EXHIBIT 99
RISK FACTORS
An investment in Possis Medical, Inc.'s common stock involves a number of
risks. You should consider carefully the following risk factors, together with
the other information in this prospectus, before buying any shares. You also
should be aware that this filing contains forward-looking statements that are
not related to historical results. These forward-looking statements, such as
statements concerning our strategies, plans, objectives, expectations and
intentions, involve risks and uncertainties. Our actual results could differ
materially from those anticipated in these forward-looking statements. Factors
that could cause or contribute to such differences include, but are not limited
to, the following
risk factors.
We have a history of operating losses and a lack of profitable operations.
We incurred losses for fiscal years 1999, 2000 and 2001. As of July 31,
2001, we had accumulated a deficit of $64.0 million. We incurred an operating
loss of $12.5 million for the year ended July 31, 1999, an operating loss of
$11.2 million for the year ended July 31, 2000, and an operating loss of $3.8
million for the year ended July 31, 2001.
We became profitable on a quarterly basis in the third quarter of fiscal
2001. To maintain profitability, we must continue to achieve significant sales
in the United States. We must convince health care professionals, third-party
payors and the general public of the medical and economic benefits of the
AngioJet(R) Rheolytic(TM) Thrombectomy System. We cannot assure you that we will
succeed in marketing this product and continue to achieve significant sales.
Even if we accomplish this goal, we cannot assure you that we will operate
profitably on a consistent basis.
There has been limited regulatory approval for our products, and our products
are subject to extensive governmental regulation.
Our products and manufacturing activities are subject to extensive and
rigorous federal and state regulation in the United States and various
regulatory requirements in other countries, including Japan. Current United
States Food and Drug Administration (FDA) enforcement policy strictly prohibits
the marketing of approved medical devices for unapproved uses. Therefore, even
if our products receive regulatory approval, regulators may significantly limit
the uses for which our products may be marketed. In addition, the process of
obtaining and maintaining required regulatory approvals can be lengthy and
expensive, and the outcome of the process can be uncertain. Moreover, regulatory
approvals may be withdrawn if we fail to comply with regulatory standards or if
unforeseen problems arise following the initial marketing of a product.
Additionally, we are required to adhere to Quality System Regulations
relating to product design, development, manufacturing, servicing, testing and
documentation. Failure to comply with applicable Quality System Regulations or
other regulatory requirements may result in fines, delays or suspensions of
approvals, injunctions against further distribution of our products, seizures or
recalls of products, operating restrictions, criminal prosecutions or other
sanctions, in addition to adverse publicity. The adoption of new regulations or
changes in existing regulations could prevent us from obtaining, or affect the
timing of, future regulatory approvals and could adversely affect the marketing
of our existing products. We cannot assure you that we will be able to obtain
necessary regulatory approvals on a timely basis or at all. Delays in our
receipt of or failure to receive regulatory approvals, the loss of previously
received approvals or our failure to comply with regulatory requirements would
have a material adverse effect on our business, financial condition and results
of operations.
Clinical and marketing acceptance of our products is uncertain.
Because our products are relatively new to the market, they are still
unfamiliar to many members of the medical community. The AngioJet System has
only recently begun to be used for the removal of vascular, cardiovascular and
intercranial blood clots. Market acceptance of our AngioJet products will depend
largely on our ability to demonstrate to the medical community in general, and
to interventionalists in particular, the efficacy, relative safety and
cost-effectiveness of treating cardiovascular disease using our products, as
well as on our ability to train physicians to perform necessary procedures using
our products. We cannot assure you that our products will provide benefits
considered adequate by providers of cardiovascular and vascular treatments, or
that enough providers will use our products to ensure their commercial success.
Moreover, even if our products become generally accepted by the medical
community, physicians trained to use our products may not use them or may
recommend a competitor's products. We cannot assure you that physicians will
determine that our AngioJet products are appropriate courses of treatment for
their patients or acceptable alternatives to other therapies. Even if they are
accepted by the medical community, our ability to successfully market our
products before they receive FDA approval may be limited by FDA regulations,
guidelines or policies. Lack of clinical and market acceptance and significant
restrictions on our marketing program would have a material adverse effect on
our business, financial condition and results of operations.
We depend on our AngioJet products.
We have focused our resources on the continued development and refinement
of our AngioJet System. If we fail to obtain necessary regulatory approvals, or
the medical community rejects the use of the AngioJet System for multiple
purposes, our business, financial condition and results of operations would be
materially and adversely affected.
The industry in which we compete is characterized by rapid technological
change and intense competition.
The medical products market is characterized by rapidly evolving technology
and intense competition. Our future success depends on our ability to keep pace
with advancing technology and competitive innovations. Potential competitors
have developed or are in the process of developing technologies that are, or in
the future may be, the basis for competitive products, some of which may
accomplish desired therapeutic effects through entirely different methods than
the products we are developing.
We believe our AngioJet System will face intense competition from a variety
of treatments for the removal of blood clots, including clot-dissolving
(thrombolytic) drug therapies, surgical intervention, balloon embolectomy,
mechanical and laser thrombectomy devices, ultrasound ablators, and other
thrombectomy devices based on waterjet systems that are currently being
developed by other companies.
Many of the companies developing competing devices have substantially
greater capital and substantially greater resources for and experience in
research and development, regulatory matters, manufacturing and marketing than
we have. These companies will be serious competitors for us and may succeed in
developing products that are more effective and/or less costly than the AngioJet
System. Furthermore, these companies may be more successful than we are in
manufacturing and marketing their products. Our competitors or others may
develop technologies, products or procedures that are more effective than any we
are developing or that may render our technology and products obsolete or
noncompetitive. The advent of new devices, procedures or new pharmaceutical
agents could hinder our ability to compete effectively and could have a material
adverse effect on our business, financial condition and results of operations.
Our success will depend on our ability to maintain patents and other
proprietary rights.
Our success depends and will continue to depend in part on our ability to
maintain patent protection for our products and processes, to preserve our trade
secrets and to operate without infringing the proprietary rights of third
parties. We attempt to protect our technology by filing patent applications for
technology that we consider important to the development of our business, among
other measures described below. We currently hold ten United States patents
relating to the AngioJet System, and we have thirteen United States and numerous
foreign patent applications pending relating to the AngioJet System. Claims
relating to medical technology patents involve complex legal and factual
questions. Therefore, their outcomes are highly uncertain. We cannot assure you
that our pending applications will result in patents being issued to us or that
either our new patents or our existing patents will give us a competitive
advantage. Moreover, our competitors may design around any patents issued to us,
third parties may receive patent protection on their own waterjet devices, and
others may hold or receive patents containing claims that may cover products
developed by us.
We require all our employees to execute non-disclosure agreements when they
join Possis Medical. These agreements generally provide that all confidential
information developed or made known to the employee by us during the course of
his or her employment with Possis Medical must be kept confidential and not
disclosed to third parties. We cannot assure you, however, that these
non-disclosure agreements and other safeguards will protect our proprietary
information and know-how, or that they will provide us adequate remedies in the
event of unauthorized use or disclosure of confidential information. We also
cannot assure you that others will be unable to develop such information
independently.
We also rely on unpatented proprietary technology and trade secrets that we
seek to protect in part through confidentiality agreements with employees and
other parties. We cannot assure you that the employees and other parties will
comply with these agreements, that we will have adequate remedies for any breach
or that we can meaningfully protect our rights to unpatented proprietary
technology in any other way. We also cannot assure you that others will be
unable independently to develop or otherwise acquire substantially equivalent
proprietary technology and trade secrets, or that they will keep the technology
secret. The disclosure of this type of information could have a material adverse
effect on our business, financial condition and results of operations.
The medical device industry has seen much litigation with respect to patent
and other intellectual property rights. Litigation may be necessary for us to
enforce our patents, to protect our trade secrets and know-how, to defend
against claimed infringement of others' rights or to determine the ownership,
scope or validity of the proprietary rights of Possis Medical and others.
However, litigation also could be extremely costly to us and could divert our
resources and efforts away from our products and day-to-day business matters. If
the litigation had an adverse outcome, it could subject us to substantial
liabilities to third parties, require us to seek licenses from third parties and
prevent us from manufacturing, selling or using our products. Any of these
results could have a material adverse effect on our business, financial
condition and results of operations.
Acceptance of our products and our profits may be limited by inadequate
third-party reimbursements.
Health care providers (such as hospitals and physicians) that purchase
medical devices like the AngioJet System for the treatment of patients generally
rely on third-party payors like Medicare, Medicaid and private insurance plans
to reimburse all or part of the costs associated with the health care services
they provide. In certain foreign markets, the pricing of and profits generated
by health care products are subject to government control. In some states,
Medicare and Medicaid payors reimburse hospitals for inpatient medical
procedures at a pre-determined rate based on diagnosis-related groups. If these
rates do not include, and third-party payors do not otherwise provide, adequate
reimbursement to health care providers for the cost of our products, our
products will not gain wide market acceptance and our financial results will
suffer.
The Health Care Financing Administration (HCFA) is the federal agency
responsible for administering the Medicare system. HCFA has prohibited Medicare
from paying for certain revolutionary (new) procedures that are still under
investigation or that are not deemed safe and effective for the condition being
treated. Therefore, even if a device has FDA approval, Medicare payors may deny
reimbursement if they conclude that the device is experimental or that it will
not improve the condition being treated.
The market for our products also could be adversely affected by future
legislation to reform the nation's health care system or by changes in industry
practices regarding reimbursement. We cannot assure you that the reimbursement
rates of third-party payors will allow us to price our products at levels
sufficient to realize an appropriate return on our investment in product
development.
We depend on key personnel.
We depend greatly on a limited number of key management and technical
personnel. Moreover, because of the highly technical nature of our business, our
ability to continue our technological developments and to market our products -
and thereby develop a competitive edge in the marketplace - depends in large
part on our ability to attract and retain qualified technical and key management
personnel. Competition for qualified personnel is intense, and we cannot assure
you that we will be able to attract and retain the individuals we need. The loss
of key personnel, or our inability to hire or retain qualified personnel, could
have a material adverse effect on our business, financial condition and results
of operations.
We may be subject to product liability claims, for which insurance coverage
may be insufficient.
The manufacture and sale of our products may subject us to product
liability claims. The United States Supreme Court has held that, despite a
company's compliance with FDA regulations, it may not be shielded from
common-law negligent-design claims or manufacturing and labeling claims based on
state laws. Product liability insurance is expensive and in the future may not
be available on acceptable terms, if at all. We cannot assure you that the
coverage limits of our product liability insurance policies will be adequate if
a product liability claim is brought against us. A successful claim or series of
claims against us that exceeds our insurance coverage could have a material
adverse effect on our business, financial condition and results of operations.
Moreover, whether or not successful, product liability litigation would likely
divert the attention of our key personnel and could adversely affect our
reputation and the marketability of our technology and products. Consequently,
any product liability litigation could have a material adverse effect on our
business, financial condition and results of operations.
It is uncertain whether we will be able to obtain funding sufficient to
meet our future capital needs.
We anticipate that cash on hand, the interest expected to be earned on such
cash and expected revenues will be sufficient to finance our operations for at
least the next twelve to eighteen months. However, we cannot assure you that
additional capital will not be needed sooner. Depending on the level of product
sales we may need to raise additional funds in the future. We cannot assure you
that additional capital will be available to us or that it will be available on
satisfactory terms. Raising additional capital through equity financing may
dilute the equity interests of the shareholders of the company, and debt
financing may involve restrictive covenants. Failure to secure additional
financing if and when needed could have a material adverse effect on our
business, financial condition and results of operations.
The securities market is volatile, and our common stock price may fluctuate
widely.
The market price of our stock has in the past been subject to significant
fluctuations. Moreover, the markets for equity securities in general, and for
those of smaller medical device manufacturers in particular, have been volatile
in the past, and the price of our common stock in the future could be subject to
wide fluctuations in response to quarterly variations in operating results, news
and product announcements, trading volume, general market trends and other
factors. We cannot assure you that our common stock will trade in the future at
market prices in excess of its current market price.
We have in place certain protections against takeover attempts.
Of the 100 million shares of capital stock authorized by our amended and
restated articles of incorporation, 79 million shares are undesignated. Our
board of directors may issue the undesignated shares on terms and with the
rights, preferences and designations determined by the board without shareholder
action. In addition, we have adopted a shareholder rights plan that provides for
the exercise of preferred share purchase rights when a person becomes the
beneficial owner of 15% or more of our outstanding common stock (subject to
certain exceptions). We also are subject to provisions of the Minnesota Business
Corporation Act that limit the voting rights of shares acquired in specified
types of acquisitions and that restrict specified types of business
combinations. The existence or issuance of "blank check" stock, the existence of
our shareholder rights plan and the effect of anti-takeover provisions under
Minnesota law, individually or in the aggregate, may discourage potential
takeover attempts and delay, defer or prevent a change in control. They also may
make the removal of management more difficult, which could deprive our
shareholders of opportunities to sell their shares at prices higher than
prevailing market prices.
We depend on single-source suppliers.
We depend on single-source suppliers for some of the raw materials used in
the manufacture of our products. If we cannot obtain key raw materials from our
suppliers, we cannot assure you that the materials will be available from other
suppliers, that other suppliers will agree to supply the materials to us, or
that our use of the other suppliers would be approved by the FDA. Although we
believe our supply of raw materials currently is adequate for the needs of our
business, we cannot assure you that new sources of supply will be available when
needed. Any interruption in our supply of raw materials could have a material
adverse effect on our ability to manufacture our products until a new source of
supply is located and, therefore, could have a material adverse effect on our
business, financial condition and results of operations.
We have not paid dividends on our stock.
We have never paid cash dividends on our common stock. We currently intend
to retain all future earnings, if any, for use in our business and do not
anticipate paying cash dividends in the near future.