made on one or more exchanges or in the over-the-counter
market or otherwise, at prices and under terms then prevailing or at prices related to the then
current market price or in negotiated transactions. The selling stockholders may sell their shares
by one or more of, or a combination of, the following methods:
|
|
|
purchases by a broker-dealer as principal and resale by such broker-dealer for its own
account pursuant to this prospectus; |
|
|
|
|
ordinary brokerage transactions and transactions in which the broker solicits
purchasers; |
|
|
|
|
an over-the-counter distribution in accordance with the rules of The Nasdaq Global
Market; |
|
|
|
|
in privately negotiated transactions; |
|
|
|
|
in options transactions; |
|
|
|
|
to or through underwriters; |
|
|
|
|
through dealers or agents; |
|
|
|
|
a block trade in which the broker or dealer so engaged will attempt to sell the
securities as an agent but may position and resell a portion of the block as a principal to
facilitate the transaction; |
|
|
|
|
through a combination of these methods; and |
|
|
|
|
by any other legally available means. |
In addition, any shares that qualify for sale pursuant to Rule 144 may be sold under Rule 144
rather than pursuant to this prospectus.
To the extent required, this prospectus may be amended or supplemented from time to time to
describe a specific plan of distribution. In connection with the distributions of shares or
otherwise, the selling stockholders may enter into hedging transactions with broker-dealers or
other financial institutions. In connection with such transactions, broker-dealers or other
financial institutions may engage in short sales of the common stock in the course of hedging the
positions they assume with the selling stockholder. The selling stockholders may enter into option
or other transactions with broker-dealers or other financial institutions which require the
delivery to such broker-dealer or other financial institution of shares offered by this prospectus,
which shares such broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction). The selling stockholders may
also pledge shares to a broker-dealer or other financial institution, and, upon a default, such
broker-dealer or other financial institution, may effect sales of the pledged shares pursuant to
this prospectus (as supplemented or amended to reflect such transaction).
In effecting sales, underwriters, broker-dealers or agents engaged by the selling stockholders
may arrange for other underwriters or broker-dealers to participate. Underwriters, broker-dealers
or agents may receive commissions, discounts or concessions from the selling stockholders in
amounts to be negotiated immediately prior to the sale. Such discounts, concessions or commissions
as to particular underwriters, broker-dealers or agents may be in excess of those customary on the
types of transactions involved.
In offering the shares covered by this prospectus, the selling stockholders and any
broker-dealers who execute sales for the selling stockholders may be deemed to be underwriters
within the meaning of the Securities Act in connection with such sales. Any profits realized by the
selling stockholders and the compensation of any broker-dealer may be deemed to be
30
underwriting discounts and commissions. Some of the underwriters or deemed underwriters or agents
and their associates may be customers of, engage in transactions with, and perform services for us
in the ordinary course of business.
In order to comply with the securities laws of certain states, if applicable, the shares must
be sold in such jurisdictions only through registered or licensed brokers or dealers. In addition,
in certain states the shares may not be sold unless they have been registered or qualified for sale
in the applicable state or an exemption from the registration or qualification requirement is
available and is complied with.
We have advised the selling stockholders that the anti-manipulation rules of Regulation M
under the Securities Exchange Act of 1934, as amended, or the Exchange Act, apply to sales of
shares in the market and to the activities of the selling stockholders and their affiliates. In
addition, we will make copies of this prospectus available to the selling stockholders for the
purpose of satisfying the prospectus delivery requirements of the Securities Act of 1933, as
amended, or the Securities Act. The selling stockholders may indemnify any broker-dealer that
participates in transactions involving the sale of the shares against certain liabilities,
including liabilities arising under the Securities Act.
At the time a particular offer of shares is made, if required, a prospectus supplement will be
distributed that will set forth the number of shares being offered and the terms of the offering,
including the name of any underwriter, dealer or agent, the purchase price paid by any underwriter,
any discount, commission and other item constituting compensation, any discount, commission or
concession allowed or reallowed or paid to any dealer, and the proposed selling price to the
public.
We will pay all expenses of the registration of the shares of common stock pursuant to the
Securities Purchase Agreements, including, without limitation, U.S. Securities and Exchange
Commission filing fees and expenses of compliance with state securities or blue sky laws;
provided, however, that the selling stockholders will pay all underwriting discounts, commissions
and concessions and brokers or agents commissions and concessions or selling commissions and
concessions, if any. We have agreed to indemnify the selling stockholders against certain
liabilities, including certain liabilities under the Securities Act. Underwriters, dealers and
agents may be entitled to indemnification by us and the selling stockholders against specific civil
liabilities, including liabilities under the Securities Act or to contribution with respect to
payments which the underwriters or agents may be required to make in respect thereof, under
underwriting or other agreements. The terms of any indemnification provisions will be set forth in
a prospectus supplement.
We have agreed with the selling stockholders to keep the registration statement of which this
prospectus constitutes a part effective until the earliest of (1) such time as all of the shares
covered by this prospectus may be sold pursuant to Rule 144(b) without volume restrictions, or (2)
such time as all of the shares covered by this prospectus have been publicly sold. Notwithstanding
the foregoing obligations, we may, under specified circumstances, suspend the use of the
registration statement, or any amendment or supplement thereto.
LEGAL MATTERS
The validity of the shares offered by this prospectus has been passed upon by OMelveny &
Myers LLP.
EXPERTS
The consolidated financial statements of NxStage Medical, Inc. appearing in NxStage Medical,
Inc.s Annual Report (Form 10-K) for the year ended December 31, 2007, and the effectiveness of
NxStage Medical, Inc.s internal control over financial reporting as of December 31, 2007 have been
audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their
reports thereon, included therein, and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such reports given on
the authority of such firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other documents with the SEC. You may read and copy any
document we file at the SECs public reference room at 100 F Street, NE, Room 1580,
Washington, D.C. 20549. You should call 1-800-SEC-0330 for more information on the public
reference room. Our SEC filings are also available to you on the SECs Internet site at
www.sec.gov.
This prospectus is part of a registration statement that we filed with the SEC. The
registration statement contains more information than this prospectus regarding us and our common
stock, including certain exhibits and schedules. You can obtain a copy of the registration
statement from the SEC at the address listed above or from the SECs Internet site.
31
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC requires us to incorporate into this prospectus information that we file with the
SEC in other documents. This means that we can disclose important information to you by referring
to other documents that contain that information. The information incorporated by reference is
considered to be part of this prospectus. Information contained in this prospectus and information
that we file with the SEC in the future and incorporate by reference in this prospectus
automatically updates and supersedes previously filed information. We incorporate by reference the
documents listed below and any future filings we make with the SEC under Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this prospectus and prior to the termination of this
offering.
|
|
|
our Annual Report filed on Form 10-K for the fiscal year ended December 31, 2007 filed
with the SEC on March 7, 2008; |
|
|
|
|
our Quarterly Report filed on Form 10-Q for the quarterly period ended March 31, 2008
filed with the SEC on May 12, 2008; |
|
|
|
|
our Current Reports on Form 8-K filed with the SEC on April 2, 2008, May 8, 2008,
May 23, 2008, July 24, 2008 and August 5, 2008. |
|
|
|
|
any other filings we make pursuant to the Exchange Act after the date of filing the
initial registration statement and prior to effectiveness of the registration statement;
and |
|
|
|
|
the description of our common stock contained in our Registration Statement on Form 8-A
filed with the SEC on October 7, 2005. |
Notwithstanding the foregoing, unless specifically stated otherwise, none of the information
that we disclose under Items 2.02 and 7.01 of any Current Report on Form 8-K that we may furnish
from time to time to the SEC will be incorporated by reference into, or otherwise included in, this
prospectus.
A statement contained in a document incorporated by reference into this prospectus shall be
deemed to be modified or superceded for purposes of this prospectus to the extent that a statement
contained in this prospectus, any prospectus supplement or in any other subsequently filed document
which is also incorporated in this prospectus modifies or replaces such statement. Any statements
so modified or superceded shall not be deemed, except as so modified or superceded, to constitute a
part of this prospectus.
You may request a copy of these documents, which will be provided to you at no cost, by
writing or telephoning us using the following contact information:
NxStage Medical, Inc.
439 S. Union Street, 5th Floor
Lawrence, Massachusetts 01843
(978) 687-4700
32
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the various expenses to be incurred in connection with the sale
and distribution of the securities being registered hereby, all of which will be borne by NxStage
(except any underwriting discounts and commissions and expenses incurred by the selling
stockholders for brokerage, accounting, tax or legal services or any other expenses incurred by the
selling stockholders in disposing of the shares). All amounts shown are estimates except the SEC
registration fee.
|
|
|
|
|
SEC registration fee |
|
$ |
1,831.86 |
|
Legal fees and expenses |
|
$ |
120,000.00 |
|
Accounting fees and expenses |
|
$ |
60,000.00 |
|
Miscellaneous expenses |
|
$ |
90,000.00 |
|
Total expenses |
|
$ |
271,831.86 |
|
Item 15. Indemnification of Directors and Officers.
Section 102 of the Delaware General Corporation Law allows a corporation to eliminate the
personal liability of directors of a corporation to the corporation or its stockholders for
monetary damages for a breach of fiduciary duty as a director, except where the director breached
his duty of loyalty, failed to act in good faith, engaged in intentional misconduct or knowingly
violated a law, authorized the payment of a dividend or approved a stock repurchase in violation of
Delaware corporate law or obtained an improper personal benefit. We have included such a provision
in our Restated Certificate of Incorporation.
Section 145 of the Delaware General Corporation Law provides that a corporation has the power
to indemnify a director, officer, employee or agent of the corporation and certain other persons
serving at the request of the corporation in related capacities against amounts paid and expenses
incurred in connection with an action or proceeding to which he is or is threatened to be made a
party by reason of such position, if such person shall have acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the corporation, and, in any
criminal proceeding, if such person had no reasonable cause to believe his conduct was unlawful;
provided that, in the case of actions brought by or in the right of the corporation, no
indemnification shall be made with respect to any matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the adjudicating court
determines that such indemnification is proper under the circumstances.
Our Restated Certificate of Incorporation includes a provision that eliminates the personal
liability of our directors for monetary damages for breach of fiduciary duty as a director, except
for liability:
|
|
|
for any breach of the directors duty of loyalty to NxStage or its stockholders; |
|
|
|
|
for acts or omissions not in good faith or that involve intentional misconduct or a
knowing violation of law; |
|
|
|
|
under section 174 of the Delaware General Corporation Law regarding unlawful dividends
and stock purchases; or |
|
|
|
|
for any transaction from which the director derived an improper personal benefit. |
|
|
These provisions are permitted under Delaware law. Our Bylaws provide that: |
|
|
|
|
we must indemnify our directors and officers to the fullest extent permitted by Delaware
law; |
|
|
|
|
we may indemnify our other employees and agents to the same extent that we indemnify our
officers and directors, unless otherwise determined by our Board of Directors; and |
33
|
|
|
we must advance expenses, as incurred, to our directors and executive officers in
connection with a legal proceeding to the fullest extent permitted by Delaware law. |
The indemnification provisions contained in our Restated Certificate of Incorporation and
Bylaws are not exclusive of any other rights to which a person may be entitled by law, agreement,
vote of stockholders or disinterested directors or otherwise.
In addition to the indemnification provided for in our Restated Certificate of Incorporation
and Bylaws, we have entered into indemnification agreements with each of our directors and
executive officers. Each indemnification agreement provides that we will indemnify the director or
executive officer to the fullest extent permitted by law for claims arising in his or her capacity
as a director, officer, employee or agent of ours, provided that he or she acted in good faith and
in a manner that he or she reasonably believed to be in, or not opposed to, our best interests and,
with respect to any criminal proceeding, had no reasonable cause to believe that his or her conduct
was unlawful. If the claim is brought by us or on our behalf, we will not be obligated to indemnify
the director or executive officer if he or she is found liable to us, unless the court determines
that, despite the adjudication of liability, in view of all the circumstances of the case the
director or executive officer is fairly and reasonably entitled to be indemnified. In the event
that we do not assume the defense of a claim against a director or executive officer, we are
required to advance his or her expenses in connection with his or her defense, provided that he or
she undertakes to repay all amounts advanced if it is ultimately determined that he or she is not
entitled to be indemnified by us.
In addition, we maintain insurance on behalf of our directors and executive officers insuring
them against any liability asserted against them in their capacities as directors or officers or
arising out of such status.
Item 16. Exhibits
|
|
|
EXHIBIT |
|
|
NUMBER |
|
DESCRIPTION |
4.1
|
|
Restated Certificate of Incorporation of the Registrant (filed
as Exhibit 3.4 to the Registrants Amendment No. 2 to the
Registration Statement on Form S-1 (File No. 333-126711), as
originally filed on October 7, 2005, and incorporated herein by
reference) |
|
4.2
|
|
Amended and Restated Bylaws of the Registrant (filed as
Exhibit 3.5 to the Registrants Amendment No. 2 to the
Registration Statement on Form S-1 (File No. 333-126711), as
originally filed on October 7, 2005, and incorporated herein by
reference) |
|
4.3
|
|
Specimen Certificate evidencing shares of common stock (filed as
Exhibit 4.1 to the Registrants Amendment No. 2 to the
Registration Statement on Form S-1 (File No. 333-126711), as
originally filed on October 7, 2005, and incorporated herein by
reference) |
|
5.1
|
|
Opinion of OMelveny & Myers LLP |
|
23.1
|
|
Consent of Ernst & Young LLP |
|
23.2
|
|
Consent of OMelveny, included in Exhibit 5.1 filed herewith. |
|
24.1
|
|
Power of Attorney (See page II-5 of this Registration Statement). |
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective
amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the effective date of the
registration statement (or the most recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in the volume of securities
offered (if the total dollar value of securities offered would not exceed that which was
registered) and any deviation
34
from the low or high end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20 percent change in the maximum aggregate offering price
set forth in the Calculation of Registration Fee table in the effective registration statement;
and
(iii) To include any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to such information in
the registration statement;
provided, however, that paragraphs (i), (ii) and (iii) do not apply if the information required to
be included in a post-effective amendment by those paragraphs is contained in reports filed with or
furnished to the Commission by the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the registration statement,
or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the
registration statement.
(2) That, for the purpose of determining any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities
being registered which remain unsold at the termination of the offering.
(4) That, for purposes of determining liability under the Securities Act of 1933 to any
purchaser:
(i) Each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be
part of the registration statement as of the date the filed prospectus was deemed part of and
included in the registration statement; and
(ii) Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5) or (b)(7) as part
of a registration statement in reliance on Rule 430B relating to an offering made pursuant to
Rule 415(a)(1)(i), (vii) or (x) for the purpose of providing the information required by Section
10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration
statement as of the earlier of the date such form of prospectus is first used after effectiveness
or the date of the first contract of sale of securities in the offering described in the
prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is
at that date an underwriter, such date shall be deemed to be a new effective date of the
registration statement relating to the securities in the registration statement to which that
prospectus relates, and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof. Provided, however, that no statement made in a registration
statement or prospectus that is part of the registration statement or made in a document
incorporated or deemed incorporated by reference into the registration statement or prospectus that
is part of the registration statement will, as to a purchaser with a time of contract of sale prior
to such effective date, supersede or modify any statement that was made in the registration
statement or prospectus that was part of the registration statement or made in any such document
immediately prior to such effective date.
(b) The undersigned registrant hereby undertakes that, for the purpose of determining any
liability under the Securities Act of 1933, each filing of the registrants annual report pursuant
to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plans annual report pursuant to Section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may
be permitted to directors, officers and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy as expressed in
the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is against public policy
as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such
issue.
35
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant
certifies that it has reasonable grounds to believe that it meets all the requirements for filing
on Form S-3 and has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Lawrence, Commonwealth of Massachusetts, on
August 8, 2008.
|
|
|
|
|
|
NxSTAGE MEDICAL, INC.
|
|
|
By: |
/s/ Jeffrey H. Burbank
|
|
|
|
Jeffrey H. Burbank |
|
|
|
President and Chief Executive Officer
|
|
|
SIGNATURES AND POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and
appoints Jeffrey H. Burbank, Robert S. Brown and Winifred L. Swan his true and lawful
attorneys-in-fact and agents, each acting alone, with full powers of substitution and
resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or
all amendments to this registration statement, including all pre-effective and post-effective
amendments, and to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and purposes as he might or
could do in person, and hereby ratifies and confirms all his said attorneys-in-fact and agents,
each acting alone, or his substitute or substitutes may lawfully do or cause to be done by virtue
thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration
statement has been signed by the following persons in the capacities and on the dates indicated.
|
|
|
|
|
Signature |
|
Title |
|
Date |
/s/ Jeffrey H. Burbank
|
|
President, Chief Executive Officer and Director
|
|
August 8, 2008 |
|
|
|
|
|
Jeffrey H. Burbank
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
/s/ Robert S. Brown
|
|
Chief Financial Officer and Senior Vice President
|
|
August 8, 2008 |
|
|
|
|
|
Robert S. Brown
|
|
(Principal Accounting and Financial Officer)
|
|
|
|
|
|
|
|
/s/ Philippe O. Chambon
|
|
Chairman of the Board of Directors
|
|
August 8, 2008 |
|
|
|
|
|
Philippe O. Chambon,
M.D., Ph.D.
|
|
|
|
|
|
|
|
|
|
/s/ Daniel A. Giannini
|
|
Director
|
|
August 8, 2008 |
|
|
|
|
|
Daniel A. Giannini
|
|
|
|
|
|
|
|
|
|
/s/ Reid S. Perper
|
|
Director
|
|
August 8, 2008 |
|
|
|
|
|
Reid S. Perper
|
|
|
|
|
|
|
|
|
|
/s/ Peter P. Phildius
|
|
Director
|
|
August 8, 2008 |
|
|
|
|
|
Peter P. Phildius
|
|
|
|
|
|
|
|
|
|
/s/ David S. Utterberg
|
|
Director
|
|
August 8, 2008 |
|
|
|
|
|
David S. Utterberg
|
|
|
|
|
36
EXHIBIT INDEX
|
|
|
EXHIBIT |
|
|
NUMBER |
|
DESCRIPTION |
4.1
|
|
Restated Certificate of Incorporation of the Registrant (filed
as Exhibit 3.4 to the Registrants Amendment No. 2 to the
Registration Statement on Form S-1 (File No. 333-126711), as
originally filed on October 7, 2005, and incorporated herein by
reference) |
|
4.2
|
|
Amended and Restated Bylaws of the Registrant (filed as
Exhibit 3.5 to the Registrants Amendment No. 2 to the
Registration Statement on Form S-1 (File No. 333-126711), as
originally filed on October 7, 2005, and incorporated herein by
reference) |
|
4.3
|
|
Specimen Certificate evidencing shares of common stock (filed as
Exhibit 4.1 to the Registrants Amendment No. 2 to the
Registration Statement on Form S-1 (File No. 333-126711), as
originally filed on October 7, 2005, and incorporated herein by
reference) |
|
5.1
|
|
Opinion of OMelveny & Myers LLP |
|
23.1
|
|
Consent of Ernst & Young LLP |
|
23.2
|
|
Consent of OMelveny, included in Exhibit 5.1 filed herewith. |
|
24.1
|
|
Power of Attorney (See page II-5 of this Registration Statement). |
37