Exhibit 99.1
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CAUTIONARY STATEMENT
Integ Incorporated ("Integ" or the "Company"), or persons acting on behalf
of the Company, or outside reviewers retained by the Company making statements
on behalf of the Company, or underwriters, from time to time, may make, in
writing or orally, "forward-looking statements" as defined under the Private
Securities Litigation Reform Act of 1995 (the "Act"). This Cautionary Statement
is for the purpose of qualifying for the "safe harbor" provisions of the Act and
is intended to be a readily available written document that contains factors
which could cause results to differ materially from those projected in such
forward-looking statements. These factors are in addition to any other
cautionary statements, written or oral, which may be made or referred to in
connection with any such forward-looking statement.
The following matters, among others, may have a material adverse effect on
the business, financial condition, liquidity, results of operations or
prospects, financial or otherwise, of the Company. Reference to this Cautionary
Statement in the context of a forward-looking statement shall be deemed to be a
statement that any one or more of the following factors may cause actual results
to differ materially from those which might be projected, forecast, estimated or
budgeted by the Company in such forward-looking statement or statements:
Development of New Technology; Dependence on the LifeGuide(TM) System;
Uncertainty of Market Acceptance
The Company's future success is dependent upon the success of its alliance
with Amira Medical, and the successful development, of the LifeGuide(TM) System,
which is ongoing and the complete efficacy of which has not yet been
demonstrated. The Company has tested benchtop prototypes of the LifeGuide
Meter and the LifeGuide Key. There can be no assurance that unforeseen problems
will not occur in research and development, clinical testing, regulatory
submissions and clearance or approval, product manufacturing and commercial
scale up, marketing or product distribution. Any such occurrence could
materially delay the commercialization of the LifeGuide System or prevent its
market introduction entirely. Further, even if successfully developed, the
commercial success of the LifeGuide System will depend upon its acceptance as an
accurate, reliable and cost-effective alternative to existing blood glucose
monitoring techniques. The glucose monitoring industry is currently dominated
by several companies with established markets and distribution channels.
Because the proposed LifeGuide System will represent a new practice in the
monitoring of glucose levels, the Company is unable to predict how quickly, if
at all, its products will be accepted by members of the medical community and
people with diabetes. There is no assurance that the Company will ever derive
substantial revenues from the sale of the LifeGuide System.
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History of Operating Losses; Accumulated Deficit; Expectation of Future Losses
The Company has generated no revenue and has sustained significant
operating losses each year since its inception. As of June 30, 1999, the
Company had an accumulated deficit of $46.2 million. Net losses for the years
ended December 31, 1996, 1997 and 1998 were approximately $9,083,432,
$11,564,391 and $11,085,905, respectively, and the Company expects such losses
to continue through 2000 and to increase at least through the end of 1999. The
Company may never generate substantial operating revenue or achieve
profitability.
Corporate Alliance
The Company announced on April 5, 1999 that it formed a strategic alliance
with Amira Medical to jointly develop a new generation of home glucose
monitoring tests utilizing interstitial fluid (ISF). In connection with this
strategic alliance, the Company is subject to risks associated with integrating
its operations and personnel with Amira, which could result in a potential
disruption to the business of the Company and potential diversion of management
time and attentions. The Company agreed to use the application of its ISF
sampling technology in the field of glucose measurement exclusively in
connection with the strategic alliance. There can be no assurance that any
glucose measurement products or technologies of Amira will be effectively
assimilated into or integrated with the Company's ISF sampling technology. If
the strategic alliance were not successful, the Company's ability to continue
its existence or identify suitable business alliances or opportunities or
business combinations with another third party would be limited.
Limited Clinical Testing Experience; Uncertainty of Obtaining FDA Clearance or
Approval
Testing of the LifeGuide System has been performed on benchtop prototypes
and hand-held prototypes solely by Company personnel under controlled
circumstances. The Company expects to make commercial prototypes of the
LifeGuide System available for clinical testing by people with diabetes as soon
as the integration with Amira's glucose measurement technology is complete, and
to use the data derived from this testing to support either a 510(k)
notification or Premarket Approval application (PMA) with the Food and Drug
Administration ("FDA") to permit commercialization of the LifeGuide System in
the United States. There can be no assurance that the Company will not
encounter problems in clinical testing which will cause delays in the
commercialization of the LifeGuide System, and there can be no assurance that
the LifeGuide System will prove to be accurate and reliable on a consistent
basis. Even if accurate and reliable, there can be no assurance that such
testing will show the LifeGuide System to be safe or effective. There can also
be no assurance that the required FDA clearances will be obtained on a timely
basis or at all. The Company believes and has confirmed with the FDA that the
LifeGuide System will be eligible for a 510(k) clearance from the FDA. Still,
there can be no assurance that the FDA will not require a PMA or that the
required FDA clearances or approvals will be obtained on a timely basis or at
all. The Company has no experience in obtaining regulatory approval.
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Highly Competitive Markets; Risk of Technological Obsolescence
The glucose monitoring industry is characterized by continuously evolving
technology and intense competition, and the market is currently dominated by
several companies with established products and distribution channels. In
addition, other companies are attempting to develop minimally- or non-invasive
glucose monitoring products competitive with the proposed LifeGuide System.
There can be no assurance that the Company's competitors and potential
competitors will not succeed in developing or marketing technologies and
products that will be more accepted in the marketplace than the proposed
LifeGuide System or that would render the Company's technology and proposed
device obsolete or noncompetitive. In addition, numerous researchers are
investigating alternative treatments or cures for diabetes. If any of these
efforts are successful in reducing the complications associated with diabetes
and can be cost-effectively provided to people with diabetes, the need for the
Company's products could be mitigated or become entirely nonexistent.
Most of the Company's competitors and potential competitors have
substantially greater capital resources, research and development staffs and
facilities than the Company. In addition, most of the Company's competitors and
potential competitors have substantially greater experience than the Company in
research and new product development, obtaining regulatory approvals and
manufacturing and marketing medical devices. Many of the Company's potential
competitors have already entered into distribution and marketing agreements with
major marketing partners. Competition within the glucose monitoring industry
could also result in reductions of the prices of the Company's products and the
use of purchase incentive programs that could adversely affect the Company's
revenues and profitability.
Lack of Manufacturing Capability; Dependence on Suppliers
The Company's LifeGuide System is still in development and the Company has
not yet created or manufactured a commercial prototype of its device. To be
successful, the Company must manufacture the LifeGuide System in compliance with
regulatory requirements, in a timely manner and in sufficient quantities while
maintaining product quality and acceptable manufacturing costs. The LifeGuide
Key will be assembled by the Company from components to be purchased from
outside suppliers. Manufacturers often encounter difficulties in scaling up
production of new products, including problems involving production yields,
quality control and assurance, component supplies and shortages of personnel.
There can be no assurance that the Company will be able to install and qualify
subsequent commercial productions lines on a timely basis or at all. There also
can be no assurance that the Company will be able to achieve and maintain
product quality and reliability when producing the LifeGuide System in the
quantities required for commercial operations or within a period that will
permit the Company to introduce its products in a timely fashion, or that the
Company will be able to assemble and manufacture its products at an acceptable
cost.
Dependence on Patents and Proprietary Technology
The Company's success will depend in part on its ability to obtain patent
protection for its proposed products and processes, to preserve its trade
secrets and to operate without infringing the proprietary rights of third
parties. The Company pursues a policy of seeking patent protection for each of
the areas of invention embodied in the LifeGuide System. The Company has four
issued United States patents relating to the method of drawing an ISF sample
from the outer layers of the skin, as well as three related US patents. The
company has several pending United States patent applications
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directed toward various aspects of the technologies underlying the LifeGuide
System. The Company has also filed two corresponding PCT foreign patent
applications related to its sampling methods, in order to seek similar patent
protection outside the United States. The first of these has received a
favorable PCT option and has been filed in Europe and three non-European
countries. The European application has been granted and is being filed in
selected member states. There can be no assurance, however, that any additional
patents will be issued, that the scope of any patent protection granted to the
Company will prevent competitors from introducing products competitive with the
LifeGuide System or that any of the Company's patents will be held valid or
enforceable if subsequently challenged. Patenting medical devices involves
complex legal and factual questions, and there is no consistent policy regarding
the breadth of claims which issue pertaining to such technologies. The Company
also relies upon unpatented trade secrets, and no assurance can be given that
others will not independently develop or otherwise acquire unpatented
technologies substantially equivalent to those of the Company. In addition, even
if the patents for which the Company has applied are ultimately issued, other
parties may hold or receive patents that contain claims covering the LifeGuide
System and which may delay or prevent the sale of the LifeGuide System or
require licenses resulting in the payment of fees or royalties by the Company in
order for the Company to carry on its business. There can be no assurance that
needed or potentially useful licenses will be available in the future on
acceptable terms or at all.
There has been substantial litigation regarding patent and other
intellectual property rights in the medical device industry. Litigation could
result in substantial costs to and a diversion of effort by the Company, but may
be necessary to enforce any patents issued to the Company, protect trade secrets
or know-how owned by the Company, defend the Company against claimed
infringement of the rights of others or determine the scope and validity of the
proprietary rights of others. The Company is not currently a party to any patent
or other litigation. The Company routinely monitors patent issuance by others in
its industry. There can be no assurance that third parties will not pursue
litigation that could be costly to the Company. An adverse determination in any
litigation could subject the Company to significant liabilities to third
parties, require the Company to seek licenses from or pay royalties to third
parties or prevent the Company from manufacturing, selling or using its proposed
products, any of which could have a material adverse effect on the Company's
business and prospects.
Government Regulation; Need for Additional Government Clearance or Approval
Government regulation in the United States and other countries is a
significant factor in the Company's business. The Company's products will be
regulated by the FDA under a number of statutes including the Federal Food, Drug
and Cosmetic Act, as amended (the "FDC Act"), the Safe Medical Devices Act of
1990 (the "SMDA"), and the FDA Modernization Act (the "FDAMA"). Manufacturers
of medical devices must comply with applicable provisions of the FDC Act, the
SMDA, the FDAMA and certain associated regulations governing the development,
testing, manufacturing, labeling, marketing and distribution of medical devices
and the reporting of certain information regarding their safety. The FDC Act,
the SMDA, and the FDAMA require authorization from the FDA before medical
devices, such as the Company's proposed LifeGuide System, can be marketed.
The Company has not obtained FDA clearance or approval to market the
LifeGuide System. The regulatory process may delay the marketing of new
products for lengthy periods, impose substantial additional costs and provide an
advantage to those of the Company's competitors who
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have greater financial resources. FDA marketing clearance and approval
regulations depend heavily on administrative interpretation. There can be no
assurance that interpretations made by the FDA or other regulatory bodies, with
possible retroactive effect, will not adversely affect the Company. There can be
no assurance that the required clearance or approval will be obtained in a
timely manner, or at all. In addition, even if obtained, FDA clearance and
approval decisions are subject to continual review, and if the FDA believes that
the Company is not in compliance with the FDC Act, the SMDA, the FDAMA, or their
associated regulations, it can institute proceedings to detain or seize the
Company's products, require a recall, enjoin future violations and assess civil
and criminal penalties against the Company, its directors, officers or
employees. The FDA may also withdraw market clearance or approval for the
Company's products or require the Company to repair, replace or refund the cost
of any device manufactured or distributed by the Company.
The FDC Act will regulate the Company's development, quality control and
manufacturing procedures by requiring the Company to demonstrate compliance with
current Good Manufacturing Practices as implemented through the Quality System
Regulation. The FDA monitors compliance with these requirements by requiring
manufacturers to register with the FDA, which subjects them to periodic FDA
inspections of their manufacturing facilities. In order to ensure compliance
with these requirements, the Company will be required to expend time, resources
and effort in the areas of production and quality control. If violations of the
applicable regulations are noted during FDA inspections, the continued marketing
of any products manufactured by the Company may be halted or adversely affected.
The Company also plans to eventually distribute its products in several
foreign countries. The Company's products will be subject to a wide variety of
laws and regulations in these markets. Generally, the extent and complexity of
the regulation of medical devices is increasing worldwide, with regulations in
some countries already nearly as exhaustive as those applicable in the United
States. This trend may continue and the cost and time required to obtain
marketing approval in any given country may increase. There can be no assurance
that any foreign approvals will be allowed on a timely basis or at all.
Dependence on Key Personnel; Need for Additional Personnel
The success of the Company is dependent in large part upon the ability of
the Company to attract and retain key management and operating personnel.
Qualified individuals are in high demand and are often subject to competing
offers. In the future, the Company will need to add additional skilled
personnel in the areas of research and development and manufacturing. There can
be no assurance that the Company will be able to attract and retain the
qualified personnel needed for its business. The loss of the services of
additional members of the Company's research, manufacturing or management group
or the inability to hire additional personnel as needed would likely have a
material adverse effect on the Company's business and prospects.
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Future Capital Requirements; No Assurance Future Capital Will Be Available
At its current rate of spending, the Company's existing cash will be
sufficient to fund the Company's operations through approximately the first half
of 2000. The Company will require substantial additional funds to meet its
working capital requirements for a full-scale commercial introduction of its
proposed LifeGuide System. Under the strategic alliance with Amira, the Company
will receive a fixed percentage over cost of its LifeGuide Key. Amira will also
fund any additional equipment and tooling required to produce the LifeGuide
System. There can be no assurance that Amira will order sufficient quantities
of the LifeGuide Key in order for the Company to meet its operating expenses and
other needs. In order to meet its needs beyond the first half of 2000, the
Company may be required to raise additional funds through public or private
financings, including equity financings. Adequate funds for the Company's
operations, whether from financial markets or from other sources, may not be
available when needed on terms attractive to the Company or at all.
Insufficient funds may require the Company to delay, scale back or eliminate
some or all of its programs designed to facilitate the commercial introduction
of the LifeGuide System or prevent such commercial introduction altogether.
Product Liability Risk; Limited Insurance Coverage
The Company faces an inherent business risk of exposure to product
liability claims in the event that an end-user is adversely affected by its
prospective products. The Company currently carries a product liability
insurance policy covering the Company's clinical testing with an aggregate limit
of $1.0 million. Although the Company expects to obtain product liability
insurance coverage in connection with the commercialization of the LifeGuide
System, there can be no assurance that such insurance will be available on
commercially reasonable terms, or at all, or that such insurance, even if
obtained, would adequately cover any product liability claim. A product
liability or other claim with respect to uninsured liabilities or in excess of
insured liabilities could have a material adverse effect on the business and
prospects of the Company.
The foregoing review of factors pursuant to the Act should not be construed
as exhaustive or as any admission regarding the adequacy of disclosures made by
the Company prior to the effective date of the Act.
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