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1、OUR MISSIONIntegra LifeSciences Holdings Corporation,through internal product development,acquisitions andstrategic partnerships seeks to be a world leader in providing customers with clinically relevant,inno-vative and cost-effective products that improve the quality of life.Presidents MessageTo Ou
2、r Stockholders:In 2002 we achieved record revenues,operating cash flow and net income while continuing to develop ourextensive product offerings and global infrastructure.We grew total revenues to$117.8 million in 2002,a 26%increaseover 2001,and reported our second full year of profitability.Net inc
3、ome totaled$35.3 million in 2002 as compared tonet income of$26.2 million in 2001,while cash flows generated from operations in 2002 totaled$32.0 millionbyfar our best performance ever.We have continued to expand our sales and distribution channels.We market most of our products directly throughthre
4、e separate sales forces:Integra NeuroSciences(calling on neurosurgery and neurotrauma),Integra Padgett(callingon burn,plastic and reconstructive surgery)and JARITSurgical Instruments(calling on traditional and minimally invasivesurgery).Our global selling organization now has over 150 sales,marketin
5、g,and clinical people providing unparalleledproduct support,customer service and clinical education.We also manufacture medical devices and biomaterials for sale to other companies on a private label basis or throughstrategic alliances.In 2002,Medtronic Sofamor Danek launched its bone regeneration g
6、raft for use in spinal fusionprocedures.This product includes the Absorbable Collagen Sponge that we developed and manufacture.Additionally,we expanded the indications for our INTEGRADermal Regeneration Template to include reconstructive surgery.Acquisitions also contributed to our growth last year.
7、In 2002,Integra completed five acquisitions.In July,we acquiredthe business of Signature Technologies,Inc.,a specialty contract manufacturer of titanium and stainless steel implantsfor the neurosurgical and spinal markets.In August,we added a range of leading hydrocephalus valves,including theOrbis-
8、Sigma,Hakimand horizontal-vertical(“H-V”)lumbar valves,and external ventricular drainage products toour neurosurgical product line through our acquisition of the neurosciences division of NMT Medical Inc.The acquiredoperations included an owned facility in Biot,France that manufactures,packages and
9、distributes shunting,catheter anddrainage products,and a leased distribution facility in Atlanta.We closed the Atlanta facility and consolidated its operationsinto our Cranbury,New Jersey national distribution center during the third quarter.We acquired the rights to the NeuroSensor Monitoring syste
10、m and rights to related intellectual property fromNovus Monitoring Limited of the United Kingdom in September.The NeuroSensor system will measure both intracranialpressure and cerebral blood flow using a single combined probe and a monitor for display.This system has potentialapplications in neuro-t
11、rauma,cerebrovascular disease,and post-operative surgical treatment.We expect to beginclinical trials on the NeuroSensor in 2003.In October,we acquired Padgett Instruments,Inc.,a marketer of instruments and other devices used in reconstructive,plastic and burn surgery.For more than 40 years,the Padg
12、ett name has been identified with providing instruments ofthe highest quality to meet the exacting standards of the plastic and reconstructive surgeon.The acquisition broadensour existing customer base and gives us access to new market segments in which to market our other products such asthe NeuraG
13、en Nerve Guide.The Padgett sales force is already trained and selling the NeuraGen product in additionto Padgetts established product lines.In March 2003,we transferred Padgetts operations from its Kansas City facilityto our national distribution center.In December,we acquired the epilepsy monitorin
14、g electrode and neuro shunting businessof the Radionics division of Tyco Healthcare Group.So far,2003 has been just as exciting.In March,we acquired JARITSurgical Instruments.JARIT,based in Hawthorne,New York,markets a wide variety of high quality surgical instruments for use in both traditional and
15、 minimallyinvasive surgery.The JARIT organization has over 30 years of dedicated experience in meeting the general andspecialty instrument needs of doctors and hospitals.Its unique distribution network and service management team isrecognized for providing the industrys highest levels of customer se
16、rvice and fill-rates.JARITs instruments are usedin virtually all surgical disciplines,including general,plastic,neuro,ENT,cardiovascular,ob-gyn,and ophthalmic surgery,iiat more than 5,200 hospitals and surgery centers worldwide.JARIT sells products in the United States through a twenty-person sales
17、management force that works with over 100 distributor sales representatives.JARIT maintains theindustrys most comprehensive inventory to insure complete and timely delivery.This acquisition broadens our existingcustomer base and allows us to expand into new market segments involving procedures that
18、could benefit frominnovative new products.Integra will also benefit from the national contract relationships that JARIT has established with Group PurchasingOrganizations(GPOs)such as Novation,Broadlane,MedAssets,and Consorta.Also,we were recently awarded amultisource contract for our neurosurgical
19、products with Premier,Inc.,a strategic alliance of more than 200 of the nationsleading hospital and health care systems.Premier selected our Integra NeuroSciences sales organization as a nationalsupplier for its neurosurgical products contract.We believe that this contract award represents an import
20、ant opportunityfor us to offer our broad neurosurgical product line to a larger audience.We raised$120 million in a very successful convertible notes offering this year,greatly enhancing our financialflexibility going forward.With more than$165 million in cash and marketable securities as of March 3
21、1,2003 and adiversified and experienced management team,Integra now has more resources than ever to execute on our strategy.We will continue to work toward strategic alliances with leading companies to develop and market our private label productlines,and we are increasing our efforts toward interna
22、l product development.We are actively seeking additionalacquisitions in neurosurgery and related markets such as the ear,nose and throat,instruments,neurology,and spine markets.Overall,I am extremely pleased with our performance in 2002 and early 2003,and I am enthusiastic aboutIntegras future.I wan
23、t to again recognize the efforts of our 850 dedicated employees located around the world.Looking forward to 2004,I expect that additional acquisitions and internal product development will allow us to continueour successful track record of profitably bringing critical life-saving and innovative prod
24、ucts to the medical communityand to patients around the globe.Thanks to you,our stockholders,for your continued support.Sincerely,President and Chief Executive OfficerSECURITIES AND EXCHANGE COMMISSIONWASHINGTON,DC 20549FORM 10-KANNUAL REPORT PURSUANT TO SECTION 13 OFTHE SECURITIES EXCHANGE ACT OF 1
25、934FOR THE FISCAL YEAR ENDEDCOMMISSION FILE NO.0-26224DECEMBER 31,2002INTEGRA LIFESCIENCES HOLDINGS CORPORATION(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)DELAWARE51-0317849_(STATE OR OTHER JURISDICTION OF(I.R.S.EMPLOYERINCORPORATION OR ORGANIZATION)IDENTIFICATION NO.)311 ENTERPRISE DRIVEP
26、LAINSBORO,NEW JERSEY08536_(ADDRESS OF PRINCIPAL(ZIP CODE)EXECUTIVE OFFICES)REGISTRANTS TELEPHONE NUMBER,INCLUDING AREA CODE:(609)275-0500SECURITIES REGISTERED PURSUANT TO SECTION 12(b)OF THE ACT:NONESECURITIES REGISTERED PURSUANT TO SECTION 12(g)OF THE ACT:COMMON STOCK,PAR VALUE$.01 PER SHARE(TITLE
27、OF CLASS)Indicate by check mark whether the registrant:(1)has filed all reports required to be filed by Section 13 or 15(d)ofthe Securities Exchange Act of 1934 during the preceding 12 months(or for such shorter period that the registrant wasrequired to file such reports),and(2)has been subject to s
28、uch filing requirements for the past 90 days.Yes?No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein,and will not be contained,to the best of registrants knowledge,in definitive proxy or information statements incorporatedby ref
29、erence in Part III of this Form 10-K or any amendment to this Form 10-K.Indicate by check mark whether the registrant is an accelerated filer(as defined in Rule 12b-2 of the Act).Yes?No As of June 28,2002,the aggregate market value of the registrants common stock held by non-affiliates was approxima
30、tely$356,962,914,based upon the closing sales price of the registrants common stock on NASDAQ on such date.For purposesof this calculation only,all directors,executive officers and holders of more than 10%of the registrants outstandingcommon stock as of such date were deemed to be“affiliates”of the
31、registrant.The number of shares of the registrants Common Stock outstanding as of March 14,2003 was 27,325,902.DOCUMENTS INCORPORATED BY REFERENCECertain portions of the registrants definitive proxy statement relating to its scheduled May 21,2003 Annual Meetingof Stockholders are incorporated by ref
32、erence in Part III of this report.2PART IITEM 1.BUSINESSThe terms“we,”“our,”“us,”“Company”and“Integra”refer to Integra LifeSciences Holdings Corporation and itssubsidiaries unless the context suggests otherwise.Integra develops,manufactures,and markets medical devices,implants and biomaterials prima
33、rily for use in neurosurgery,orthopedics and soft tissue repair.Our business operates globally and is divided into two segments,which we sometimesrefer to as divisions:Integra NeuroSciences and Integra LifeSciences.Integra was founded in 1989 and over the next decade developed technologies and a pro
34、duct portfolio directed towardtissue regeneration.In 1999,we entered the neurosurgery market through an acquisition and the launch of our DuraGenDural Graft Matrix product for the repair of the dura mater.Since 1999,Integra NeuroSciences has grown to comprisemore than 77%of our total revenues.During
35、 that period,we have increased our revenues from$40.0 million to$117.8million,for an average annual growth rate of 41%,and we have broadened our product offerings to include more than10,000 products.We have achieved this growth in our overall business through eleven acquisitions,the developmentand i
36、ntroduction of new products,and the expansion of Integra NeuroSciencesdirect sales force.Integra is subject to the informational requirements of the Securities Exchange Act of 1934,as amended,which we referto as the“Exchange Act”.In accordance with the Exchange Act,we file annual,quarterly and speci
37、al reports,proxystatements and other information with the Securities and Exchange Commission.You may view our financial information,including the information contained in this report,and other reports we file with the Securities and ExchangeCommission,on the Internet in the“SEC Filings”page of the I
38、nvestor Relations section of our website at www.Integra-LS.com.You may also obtain a copy of any of these reports,without charge,from our investor relations department,311 Enterprise Drive,Plainsboro,NJ 08536.Alternatively,you may view or obtain reports filed with the Securities andExchange Commissi
39、on at the SEC Public Reference Room at 450 Fifth Street,N.W.in Washington,D.C.20549,or atthe SECs Internet site at www.sec.gov.Please call the Securities and Exchange Commission at 1-800-SEC-0330 forfurther information on the operation of the public reference facilities.Integra NeuroSciences Segment
40、Our Integra NeuroSciences segment comprises our businesses that primarily sell directly to healthcare providers.Through our Integra NeuroSciences segment we are a leading provider of implants,devices,and systems used inneurosurgery,neurotrauma,and related critical care,a marketer of surgical instrum
41、ents and devices,and a distributorof disposables and supplies used in the diagnosis and monitoring of neurological disorders.We market the majority of these products directly to neurosurgeons and critical care units.We believe that we are ableto access this focused group of hospital-based practition
42、ers cost effectively through our direct sales and marketinginfrastructure in the United States and Europe and our distribution network elsewhere.Integra NeuroSciencesdirectselling effort in the United States and Europe currently involves more than 100 professionals,including directsalespeople(called
43、 neurospecialists in the United States),sales management,and clinical educators who educate andtrain both our salespeople and customers in the use of our products.A national sales manager and seven regional managerslead the United States sales force.We increased the number of our domestic sales terr
44、itories from 44 to 63 in 2002.Webelieve our expanded sales force allows for smaller,more focused territories,better coverage of our customers,greaterparticipation in trade shows and more extensive marketing efforts.We market surgical instruments and other devices directly to plastic and reconstructi
45、ve surgeons,burn surgeons,handsurgeons,ear,nose and throat(ENT)surgeons and other physicians through a separate eight-person sales force in theUnited States and a network of distributors outside the United States.We also market a broad range of disposables andsupplies used in the diagnosis and monit
46、oring of neurological,ENT and pulmonary disorders directly to neurologists,hospitals and sleep clinics through our Integra NeuroSupplies catalog business.3Integra LifeSciences SegmentOur Integra LifeSciences segment comprises our businesses that primarily sell through intermediaries,such as strategi
47、cpartners and original equipment manufacturer customers.Through our Integra LifeSciences segment we develop andmanufacture a variety of medical products and devices,including products based on our proprietary tissue regenerationtechnology.We partner with market leaders for the development and market
48、ing of most of our Integra LifeSciences products.We believe that because these products address large,diverse markets,we can promote them more cost-effectively throughleveraging the sales capabilities of our marketing partners than through developing our own sales infrastructure.Thisstrategy allows
49、us to achieve our growth objectives cost-effectively while enabling us to focus our management effortson developing new products.Our strategic partners include Ethicon,Inc.(a division of Johnson&Johnson),WyethBiopharma,Medtronic Sofamor Danek,and Centerpulse.Financial information about our segments
50、and geographical areas,is set forth in our financial statements under Notesto Consolidated Financial Statements,Note 13Segment and Geographic Information.We do not disaggregatenonoperating revenues and expenses nor identifiable assets on a segment basis.Recent DevelopmentOn March 17,2003,we acquired
51、 JARITSurgical Instruments,Inc.(“JARIT”)for$44.5 million in cash,subject to aworking capital adjustment and other adjustments with respect to certain income tax elections.For more than 30 years,JARIT has marketed a wide variety of high quality,reusable surgical instruments to virtually all surgical
52、disciplines.JARIT sells its products to more than 5,200 hospitals and surgery centers worldwide.In the United States,JARIT sellsthrough a 20 person sales management force that works with over 100 distributor sales representatives.With more than 5,000 instrument patterns and a 98%order fill rate,JARI
53、T has developed a strong reputation as a leadingprovider of high-quality surgical instruments.JARIT manages its vendor relationships and purchases,packages and labelsits products directly from instrument manufacturers through its facility in Tuttlingen,Germany.The acquisition of JARIT broadens Integ
54、ras existing customer base and surgical instrument product offering and providesan opportunity to achieve operating costs savings,including the procurement of Integras Redmond-Ruggles andPadgett Instruments Inc.products directly from the instrument manufacturers.The acquired business generated appro
55、ximately$30.9 million in revenues and$7.8 million in income before incometaxes for the year ended December 31,2002.We expect to report the results of JARIT in the Integra NeuroSciences segment.STRATEGYOur goal is to become a global leader in the development,manufacturing and marketing of medical dev
56、ices,implantsand biomaterials in the markets in which we compete.Key elements of our strategy include the following:Expand Integra NeuroSciences.Through acquisitions and internal growth,we have rapidly grown Integra NeuroSciencesinto a leading provider of products used in the diagnosis,monitoring an
57、d treatment of chronic diseases and acute injuriesinvolving the brain,spine and nervous system.We believe that additional growth potential in the Integra NeuroSciencessegment exists throughexpanding our product portfolio and market reach through additional acquisitions;increasing the penetration of
58、our existing products into closely related markets,such as the ENT,neurology,andspine markets;continuing the development and promotion of innovative new products,such as the NeuraGen Nerve Guide andthe LICOXBrain Tissue Oxygen Monitoring System;andexpanding our sales force and product offerings focu
59、sed on plastic and reconstructive surgeons.Additional Strategic Acquisitions.Since 1999 we have completed twelve acquisitions focused primarily in the IntegraNeuroSciences division.We regularly evaluate potential acquisition candidates in this market and in other specialty medicaltechnology markets
60、characterized by high margins,fragmented competition and focused target customers.4Continue To Form Strategic Alliances For Integra LifeSciencesProducts.We have collaborated with well-known medicaldevice companies to develop and market the majority of our non-neurosurgical product lines.Significant
61、ongoing strategicalliances include those with Ethicon to market our INTEGRADermal Regeneration Template and Wyeth BioPharmaand Medtronic Sofamor Danek to develop products for use in orthopedics.We intend to pursue additional strategic alliancesselectively.Continue To Develop New And Innovative Medic
62、al Products.As evidenced by our development of the INTEGRADermal Regeneration Template,biomaterials for the orthopedic implant market,Biomendand BiomendExtendAbsorbable Collagen Membrane,DuraGenDural Graft Matrix and the NeuraGen Nerve Guide,we have a leadingproprietary absorbable implant franchise.
63、We currently are developing a variety of innovative neurosurgical and othermedical products and are seeking expanded applications for our existing products.BUSINESS SEGMENTSOVERVIEWThe Integra NeuroSciences segment sells medical devices,implants,systems and instruments used in the diagnosis,monitori
64、ng and treatment of chronic diseases and acute injuries involving the brain,spine and nervous system,anddisposable medical supplies,such as electrodes,used in neurological testing.These products are used primarily byneurosurgeons and nurses in the intensive care unit and the operating room and by ne
65、urologists in hospital andoutpatient settings.We also sell products that vascular surgeons use to divert blood to vital organs,such as the brain,during surgical procedures involving blood vessels.Additionally,Padgett Instruments sells instruments and otherdevices through a separate direct sales forc
66、e to plastic and reconstructive surgeons,burn surgeons,ENT surgeons andother physicians.According to industry sources and our estimates,our Integra NeuroSciences products address marketsthat exceed$400 million in the aggregate and are expected to grow at an annual rate of 6-8%.Integra NeuroSciences
67、offers one of the most comprehensive product lines serving the neuro intensive care unit andoperating room.We have established market positions in intracranial monitoring,dural repair,tumor ablation,neurosurgical shunting,surgical instrumentation,carotid shunting,peripheral nerve repair and central
68、nervous systemdiagnostic and monitoring supplies.Integra NeuroSciencesproducts can be divided by use into the following functionalareas:i)the neuro intensive care unit,ii)the neurosurgical operating room,and iii)all other.The table below providesa summary of Integra NeuroSciencesproducts:PRODUCT LIN
69、ESAPPLICATIONNEURO INTENSIVE CARE UNITCaminoand Ventrixfiber optic-based intracranialAccess,drainage and continuousMonitoring systems,LICOXoxygen monitoringmonitoring of intracranial pressure,Systems,Integra Systems of CSF Drainage andoxygen and temperature following injuryCranial Accessor neurosurg
70、ical proceduresNEUROSURGICAL OPERATING ROOMDuraGenDural Graft MatrixGraft to close brain and spine membraneNeuraGen Nerve GuideRepair of peripheral nervesSelectorIntegra Ultrasonic Aspirator;Use of ultrasonic energy toDissectronUltrasonic Aspiratorablate tissue5PRODUCT LINESAPPLICATIONNeurosurgical
71、shunts,including theSpecifically designed for theOrbis-Sigma II,and the H-V Lumbar,management of hydrocephalus,a chronicNovus and Equi-FlowValvescondition involving excesscerebrospinal fluid in the brainRedmond-Ruggles neurosurgicalSpecialized surgical instruments forand spinal instrumentsuse in bra
72、in or spinal surgeryIntegra epilepsy monitoring electrodesElectrodes for the intraoperativemonitoring of epileptic seizuresALL OTHERJARITSurgical InstrumentsInstruments for general,plastic,neuroENT,cardiovascular,ob-gyn,andophthalmic surgeryPadgett InstrumentsDevices and instruments used in burn,rec
73、onstructive and plastic surgeryIntegra NeuroSuppliesDisposables and supplies used in thediagnosis and monitoring ofneurological,ENT and pulmonarydisordersSundt and other carotid shuntsFor shunting blood during surgicalprocedures involving blood vesselsMARKETS AND PRODUCTSNeuro Intensive Care UnitThe
74、 Monitoring Of Brain Parameters.Neurosurgeons use intracranial monitors to diagnose and treat cases of severehead trauma and other diseases.There are approximately 400,000 cases of head trauma each year in the United States,and the market for monitoring and intervention is estimated to be approximat
75、ely$40 million.Integra NeuroSciences sells the Caminoand Ventrixlines of intracranial pressure and temperature monitoringsystems and the LICOXBrain Tissue Oxygen Monitoring System.Integra NeuroSciences currently has over 3,000intracranial monitors installed worldwide.The Caminoand Ventrixsystems mea
76、sure the intracranial pressure andtemperature in the brain and ventricles,and the LICOXsystem allows for continuous qualitative regional monitoringof dissolved oxygen in cerebral tissues.Core technologies underlying the brain parameter monitoring product line includethe design and manufacture of the
77、 disposable catheters used in the monitoring systems,pressure transducer technology,optical detection/fiber optic transmission technology,sensor characterization and calibration technology and monitordesign.External Drainage And Cranial Access.Neurosurgeons use external drainage systems and cranial
78、access kits to gainaccess to the cranial cavity and to drain excess cerebrospinal fluid from the ventricles of the brain into an external container.Integra NeuroSciences manufactures and markets a broad line of cranial access kits and ventricular and lumbar externaldrainage systems under the Integra
79、 CSF Drainage and Cranial Access Systems brand names.6Neurosurgical Operating RoomRepair Of The Dura Mater.The dura mater is the thick membrane that contains the cerebrospinal fluid within the brainand the spine.The dura mater often must be penetrated during brain surgery and is often damaged during
80、 spinal surgery.In either case,surgeons may close or repair the dura mater with a graft.The graft may consist of tissue taken from elsewherein the patients body,or it may be one of the dural substitute products currently on the market,which are made of syntheticmaterials,processed human cadaver,or b
81、ovine pericardium.The worldwide market for dural repair,including cranialand spinal applications,is estimated to be$80 million.The DuraGenDural Graft Matrix is an absorbable collagen matrix indicated for the repair of the dura mater surroundingthe brain and spine.We believe that the DuraGenDural Gra
82、ft Matrix addresses the shortcomings from which othermethods for repairing the dura mater suffer.Clinical trials have shown our DuraGenproduct to be an effective meansfor closing the dura mater without the need for suturing,which allows the neurosurgeon to conclude the operation moreefficiently.In a
83、ddition,because the human body ultimately absorbs the DuraGenproduct and replaces it with new naturaltissues,the patient avoids some of the risks associated with a permanent implant inside the cranium or spinal cavity.Repair Of Peripheral Nerves.Peripheral nerves may become severed through traumatic
84、 accidents or surgical injuries,often resulting in the permanent loss of motor and sensory function.Although severed peripheral nerves regeneratespontaneously,they do not establish functional connections unless the nerve stumps are surgically reconnected.We estimatethe market for the repair of sever
85、ed peripheral nerves to be$40 million.The NeuraGen Nerve Guide is an absorbable implant for the repair of severed peripheral nerves.The NeuraGenproduct is a collagen tube designed to provide a protective environment for the regenerating nerve and to provide a conduitthrough which regenerating nerves
86、 can bridge the gap caused by the injury.The NeuraGen Nerve Guide offers a rapidmethod for rejoining severed peripheral nerves.In addition to targeting the neurosurgical operating room,we are alsomarketing the NeuraGen product to Integra NeuroSuppliescustomer base of non-hospital and private practic
87、e-basedneurologists and to Padgett Instrumentscustomer base of hand and reconstructive surgeons.Neurosurgical Systems For Tissue Ablation.More than 145,000 primary and metastatic brain tumors are diagnosed annuallyin the United States.Our SelectorIntegra Ultrasonic Aspirator and DissectronUltrasonic
88、 Surgical Aspirator systemsaddress the market for the surgical destruction and removal of malignant and non-malignant tumors and other tissue.The SelectorIntegra Ultrasonic Aspirator and DissectronUltrasonic Surgical Aspirator use very high frequency soundwaves to pulverize cancer tumors and allow t
89、he surgeon to remove the damaged tumor tissue by aspiration.Unlike othersurgical techniques,ultrasonic surgery selectively dissects and fragments soft tissue leaving fibrous tissues such as nervesand blood vessels intact.Ultrasonic aspiration facilitates the removal of unwanted tissue adjacent or at
90、tached to vitalstructures.In September 2002,we received FDA 510(k)clearance to market the Selectorproduct for use in general,gynecological,urological,plastic and reconstructive,orthopedic,thoracic and thorascopic surgery procedures.We offer the Dissectronproduct only outside the United States.Hydroc
91、ephalus Management.Hydrocephalus is an incurable condition resulting from an imbalance between the amountof cerebrospinal fluid produced by the brain and the rate at which the body absorbs cerebrospinal fluid.This conditioncauses the ventricles of the brain to enlarge and the pressure inside the hea
92、d to increase.Hydrocephalus often is presentat birth,but may also result from head trauma,spina bifida,intraventricular hemorrhage,intracranial tumors and cysts.Hydrocephalus is most commonly treated by inserting a shunt into the ventricular system of the brain to divert the flowof cerebrospinal flu
93、id out of the brain and using a pressure valve to maintain a normal level of cerebrospinal fluid withinthe ventricles.According to the Hydrocephalus Association,hydrocephalus affects approximately one in 500 children born in the UnitedStates.We estimate that approximately 80%of total cerebrospinal f
94、luid shunt sales address birth-related hydrocephalus,and the remaining 20%address surgical procedures involving excess cerebrospinal fluid due to head trauma.Based onindustry sources,we believe that the total United States market for hydrocephalus management,including monitoring,shunting and drainag
95、e,is approximately$70 million.Of that amount,it is estimated that a little more than half consistsof sales of monitoring products,and the balance consists of sales of shunts and drains for the management ofhydrocephalus.7In 2002 we strengthened our offering of hydrocephalus management products throu
96、gh our acquisition of the neurosciencesdivision of NMT Medical,Inc.and certain assets of the Radionics business,a division of Tyco Healthcare Group.Thoseacquisitions added a range of leading pressure valves,including the Orbis-Sigma,Integra Hakimhorizontal-vertical(“H-V”),Equiflowand Contour Flexval
97、ves to our existing line of hydrocephalus management shunting products.We have sold the Heyer-Schulte,Novus,LPVand Pudenz shunts,ventricular,peritoneal and cardiac catheters,physician-specified hydrocephalus management shunt kits,Ommayacerebrospinal fluid reservoirs and Spetzlerlumbar and syringo-pe
98、ritoneal shunts since our acquisition of the NeuroCare group of companies in 1999.In recent years,neurosurgeons have increased their use of programmable valves,which allow the neurosurgeon to adjustthe pressure settings of the shunt while it is implanted in the patient.Shunts that do not incorporate
99、 programmable valvetechnology must be removed from the patient for subsequent pressure adjustments,a process that requires an additionalsurgical procedure.We do not market hydrocephalus management shunts with programmable valves and believe thatthe increasing use of programmable valves may negativel
100、y affect the future sales of our shunt products.Neurosurgical And Spinal Instrumentation.We provide neurosurgeons and spine surgeons with a full line of specialtyhand-held spinal and neurosurgical instruments sold under the Redmond and Ruggles brand names and a line ofdisposable neuroendoscopy produ
101、cts sold under the Neuro Navigationalbrand name.The Redmond-Rugglesproducts include retractors,kerrisons,dissectors,and curettes.Major product segments includespinal instruments,microsurgical neuro instruments,and products customized by Integra NeuroSciences and sold throughother companies and distr
102、ibutors.Specialty surgical steel fabricators in Germany manufacture most of the Redmondand Ruggles products to our specifications.The Neuro Navigationalproduct line consists of fiber optic instrumentsused to facilitate minimally invasive neurosurgery,including third ventriculostomies,which are incre
103、asingly substitutedfor shunt placement for patients who meet the criteria.Epilepsy Electrodes.We sell a line of electrodes for the intraoperative monitoring of epileptic seizures through ourNeuroSciences sales force.We acquired these products and other assets in December 2002 from Radionics,a divisi
104、onof the Tyco Healthcare Group,and are transferring the manufacture of these products to our facility in Biot,France.All OtherNeurological Supplies.Through our Integra NeuroSupplies business,we distribute a wide variety of disposables andsupplies,including surface electrodes,needle electrodes,record
105、ing transducers and stimulators,and respiratory sensors,that are used in the diagnosis and monitoring of neurological disorders.These products are designed to monitor andperform tests of the nervous system and brain,including electromyography(EMG),evoked potential(EP)andelectroencephalography(EEG)te
106、sts,and to test sleep disorders.We sell these products under the Integra NeuroSupplies name primarily through a catalog to more than 6,000neurologists,hospitals,sleep clinics,and other physicians.Neurologists are the referring physicians for Integrasexisting neurosurgeon customers and participate in
107、 the decision to use our line of epilepsy monitoring electrodes.Padgett Instruments.Padgett Instruments,Inc.markets a wide variety of high quality,reusable surgical instrumentsto plastic and reconstructive surgeons,burn surgeons,ENT surgeons,hospitals,surgery centers,and other physicians.We sell the
108、se products in the United States through an eight-person direct sales force and through certain distributorsand original equipment manufacturer accounts.We sell these products internationally through distributors.Padgettscustomer base represents an attractive potential market for certain of our othe
109、r products,such as the NeuraGen NerveGuide.Hemodynamic Shunts.Our Sundt and other carotid shunts are used to divert blood to vital organs,such as the brain,during surgical procedures involving blood vessels.The Integra NeuroSciences sales force sells these products directlyin the United States for u
110、se by vascular surgeons and neurosurgeons.8OVERVIEWThe Integra LifeSciences segment develops and manufactures implants and other medical devices used primarily forthe treatment of defects,diseases and injuries involving soft tissue and bone and for infection control.Many of the currentproducts of In
111、tegra LifeSciences are built on our expertise in absorbable collagen products.The Integra LifeSciences segment comprises our businesses that sell primarily through intermediaries,such as strategicpartners and original equipment manufacturer customers.Because its products generally address large,dive
112、rse markets,we have constructed Integra LifeSciences segments marketing,research and development programs around strategicalliances with leading medical device companies.We believe that we can promote these products more cost-effectivelythrough leveraging our marketing partnerssales capabilities tha
113、n through developing our own sales force.Accordingto industry sources and our estimates,the aggregate size of the markets addressed by Integra LifeSciences productsexceeds$1 billion.We have established a reputation as a value-added and dependable development and manufacturing partner.In addition,we
114、have expertise in the development,manufacture and supply of a variety of absorbable materials and can provideexperienced personnel to support product quality and regulatory review efforts.Although the Integra LifeSciences products serve a wide variety of markets,they can be segmented into two genera
115、lgroups:i)tissue repair products and ii)other medical devices.The table below provides a summary of our IntegraLifeSciences products,their application,and marketing/development partner:PRODUCT LINESAPPLICATIONMARKETING/DEVELOPMENT PARTNERTISSUE REPAIR PRODUCTSINTEGRADermalRegenerate dermis and repai
116、rEthicon,Inc.,a division ofRegeneration Templateskin defectsJohnson&Johnson,and CenturyMedical,Inc.in JapanBioMendandUsed in guided tissueCenterpulseBioMendExtendregeneration in periodontalAbsorbable CollagensurgeryMembraneAbsorbable CollagenFracture management/enablingWyeth BioPharma;MedtronicSpong
117、e and other matricesspinal fusionSofamor Danekfor use with bonemorphogenetic protein(rhBMP-2)OTHER MEDICAL DEVICESVitaCuffcatheter accessProvides protection againstArrow International,Inc.,infection control deviceinfection arising fromBard Access Systems,Inc.,long-term cathetersTyco HealthCareBioPat
118、ch(1)Antimicrobial wound dressingEthicon,Inc.Antimicrobial WoundDressing9PRODUCT LINESAPPLICATIONMARKETING/DEVELOPMENT PARTNERCollaCote,CollaTapeUsed to control bleeding inCenterpulseand CollaPlugabsorbabledental surgerywound dressingsInstat(1),HelistatandControl of bleedingEthicon,Inc.and variousHe
119、liteneAbsorbabledistributorsCollagen HemostatsSpembly MedicalAllows surgeon to use lowVarious distributorscryosurgery productstemperature to more easilyextract diseased tissueCranial fixation devices;Allows neurosurgeon to repairMedtroniccustom cranial platesinjuries to the cranium(1)BioPatch and In
120、stat are registered trademarks of Johnson&Johnson.MARKETS AND PRODUCTSTissue Repair ProductsSkin Replacement.Integra LifeSciencesskin replacement products address the market need created by severe burns,reconstructive surgery,and chronic wounds.INTEGRADermal Regeneration Template is designed to enab
121、le the human body to regenerate functional dermal tissue.The FDA initially approved the product under a Premarket Approval application(“PMA”)for the post-excisional treatmentof life-threatening deep or full-thickness dermal injury where sufficient autograft is not available at the time of excisionor
122、 not desirable due to the physiological condition of the patient.In 2002,the FDA approved a PMA supplement to permitthe marketing of the INTEGRADermal Regeneration Template for the repair of scar contractures in patients who havealready recovered from their initial wound.In 2002,we also received FDA
123、 510(k)clearance to sell a related product,Integra Bilayer Matrix Wound Dressing and Integra Matrix Wound Dressing,for the dressing of wounds,includingchronic wounds.The Ethicon division of Johnson&Johnson is the exclusive seller of the INTEGRADermal Regeneration Templateand the Integra BiLayer Woun
124、d Matrix worldwide,except in Japan where Century Medical,Inc.has rights todistribute the INTEGRADermal Regeneration Template.In 2002,we sold$4.2 million of INTEGRADermal Regeneration Template to Ethicon and received$2.0 million inresearch payments and$1.0 million in clinical and regulatory event pay
125、ments that were recorded in other revenue.Ethicon has not been successful in selling the minimum amounts of INTEGRADermal Regeneration Templatespecified in its agreement with us.In addition,we have notified Ethicon that certain clinical and regulatory events havebeen achieved under the agreement and
126、 that payments for the achievement of those events is due to us.Ethicon has informedus that it disagrees that the clinical and regulatory events in question have been achieved,and that it does not intend tomake the payments we have demanded.In addition,Ethicon has informed us that if we do not agree
127、 to substantialamendments to its agreement with us,it will consider alternatives that may include exercising its right to terminate theagreement.The agreement requires Ethicon to give us notice one year in advance of a termination of the agreement,during whichtime Ethicon is required to continue to
128、comply with the terms of the contract.At the end of that period,Ethicon maybe required to pay additional amounts based on the termination provisions of the agreement and is required to cooperatein the transfer of the business back to Integra.Additionally,Ethicon may apply the value of any minimum pa
129、yments in10excess of actual product purchases against future purchases of products for sale on a non-exclusive basis for a specifiedperiod of time.If Ethicon does terminate the agreement or if we determine that Ethicon is in breach of the agreement and we terminatethe agreement,there is no assurance
130、 that we will be able to recover the money that we believe Ethicon is obligated topay us under the agreement.If Ethicon does give us notice that it will terminate the agreement,it is possible that Ethiconwill diminish its sales and marketing efforts for the product during the one-year notice period
131、and that its sales will declineas a result.In addition,we may not be successful in sustaining or restoring the sales of the INTEGRADermalRegeneration Template at current levels after the termination date.Finally,if Ethicon terminates the agreement it is possiblethat we may become involved in litigat
132、ion with Ethicon,which could also impair our ability to sell products under ourother agreements with Ethicon,including the BioPatchand Instatproducts.Guided Tissue Regeneration In Periodontal Surgery.Our BioMendAbsorbable Collagen Membrane is used forguided tissue regeneration in periodontal surgery
133、.The BioMendmembrane is inserted between the gum and the toothafter surgical treatment of periodontal disease,preventing the gum tissue from interfering with the regeneration ofthe periodontal ligament that holds the tooth in place.The body absorbs the BioMendproduct after approximatelyfour to seven
134、 weeks,avoiding the requirement for additional surgical procedures to remove a non-absorbablemembrane.The BioMendExtend product has the same indication for use as the BioMendproduct,except that itabsorbs in approximately 16 weeks.The BioMendand BioMendExtend Absorbable Collagen Membranes are soldthr
135、ough Centerpulse.Orthopedic Biomaterials.Integra LifeSciences supplies Wyeth BioPharma with Absorbable Collagen Sponges for usein developing bone regeneration implants.Since 1994,we have supplied Absorbable Collagen Sponges for use with WyethBioPharmas recombinant human bone morphogenetic protein-2(
136、rhBMP-2),a manufactured version of human proteinnaturally present in very small quantities in the body.Wyeth BioPharma is developing rhBMP-2 for clinical evaluationin several areas of bone repair and augmentation,including orthopedic,oral and maxillofacial surgery applications.We are selling Absorba
137、ble Collagen Sponges for spinal applications through a related collaboration with Medtronic SofamorDanek in North America.In July 2002,the FDA approved Medtronic Sofamor Daneks InFUSE Bone Graft used withthe LT-CAGELumbar Tapered Fusion Device for use in spinal fusion procedures.The InFUSE Bone Graf
138、t uses rhBMP-2 applied to our Absorbable Collagen Sponge in place of a painful secondary procedure to harvest small pieces of bonefrom the patients own hip(autograft).When used with the LT-CAGE Lumbar Tapered Fusion Device,the InFUSE BoneGraft is indicated to treat certain types of spinal degenerati
139、ve disc disease,a common cause of low back pain.Wyeth BioPharma has filed a PMA application with the FDA seeking approval for the use of InductOs,rhBMP-2used in conjunction with our Absorbable Collagen Sponge,for use in the treatment of acute long-bone fracturesrequiring open surgical management.In
140、November 2002,the Orthopedic and Rehabilitation Panel of the FDA MedicalDevices Advisory Committee recommended that the FDA approve,with conditions,Wyeth BioPharmas PMAapplication.We receive development funding and other payments from Medtronic Sofamor Danek and Wyeth BioPharma relatedto the develop
141、ment of additional matrices for various applications.Although the agreement provides for no milestoneor other contingent payments,Wyeth BioPharma pays us to assist with regulatory affairs and research.In addition,we are continuing to develop additional biomaterial technologies,such as a new class of
142、 absorbablepolycarbonates created through the polymerization of tyrosine,that enhance the rate and quality of healing and tissueregeneration with synthetic biodegradable scaffolds that support cell attachment and growth.No medical devicecontaining these materials has yet been approved for sale.Other
143、 Medical DevicesOther current products of Integra LifeSciences include the VitaCuffcatheter access infection control device,the BioPatchanti-microbial wound dressing,a wide range of absorbable collagen products for hemostasis for use in dental surgerysold under the names CollaCote,CollaTapeand Colla
144、Plug,the HelistatAbsorbable Collagen Hemostatic Agent,the InstatAbsorbable Collagen Hemostat,and cranial fixation devices for use in craniomaxillofacial surgery.Our Spembly11Medical cryosurgery products allow surgeons to use low temperatures to more easily extract diseased tissue inophthalmic,genera
145、l,gynecological,urological and cardiac applications.RESEARCH AND DEVELOPMENT STRATEGYOur research and development programs focus on developing new products based on our materials and collagenengineering technologies and our expertise in fiber optics.Contract development revenues from strategic allia
146、nce partnersand government grants fund a portion of our research and development activities.We spent approximately$10.6million,$8.0 million,and$7.5 million in 2002,2001,and 2000,respectively,on research and development activities.The 2002 amount includes$2.3 million of acquired in-process research a
147、nd development charges recorded in connectionwith acquisitions.Research and development activities funded by contract development and government grant revenuesamounted to$3.5 million,$3.9 million,and$2.8 million in 2002,2001,and 2000,respectively.We have either acquired or secured the proprietary ri
148、ghts to several important technological and scientific platforms,including collagen matrix,peptide,biomaterials,and intracranial monitoring technologies.These technologies providesupport for our critical applications in neurosciences and tissue regeneration and additional opportunities for generatin
149、gnear-term and long-term revenues from medical applications.We have been able to identify and bring together criticalplatform technology components from which we work to develop products for both tissue regeneration and neuroscienceapplications.These efforts have led to the successful development of
150、 new products,such as the NeuraGen Nerve Guideand DuraGenDural Graft Matrix.We regularly review our research and development programs to ensure that they remain consistent with and supportiveof our growth strategies.To that end,in 2002 we expanded our product development staff to increase the focus
151、on ourIntegra NeuroSciences product development efforts and to seek additional strategic alliances and applications for ourIntegra LifeSciences products and technologies.GOVERNMENT REGULATIONAs a manufacturer of medical devices,we are subject to extensive regulation by the Food and Drug Administrati
152、on(FDA)and,in some jurisdictions,by state and foreign governmental authorities.These regulations govern the introduction ofnew medical devices,the observance of certain standards with respect to the design,manufacture,testing,labeling andpromotion of the devices,the maintenance of certain records,th
153、e ability to track devices,the reporting of potential productdefects,the export of devices and other matters.We believe that we are in substantial compliance with these governmentalregulations.From time to time,we have recalled certain of our products.We have recalled defective components or devices
154、supplied by other vendors,kits assembled by us that included incorrect combinations of products and defective devicesmanufactured by us.None of these recalls resulted in material direct expense to us or a long-term disruption of an importantcustomer or supplier relationship.However,a future voluntar
155、y or involuntary recall of one of our major products,particularlyif it involved a potential or actual risk to patients,could have an adverse financial impact on us,as a result both of directexpenses and disrupted customer relationships.The FDA requires,as a condition of marketing a medical device in
156、 the United States,that we secure a Premarket Notificationclearance pursuant to Section 510(k)of the Federal Food,Drug and Cosmetic Act,an approved PMA application or asupplemental PMA application.Alternatively,we may seek United States market clearance through a ProductDevelopment Protocol approved
157、 by the FDA.Establishing and completing a Product Development Protocol,orobtaining a PMA application or supplemental PMA application,can take up to several years and can involve preclinicalstudies and clinical testing.To perform clinical testing in the United States on an unapproved product,we are a
158、lso requiredto obtain an Investigational Device Exemption from the FDA.In addition to requiring clearance for new products,FDArules may require a filing and FDA approval,usually through a PMA application supplement or a 510(k)PremarketNotification clearance,prior to marketing products that are modif
159、ications of existing products or new indications forexisting products.The FDA Medical Device User Fee and Modernization Act of 2002(MDUFMA)imposes user feespayable to FDA for submission of Premarket Notifications,PMA applications,Product Development Protocols,andcertain supplemental PMA applications
160、.The regulatory process of obtaining product approvals/clearances can beonerous and costly.12We may not receive the necessary regulatory approvals,including approval for product improvements and new products,on a timely basis,if at all.Delays in receipt of,or failure to receive,regulatory approvals
161、could have a material adverseeffect on our business.Moreover,after clearance is given,if the product is shown to be hazardous or defective,the FDAand foreign regulatory agencies have the power to withdraw the clearance or require us to change the device,itsmanufacturing process or its labeling,to su
162、pply additional proof of its safety and effectiveness or to recall,repair,replaceor refund the cost of the medical device.In addition,federal,state and foreign regulations regarding the manufactureand sale of medical devices are subject to future changes.We cannot predict what impact,if any,these ch
163、anges mighthave.However,the changes could have a material impact on our business.We have received or acquired more than 190 Premarket Notification 510(k)clearances,five approved PMA applicationsand 54 supplemental PMA applications.We expect to file new applications during the next year to cover new
164、productsand variations on existing products.We are also required to register with the FDA as a device manufacturer.As such,we are subject to periodic inspectionby the FDA for compliance with the FDAs Quality Systems Regulations.These regulations require that we manufactureour products and maintain o
165、ur documents in a prescribed manner with respect to design,manufacturing,testing and controlactivities.Further,we are required to comply with various FDA requirements for labeling and promotion.The MedicalDevice Reporting regulations require that we provide information to the FDA whenever there is e
166、vidence to reasonablysuggest that one of our devices may have caused or contributed to a death or serious injury or,if a malfunction wereto recur,could cause or contribute to a death or serious injury.In addition,the FDA prohibits us from promoting a medicaldevice before marketing clearance has been
167、 received or promoting an approved device for unapproved indications.UnderFDA regulations,we are required to submit reports of certain voluntary recalls and corrections to FDA.If the FDA believesthat a company is not in compliance with applicable regulations,it can institute proceedings to detain or
168、 seize products,issue a warning letter,issue a recall order,impose operating restrictions,enjoin future violations and assess civilpenalties against that company,its officers or its employees and can recommend criminal prosecution to the Departmentof Justice.These actions could have a material impac
169、t on our business.Other regulatory agencies may have similar powers.Medical Device Regulations also are in effect in many of the countries outside the United States in which we do business.These laws range from comprehensive device approval and quality system requirements for some or all of our medi
170、caldevice products to simpler requests for product data or certifications.The number and scope of these requirements areincreasing.In June 1998,the European Union Medical Device Directive became effective,and all medical devices mustmeet the Medical Device Directive standards and receive CE Mark cer
171、tification.CE Mark certification requires acomprehensive Quality System program,and submission of data on a product to the Notified Body in Europe.The MedicalDevice Directive,ISO 9000,ISO 13485 and EN46001 are recognized international quality standards that are designedto ensure that we develop and
172、manufacture quality medical devices.A recognized Notified Body(an organization designatedby the national governments of the European Union member states to make independent judgments about whether ornot a product complies with the protection requirements established by each CE marking directive)audi
173、ts each of ourfacilities annually to verify our compliance with these standards.In 2002,each of our certified facilities was audited,and we have maintained our certification to these standards.In addition,we are required to notify the FDA if we export specified medical devices manufactured in the Un
174、ited Statesthat have not been approved by the FDA for distribution in the United States.We are also required to maintain certainrecords relating to exports and make the records available to the FDA for inspection,if required.We do not currently exportmedical devices manufactured in the United States
175、 that have not been approved by the FDA,although we have in the past.OTHER UNITED STATES REGULATORY REQUIREMENTSIn addition to the regulatory framework for product approvals,we are and may be subject to regulation under federaland state laws,including requirements regarding occupational health and s
176、afety;laboratory practices;the maintenanceof personal health information;sales and marketing practices,including product discounting practices;and the use,handlingand disposal of toxic or hazardous substances.We may also be subject to other present and possible future local,state,federal and foreign
177、 regulations.Our research,development and manufacturing processes involve the controlled use of certain hazardous materials.Weare subject to federal,state and local laws and regulations governing the use,manufacture,storage,handling and disposal13of these materials and certain waste products.Althoug
178、h we believe that our safety procedures for handling anddisposing of these materials comply with the standards prescribed by the controlling laws and regulations,the risk ofaccidental contamination or injury from these materials cannot be eliminated.In the event of this type of an accident,we could
179、be held liable for any damages that result and any liability could exceed our resources.Although we believethat we are in compliance in all material respects with applicable environmental laws and regulations,we could incursignificant costs to comply with environmental laws and regulations in the fu
180、ture,and our operations,business or assetscould be materially adversely affected by current or future environmental laws or regulations.PATENTS AND INTELLECTUAL PROPERTYWe pursue a policy of seeking patent protection of our technology,products and product improvements both in the UnitedStates and in
181、 selected foreign countries.When determined appropriate,we have enforced and plan to continue to enforceand defend our patent rights.In general,however,we do not rely on our patent estate to provide us with any significantcompetitive advantages as it relates to our existing product lines.We rely upo
182、n trade secrets and continuing technologicalinnovations to develop and maintain our competitive position.In an effort to protect our trade secrets,we have a policyof requiring our employees,consultants and advisors to execute proprietary information and invention assignmentagreements upon commenceme
183、nt of employment or consulting relationships with us.These agreements provide thatall confidential information developed or made known to the individual during the course of their relationship with usmust be kept confidential,except in specified circumstances.BioMend,Camino,CollaCote,CollaPlug,Colla
184、Stat,CollaTape,Dissectron,DuraGen,EquiFlow,Helistat,Helitene,Heyer-Schulte,INTEGRADermal Regeneration Template,Integra LifeSciences,Integra NeuroSciences,Integra NeuroSupplies,JARIT,LICOX,NeuraGen,NeuroNavigational,Novus,LPV,Ommaya,Orbis-Sigma,Padgett Instruments,Inc,Pudenz,Redmond,Ruggles,Selector,
185、Spetzler,Sundt,Ventrix,VitaCuffaresome of the trademarks of Integra and its subsidiaries.All other brand names,trademarks and service marks appearingin this report are the property of their respective holders.COMPETITIONThe largest competitors of Integra NeuroSciences in the neurosurgery markets are
186、 the Medtronic Neurotechnologiesdivision of Medtronic,Inc.,the Codman division of Johnson&Johnson,the Aesculap division of B.Braun and the Valleylabdivision of Tyco International Ltd.In addition,various of the Integra NeuroSciences product lines compete withsmaller specialized companies or larger co
187、mpanies that do not otherwise focus on neurosurgery.The products ofIntegra LifeSciences face diverse and broad competition,depending on the market addressed by the product.Finally,in certain cases our products compete primarily against medical practices that treat a condition without using a medical
188、device,rather than any particular product(such as autograft tissue as a substitute for INTEGRADermal RegenerationTemplate).Depending on the product line,we compete on the basis of our products features,strength of our salesorganization or marketing partner,sophistication of our technology,and cost e
189、ffectiveness of our solution to thecustomers medical requirements.EMPLOYEESAt December 31,2002,we had approximately 760 regular employees engaged in production and production support(including warehouse,engineering,and facilities personnel),quality assurance/quality control,research and development,
190、regulatory and clinical affairs,sales,marketing,administration and finance.Except for certain employees at our Biot,France facility,none of our current employees are subject to a collective bargaining agreement.Many of our employees,including those holding senior positions in our regulatory,operatio
191、ns,research and development,and sales and marketing departments,were recruited from large pharmaceutical or medical technology companies.Oursales representatives and regional sales managers attend in-depth product training meetings throughout the year,andour clinical development team consists of med
192、ical professionals who specialize in specific therapeutic areas that ourIntegra NeuroSciences products serve.We believe that our clinical development team differentiates us from ourcompetition,as their knowledge and experience as medical professionals allows them to more effectively educate andtrain
193、 both our sales force and the customers who use our products.This team is especially valuable in communicatingthe clinical benefits of new products.14SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTSWe have made statements in this report,including statements under“Managements Discussion and Analysis
194、 ofFinancial Condition and Results of Operations”and“Business”,which constitute forward-looking statements withinthe meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.Theseforward-looking statements are subject to a number of risks,uncertaint
195、ies and assumptions about Integra,including,among other things:general economic and business conditions,both nationally and in our international markets;our expectations and estimates concerning future financial performance,financing plans and the impact ofcompetition;anticipated trends in our busin
196、ess;existing and future regulations affecting our business;our ability to obtain additional debt and equity financing to fund capital expenditures and working capitalrequirements and acquisitions;our ability to complete acquisitions and integrate operations post-acquisition;andother risk factors des
197、cribed in the section entitled“Risk Factors”in this report.You can identify these forward-looking statements by forward-looking words such as believe,may,could,will,estimate,continue,anticipate,intend,seek,plan,expect,should,would and similar expressions in this report.We undertake no obligation to
198、publicly update or revise any forward-looking statements,whether as a result of newinformation,future events or otherwise.In light of these risks and uncertainties,the forward-looking events andcircumstances discussed in this report may not occur and actual results could differ materially from those
199、 anticipatedor implied in the forward-looking statements.15RISK FACTORSWe believe that the following important factors,among others,have affected,and in the future could affect,ourbusiness,financial condition,and results of operations and could cause our future results to differ materially from ourh
200、istorical results and those anticipated in any forward-looking statements made by us.Such factors are not meant torepresent an exhaustive list of the risks and uncertainties associated with our business.These and other factors may affectour future results and our stock price,particularly on a quarte
201、rly basis.Our Operating Results May Fluctuate.Our operating results may fluctuate from time to time,which could affect our stock price.Our operating results havefluctuated in the past and can be expected to fluctuate from time to time in the future.Some of the factors that may causethese fluctuation
202、s include:the impact of acquisitions;the timing of significant customer orders;market acceptance of our existing products,as well as products in development;the timing of regulatory approvals;the timing of payments received and the recognition of those payments as revenue under collaborative arrange
203、mentsand strategic alliances;expenses incurred and business lost in connection with product field corrections or recalls;our ability to manufacture our products efficiently;andthe timing of our research and development expenditures.The Industry And Market Segments In Which We Operate Are Highly Comp
204、etitive,And We May Be Unable ToCompete Effectively With Other Companies.In general,the medical technology industry is characterized by intense competition.We compete with established medicaltechnology and pharmaceutical companies.Competition also comes from early stage companies that have alternativ
205、etechnological solutions for our primary clinical targets,as well as universities,research institutions and other non-profitentities.Many of our competitors have access to greater financial,technical,research and development,marketing,manufacturing,sales,distribution services and other resources tha
206、n we do.Further,our competitors may be more effectiveat implementing their technologies to develop commercial products.Our competitive position will depend on our ability to achieve market acceptance for our products,implementproduction and marketing plans,secure regulatory approval for products und
207、er development,obtain patent protectionand secure adequate capital resources.We may need to develop new applications for our products to remain competitive.Technological advances by one or more of our current or future competitors could render our present or future productsobsolete or uneconomical.O
208、ur future success will depend upon our ability to compete effectively against current technologyas well as to respond effectively to technological advances.Competitive pressures could adversely affect our profitability.The largest competitors of Integra NeuroSciences in the neurosurgery markets are
209、the Medtronic Neurotechnologies divisionof Medtronic,Inc.,the Codman division of Johnson&Johnson,the Aesculap division of B.Braun,and the Valleylab divisionof Tyco International Ltd.In addition,various of the Integra NeuroSciences product lines compete with smallerspecialized companies or larger com
210、panies that do not otherwise focus on neurosurgery.The products of IntegraLifeSciences face diverse and broad competition,depending on the market addressed by the product.Finally,in certaincases our products compete primarily against medical practices that treat a condition without using a device,ra
211、ther thanany particular product,such as autograft tissue as a substitute for INTEGRADermal Regeneration Template.Our Current Strategy Involves Growth Through Acquisitions,Which Requires Us To Incur Substantial CostsAnd Potential Liabilities For Which We May Never Realize The Anticipated Benefits.In
212、addition to internal growth,our current strategy involves growth through acquisitions.Since 1999,we have acquiredtwelve businesses or product lines at a total cost of approximately$107 million.16We may be unable to continue to implement our growth strategy,and this strategy may be ultimately unsucce
213、ssful.Asignificant portion of our growth in revenues has resulted from,and is expected to continue to result from,theacquisition of businesses complementary to our own.We engage in evaluations of potential acquisitions and are in variousstages of discussion regarding possible acquisitions,certain of
214、 which,if consummated,could be significant to us.Anypotential acquisitions may result in material transaction expenses,increased interest and amortization expense,increaseddepreciation expense and increased operating expense,any of which could have a material adverse effect on ouroperating results.A
215、s we grow by acquisitions,we must integrate and manage the new businesses to realize economiesof scale and control costs.In addition,acquisitions involve other risks,including diversion of management resourcesotherwise available for ongoing development of our business and risks associated with enter
216、ing new markets with whichour marketing and sales force has limited experience or where experienced distribution alliances are not available.Ourfuture profitability will depend in part upon our ability to develop further our resources to adapt to these new productsor business areas and to identify a
217、nd enter into satisfactory distribution networks.We may not be able to identify suitableacquisition candidates in the future,obtain acceptable financing or consummate any future acquisitions.If we cannotintegrate acquired operations,manage the cost of providing our products or price our products app
218、ropriately,our profitabilitycould suffer.In addition,as a result of our acquisitions of other healthcare businesses,we may be subject to the risk ofunanticipated business uncertainties or legal liabilities relating to those acquired businesses for which the sellers of theacquired businesses may not
219、indemnify us.Future acquisitions may also result in potentially dilutive issuances of securities.To Market Our Products Under Development We Will First Need To Obtain Regulatory Approval.Further,IfWe Fail To Comply With The Extensive Governmental Regulations That Affect Our Business,We Could Be Subj
220、ectTo Penalties And Could Be Precluded From Marketing Our Products.Our research and development activities and the manufacturing,labeling,distribution and marketing of our existing andfuture products are subject to regulation by numerous governmental agencies in the United States and in other countr
221、ies.The FDA and comparable agencies in other countries impose mandatory procedures and standards for the conduct ofclinical trials and the production and marketing of products for diagnostic and human therapeutic use.Our products under development are subject to FDA approval or clearance prior to ma
222、rketing for commercial use.Theprocess of obtaining necessary FDA approvals or clearances can take years and is expensive and full of uncertainties.Our inability to obtain required regulatory approval on a timely or acceptable basis could harm our business.Further,approval or clearance may place subs
223、tantial restrictions on the indications for which the product may be marketed orto whom it may be marketed.Further studies,including clinical trials and FDA approvals,may be required to gain approvalfor the use of a product for clinical indications other than those for which the product was initiall
224、y approved or clearedor for significant changes to the product.In addition,for products with an approved PMA application,the FDArequires annual reports and may require post-approval surveillance programs to monitor the products safety andeffectiveness.Results of post-approval programs may limit or e
225、xpand the further marketing of the product.We believe that the most significant risk of our recent applications to the FDA relates to the regulatory classificationof certain of our new products or proposed new uses for existing products.In the filing of each application,we makea legal judgment about
226、 the appropriate form and content of the application.If the FDA disagrees with our judgment inany particular case and,for example,requires us to file a PMA application rather than allowing us to market for approveduses while we seek broader approvals or requires extensive additional clinical data,th
227、e time and expense required toobtain the required approval might be significantly increased or approval might not be granted.Approved products are subject to continuing FDA requirements relating to quality control and quality assurance,maintenance of records,reporting of adverse events and product r
228、ecalls,documentation,and labeling and promotionof medical devices.The FDA and foreign regulatory authorities require that our products be manufactured according to rigorous standards.These regulatory requirements may significantly increase our production or purchasing costs and may even prevent usfr
229、om making or obtaining our products in amounts sufficient to meet market demand.If a third-party manufacturer orwe change our approved manufacturing process,the FDA may require a new approval before that process may be used.Failure to develop our manufacturing capability may mean that even if we dev
230、elop promising new products,we maynot be able to produce them profitably,as a result of delays and additional capital investment costs.Manufacturing facilities,both international and domestic,are also subject to inspections by or under the authority of the FDA.In addition,failure17to comply with app
231、licable regulatory requirements could subject us to enforcement action,including product seizures,recalls,withdrawal of clearances or approvals,restrictions on or injunctions against marketing our product or productsbased on our technology,and civil and criminal penalties.See“BusinessGovernment Regu
232、lation”.Certain Of Our Products Contain Materials Derived From Animal Sources And May Become Subject ToAdditional Regulation.Certain of our products,including the DuraGenDural Graft Matrix and the INTEGRADermal RegenerationTemplate,contain material derived from bovine tissue.Products,including food
233、as well as pharmaceuticals and medicaldevices,that contain materials derived from animal sources are increasingly subject to scrutiny in the press and by regulatoryauthorities.Regulatory authorities are concerned about the potential for the transmission of disease from animals to humansvia those mat
234、erials.This public scrutiny has been particularly acute in Japan and Western Europe with respect to productsderived from cattle,because of concern that materials infected with the agent that causes bovine spongiformencephalopathy,otherwise known as BSE or mad cow disease,may,if ingested or implanted
235、,cause a variant of the humanCreutzfeldt-Jakob Disease,an ultimately fatal disease with no known cure.We take great care to provide that our products are safe,and free of agents that can cause disease.In particular,the collagenused in the manufacture of our products is derived only from the Achilles
236、 tendon of cattle from the United States,whereno cases of BSE have been reported.Scientists and regulatory authorities classify the Achilles tendon as having a negligiblerisk of containing the agent that causes BSE(an improperly folded protein known as a prion)compared with other partsof the body.Ad
237、ditionally,we use processes in the manufacturing of our products that are believed to inactivate prions.Nevertheless,products that contain materials derived from animals,including our products,may become subject toadditional regulation,or even be banned in certain countries,because of concern over t
238、he potential for prion transmission.Accordingly,new regulation,or a ban of our products,could have a significant adverse effect on our current businessor our ability to expand our business.Lack Of Market Acceptance For Our Products Or Market Preference For Technologies That Compete With OurProducts
239、Could Reduce Our Revenues And Profitability.We cannot be certain that our current products or any other products that we may develop or market,will achieve ormaintain market acceptance.Certain of the medical indications that can be treated by our devices can also be treatedby other medical devices o
240、r by medical practices that do not include a device.The medical community widely acceptsmany alternative treatments,and certain of these other treatments have a long history of use.For example,the use ofautograft tissue is a well-established means for repairing the dermis,and it may interfere with t
241、he widespread acceptancein the market for INTEGRADermal Regeneration Template.We cannot be certain that our devices and procedures will be able to replace those established treatments or that eitherphysicians or the medical community in general will accept and utilize our devices or any other medica
242、l products thatwe may develop.For example,we cannot be certain that the medical community will accept the NeuraGen NerveGuide over conventional microsurgical techniques for connecting severed peripheral nerves.In addition,our future success depends,in part,on our ability to develop additional produc
243、ts.Even if we determine thata product candidate has medical benefits,the cost of commercializing that product candidate may be too high to justifydevelopment.Competitors may develop products that are more effective,cost less,or are ready for commercialintroduction before our products.For example,our
244、 sales of shunt products could decline if neurosurgeons increase theiruse of programmable values and we fail to introduce a competitive product.If we are unable to develop additional,commercially viable products,our future prospects could be adversely affected.Market acceptance of our products depen
245、ds on many factors,including our ability to convince prospective collaboratorsand customers that our technology is an attractive alternative to other technologies,to manufacture products in sufficientquantities and at acceptable costs,and to supply and service sufficient quantities of our products d
246、irectly or through ourstrategic alliances.In addition,limited funding available for product and technology acquisitions by our customers,aswell as internal obstacles to customer approvals of purchases of our products,could harm acceptance of our products.The industry is subject to rapid and continuo
247、us change arising from,among other things,consolidation and technologicalimprovements.One or more of these factors may vary unpredictably,which could materially adversely affect our18competitive position.We may not be able to adjust our contemplated plan of development to meet changing marketdemands
248、.Our Business Depends Significantly On Key Relationships With Third Parties,Which We May Be Unable ToEstablish And Maintain.Our revenue stream and our business strategy depend in part on our entering into and maintaining collaborative or allianceagreements with third parties concerning product marke
249、ting,as well as research and development programs.Our mostimportant strategic alliances are our agreement with Ethicon,Inc.,a division of Johnson&Johnson,relating toINTEGRADermal Regeneration Template,and our agreement with the Wyeth BioPharma division of Wyeth for thedevelopment of collagen matrice
250、s to be used in conjunction with Wyeth BioPharmas recombinant bone protein,a proteinthat stimulates the growth of bone in humans.Termination of these alliances would require us to develop other meansto distribute the affected products and could adversely affect our expectations for the growth of our
251、 Integra LifeSciencessegment.Ethicon has notified us that if we do not agree to substantial amendments to its agreement with us,it will consideralternatives that may include exercising its right to terminate the agreement.Our ability to enter into agreements with collaborators depends in part on con
252、vincing them that our technology can helpthem achieve their goals and execute their strategies.This may require substantial time,effort and expense on our partwith no guarantee that a strategic relationship will result.We may not be able to establish or maintain these relationshipson commercially ac
253、ceptable terms.Our future agreements may not ultimately be successful.Even if we enter intocollaborative or alliance agreements,our collaborators could terminate these agreements,or these agreements could expirebefore meaningful developmental milestones are reached.The termination or expiration of a
254、ny of these relationshipscould have a material adverse effect on our business.Much of the revenue that we may receive under these collaborations will depend upon our collaborators ability tosuccessfully introduce,market and sell new products derived from our products.Our success depends in part upon
255、 theperformance by these collaborators of their responsibilities under these agreements.Some collaborators may notperform their obligations as we expect.Some of the companies we currently have alliances with or are targeting as potentialallies offer products competitive with our products or may deve
256、lop competitive production technologies or competitiveproducts outside of their collaborations with us that could have a material adverse effect on our competitive position.In addition,our role in the collaborations is mostly limited to the production aspects.As a result,we may also be dependenton c
257、ollaborators for other aspects of the development,preclinical and clinical testing,regulatory approval,sales,marketing and distribution of our products.If our current or future collaborators fail to market our products effectivelyor to develop additional products based on our technology,our sales an
258、d other revenues could significantly be reduced.Finally,we have received and may continue to receive payments from collaborators that may not be immediately recognizedas revenue and therefore may not contribute to reported profits until further conditions are satisfied.Our Intellectual Property Righ
259、ts May Not Provide Meaningful Commercial Protection For Our Products,Which Could Enable Third Parties To Use Our Technology Or Very Similar Technology And Could Reduce OurAbility To Compete In The Market.Our ability to compete effectively depends in part,on our ability to maintain the proprietary na
260、ture of our technologiesand manufacturing processes,which includes the ability to obtain,protect and enforce patents on our technology andto protect our trade secrets.We own or have licensed patents that cover significant aspects of many of our product lines.However,you should not rely on our patent
261、s to provide us with any significant competitive advantage.Others may challengeour patents and,as a result,our patents could be narrowed,invalidated or rendered unenforceable.Competitors maydevelop products similar to ours that our patents do not cover.In addition,our current and future patent appli
262、cationsmay not result in the issuance of patents in the United States or foreign countries.Further,there is a substantialbacklog of patent applications at the U.S.Patent and Trademark Office,and the approval or rejection of patentapplications may take several years.19Our Competitive Position Depends
263、,In Part,Upon Unpatented Trade Secrets Which We May Be Unable To Protect.Our competitive position is also dependent upon unpatented trade secrets.Trade secrets are difficult to protect.We cannotassure you that others will not independently develop substantially equivalent proprietary information and
264、 techniquesor otherwise gain access to our trade secrets,that our trade secrets will not be disclosed,or that we can effectively protectour rights to unpatented trade secrets.In an effort to protect our trade secrets,we have a policy of requiring our employees,consultants and advisors to executeprop
265、rietary information and invention assignment agreements upon commencement of employment or consultingrelationships with us.These agreements provide that,except in specified circumstances,all confidential informationdeveloped or made known to the individual during the course of their relationship wit
266、h us must be kept confidential.We cannot assure you,however,that these agreements will provide meaningful protection for our trade secrets or otherproprietary information in the event of the unauthorized use or disclosure of confidential information.Our Success Will Depend Partly On Our Ability To O
267、perate Without Infringing Or Misappropriating TheProprietary Rights Of Others.We may be sued for infringing the intellectual property rights of others.In addition,we may find it necessary,if threatened,to initiate a lawsuit seeking a declaration from a court that we do not infringe the proprietary r
268、ights of others or thattheir rights are invalid or unenforceable.If we do not prevail in any litigation,in addition to any damages we might haveto pay,we would be required to stop the infringing activity or obtain a license.Any required license may be unavailableto us on acceptable terms,or at all.I
269、n addition,some licenses may be nonexclusive,and allow our competitors to accessthe same technology we license.If we fail to obtain a required license or are unable to design our product so as not toinfringe on the proprietary rights of others,we may be unable to sell some of our products,which coul
270、d have amaterial adverse effect on our revenues and profitability.It May Be Difficult To Replace Some Of Our Suppliers.Outside vendors,some of whom are sole-source suppliers,provide key components and raw materials used in themanufacture of our products.Although we believe that alternative sources f
271、or many of these components and raw materialsare available,any supply interruption in a limited or sole source component or raw material could harm our ability tomanufacture our products until a new source of supply is identified and qualified.In addition,an uncorrected defect orsuppliers variation
272、in a component or raw material,either unknown to us or incompatible with our manufacturing process,could harm our ability to manufacture products.We may not be able to find a sufficient alternative supplier in a reasonabletime period,or on commercially reasonable terms,if at all,and our ability to p
273、roduce and supply our products couldbe impaired.We believe that these factors are most likely to affect our Caminoand Ventrixlines of intracranial pressuremonitors and catheters,which we assemble using many different electronic parts from numerous suppliers.While weare not dependent on sole-source s
274、uppliers,if we were suddenly unable to purchase products from one or more of thesecompanies,we could need time a significant period of time to qualify a replacement,and the production of anyaffected products could be disrupted.While it is our policy to maintain sufficient inventory of components so
275、that ourproduction will not be significantly disrupted even if a particular component or material is not available for a period oftime,we remain at risk that we will not be able to qualify new components or materials quickly enough to prevent adisruption if one or more of our suppliers ceases produc
276、tion of important components or materials.If Any Of Our Manufacturing Facilities Were Damaged And/Or Our Manufacturing Processes Interrupted,WeCould Experience Lost Revenues And Our Business Could Be Seriously Harmed.We manufacture our products in a limited number of facilities.Damage to our manufac
277、turing,development or researchfacilities due to fire,natural disaster,power loss,communications failure,unauthorized entry or other events could causeus to cease development and manufacturing of some or all of our products.In particular,our San Diego,California facilitythat manufactures our Caminoan
278、d Ventrixproduct line is as susceptible to earthquake damage and power losses fromelectrical shortages as are other businesses in the Southern California area.Our silicone manufacturing plant in Anasco,Puerto Rico is vulnerable to hurricane damage.Although we maintain property damage and business in
279、terruption insurancecoverage on these facilities,we may not be able to renew or obtain such insurance in the future on acceptable termswith adequate coverage or at reasonable costs.20We May Be Involved In Lawsuits To Protect Or Enforce Our Intellectual Property Rights,Which May Be Expensive.In order
280、 to protect or enforce our intellectual property rights,we may have to initiate legal proceedings against thirdparties,such as infringement suits or interference proceedings.Intellectual property litigation is costly,and,even if weprevail,the cost of that litigation could affect our profitability.In
281、 addition,litigation is time consuming and could divertmanagement attention and resources away from our business.We may also provoke these third parties to assert claimsagainst us.We Are Exposed To A Variety Of Risks Relating To Our International Sales And Operations,IncludingFluctuations In Exchang
282、e Rates,Local Economic Conditions,And Delays In Collection Of Accounts Receivable.We generate significant revenues outside the United States,a substantial portion of which are U.S.dollar-denominatedtransactions conducted with customers who generate revenue in currencies other than the U.S.dollar.As
283、a result,currencyfluctuations between the U.S.dollar and the currencies in which those customers do business may have an impact onthe demand for our products in foreign countries where the U.S.dollar has increased in value compared to the localcurrency.We cannot predict the effects of exchange rate
284、fluctuations upon our future operating results because of thenumber of currencies involved,the variability of currency exposure and the potential volatility of currency exchangerates.Because we have operating subsidiaries based in Europe and we generate certain revenues and incur certain operatingex
285、penses in British Pounds and the Euro,we experience currency exchange risk with respect to those foreign currencydenominated revenues or expenses.Our sales to foreign markets may be affected by local economic conditions.Relationships with customers and effectiveterms of sale frequently vary by count
286、ry,often with longer-term receivables than are typical in the United States.Changes In The Health Care Industry May Require Us To Decrease The Selling Price For Our Products Or CouldResult In A Reduction In The Size Of The Market For Our Products,And Limit The Means By Which We MayDiscount Our Produ
287、cts,Each Of Which Could Have A Negative Impact On Our Financial Performance.Trends toward managed care,health care cost containment,and other changes in government and private sectorinitiatives in the United States and other countries in which we do business are placing increased emphasis on the del
288、iveryof more cost-effective medical therapies that could adversely affect the sale and/or the prices of our products.For example:major third-party payors of hospital services,including Medicare,Medicaid and private health care insurers,havesubstantially revised their payment methodologies,which has
289、resulted in stricter standards for reimbursement ofhospital charges for certain medical procedures;Medicare,Medicaid and private health care insurer cutbacks could create downward price pressure on our products;numerous legislative proposals have been considered that would result in major reforms in
290、 the U.S.health care systemthat could have an adverse effect on our business;there has been a consolidation among health care facilities and purchasers of medical devices in the United Stateswho prefer to limit the number of suppliers from whom they purchase medical products,and these entities mayde
291、cide to stop purchasing our products or demand discounts on our prices;there is economic pressure to contain health care costs in international markets;there are proposed and existing laws and regulations in domestic and international markets regulating the sales andmarketing practices and the prici
292、ng and profitability of companies in the health care industry;andthere have been initiatives by third-party payors to challenge the prices charged for medical products that couldaffect our ability to sell products on a competitive basis.Both the pressures to reduce prices for our products in respons
293、e to these trends and the decrease in the size of the marketas a result of these trends could adversely affect our levels of revenues and profitability of sales.In addition,there are laws and regulations that regulate the means by which companies in the health care industry maymarket their products
294、to health care professionals and may compete by discounting the prices of their products.21Although we exercise care in structuring our sales and marketing practices and customer discount arrangements to complywith those laws and regulations,we cannot assure you that:government officials charged wit
295、h responsibility for enforcing those laws will not assert that our sales andmarketing practices or customer discount arrangements are in violation of those laws or regulations,orgovernment regulators or courts will interpret those laws or regulations in a manner consistent with our interpretation.We
296、 May Have Significant Product Liability Exposure And Our Insurance May Not Cover All Potential Claims.We are exposed to product liability and other claims in the event that our technologies or products are alleged to havecaused harm.We may not be able to obtain insurance for the potential liability
297、on acceptable terms with adequate coverageor at reasonable costs.Any potential product liability claims could exceed the amount of our insurance coverage or maybe excluded from coverage under the terms of the policy.Our insurance may not be renewed at a cost and level of coveragecomparable to that t
298、hen in effect.We Are Subject To Other Regulatory Requirements Relating To Occupational Health And Safety And The UseOf Hazardous Substances Which May Impose Significant Compliance Costs On Us.We are subject to regulation under federal and state laws regarding occupational health and safety,laborator
299、y practices,and the use,handling and disposal of toxic or hazardous substances.Our research,development and manufacturingprocesses involve the controlled use of certain hazardous materials.Although we believe that our safety procedures forhandling and disposing of those materials comply with the sta
300、ndards prescribed by the applicable laws and regulations,the risk of accidental contamination or injury from these materials cannot be eliminated.In the event of such an accident,we could be held liable for any damages that result and any related liability could exceed the limits or fall outside the
301、coverage of our insurance and could exceed our resources.We may not be able to maintain insurance on acceptable termsor at all.We may incur significant costs to comply with environmental laws and regulations in the future.We may alsobe subject to other present and possible future local,state,federal
302、 and foreign regulations.The Loss Of Key Personnel Could Harm Our Business.We believe our success depends on the contributions of a number of our key personnel,including Stuart M.Essig,ourPresident and Chief Executive Officer.If we lose the services of key personnel,those losses could materially har
303、m ourbusiness.We maintain key person life insurance on Mr.Essig.Our Stock Price May Continue To Be Highly Volatile And You May Not Be Able To Resell Your Shares At OrAbove The Price You Paid For Them.The stock market in general,and the stock prices of medical device companies,biotechnology companies
304、 and othertechnology-based companies in particular,have experienced significant volatility that often has been unrelated to theoperating performance of and beyond the control of any specific public company.The market price of our common stockhas fluctuated widely in the past and is likely to continu
305、e to fluctuate in the future.Factors that may have a significantimpact on the market price of our common stock include:our actual financial results differing from guidance provided by management;our actual financial results differing from that expected by securities analysts;future announcements con
306、cerning us or our competitors,including the announcement of acquisitions;changes in the prospects of our business partners or suppliers;developments regarding our patents or other proprietary rights or those of our competitors;quality deficiencies in our products;competitive developments,including t
307、echnological innovations by us or our competitors;government regulation,including the FDAs review of our products and developments;changes in recommendations of securities analysts and rumors that may be circulated about us or our competitors;public perception of risks associated with our operations
308、;conditions or trends in the medical device and biotechnology industries;additions or departures of key personnel;andsales of our common stock.22Any of these factors could immediately,significantly and adversely affect the trading price of our common stock.Our Major Stockholders Could Make Decisions
309、 Adverse To Your Interests.Our directors and executive officers and affiliates of certain directors own or control more than one-third of ouroutstanding voting securities and generally have significant influence over the election of all directors,the outcome ofany corporate action requiring stockhol
310、der approval,and other aspects of the business.The ability of the board of directorsto issue preferred stock,while providing flexibility in connection with financing,acquisitions and other corporate purposes,could have the effect of discouraging,deferring or preventing a change in control or an unso
311、licited acquisition proposal,since the issuance of preferred stock could be used to dilute the share ownership of a person or entity seeking to obtaincontrol of us.This significant influence could preclude any unsolicited acquisition of Integra and consequentlyadversely affect the market price of th
312、e common stock.Furthermore,we are subject to Section 203 of the Delaware GeneralCorporation Law,which could have the effect of delaying or preventing a change of control.ITEM 2.PROPERTIESOur principal executive offices are located in Plainsboro,New Jersey.Principal manufacturing and research facilit
313、iesare located in Plainsboro,New Jersey,Biot,France,San Diego,California,Anasco,Puerto Rico,Andover,England andMielkendorf,Germany.Our primary distribution centers are located in Cranbury,New Jersey,Hawthorne,New York,Andover,England and Biot,France.In addition,we lease several smaller facilities to
314、 support additional administrative,assembly,and distribution operations.We lease all of our facilities other than our facilities in Biot,France andTuttlingen,Germany,which we own.All of our manufacturing and distribution facilities are registered with the FDA.Our facilities are subject to FDA inspec
315、tionto assure compliance with Quality System Regulations.We believe that our manufacturing facilities are in substantialcompliance with Quality System Regulations,suitable for their intended purposes and have capacities adequate for currentand projected needs for existing products.Some capacity of t
316、he plants is being converted,with any needed modification,to meet the current and projected requirements of existing and future products.ITEM 3.LEGAL PROCEEDINGSIn July 1996,we filed a patent infringement lawsuit in the United States District Court for the Southern District of California(the“Court”)
317、against Merck KGaA,a German corporation,Scripps Research Institute,a California nonprofit corporation,and David A.Cheresh,Ph.D.,a research scientist with Scripps,seeking damages and injunctive relief.The complaintcharged,among other things,that the defendant Merck KGaA willfully and deliberately ind
318、uced,and continueswillfully and deliberately to induce,defendants Scripps Research Institute and Dr.Cheresh to infringe certain of ourpatents.These patents are part of a group of patents granted to The Burnham Institute and licensed by us that are basedon the interaction between a family of cell sur
319、face proteins called integrins and the arginine-glycine-aspartic acid(“RGD”)peptide sequence found in many extracellular matrix proteins.The defendants filed a countersuit asking for an awardof defendantsreasonable attorney fees.In March 2000,a jury returned a unanimous verdict in our favor and awar
320、ded us$15,000,000 in damages,finding thatMerck KGaA had willfully infringed and induced the infringement of our patents.The Court dismissed Scripps andDr.Cheresh from the case.In October 2000,the Court entered judgment in our favor and against Merck KGaA in the case.In entering thejudgment,the Court
321、 also granted to us pre-judgment interest of approximately$1,350,000,bringing the total award toapproximately$16,350,000,plus post-judgment interest.Merck KGaA filed various post-trial motions requesting ajudgment as a matter of law notwithstanding the verdict or a new trial,in each case regarding i
322、nfringement,invalidityand damages.In September 2001,the Court entered orders in favor of us and against Merck KGaA on the final post-judgment motions in the case,and denied Merck KGaAs motions for judgment as a matter of law and for a new trial.Merck KGaA and we have each appealed various decisions
323、of the Court.The court of appeals heard arguments in theappeal in November 2002,and we expect the court to issue its opinion in 2003.We have not recorded any gain in connectionwith this matter.23In addition to the Merck KGaA matter,we are subject to various claims,lawsuits and proceedings in the ord
324、inary courseof our business,including claims by current or former employees and distributors and with respect to our products.Inthe opinion of management,such claims are either adequately covered by insurance or otherwise indemnified,or arenot expected,individually or in the aggregate,to result in a
325、 material adverse effect on our financial condition.However,it is possible that our results of operations,financial position and cash flows in a particular period could be materiallyaffected by these contingencies.In September,2001,three subsidiaries of the recently acquired neurosciences division o
326、f NMT Medical,Inc.receiveda tax reassessment notice from the French tax authorities seeking in excess$1.5 million in back taxes,interest and penalties.NMT Medical,Inc.,the former owner of these entities,has agreed to specifically indemnify Integra against anyliability in connection with these tax cl
327、aims.In addition,NMT Medical,Inc.has agreed to provide the French tax authoritieswith payment of the tax liabilities on behalf of each of these subsidiaries.ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSNo matters were submitted to a vote of security holders during the fourth quarter of
328、the fiscal year covered by this report.Additional Information:The following information is furnished in this Part I pursuant to Instruction 3 to Item 401(b)of Regulation S-K.Executive OfficersThe executive officers of Integra are elected annually and serve at the discretion of the Board of Directors
329、.The onlyfamily relationship between any of the executive officers and our Board of Directors is that Mr.Holtz is the nephew ofRichard E.Caruso,Ph.D.,who is Chairman of the Board of Directors.The following information indicates the positionand age of our executive officers as of the date of this rep
330、ort and their previous business experience.NAMEAGEPOSITIONStuart M.Essig .41President,Chief Executive Officer and DirectorJohn B.Henneman,III .41Executive Vice President,Chief AdministrativeOfficer and SecretaryDavid B.Holtz .36Senior Vice President,Finance and TreasurerDonald R.Nociolo .40Senior Vi
331、ce President,OperationsJudith E.OGrady.52Senior Vice President,Regulatory,QualityAssurance and Clinical AffairsRobert D.Paltridge.45Senior Vice President,Global SalesMichael D.Pierschbacher,Ph.D.51Senior Vice President Research and Development,Director of the Corporate Research CenterDeborah A.Leone
332、tti .47Vice President,Global MarketingStuart M.Essig has served as President and Chief Executive Officer and a director of Integra since December 1997.Before joining Integra,Mr.Essig supervised the medical technology practice at Goldman,Sachs&Co.as a managingdirector.Mr.Essig had ten years of broad
333、health care experience at Goldman Sachs serving as a senior merger andacquisitions advisor to a broad range of domestic and international medical technology,pharmaceutical and biotechnologyclients.Mr.Essig received an A.B.degree from the Woodrow Wilson School of Public and International Affairs at PrincetonUniversity and an MBA and a Ph.D.degree in Financial Economics from the University of Chicag
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