Integra LifeSciences Holdings (IART) 2007年年度報告「NASDAQ」.pdf

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1、2007 Annual ReportCorporate OfficersStuart M.EssigPresident,Chief Executive Officer andDirectorGerard S.CarlozziExecutive Vice President and ChiefOperating OfficerJohn B.Henneman,IIIExecutive Vice President,Finance and Administration,andChief Financial OfficerJudith E.OGrady,R.N.,M.S.N.,R.A.C.Senior

2、 Vice President,Regulatory,QualityAssurance and Clinical AffairsJerry E.CorbinVice President and Corporate ControllerOutside DirectorsRichard E.Caruso,Ph.D.(3)Chairman of the Board of Directors andPresident of The Provco Group,LTD.Thomas J.Baltimore,Jr.(1)Co-Founder and President of RLJDevelopment,L

3、LCKeith Bradley,Ph.D.(1)(3)Former Professor of InternationalManagement and Management Strategyat the Open University and Cass LondonBusiness SchoolsNeal Moszkowski(1)Co-Chief Executive Officer of TowerBrookCapital Partners,LPChristian S.Schade(2)Senior Vice President,Finance andAdministration,and Ch

4、ief Financial Officerof Medarex,Inc.James M.Sullivan(2)(3)Executive Vice President of LodgingDevelopment,Marriott International,Inc.Anne M.VanLent(2)Former Executive Vice President andChief Financial Officer,BarrierTherapeutics,Inc.(1)Compensation Committee member(2)Audit Committee member(3)Nominati

5、ng and Corporate GovernanceCommittee memberPresidents MessageTo our Stockholders:It is a great pleasure to report that 2007 wasanother exciting year for our Integra.We continued to growbyintroducingnewproducts,enlargingoursalesorganizations,consummatingstrategicandsynergistictransactions,and startin

6、g new businesses.We entered the orthobiologics market through the intro-duction of Integra MozaikTMOsteoconductive Scaffold,the establishment of a sales organization,andthe acquisition of IsoTis OrthoBiologics.Finally,we significantly expanded our horizons internation-ally,substantially increasing o

7、ur European infrastructure.With record revenues of$550 million,we delivered an excellent 31%growth in 2007.We haveconfidence in our plan for continued growth,strategic direction and sales leadership.Once devoted almost entirely to neurosurgery,Integra nowhasexpanded into newmarkets of extremityrecon

8、struction,orthobiologics and handheld instruments in the United States,and has a growing directand distributor sales strategy in the rest of the world.At year-end,Integra continued to lead theneurosurgerymarket andwasoneofthe topsurgicalinstrument companies intheUnitedStates.Wehadalso established ou

9、rselves in the fast growing extremity reconstruction and orthobiologics markets.2007 wasabanneryear forourcompany;weachievedanumberofimportant milestones andbelowaresome of our key highlights:Grew Revenue by 31%to$550 million;Increased Earnings Per Share,on an adjusted basis,by 15%Added the Integra

10、OrthoBiologics distribution channel;Embarked on a direct selling strategy for handheld surgical instruments;Acquired five businesses for more than$100 million;Repurchased 2.2 million shares of stock;Launchednearly30newproductsincluding 3newproductsinourRegenerative ProductLine:Integra MozaikTMOsteoc

11、onductive Scaffold,IntegraTMFlowable Wound Matrixand DuraGen XSTMDural Regeneration Matrix;Grew our sales and marketing group by 20%;Doubled our direct European sales force;Grew our Research and Development group by nearly 40%;andBegan production of collagen-based products in our Puerto Rican facili

12、ty.New Products.Our R&D investment is producing significant and important results.We launchednearly30newproductsin2007,whichweexpecttohelppowerourorganic growthinthecoming years.These products provide important benefits to the patient and surgeon and include:Integra MozaikTMOsteoconductiveScaffold,a

13、neworthobiologic productline;DuraGenXSTMDuralRegenerationMatrixandIntegraTMFlowable WoundMatrix,extensions ofexisting collagen products;and numerousimplantand medical surgical equipment products,including our AEONTMShape Memory Implant,AdvansysTMMid and Hind Foot Plating Systems,and Uni-CPTMCompress

14、ion Plate.Transactions.We completed five strategic transactions in 2007,four in the Integra Medical Instru-ments Group and one in the NeuroSciences organization.Two of these acquisitions,LXU HealthcareandIsoTis,provided uswith newdistribution platforms.LXUHealthcare enabled ouracute care sellingorga

15、nization to establish a direct sales channel in roughly half of the United States,through its leadingspecialty surgical products distribution organization.The LXU organization had an excellent salesforce,calling on surgeons and key clinical decision makers,covering 18,000 operating rooms.Thisprovide

16、d us with a unique entre into specialty surgeons,allowing us to highlight Jarits growing linesof surgical instrumentation directly to the end-user.Our teams continue to excel at integrating our new acquisitions.Combining our new businesses hasgone smoothly and we are already seeing significant gains

17、 from our acquisitions.Integra NeuroSciences/OrthoBiologics.The combination of IsoTis products with the Integra MozaikTMfamilyofproductscreatedoneofthemostcomprehensiveproductportfoliosintheorthobiologicsmarket,and it forms the basis for our new sales organization,Integra OrthoBiologics.IsoTis is th

18、e centerpiece ofour Integra OrthoBiologics distribution channel,and its product lines include demineralized bonematrices marketed under the brands Dynagraft,Orthoblast,Accell and Trel-XTM.These productsare used for bone repair and bone fusion in orthopedic procedures that include spine,trauma,recon-

19、struction,and foot and ankle.Integra OrthoBiologics combined IsoTissale forcewith our direct spine sales team.This increased ourmarket presence in orthopedics from 20 specialists to over 300 sales representatives selling our fullrange of orthobiologics products to surgeons focused on spine and large

20、 bone applications.Our IsoTisacquisitionoffersotherbenefits,includingsignificantcostsavings,thepotential forincreasedsales,andthe development of new products from the combination of our technologies.Our pivotal DuraGen Plus Adhesion Barrier Matrix clinical trial continued to make good progress.Assum

21、ingwemeet ourtrial objectives,weanticipatea 2011filing ofthe Premarket Approval applicationwith the FDA.Extremity Reconstruction.Our Integra Extremity Reconstruction selling organization continued toexpand its field presence and introduce new products.We introduced several innovative new productsinc

22、luding our AEONTMShape Memory Implant,AdvansysTMMid and Hind Foot Plating Systems,andUni-CPTMCompression Plate.We have a full complement of 75 sales professionals,including specialistswho focuson the engineered tissue repairproducts.Inthe fourthquarter of2007,welaunched a flowableversion of our Inte

23、graTMWound Matrix,a groundbreaking technology for the treatment of tunneledwounds in diabetic foot and lower extremity ulcers.In the first quarter of 2008,we expanded thedistribution of our orthobiologic products,launching Integra OSTMOsteoconductive Scaffold,Trel-XTMandTrel-XCTMDemineralizedBoneMat

24、rixproducts.Weareexcitedaboutthesynergybetweenthesmallbone and joint implants for the upper and lower extremities and the orthobiologics platform that weveassembled.Integra Medical Instrument Group.We integrated the Jarit and newly acquired Luxtec/LXU surgicalsales teams,establishing our direct sell

25、ing organization,which has been renamed Integra Surgical.Wenowhaveacombinedsellingorganization ofapproximately fortydirect salesreps,coveringoverhalfofthe United States,selling Jarit instruments and Luxtec surgical lighting.Inother areas ofthe country,we will continue our strong historical relations

26、hips with Jarit and Luxtec dealers.Sales and Distribution.Integras distribution channels continue to grow.Our global sales andmarketing organization now has approximately five hundred sales,marketing,and clinical specialists,who provide unparalleled product support,customer service and education.Thr

27、ough acquisitions,wehave enhanced our selling strategies for both surgical instruments and orthobiologics.We now marketmost of our domestic products directly through the following four separate sales organizations:Integra NeuroSciences(calling on neurosurgeons,intensivists and neurosurgical nurses);

28、Integra Extremity Reconstruction(calling on orthopedic foot and ankle surgeons,surgicalpodiatrists,hand surgeons,burn units,and reconstructive surgeons);Integra Medical Instruments(a hybrid of distributor and direct sales representatives calling oncentral purchasing within the hospital,and independe

29、nt distributors calling on medical,dentaland veterinary offices);andIntegra OrthoBiologics(a network of approximately 45 distributors selling Integras full rangeof DBM and synthetic bone graft substitutes).International.We continued to expand the infrastructure in our European sales and marketingact

30、ivities.As a result,we are seeing increased sales growth and operating efficiencies.Early thisyear,we took over the distribution of our neurosurgical products from our dealer in Switzerland andnow sell direct in Canada and seven European countries,utilizing distributors in the rest of the world.Cash

31、 flow,liquidity,and financing.We generated operating cash flows of$47 million in 2007 andraised$330 million in a convertible debt offering.We used that cash to invest in the expansion of ourbusiness,repurchase 2.2 million shares of our common stock,and acquire five new businesses.At theend of the ye

32、ar,we had nearly$60 million of cash on our balance sheet and no outstanding balance onour line of credit.During 2007,we also increased our credit facility to$300 million.With ourborrowing ability and strong operating cash flows,we have the financial resources to continue toexecuteaccretive,strategic

33、acquisitions,andtorepurchaseadditional sharesofourcommonstockintheopen market,when appropriate.2008 and Beyond.We will continue to develop and acquire innovative products that save lives andimprove patient quality of life.Our basic strategy remains the same to leverage our strongregenerative technol

34、ogy base across our sales channels.As we have in the past,we will actively seekacquisitions in order to add complementary products to our neurosurgery,extremity reconstruction,orthobiologics,and medical instrument sales channels.We also recognize the importance of ourcustomers and will continue to d

35、eliver the highest levels of customer service in the industry.Integra continues to stand for integrity of our people,our products and our partners.I want to takethis opportunity to thank our 2,500 dedicated employees around the world for their many importantcontributions and for their relentless eff

36、orts to make Integra LifeSciences the great company that it istoday and the even better company it will be in the future.Thank you,our stockholders,for your continued support.Sincerely,Stuart EssigPresident and Chief Executive Officer(This page intentionally left blank)STOCK PERFORMANCE GRAPHThe fol

37、lowing line graph and table compare,for the period from December 31,2002 throughDecember 31,2007,the yearly change in the cumulative total stockholder return on the Companyscommonstockwiththe cumulativetotal returnoftheNasdaqStockMarket-U.S.Indexandthe NasdaqMedical Devices,Instruments and Supplies,

38、Manufacturers and Distributors Index.The graph assumesthat the value of the investment in the Companys common stock and the relevant index was$100 atDecember 31,2002 and that all dividends were reinvested.The closing market price of the Companyscommon stock on December 31,2007 was$41.93 per share.Co

39、mparison of Five Year Cumulative Total ReturnValue of Investment of$100 on December 31,2002$0$50$100$150$200$250$300200220032004200520062007Integra LifeSciences Holding CorporationNasdaq Medical Devices,Instruments and Supplies,Manufacturers and Distributors IndexNasdaq Stock Market-US IndexComparis

40、on of Cumulative Total Return among Integra LifeSciences Holdings Corporation,the Nasdaq Medical Devices,Instruments and Supplies,Manufacturers andDistributors Index,and the Nasdaq Stock Market-U.S.Index12/0212/0312/0412/0512/0612/07Integra LifeSciences Holdings Corporation$100$162$209$201$241$238Na

41、sdaq Medical Devices,Instruments andSupplies,Manufacturers and Distributors Index$100$148$173$190$201$255Nasdaq Stock Market-U.S.Index$100$150$163$166$183$198The graph and table above depict the past performance of the Companys stock price.TheCompany neither makes nor endorses any predictions as to

42、future stock performance.(This page intentionally left blank)UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington,DC 20549Form 10-K(Mark One)ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31,2007nTRANSITION REPORT PURSUANT

43、TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period fromtoCOMMISSION FILE NO.0-26224INTEGRA LIFESCIENCES HOLDINGS CORPORATION(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)Delaware(STATE OR OTHER JURISDICTION OF51-0317849(I.R.S.EMPLOYERINCORPORATION OR ORGANI

44、ZATION)IDENTIFICATION NO.)311 ENTERPRISE DRIVE08536PLAINSBORO,NEW JERSEY(ZIP CODE)(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)REGISTRANTS TELEPHONE NUMBER,INCLUDING AREA CODE:(609)275-0500SECURITIES REGISTERED PURSUANT TO SECTION 12(b)OF THE ACT:Title of Each ClassName of Exchange on Which RegisteredCom

45、mon Stock,Par Value$.01 Per ShareThe Nasdaq Stock Market LLCSECURITIES REGISTERED PURSUANT TO SECTION 12(g)OF THE ACT:NONEIndicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the SecuritiesAct.Yes nNoIndicate by check mark if the registrant is not requir

46、ed to file reports pursuant to Section 13 or 15(d)of the Securities ExchangeAct.Yes nNo Indicate by check mark whether the registrant:(1)has filed all reports required to be filed by Section 13 or 15(d)of the SecuritiesExchange Actof1934duringthepreceding 12months(orforsuchshorterperiodthat theregis

47、trantwasrequiredtofilesuchreports),and(2)has been subject to such filing requirements for the past 90 days.Yes nNo Indicate bycheck mark ifdisclosureofdelinquent filerspursuanttoItem 405ofRegulation S-Kisnotcontained herein,andwill notbe contained,to the best of registrants knowledge,in definitive p

48、roxy or information statements incorporated by reference in Part III ofthis Form 10-K or any amendment to this Form 10-K.nIndicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,or a smallerreporting company.See the definitions of“large

49、 accelerated filer,”“accelerated filer”and“smaller reporting company”in Rule 12b-2 ofthe Exchange Act.(Check one):Large accelerated filer Accelerated filer nNon-accelerated filer n(Do not check if a smaller reporting company)Smaller reporting company nIndicate by check mark whether the registrant is

50、 a shell company(as defined in Rule 12b-2 of the ExchangeAct).Yes nNo As of June 30,2007,the aggregate market value of the registrants common stock held by non-affiliates was approximately$624.8 million based upon the closing sales price of the registrants common stock on The Nasdaq Global Market on

51、 such date.Thenumber of shares of the registrants Common Stock outstanding as of May 13,2008 was 27,307,058.DOCUMENTS INCORPORATED BY REFERENCE:NONEPART IITEM 1.BUSINESSOVERVIEWThe terms“we,”“our,”“us,”“Company”and“Integra”refer to Integra LifeSciences Holdings Corporation,aDelaware corporation,and

52、its subsidiaries unless the context suggests otherwise.Integra,a world leader in regenerative medicine,is dedicated to improving the quality of life for patientsthrough the development,manufacturing and marketing of cost-effective surgical implants and medical instru-ments.Our products are used to t

53、reat millions of patients every year,primarily in neurosurgery,extremityreconstruction,orthopedics and general surgery.Revenues grew to$550.5 million in 2007,an increase of31.3%from$419.3 million in 2006.Founded in 1989,Integra has grown to be a leader in applying the principles of biotechnology to

54、medicaldevices,particularly for neurosurgery and extremity reconstruction,and is one of the largest surgical instrumentcompanies in the United States.In the United States,Integra sells its products for neurosurgery and extremityreconstruction directly to customers and its surgical instruments throug

55、h a hybrid sales organization consisting ofdirect representatives,appointed dealers and authorized stocking distributors.Outside the United States,Integrasells its products directly in Canada and major European markets and through stocking distributors elsewhere.STRATEGYOur goal is to become a globa

56、l leader in the development,manufacturing and marketing of medical devices,implants and instruments for surgery,and the leader in the neurosurgery and extremity reconstruction markets.Keyelements of our strategy include:Marketing innovative medical devices in underserved markets.We develop innovativ

57、e medical devicesfor neurosurgery and extremity reconstructive surgery.These are niche markets that larger medical devicecompanies tend not to emphasize as their primary focus.Investing in sales distribution channels to increase market penetration.We have built a large neuro-surgicalsalesteamofappro

58、ximately 150salesprofessionalsintheUnitedStateswhosellproductstooperatingroomsandintensivecareunits.Wehavealsobuiltoneofthelargestdirect extremityreconstructionsalesforcesof approximately 75 sales professionals in the United States.Our European sales force consists of approx-imately 70 professionals

59、 and our Canadian sales force consists of approximately 10 professionals.Developing innovative products based on core technologies.We are a leader in regenerative technol-ogy.We sell a number of regenerative products through both our own sales network and alliances with othercompanies in private-lab

60、el arrangements.Our proprietary highly purified collagen scaffold technology is thefoundation of our products for duraplasty,dermal regeneration,nerve and tendon repair,and boneregeneration.Acquiring products that fit existing sales channels or establish new sales channels.We acquire newproductsandb

61、usinessestoincrease theefficiencyandsizeofoursalesforce,stimulate thedevelopment ofnewproducts,and extend the commercial lives of existing products.We have completed 15 acquisitions since thebeginning of 2004,have demonstrated that we can quickly and profitably integrate new products andbusinesses a

62、nd have an active program to evaluate more such opportunities.Our strategy allowsusto expand ourpresence in hospitals and other health care facilities,to integrate acquiredproducts effectively,tocreate strongsales platforms and to drive short-and long-term revenue and earnings growth.OUR BUSINESSWe

63、look at our business in twoways by sales and distribution channel,and by the type of product.We havefive main sales organizations:Integra NeuroSciences,Integra OrthoBiologics,Integra Extremity Reconstruction,Integra Medical Instruments,and Europe.We report our revenue by type of product:Neurosurgica

64、l and Orthopedic1Implants,and Medical Surgical Equipment.We sell products from both revenue categories through the Neuro-surgery Extremity Reconstruction and European sales channels;the Instruments sales organization sells onlyMedical Surgical Equipment and the Integra OrthoBiologics sales organizat

65、ion sells only Neurosurgical andOrthopedic Implants.SALES AND DISTRIBUTIONIn the United States,we have four sales organizations.The largest,Integra NeuroSciences,sells productsthrough directly employed sales representatives.Integra OrthoBiologics sells through specialty distributors tosurgeons for s

66、pinal and large joint procedures.The Extremity Reconstruction organization sells primarily throughdirect sales representatives,and Integra Medical Instruments sells through a mixed organization consisting ofapproximately 50 directly employed sales representatives and a group of appointed dealers plu

67、s stocking distrib-utors.Outside the United States,we generally sell directly in Canada,the United Kingdom,France,Germany,Benelux,and Switzerland and through distributors in other markets.Integra NeuroSciences.Integra NeuroSciences direct sales effort in the United States involves more than150 profe

68、ssionals,including direct sales representatives,sales management and clinical educators who educate andtrain our salespeople and customers in the use of ourproducts.Direct sales representativesinclude neurospecialists,who focus on products used in operating rooms and intensive care units,and intensi

69、ve care unit specialists.IntegraNeuroSciences sales representatives call on neurosurgeons,intensivists,other physicians,nurses,hospitals andsurgery centers.Outside the United States,we sell neurosurgical devices directly in Canada and major Europeanmarkets and elsewhere through stocking distributors

70、.Integra OrthoBiologics.We acquired IsoTis in October 2007 and formed the Integra OrthoBiologics salesorganization,whichconsists ofapproximately 22salesprofessionals.Integra OrthoBiologics combines the existingIntegra spine specialist sales team with the acquired IsoTis sales team and supports a dis

71、tributor network of morethan 45 dealer organizations,which retain over 300 sales representatives who spend time detailing our products.IntegraOrthoBiologicssalesrepresentativesworkintandem withthedistributorgroupstodeliverasolutionofboneregenerative products to spine and orthopedic surgeons.Outside

72、the United States,we sell orthobiologics productsthrough a network of distributors.Integra Extremity Reconstruction.Our Extremity Reconstruction sales organization in the United Statesconsists of approximately 75 salespeople,sales managers and clinical educators.Extremity Reconstruction sellsmedical

73、 devices to orthopedic surgeons,podiatric surgeons,trauma and reconstructive surgeons,burn surgeons andother physicians who practice in hospitals and surgery centers.The Extremity Reconstruction team sells both metalimplants for internal fixation and joint reconstruction and regenerative biomaterial

74、s for the repair of soft tissue,including the skin,peripheral nerves and tendons.Outside the United States,we sell devices for extremityreconstruction directly throughsales representativesin Canada and major European markets and elsewherethroughstocking distributors.Integra Medical Instruments.We ar

75、e a leader in specialty and general instruments and lighting for surgery.We sell Jarit surgical instruments and Luxtec surgical lighting to hospitals through Integra Surgical,a mixedorganization including approximately 50 directly employed sales representatives and a network of distributors.OurMilte

76、x unit sells hand-held surgical and dental instruments in the alternate site market(outpatient surgical clinics,physician offices,podiatry practices,dental offices and veterinary clinics)through a large network of manufac-turers agents and direct sales efforts.Strategic Alliances.We market certain p

77、roducts through strategic partners or original equipment manufac-turer customers.Because these products generally address large and diverse markets,it is more cost-effective for usto leverage the product development and distribution systems of our strategic partners.We have these relationshipswith J

78、ohnson&Johnson,Medtronic Sofamor Danek,Inc.,Wyeth BioPharma and Zimmer Holdings,Inc.,amongothers.2PRODUCTS OVERVIEWIntegraisafullyintegratedmedical devicecompanywiththousandsofproductsforthemedical specialties thatwe target.Our objective is to develop,or otherwise provide,any product that will impro

79、ve our service to ourcustomers.These products include implants for neurosurgery,spinal surgery and extremity reconstructive surgeryand medical surgical equipment,which includes hand-held instruments,powered instruments,image-guidedsurgery systems and monitors that measure brain parameters.We disting

80、uish ourselves by emphasizing theimportance of the relatively new field of regenerative medicine.In 2007,approximately 24%of our revenues came from surgical implants derived from our proprietarycollagen matrix technology.While these products vary in composition and structure,they operate under simil

81、arprinciples.Webuildourmatrix productsfromcollagen,whichisthebasicstructural proteinthatbindscellstogetherin the body.Our matrices(whether for the dura mater,dermis,peripheral nerves,tendon or bone)provide a scaffoldto support the infiltration of the patients own cells and the growth of blood vessel

82、s.Eventually,those infiltratingcells consume the collagen of the implanted matrix and lay down new native“extracellular matrix.”In theirinteraction with the patients body,our collagen matrices inhibit the formation of scar tissue,so in the end theimplant disappears andhealthy native tissuehastaken i

83、tsplace.Becausewecan applythe basic technology tomanydifferent procedures,we sell regenerative medicine products through our Integra NeuroSciences,ExtremityReconstruction and Integra OrthoBiologics organizations,as well as through strategic partners.NEUROSCIENCES PRODUCT PORTFOLIOImplants For Neuros

84、urgery And SpineWe offer a wide array of implants for neurosurgery and spine surgery,including a complete set of duraplastyproducts and biomaterials for spine surgery.Highlights include:Duraplasty Products.In the United States,over 225,000 craniotomy procedures are performed each year.Most ofthese s

85、urgeries breach the dura mater,which is the tough,fibrousmembrane that surroundsand protects thetissue of the brain and spinal cord.The breach must be repaired,either by suturing it or applying a dural graft toprevent cerebrospinal fluid leaks and facilitate wound healing.Since the introduction of t

86、he DuraGen Dural GraftMatrix in 1999,we have become the market leader in sutureless closure of dural defects in the United States.Theseproducts are alternatives to autologous tissue grafts taken from elsewhere in the patients body.In September 2007,we received 510(k)clearance from the United States

87、Food and Drug Administration tomarket the DuraGen XSTMDural Regeneration Matrix in the United States.The DuraGen XSTMgraft is the latestgeneration in our line of duraplasty materials based on Integras market leading absorbable collagen matrixtechnology.It demonstrates our sustained commitment to pro

88、viding the neurosurgical community with innovativetechnology and materials for the management of dural defects.DuraGen Dural Graft Matrix,the first onlaycollagen graft fordural repair,wasfollowedbythe launch ofDuraGen PlusDural Regeneration Matrix in2003.In2005,we launched the Suturable DuraGenTMDur

89、al Regeneration Matrix.Collagen for Spine.Over 450,000 patients undergo lumbar surgery in the United States each year.Adhesions a painful condition that occurs when internal scar tissue causes nerves,organs and other structuresto adhere to each other are a frequent complication of the procedure.Our

90、collagen matrix technology has thepotential to inhibit the formation of scar tissue,so we believe it is well-suited to address this problem.Outside theUnited States,we sell the DuraGen Plus Adhesion Barrier Matrix as a barrier against the formation of adhesionsfollowing spine surgery and for the rep

91、air and restoration of the dura mater following spinal and cranial surgery.In2007,wecontinuedtomakeprogressinourpivotalmulti-center clinical trial,designedtoevaluate thesafetyand effectiveness of DuraGen Plus Adhesion Barrier Matrix,for use in spinal surgery in the United States,as abarrier against

92、the formation of adhesions following such surgery.If the trial is completed in accordance with ourexpectations and achieves results acceptable to the FDA(of which there can be no assurance),we expect to file aPremarket Approval application for DuraGen Plus Adhesion Barrier Matrix with the FDA in 201

93、1 for use as anadhesion barrier in spinal surgery.3OrthobiologicsDegenerative disease of the spine is increasingly prevalent in the aging population.Patients who experiencesevere pain and who do not respond to conservative therapies may require fusion of one or more vertebrae(spinalfusion).A spinal

94、fusion is successful when the bones grow together biologically and form a solid mass.Surgeonsfrequentlyusebonegraftsorothermaterials toaidandpromotebonegrowthtoachievefusion.Theuseofbonegraftsubstitutes in spinal procedures,excluding recombinant bone morphogenetic proteins,represents an estimated$35

95、0million market.In2007,anestimated 450,000spinalfusionprocedureswereperformed intheU.S.Additionalopportunity exists in orthopedic reconstructive applications.We are continuing to develop regenerative medicine products for the spine In February 2007,we launched thefirst of our new products,the Integr

96、a MozaikTMOsteoconductive Scaffold,combined with bone marrow aspirate,isintended for use as a bone void filler to fill voids or gaps of the skeletal system in the extremities,spine and pelvisnot instrinsic to the stability of the bony structure.Integra Mozaik is also indicated for use in the treatme

97、nt ofsurgically created osseous defects or osseous defects created from traumatic injury to the bone.Integra Mozaik issold as a compression resistant strip and as putty,making it useful in a variety of spinal fusion procedures.In October 2007 we acquired IsoTis,Inc.,a well respected leader in regene

98、rative medicine.IsoTis brought toIntegra a comprehensive family of orthobiologic products and an established network of distributors focusing onorthopedic surgeons.IsoTis manufactures,markets and sells a range of innovative bone graft substitutes and otherrelated medical devices that are used to enh

99、ance the repair and regeneration of bone in spinal and trauma surgery,total joint replacements and dental applications.By integrating the IsoTis products with Integras own osteocon-ductive scaffold and integrating the Integra spine specialist sales team into the IsoTis distributor network,oneunified

100、 selling organization was created,now known as Integra OrthoBiologics.The combined activity strengthensour position as a global leader in orthobiologics.We are now one of the largest companies in the world focused onadvanced technology in orthobiologics and have a product portfolio encompassing some

101、 of the largest and mosttrusted orthobiologic brands,such as Integra MozaikTMOsteoconductive Scaffold,the Accell family of dem-ineralized bone matrix products,and DynaGraft II and OrthoBlast II.Medical Surgical Equipment For NeurosurgeryIntegra NeuroSciences sells a full line ofinstruments and other

102、 equipment for neurosurgery.We have productsfor each step of cranial procedure and the care of the patient after the operation.Integras Medical SurgicalEquipment for neurosurgery includes equipment used in the neurosurgery operating room(OR)and neurosurgeryintensive care unit(ICU).At the beginning o

103、f a craniotomy procedure,neurosurgeons deploy the market-leading MAYFIELD line ofcranial stabilization equipment to position and secure the patients head,an essential precondition to any cranialsurgery.Onceapatient ispositioned properly,the surgeon opensthe skull,perhapsassistedbyoneofourdisposablec

104、ranial access kits,and cuts through the dura mater.The surgeon can then use our specialty neurosurgeryinstruments to expose the tumor,perhaps guided to the precise location by a Radionics OmniSight EXcelimage-guided surgery system,which provides neurosurgeons and orthopedic surgeons with enhanced th

105、ree-dimensional visualization of critical anatomy and the ability to perform less invasive surgical procedures.Having located the tumor,the surgeon might then remove it with a CUSA Excel ultrasonic surgical aspirator,apoweredinstrument that selectively dissectstissueaccording toitsdensity.Thesurgeon

106、canreduce the bleeding atthe point of removal with one of our collagen hemostatic agents.After removing the tumor,the surgeon can repairthe dura mater with one of our duraplasty products and can fix the skull flap with our line of cranial plates andscrews.Certain intracranial brain lesions may not b

107、e surgical candidates,and neurosurgeons may use our XKnifesystem in the non-invasive treatment of these lesions.Following a craniotomy,the Neurosurgical ICU monitors a patients post-operative condition.We offer theleading products for the monitoring of intracranial pressure(the Camino ICP monitor)an

108、d metabolic activity(LICOX brain tissue oxygen monitoring system)and equipment for the drainage of excess cerebrospinal fluid(CSF)(the AccuDrainTMand HermeticTMExternal Ventricular Drainage Systems).Our MobiusTMMulti ModalityMonitoring System serves as an integrated hub for existing Integra monitori

109、ng systems such as the Camino and4LICOX systems.The MobiusTMsystem allows the clinician to monitor the multiple clinical measurements that arecritical for the treatment of neurological condition at the bedside.OurCaminoandLICOXmonitoring systemsarealsousedinthe treatment ofTraumatic BrainInjury(TBI)

110、.TBIisamajorpublichealthproblemandcoststheUnitedStatesanestimated$56billionayear.Morethan5millionAmericans alive todayhavehad a TBIresulting ina permanent need forhelpin performing daily activities,and TBIsurvivors are often left with significant cognitive,behavioral,and communicative disabilities.R

111、esearch has shownthat not all brain damage occurs at the moment of impact,but frequently evolves over the ensuing hours and daysafter the initial injury.The secondary damage may be controlled,in part,by monitoring and managing intracranialpressure and brain tissue oxygen.EXTREMITY RECONSTRUCTION PRO

112、DUCT PORTFOLIOExtremity reconstruction is a growing area of the orthopedic market.Traditionally,larger orthopedic medicaldevice companies have not focused primarily on this niche market,thus making it attractive to us.We defineextremityreconstruction tomeantherepairofsofttissueandtheorthopedic recon

113、struction ofboneinthefoot,ankleand leg below the knee and the hand,wrist,and arm.Dermal Regeneration and Engineered Wound Dressings.Our dermal repair and regeneration products(IntegraTMBilayer Matrix Wound Dressing,IntegraTMMatrix Wound Dressing,and Integra Dermal RegenerationTemplate)are used to tr

114、eat the chronic wounds that can form on the foot,ankle and lower leg,severe burnsand scarcontractures.Integras matrix wound dressings are indicated for the management of wounds including partial and full-thickness wounds,pressure ulcers,venous ulcers,diabetic ulcers,chronic vascular ulcers,tunneled/

115、underminedwounds,surgical wounds(donor sites/grafts,post-laser surgery,podiatric,and wound dehiscence),trauma wounds(abrasions,lacerations,second-degree burns,and skin tears)and draining wounds.We estimate that the marketopportunity for products used to treat trauma and chronic wounds is approximate

116、ly$400 million.There are currently 18million peoplewithdiabetes inthe U.S.,15%ofwhomsustainoneormore diabetic footulcers during their lifetime.This population is also 15 times more likely to suffer an amputation due to non-healingdiabetic foot ulcers.However,approximately 85%of all amputations are p

117、reventable if proper intervention isprovided.Approximately 500,000adults seektreatment forvenous legulcers(VLUs)annually in the United States.InDecember2007,wereceived510(k)clearance fromtheFDAtomarketIntegraTMFlowableWoundMatrixinthe United States.IntegraTMFlowable Wound Matrix is a ground-breaking

118、 technology for the treatment of tunneledwoundsindiabetic footandlowerextremityulcers.Wemodifiedourclinically provencollagen-glycosaminoglycanmatrix,which was originally developed for Integra Dermal Regeneration Template,into a flowable form to closedifficult,irregular wounds.Integra estimates that

119、the market for the flowable product in wounds is$150 million.Nerve and Tendon.Surgeons who specialize in foot or hand orthopedic surgery often have to repair nervesand tendon.Toaddresstheseneeds,weoffertheNeuraGenNerveGuideandthe NeuraWrapTMNerveProtector forperipheral nerve repair and protection an

120、d the TenoGlideTMTendon Protector Sheet,all of which are based on ourregenerative medicine technology platform.The NeuraGen Nerve Guide has been used in many procedures,including procedures to repair peripheralnerves in the upper and lower extremities and cranial and facial nerves,as well as procedu

121、res for brachial plexusreconstruction.We estimate that the worldwide market for the repair of severed peripheral nerves is approximately$40 million.The NeuraWrapTMNerve Protector,a collagen nerve repair conduit designed for the treatment of injured,compressed or scarred nerves,provides a protective

122、environment for nerve healing,serving as an interface betweendamaged nerves and surrounding tissue.We estimate that the worldwide market for the repair of injured,compressed and scarred peripheral nerves is approximately$70 million.The TenoGlide Tendon Protector Sheet is used to protect the repair o

123、f a tendon.Pre-clinical studies suggestthat it may reduce the formation of scar tissue between the tendon and surrounding tissue and may preserve the5gliding plane of the tendon.The TenoGlide Tendon Protector Sheet can be used in numerous procedures,such asthe repair of the flexor and extensor tendo

124、ns of the hand and the repair of the peroneus brevis tendon of the foot.Bone and Joint Fixation Devices and Instruments.We offer the extremity reconstruction surgeon a completeset of bone and joint fixation devices for upper and lower extremity reconstruction,including orthopedic implantsand surgica

125、l devices for small bone and joint procedures involving the foot,ankle,hand,wrist and elbow.Ourproducts address both the trauma and reconstructive segments of the extremities market,an approximately$600 million market worldwide.We are a leading developer and manufacturer of specialty implants and in

126、struments specifically designed forfoot and ankle surgery.Products include a wide range of implants for the forefoot,the midfoot and the hindfoot,including the Bold Screw,Hallu-Fix plate system and the HINTEGRATMtotal ankle prosthesis.In the recon-struction of lower extremities,our leading brands in

127、clude Newdeal,ICOSTM,the Bold Cannulated CompressionScrew,the Uni-Clip,the AdvansysTMMid and Hind Foot Plating Systems,the Hallu-Fix System,the PANTANail,and the Subtalar MBA Implant System(Maxwell-Brancheau Arthroereisis System),a market leadingproduct that provides a simple and effective means of

128、correcting debilitating flatfoot for both pediatric and adultpatients.Customersincludeorthopedicsurgeonsspecializing ininjuriesofthefoot,ankleandextremities,aswellaspodiatric surgeons,of which there are 3,200 and 2,400,respectively,in the United States.For upper extremity reconstruction,we offer the

129、 Universal2TMTotal Wrist Implant System,which is recog-nized asthepremier implant forwristreplacement,aprocedurethat restoresthefunctionofthearthritic wrist.Otherleading products offered include the KatalystTMBipolar Radial Head System for elbow reconstruction,SpiderTMLimited Wrist Fusion System for

130、 intercarpal arthrodesis,ViperTMDistal Radius Plate for fracture fixation,KompressorTMCompression Screw System for small bone fixation,and SafeGuard Mini Carpal Tunnel ReleaseSystem for treatment of carpal tunnel syndrome.In April 2007,we signed an agreement with InteliFUSE,Inc.to distribute its pat

131、ented shape memory implantand activation system in the U.S.and Canada.The AEONTMShape Memory Implant,a nitinol“smart”shapememorystaple,hasanFDAclearance foruseinmanyorthopedicindications,includingsurgeriesforthefoot,ankle,hand and wrist,as an alternative to rods,nails,screws and wires.The AEONTMShap

132、e Memory Implant is availablein sizes,gauges and designs appropriate to several fixation and fusion indications,and we estimate that it can beused in over 600,000 extremity reconstructive procedures annually.INSTRUMENTS AND SPECIALTY LIGHTING FOR SURGERYWe are one of the leading surgical instrument

133、companies in the United States,providing more than 30,000instrument patterns tohospitals,surgerycenters,andphysician officesunderthe Jarit,Miltex,and other brands.OurLuxtec line leads the market for specialty surgical lighting systems.RESEARCH AND DEVELOPMENT STRATEGYOur research and development act

134、ivities focus on identifying and evaluating unmet surgical needs and productimprovement opportunities to drive the development of innovative solutions and products.We apply our techno-logical and developmental core competencies to develop regenerative products for neurosurgical,reconstructiveand spi

135、nal applications,neuro-monitoring and CSF management,cranial stabilization and closure,tissue ablation,surgical instruments and extremity small bone and joint fixation.Our activities include both internal productdevelopment initiatives and the acquisition of proprietary rights to strategic technolog

136、ical platforms.Because implants represent a fast-growing,high-margin segment for us,a large portion of our research anddevelopment expenditure is allocated to the development of these products.Our regenerative product developmentportfolio focuses on applying our expertise in biomaterials and collage

137、n matrices to support the development ofinnovative products targeted at neurosurgical,orthopedic and spinal surgery applications,as well as dermalregeneration,nerve repair,and wound dressing applications.Our focus on technological advancement,productsegmentation and differentiation activities will c

138、ontinue to drive our activities in each of these areas.We arecommitted to investing in,and proving the safety and efficacy of,our regenerativeproducts.Our ongoing execution6of the DuraGen Plus Adhesion Barrier Matrix pivotal multi-center clinical trial in the United States reflects thiscommitment.Bo

139、lstered by the acquisition of IsoTis,we are building a world-class orthobiologic product developmentcapability that leveragesourexistingregenerativecapabilities withthoseofIsoTis.TheexistingIsoTis(nowIntegraOrthoBiologics)demineralized bone matrix product line will complement our development and suc

140、cessful launchof the Integra MozaikTMosteoconductive resorbable bone void filler product line.We are pursuing productdevelopment synergies and opportunities in both of these areas.We continue to build and expand the capabilities of our product development team,focused on the devel-opment offixation

141、devices for extremity reconstruction,and havestructured a robustproduct development programthat will advance our product offerings.This program includes the development of devices for both the upper andlower extremities.Our research and development efforts in the medical surgical equipment arena pri

142、marily focus on neuro-monitoring applications and surgical systems.Our efforts in neuromonitoring remain concentrated on theimprovement of our existing advanced neuromonitors and the evaluation of new and innovative technologies thatoffer significant advancements in monitoring ability.For CSF manage

143、ment,we are developing concepts for theimprovement of long-standing product applications and are updating existing products to meet evolving needs.Ourindustry-leading cranial stabilization product expertise focuses on the advancement of mechanical stabilizationtechniques and the application of new m

144、aterials to further the state-of-the-art of cranial stabilization.For tissueablation,we are developing multi-technology based tissue ablation modalities to offer a broad array of products.Finally,we have an ongoing program of identifying,developing and commercializing powered and hand-heldsurgical i

145、nstruments.Development of new hand-held instruments,however,does not result in significant researchand development expenditures.We spent$12.0 million,$25.7 million and$30.7 million in 2005,2006 and 2007 respectively,on research anddevelopment activities.The 2005 amount includes$0.5 million in-proces

146、s research and development chargesrecorded in connection with acquisitions.The 2006 amount includes a$5.9 million in-process research anddevelopment charge recorded in connection with the KMI acquisition.The 2007 amount includes$4.6 million in-process research and development charges recorded in con

147、nection with the IsoTis acquisition.Increases in researchand development expenditures will accelerate the development of new devices for neurosurgery,extremityreconstruction and orthobiologics.In addition to internal research and development activities,we may continueto acquire businesses that inclu

148、de research and development programs,which could result in additional in-processresearchanddevelopmentchargesuntiltheadoptionofFinancial AccountingStandardsBoard(“FASB”)StatementNo.141(R),Business Combinations,a replacement of FASBStatement No.141 on January 1,2009,after which in-process research an

149、d development expenditures will be booked as a capitalized asset.COMPETITIONOur largest competitors in the neurosurgery markets are the Medtronic Neurologic Technologies division ofMedtronic,Inc.,the Codman division of Johnson&Johnson,the Stryker Craniomaxillofacial division of StrykerCorporation an

150、d the Aesculap division of B.Braun.In addition,many of our neurosurgery product lines competewith smaller specialized companies or larger companies that do not otherwise focus on neurosurgery.Our competition in extremity reconstruction includes the DePuy division of Johnson&Johnson,Synthes,Inc.and S

151、tryker Corporation,aswellasother major orthopedic companies that carry afull line ofreconstructivesurgeryproducts.We also compete with Wright Medical Group,Inc.,Small Bone Innovations,Inc.,Tornier,Inc.,and othercompanies in the orthopedic category.We believe that we are the second largest reusable s

152、urgical instrument company in the United States.Wecompete with the largest reusable instrument company,V.Mueller,a division of Cardinal Healthcare,as well as theAesculap division of B.Braun.In addition,we compete with the Codman division of Johnson&Johnson and manysmaller instrument companies in the

153、 reusable and disposable specialty instruments markets.We rely on the depthand breadth of our sales and marketing organization and our procurement operation to maintain our competitiveposition in surgical instruments.7Our private-label products face diverse and broad competition,depending on the mar

154、ket addressed by theproduct.The competitors in our newly launched orthobiologics business include such well established companies asMedtronic,Synthes and Johnson&Johnson and also include several smaller,biologic-focused companies,such asOsteotech and Orthovita.Finally,incertain casesourproductscompe

155、te primarily againstmedical practices thattreat aconditionwithoutusing a medical device or any particular product,such as medical practices that use autograft tissue instead of ourdermal regeneration products,duraplasty products and nerve repair products.Depending on the product line,wecompete onthe

156、 basisofourproductsfeatures,strength ofoursalesforce ormarketing partner,sophistication ofourtechnology and cost effectiveness of our solution to the customers medical requirements.GOVERNMENT REGULATIONAs a manufacturer and marketer of medical devices,we are subject to extensive regulation by the FD

157、A andother federal governmental agencies and,in some jurisdictions,by state and foreign governmental authorities.These regulations govern the introduction of new medical devices,the observance of certain standards with respecttothe design,manufacture,testing,labeling,promotionand salesofthe devices,

158、the maintenance ofcertain records,the ability to track devices,the reporting of potential product defects,the import and export of devices,and othermatters.We believe that we are in substantial compliance with these governmental regulations.The regulatory process of obtaining product approvals and c

159、learances can be onerous and costly.The FDArequires,as a condition to marketing a medical device in the United States,that we secure a Premarket Notificationclearance pursuant to Section 510(k)of the Federal Food,Drug and Cosmetic Act(the FFDCA),an approvedPremarket Approval(PMA)application(or suppl

160、emental PMA application)or an approved Product DevelopmentProtocol.Obtaining these approvals and clearances can take up to several years and involves preclinical studies andclinical testing.To perform clinical trials for significant risk devices in the United States on an unapproved product,we are r

161、equired to obtain an Investigational Device Exemption from the FDA.FDA rules may also require a filingfor FDA approval prior to marketing products that are modifications of existing products or new indications forexisting products.Moreover,after clearance is given,if the product is shown to be hazar

162、dous 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 supply additional proof of its safety and effectiveness or to recall,repair,replace or refund the cost of the medical devic

163、e.Because we currently export medical devices manufactured in theUnited States that have not been approved by the FDA for distribution in the United States,we are required toprovidenoticestotheFDA,maintain certain recordsrelatingtoexportsandmaketheserecordsavailable totheFDAfor inspection,if require

164、d.Human Cells,Tissues and Cellular and Tissue-Based ProductsIntegra,through the acquisition of IsoTis,manufactures medical devices derived from human tissue(dem-ineralized bone tissue).The FDA has specific regulations governing human cells,tissues and cellular and tissue-based products,orHCT/Ps.An H

165、CT/P is a product containing,or consisting of,human cells or tissue intended for transplantation intoa human patient.Examples include bone,ligament,skin and cornea.Some HCT/Ps also meet the definition of a biological product,medical device or drug regulated under theFFDCA.These biologic,device or dr

166、ug HCT/Ps must comply both with the requirements exclusively applicable to361 HCT/Ps and,in addition,with requirements applicable to biologics,devices or drugs,including premarketclearance or approval.Section 361 of the Public Health Service Act,or PHSA,authorizes the FDA to issue regulations to pre

167、vent theintroduction,transmission or spread of communicable disease.HCT/Ps regulated as“361 HCT/Ps are subject torequirements relating to registering facilities and listing products with FDA;screening and testing for tissue donoreligibility;Good Tissue Practice when processing,storing,labeling,and d

168、istribution HCT/Ps,including requiredlabeling information;stringent record keeping;and adverse event reporting.8Some states have their own tissue banking regulation.We are licensed or have permits for tissue banking inCalifornia,Florida,New York and Maryland.In addition,tissue banks may undergo volu

169、ntary accreditation by theAmerican Association of Tissue Banks(AATB).The AATB has issued operating standards for tissue banking.Compliance with these standards is a requirement in order to become an AATB-accredited tissue establishment.National Organ Transplant Act.Procurement of certain human organ

170、s and tissue for transplantation issubject to the restrictions of the National Organ Transplant Act(NOTA),which prohibits the transfer of certainhuman organs,including skin and related tissue for valuable consideration,but permits the reasonable paymentassociated with the removal,transportation,impl

171、antation,processing,preservation,quality control and storage ofhuman tissue and skin.We reimburse tissue banks for their expenses associated with the recovery,storage andtransportation of donated human tissue that they provide to us for processing.We include in our pricing structureamountspaidtotiss

172、uebankstoreimbursethemfortheirexpensesassociated withtherecoveryandtransportation ofthe tissue,in addition to certain costs associated with processing,preservation,quality control and storage of thetissue,marketing and medical education expenses,and costs associated with development of tissue proces

173、singtechnologies.NOTA payment allowances may be interpreted to limit the amount of costs and expenses that we mayrecover in our pricing for ourproducts,thereby reducing our future revenue and profitability.If wewereto be foundto have violated NOTAs prohibition on the sale or transfer of human tissue

174、 valuable consideration,we wouldpotentially be subject to criminal enforcement sanctions,which could materially and adversely affect our results ofoperations.Postmarket Requirements.After a device is cleared or approved for commercial distribution,numerousregulatory requirements apply.These include

175、the Quality System Regulation which covers the procedures anddocumentation of the design,testing,production,control,quality assurance,labeling,packaging,sterilization,storage and shipping of medical devices;the FDAs general prohibition against promoting products for unapprovedoroff-label uses;the Me

176、dical Device Reporting regulation,whichrequires that manufacturers reporttothe FDAiftheir device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likelycause or contribute to a death or serious injury if it were to recur;and the Reports of Corrections

177、and Removalsregulation,which require manufacturers to report recalls and field actions to the FDA if initiated to reduce a risk tohealth posed by the device or to remedy a violation of the FFDCA.We are also required to register with the FDA as a Medical Device manufacturer.As such,we are subject top

178、eriodic inspection by the FDA for compliance with the FDAs Quality System Regulations.These regulationsrequire that we manufacture our products and maintain our documents in a prescribed manner with respect todesign,manufacturing,testing and control activities.Further,we are required to comply with

179、various FDArequirements and other legal requirements for labeling and promotion.If the FDA believes that a company is not incompliance with applicable regulations,it may institute proceedings to detain or seize products,issue a warningletter,issue a recall order,impose operating restrictions,enjoin

180、future violations and assess civil penalties againstthat company,its officers or its employees and may recommend criminal prosecution to the Department of Justice.Medical device regulations also are in effect in many of the countries outside the United States in which we dobusiness.These laws range

181、from comprehensive medical device approval and Quality System requirements forsome or all of our medical device products to simpler requests for product data or certifications.The number andscope of these requirements are increasing.Under the European Union Medical Device Directive,medical devicesmu

182、st meet the Medical Device Directive standards and receive CE Mark Certification.CE Mark Certificationrequires a comprehensive Quality System program,comprehensive technical documentation,and data on theproduct,which a“Notified Body”in Europe reviews.The Medical Device Directive,ISO 9000 series and

183、ISO13485 are recognized international quality standards that are designed to ensure that we develop and manufacturequality medical devices.A recognized Notified Body(an organization designated by the national governments ofthe European Union member states to make independent judgments about whether

184、a product complies with theprotection requirements established by each CE marking directive)audits our facilities annually to verify ourcompliance with these standards.Asaresult ofanamendment toJapansPharmaceutical Affairs Lawthat wentintoeffect on April 1,2005,new regulations and requirements for o

185、btaining approval of medical devices,including newrequirements governingthe conduct ofclinical trials,the manufacturing ofproductsand the distribution ofproductsin Japan became law.Australia,China and other countries have issued new regulations on the approval and9registration process for Medical De

186、vices with which we must comply with in order to sell our products in thosecountries.Our products that contain human derived tissue,including those containing DBM,are not medical devices asdefined in the Medical Device Directive(93/42/EC).They are also not medicinal products as defined in Directive2

187、001/83/EC.Today,regulations,if applicable,are different from one EU member state to the next.Due to theabsence of a harmonized regulatory framework and the proposed regulation for advanced therapy medicinalproducts in the EU,the approval processforhuman-derived cell ortissue-based medical products m

188、aybe extensive,lengthy,expensive,and unpredictable.Certain countries,as well as the European Union,have issued regulations that govern products that containmaterials derived from animal sources.Regulatory authorities are particularly concerned with materials infectedwith the agent that causes bovine

189、 spongiform encephalopathy,otherwise known as BSE or mad cow disease.Theseregulations affect our dermal regeneration products,duraplasty products,biomaterial products for the spine,nerveand tendon repair products and certain other products,all of which contain material derived from bovine tissue.Alt

190、hough we take great care to provide that our products are safe and free of agents that can cause disease,productsthat contain materials derived from animals,including our products,may become subject to additional regulation,orevenbebanned incertain countries,because ofconcern overthe potential forpr

191、iontransmission.Significantnewregulation,or a ban of our products,could have a material adverse effect on our current business or our ability toexpand our business.See“Item 1A.Risk Factors Certain Of Our Products Contain Materials Derived FromAnimal Sources And May Become Subject To Additional Regul

192、ation.”We are subject to laws and regulations pertaining to healthcare fraud and abuse,including anti-kickback lawsand physician self-referral laws that regulate the means by which companies in the health care industry may markettheir products to hospitals and health care professionals and may compe

193、te by discounting the prices of theirproducts.Thedeliveryofourproductsissubjecttoregulation regardingreimbursement,andfederal healthcare lawsapply when a customer submits a claim for a product that is reimbursed under a federally funded healthcareprogram.These rules require that we exercise care in

194、structuring our sales and marketing practices and customerdiscount arrangements.See“Item 1A.Risk Factors Regulatory Oversight Of The Medical Device IndustryMight Affect The Manner In Which We May Sell Medical Devices.”Our international operations subject us to laws regarding sanctioned countries,ent

195、ities and persons,customs,import-export,laws regarding transactions in foreign countries and the U.S.Foreign Corrupt Practices Act.Amongother things,these laws restrict,and in some cases prohibit,United States companies from directly or indirectlysellinggoods,technologyorservicestopeopleorentities i

196、ncertain countries.Inaddition,theselawsrequire thatweexercise care in structuring our sales and marketing practices in foreign countries.Our research,development and manufacturing processes involve the controlled use of certain hazardousmaterials.We are subject to federal,state and local laws and re

197、gulations governing the use,manufacture,storage,handling and disposalofthese materials and certain waste products.Although webelieve that oursafety proceduresfor handling and disposing of these materials comply with the standards prescribed by the controlling laws andregulations,the risk ofaccidenta

198、l contamination or injury from these materials cannot be eliminated.In the eventofthis type of accident,we could be held liable for any damages that may result and any liability could exceed ourresources.Although we believe that we are in compliance in all material respects with applicable environme

199、ntallaws and regulations,we could incur significant costs to comply with environmental laws and regulations in thefuture,and our operations,business or assets could be materially adversely affected by current or futureenvironmental laws or regulations.In addition to the above regulations,we are and

200、may be subject to regulation under federal and state laws,including,but not limited to,requirements regarding occupational health and safety,laboratory practices and themaintenance of personal health information.As a public company,we are subject to the securities laws andregulations,including the S

201、arbanes-Oxley Act of 2002.We also are subject to other present,and could be subject topossible future,local,state,federal and foreign regulations.10Third-Party Reimbursement.Healthcare providers that purchase medical devices generally rely on third-party payers,including the Medicare and Medicaid pr

202、ograms and private payers,such as indemnity insurers,employer group health insurance programs and managed care plans,to reimburse all or part of the cost of theproducts.As a result,demand for our products is and will continue to be dependent in part on the coverage andreimbursement policies of these

203、 payers.The manner in which reimbursement is sought and obtained varies basedupon the type of payer involved and the setting in which the product is furnished and utilized.Reimbursement fromMedicare,Medicaid and other third-party payers may be subject to periodic adjustments as a result of legislati

204、ve,regulatory and policy changes as well as budgetary pressures.Possible reductions in coverage or reimbursement bythird-party payers as a result of these changes may affect our customers revenue and ability to purchase ourproducts.Any changes in the healthcare regulatory,payment or enforcement land

205、scape relative to our customershealthcare services has the potential to significantly affect our operations and revenue.PATENTS AND INTELLECTUAL PROPERTYWe seek patent protection for our key technology,products and product improvements,both in theUnited States and in selected foreign countries.When

206、determined appropriate,we have enforced and plan tocontinue to enforce and defend our patent rights.In general,however,we do not rely on our patent estate to provideus with any significant competitive advantages as it relates to our existing product lines.We rely upon trade secretsand continuing tec

207、hnological innovations to develop and maintain our competitive position.In an effort to protectour trade secrets,we have a policy of requiring our employees,consultants and advisors to execute proprietaryinformation and invention assignment agreements uponcommencement ofemployment orconsulting relat

208、ionshipswith us.These agreements alsoprovidethat all confidential information developed ormade knownto the individualduring the course of their relationship with us must be kept confidential,except in specified circumstances.AccuDrainTM,Accell,Bold,Camino,CRW,CUSA,CUSA Excel,DenLite,Dissectron,DuraG

209、en,DuraGen Plus,Hallu-Fix,HINTEGRATM,ICOSTM,Integra,Integra Dermal Regeneration Template,IntegraLifeSciences Corporation,Integra MozaikTM,Integra NeuroSciences,Jarit,LICOX,Luxtec,Miltex,MobiusTM,NeuraGen,NeuraWrapTM,Newdeal,OmniSight,Radionics,Selector,Subtalar MBA,TenoGlide,Uni-Clip and XKnife are

210、some of the material trademarks of Integra LifeSciences Corporationand its subsidiaries.MAYFIELD is a registered trademark of SM USA,Inc.,and is used by Integra under license.EMPLOYEESAtDecember 31,2007,we had approximately 2,500employees engaged in production and production support(including wareho

211、use,engineering and facilities personnel),quality assurance/quality control,research anddevelopment,regulatory and clinical affairs,sales,marketing,administration and finance.Except for certainemployees at our facilities in France,none of our employees is subject to a collective bargaining agreement

212、.FINANCIAL INFORMATION ABOUT GEOGRAPHIC AREASFinancial information about our geographical areas is set forth in our financial statements under“Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations InternationalRevenues and Operations”and Note 15,Segment and Geog

213、raphic Information,to our Consolidated FinancialStatements.SOURCES OF RAW MATERIALSIn general,rawmaterials essential to ourbusinessesare readily available from multiple sources.Forreasons ofquality assurance,sole source availability,orcost effectiveness,certain components and rawmaterials are availa

214、bleonly from a sole supplier.Our policy is to maintain sufficient inventory of components so that our production willnot be significantly disrupted even if a particular component or material is not available for a period of time.Certain ofourproducts,including ourdermal regeneration products,durapla

215、styproducts,biomaterial productsfor the spine,nerve and tendon repair products and certain other products,contain material derived from bovinetissue.Wetakegreatcaretoprovidethatourproductsaresafeandfreeofagentsthatcancausedisease.Inparticular,the collagen used in the products that Integra manufactur

216、es isderivedonly from the deep flexortendon ofcattle less11than 24monthsoldfromNewZealand,a countrythat hasneverhad acase ofbovinespongiformencephalopathy,orfrom the United States.We are also qualifying sources of collagen from other countries that are considered BSE-free.The World Health Organizati

217、on classifies different types of cattle tissue for relative risk of BSE transmission.Deep flexor tendon is in the lowest-risk categories for BSE transmission(the same category as milk,for example),and are therefore considered to have a negligible risk of containing the agent that causes BSE.SEASONAL

218、ITYRevenues during our second and fourth quarters tend to be stronger than the first and third quarters.This isbecause many hospitals increase their purchases of our products during the second and fourth quarters,whichcoincides with the end of their budget cycles.AVAILABLE INFORMATIONWe are subject

219、to the informational requirements of the Securities Exchange Act of 1934,as amended,(the“Exchange Act”).In accordance with the Exchange Act,we file annual,quarterly and special reports,proxystatements and other information with the Securities and Exchange Commission.You may view our financialinforma

220、tion,including the information contained in this report,and other reports we file with the Securities andExchange Commission,onthe Internet,without charge assoonasreasonably practicable after we file them with theSecurities and Exchange Commission,in the“SEC Filings”page of the Investor Relations se

221、ction of our website atwww.Integra-LS.com.You may also obtain a copy of any of these reports,without charge,from our investorrelations department,311 Enterprise Drive,Plainsboro,NJ 08536.Alternatively,you may view or obtain reportsfiled with the Securities and Exchange Commission at the SEC Public R

222、eference Room at 100 F Street,N.E.inWashington,D.C.20549,or at the Securities and Exchange Commissions Internet site at www.sec.gov.Please callthe Securities and Exchange Commission at 1-800-SEC-0330 for further information on the operation of the publicreference facilities.SPECIAL NOTE REGARDING FO

223、RWARD-LOOKING STATEMENTSWe have made statements in this report,including statements under“Business”and“Managements Dis-cussion and Analysis of Financial Condition and Results of Operations”that constitute forward-looking statementswithinthemeaning ofSection27AoftheSecuritiesActof1933,asamended,andSe

224、ction21EoftheExchange Act.These forward-looking statements are subject to a number of risks,uncertainties and assumptions about usincluding,among other things:general economic and business conditions,both nationally and in our international markets;our expectations and estimates concerning future fi

225、nancial performance,financing plans and the impact ofcompetition;anticipated trends in our business;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;physicia

226、nswillingnesstoadoptourrecently launchedandplannedproducts,third-party payorswillingnessto provide reimbursement for these products and our ability to secure regulatory approval for products indevelopment;initiatives launched by our competitors;our ability to protect our intellectual property,includ

227、ing trade secrets;our ability to complete acquisitions,integrate operations post-acquisition and maintain relationships withcustomers of acquired entities;work stoppages at our facilities;and12 other risk factors described in the section entitled“Risk Factors”in this report.You can identify these fo

228、rward-looking statements by forward-looking words such as“believe,”“may,”“could,”“might,”“will,”“estimate,”“continue,”“anticipate,”“intend,”“seek,”“plan,”“expect,”“should,”“would”and similar expressions in this report.We undertake no obligation to publicly update or revise any forward-lookingstateme

229、nts,whether as a result of new information,future events or otherwise.In light of these risks anduncertainties,the forward-looking events and circumstances discussed in this report may not occur and actualresults could differ materially from those anticipated or implied in the forward-looking statem

230、ents.ITEM 1A.RISK FACTORSRisks Related to Our BusinessOur operating results may fluctuate.Our operating results,including components of operating results such as gross margin and cost of productsales,mayfluctuate fromtime totime,and suchfluctuations could affect ourstockprice.Ouroperating results ha

231、vefluctuated in the past and can be expected to fluctuate from time to time in the future.Some of the factors that maycause these fluctuations include:the impact of acquisitions;the impact of our restructuring activities;the timing of significant customer orders,which tend to increase in the second

232、and fourth quarters tocoincide with the end of budget cycles for many hospitals;market acceptance of our existing products,as well as products in development;the timing of regulatory approvals;changes in the rates of exchange between the U.S.dollar and other currencies of foreign countries in whichw

233、e do business,such as the euro and the British pound;expenses incurred and business lost in connection with product field corrections or recalls;increases in the cost or decreases in the supply of raw materials,including energy and steel;our ability to manufacture our products efficiently;the timing

234、 of our research and development expenditures;and reimbursement for our products by third-party payors such as Medicare,Medicaid and private healthinsurers.The industry and market segments in which we operate are highly competitive,and we may be unable tocompete effectively with other companies.In g

235、eneral,there is intense competition among medical device companies.We compete with establishedmedical technology companies in many of our product areas.Competition also comes from early-stage companiesthat have alternative technological solutions for our primary clinical targets,as well as universit

236、ies,researchinstitutions and other non-profit entities.Many of our competitors have access to greater financial,technical,research and development,marketing,manufacturing,sales,distribution services and other resources than we do.Our competitors may be more effective at implementing their technologi

237、es to develop commercial products.Ourcompetitors may be able to gain market share by offering lower-cost products or by offering products that enjoybetter reimbursement methodologies from third-party payors,such as Medicare,Medicaid and private healthcareinsurance.Our competitive position will depen

238、d on our ability to achieve market acceptance for our products,developnew products,implement production and marketing plans,secure regulatory approval for products under devel-opment,obtain and maintain reimbursement coverage under Medicare,Medicaid and private healthcare insurance13and obtain paten

239、t protection.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 or their achievement of superiorreimbursement from Medicare,Medicaid and private healthcare insurance could render our present or fut

240、ureproducts obsolete or uneconomical.Our future success will depend upon our ability to compete effectively againstcurrent technology as well as to respond effectively to technological advances.Competitive pressures couldadverselyaffect ourprofitability.Forexample,twoofourlargestcompetitors introduc

241、ed anonlayduralgraftmatrixduring 2004,a large company introduced a duraplasty product in 2006 and others may introduce similar products.The introduction and market acceptance of such products could reduce the sales,growth in sales and profitability ofour duraplasty products.Competitors have also bee

242、n developing products to compete with our extremity recon-struction implants,neuro critical care monitors and ultrasonic tissue ablation devices,among others.Our largest competitors in the neurosurgery markets are the Medtronic Neurosurgery division of Medtronic,Inc.,the Codman division of Johnson&J

243、ohnson,the Stryker Craniomaxillofacial division of Stryker Corporationand the Aesculap division of B.Braun Medical Inc.In addition,many of our neurosurgery product lines competewith smaller specialized companies or larger companies that do not otherwise focus on neurosurgery.Ourcompetitors in extrem

244、ity reconstruction include the DePuy division of Johnson&Johnson,Synthes,Inc.andStryker Corporation,as well as other major orthopedic companies that carry a full line of reconstructive products.Wealsocompetewith WrightMedical Group,Inc.,Small BoneInnovations,Inc.,Tornier,Inc.and other companiesin th

245、e orthopedic category.In surgical instruments,we compete with V.Mueller,a division of Cardinal Healthcare,as well as Aesculap.In addition,we compete with Codman and many smaller instrument companies in the reusableand disposable specialty instruments markets.Our private-label products face diverse a

246、nd broad competition,depending on the market addressed by the product.The competitors in our newly launched orthobiologics businessinclude such well established companies as Medtronic,Synthes and Johnson&Johnson and also include severalsmaller,biologic-focused companies,such as Osteotech and Orthovi

247、ta.Finally,in certain cases our productscompete primarily against medical practices that treat a condition without using a device or any particular product,such as the medical practices that use autograft tissue instead of our dermal regeneration products,duraplastyproducts and nerve repair products

248、.Our current strategy involves growth through acquisitions,which requires us to incur substantial costs andpotential liabilities for which we may never realize the anticipated benefits.Inaddition to internally generated growth,ourcurrent strategy involvesgrowththroughacquisitions.Since thebeginning

249、of 2004,we have acquired 15 businesses or product lines at a total cost of approximately$429 million.We may be unable to continue to implement our growth strategy,and our strategy ultimately may beunsuccessful.Asignificant portion ofourgrowthinrevenues hasresulted from,and isexpected tocontinue tore

250、sultfrom,the acquisition of businesses complementary to our own.We engage in evaluations of potential acquisitionsand are in various stages of discussion regarding possible acquisitions,certain of which,if consummated,could besignificant to us.Any new acquisition can result in material transaction e

251、xpenses,increased interest and amor-tization expense,increased depreciation expense and increased operating expense,any of which could have amaterial adverseeffectonouroperatingresults.Certain businessesthatweacquire maynothaveadequatefinancial,disclosure,regulatory or quality controls at the time w

252、e acquire them.As we grow by acquisition,we must manageand integrate the new businesses to bring them into our systems for financial,disclosure,legal,regulatory andquality control,realize economies ofscale,and control costs.Inaddition,acquisitions involve other risks,includingdiversion of management

253、 resources otherwise available for ongoing development of our business and risksassociated with entering markets in which our marketing and sales force has limited experience or whereexperienced distribution alliances are not available.Our future profitability will depend in part upon our abilityto

254、develop further our resources to adapt to these new products or business areas and to identify and enter into ormaintain satisfactory distribution networks.We may not be able to identify suitable acquisition candidates in thefuture,obtain acceptable financing or consummate any future acquisitions.If

255、 we cannot integrate acquiredoperations,manage the cost of providing our products or price our products appropriately,our profitability couldsuffer.In addition,as a result of our acquisitions of other healthcare businesses,we may be subject to the risk ofunanticipated business uncertainties,regulato

256、ry matters or legal liabilities relating to those acquired businesses forwhichthesellers ofthe acquired businessesmaynotindemnify us,forwhichwemaynotbeabletoobtain insurance(or adequate insurance),or for which the indemnification may not be sufficient to cover the ultimate liabilities.14Our future f

257、inancial results could be adversely affected by impairments or other charges.Sincewe have grown through acquisitions,we had$207.4 million of goodwill and$31.6 million of indefinite-lived intangible assets as of December 31,2007.Under Statement of Financial Accounting Standards(“SFAS”)No.142,“Goodwil

258、l and Other Intangible Assets,”we are required to test both goodwill and indefinite-livedintangible assets for impairment on an annual basis based upon a fair value approach,rather than amortizing themover time.We are also required to test goodwill and indefinite-lived intangible assets for impairme

259、nt betweenannual tests if an event occurs or circumstances change that would more likely than not reduce our enterprise fairvalue below its book value.See“Managements Discussion and Analysis of Financial Condition and Results ofOperations Critical Accounting Policies and the Use of Estimates Goodwil

260、l and other Intangible Assets”ofthis report.SFAS No.144,“Accounting for the Impairment or Disposal of Long-Lived Assets”requires that we assess theimpairment of our long-lived assets,including definite-lived intangible assets,whenever events or changes incircumstances indicate thatthecarryingvaluema

261、ynotberecoverableasmeasuredbythesumoftheexpectedfutureundiscounted cash flows.As of December 31,2007,we had$164.2 million of other intangible assets.The value of biotechnology and medical device businesses is often volatile,and the assumptions underlyingour estimates made in connection with our asse

262、ssments under SFAS No.142 or 144 may change as a result of thatvolatility or other factors outside our control and may result in impairment charges.The amount of any suchimpairment chargesunder SFASNo.142or144couldbesignificant andcouldhaveamaterial adverseeffect onourreported financial results for

263、the period in which the charge is taken and could have an adverse effect on the marketprice of our securities,including the notes and the common stock into which they may be converted.To market our products under development we will first need to obtain regulatory approval.Further,if we failto compl

264、y with the extensive governmental regulations that affect our business,we could be subject topenalties and could be precluded from marketing our products.Asa manufacturer and marketer of medical devices,we are subject to extensive regulation by the FDA and theCenter for Medicare Services(CMS)of the

265、U.S.Department of Health and Human Services and other federalgovernmental agencies and,in some jurisdictions,by state and foreign governmental authorities.These regulationsgovern the introduction of new medical devices,the observance of certain standards with respect to the design,manufacture,testin

266、g,labeling,promotion and sales of the devices,the maintenance of certain records,the ability totrack devices,the reporting of potential product defects,the import and export of devices and other matters.We arefacing an increasing amount of scrutiny and compliance costs as more states are implementin

267、g regulationsgoverning medical devices,pharmaceuticals and/or biologics whichaffect manyofourproducts.Asa result,weareimplementing additional procedures,controls and tracking and reporting processes,as well as paying additionalpermit and license fees,where required.Our products under development are

268、 subject to FDA approval or clearance prior to marketing for commercialuse.The processofobtaining necessary FDAapprovals orclearances can take years and is expensive and uncertain.Our inability to obtain required regulatory approval on a timely or acceptable basis could harm our business.Further,app

269、roval or clearance may place substantial restrictions on the indications for which the product may bemarketed or to whom it may be marketed,warnings that may be required to accompany the product or additionalrestrictions placed onthesaleand/oruseoftheproduct.Furtherstudies,including clinical trialsa

270、ndFDAapprovals,may be required to gain approval for the use of a product for clinical indications other than those for which theproduct was initially approvedor cleared or for significant changes to the product.These studies could take years tocomplete and could be expensive,and there is no guarante

271、e that the results will convince the FDA to approve orclear the additional indication.Any negative outcome in our clinical trials could adversely impact our ability tocompete against alternative products or technologies,which could impact our sales.In addition,for products withan approved Pre-Market

272、 Approval(PMA),the FDA requires annual reports and may require post-approval15surveillance programs and/or studies to monitor the products safety and effectiveness.Results of post-approvalprograms may limit or expand the further marketing of the product.Another risk ofapplication to the FDArelates t

273、o the regulatory classification of new products or proposed newuses for existing products.In the filing of each application,we make a judgment about the appropriate form andcontent of the application.If the FDA disagrees with our judgment in any particular case and,for example,requiresusto file a PM

274、Aapplication rather than allowingusto market for approved useswhilewe seek broader approvals orrequires extensive additional clinical data,the time and expense required to obtain the required approval might besignificantly increased or approval might not be granted.Approved products are subject to c

275、ontinuing FDA requirements relating to quality control and qualityassurance,maintenance of records,reporting of adverse events and product recalls,documentation,and labelingandpromotionofmedical devices.Forexample,ourorthobiologicsproducts,acquiredinconnection withtheIsoTistransaction,are subject to

276、 FDA and certain state regulations regarding human cells,tissues,and cellular or tissue-based products,which include requirements for establishment registration and listing,donor eligibility,currentgood tissue practices,labeling,adverse-event reporting,and inspection and enforcement.Some states have

277、 theirowntissuebankingregulation.Wearelicensed orhavepermitsasatissuebankinCalifornia,Florida,NewYorkandMaryland.In addition,tissue banks may undergo voluntary accreditation by the American Association of TissueBanks,ortheAATB.TheAATBhasissuedoperatingstandardsfortissuebanking.Compliancewiththesesta

278、ndardsis a requirement in order to become a licensed tissue bank.The FDA and foreign regulatory authorities require that our products be manufactured according to rigorousstandards.These and future regulatory requirements couldsignificantly increase ourproduction orpurchasing costsand could even pre

279、vent us from making or obtaining our products in amounts sufficient to meet market demand.Ifwe ora third-party manufacturer change ourapproved manufacturing process,the FDAmay require a newapprovalbefore that process may be used.Failure to develop our manufacturing capability could mean that,even if

280、 we wereto develop promising new products,we might not be able to produce them profitably,as a result of delays andadditional capital investment costs.Manufacturing facilities,both international and domestic,are also subject toinspections by or under the authority of the FDA.In addition,failure to c

281、omply with applicable regulatoryrequirements could subject us to enforcement action,including product seizures,recalls,withdrawal of clearancesor approvals,restrictions on or injunctions against marketing our product or products based on our technology,cessation of operations and civil and criminal

282、penalties.Weare alsosubjecttotheregulatoryrequirements ofcountries outsidethe UnitedStateswherewedobusiness.For example,under the European Union Medical Device Directive,all medical devices must meet the MedicalDevice Directive standards and receive CE Mark Certification.CE Mark Certification requir

283、es a comprehensiveQuality System program,comprehensive technical documentation and data on the product,which a“NotifiedBody”in Europe reviews.In addition,we must be certified to the ISO 13485:2003 Quality System standards andmaintain this certification in order to market our products in the European

284、 Union,Canada and most other countriesoutside the United States.As a result of an amendment to Japans Pharmaceutical Affairs Law that went into effecton April 1,2005,new regulations and requirements exist for obtaining approval of medical devices,including newrequirements governingthe conduct ofclin

285、ical trials,the manufacturing ofproductsand the distribution ofproductsin Japan.Significant resources may be needed to comply with the extensive auditing of and requests fordocumentation relating to all manufacturing facilities of our company and our vendors by the PharmaceuticalMedical Device Agenc

286、y and the Ministry of Health,Labor and Welfare in Japan to comply with the amendment tothe Pharmaceutical Affairs Law.These new regulations may affect our ability to obtain approvals of new productsfor sale in Japan.Our products that contain human derived tissue,including those containing DBM,are no

287、t medical devices asdefined in the Medical Device Directive(93/42/EC).They are also not medicinal products as defined in Directive2001/83/EC.Today,regulations,if applicable,are different from one EU member state to the next.Due to theabsence of a harmonized regulatory framework and the proposed regu

288、lation for advanced therapy medicinalproducts in the EU,as well as for other countries,the approval process for human derived cell or tissue basedmedical products may be extensive,lengthy,expensive,and unpredictable.16Certain of our products contain materials derived from animal sources and may beco

289、me subject to additionalregulation.Certain ofourproducts,including ourdermal regeneration products,duraplastyproducts,biomaterial productsfor the spine,nerve and tendon repair products and certain other products,contain material derived from bovinetissue.Products that contain materials derived from

290、animal sources,including food,pharmaceuticals and medicaldevices,are increasingly subject to scrutiny in the media and by regulatory authorities.Regulatory authorities areconcerned about the potential for the transmission of disease from animals to humans via those materials.Thispublic scrutiny has

291、been particularly acute in Japan and Western Europe with respect to products derived fromanimal sources,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,cause a variantof the h

292、uman Creutzfeldt-Jakob Disease,an ultimately fatal disease with no known cure.Cases of BSE in cattlediscovered in Canada and the United States have increased awareness of the issue in North America.We take great care to provide that our products are safe and free of agents that can cause disease.In

293、particular,we are qualifying sources of collagen from countries outside the United States that are considered BSE-free.TheWorld Health Organization classifies different types of cattle tissue for relative risk of BSE transmission.Deepflexortendonisinthelowest-riskcategoriesforBSEtransmission(thesame

294、 categoryasmilk,forexample),andaretherefore considered to have a negligible risk of containing the agent that causes BSE(an improperly folded proteinknown as a prion).Nevertheless,products that contain materials derived from animals,including our products,maybecome subject to additional regulation,o

295、r even be banned in certain countries,because of concern over thepotential for prion transmission.Significant new regulation,or a ban of our products,could have a material adverseeffect on our current business or our ability to expand our business.Certain countries,such as China,Taiwan and Argentina

296、,have issued regulations that require our collagenproducts be processed from bovine tendon sourced from countries where no cases of BSE have occurred and theEuropean Union has requested that our dural replacement products be sourced from bovine tendon sourced from acountry where no cases of BSE have

297、 occurred.In addition,Japan has issued new regulations regarding medicaldevices that contain tissue of animal origin.Among other regulations,Japan requires that the tendon used in themanufacture of medical devices sold in Japan originate in a country that has never had a case of BSE.Currently,wepurc

298、hase our tendon from the United States and New Zealand.We received approval in Japan for the use ofNew Zealand-sourced tendon in the manufacturing of our products sold in Japan.If we cannot continue to use orqualify a source of tendon from New Zealand or another country that has never had a case of

299、BSE,we will not bepermitted to sell our collagen hemostatic agents and products for oral surgery in Japan.We do not currently sell ourdural or dermal repair products in Japan.Certain of our products are derived from human tissue and are subject to additional regulations andrequirements.Through the a

300、cquisition ofIsoTis,we manufacture medical devices derivedfrom human tissue(demineralizedbone tissue).The FDA has specific regulations governing human cells,tissues and cellular and tissue-basedproducts,or HCT/Ps.An HCT/P is a product containing or consisting of human cells or tissue intended fortra

301、nsplantation into a human patient.Examples include bone,ligament,skin and cornea.Some HCT/Ps also meet the definition of a biological product,medical device or drug regulated under theFederal Food,Drug and Cosmetic Act,or the FFDC Act.These biologic,device or drug HCT/Ps must comply bothwith the req

302、uirements exclusively applicable to 361 HCT/Ps and,in addition,with requirements applicable tobiologics,devices or drugs,including premarket clearance or approval.Section 361 of the Public Health Service Act,or PHSA,authorizes the FDA to issue regulations to prevent theintroduction,transmission or s

303、pread of communicable disease.HCT/Ps regulated as“361”HCT/Ps are subject torequirements relating to:registering facilities and listing products with FDA;screening and testing for tissue donoreligibility;Good Tissue Practice,or GTP,when processing,storing,labeling,and distribution HCT/Ps,includingreq

304、uired labeling information;stringent record keeping;and adverse event reporting.17Some states have their own tissue banking regulation.We are licensed or have permits as a tissue bank inCalifornia,Florida,New York and Maryland.In addition,tissue banks may undergo voluntary accreditation by theAmeric

305、an Association of Tissue Banks,or the AATB.The AATB has issued operating standards for tissue banking.Compliance with these standards is a requirement in order to become a licensed tissue bank.Lack of market acceptance for our products or market preference for technologies that compete with ourprodu

306、cts could reduce our revenues and profitability.We cannot be certain that our current products or any other products that we may develop or market willachieve or maintain market acceptance.Certain of the medical indications that can be treated by our devices canalso be treated by other medical devic

307、es or by medical practices that do not include a device.The medicalcommunity widely accepts many alternative treatments,and certain of these other treatments have a long history ofuse.Forexample,theuseofautograft tissueisawell-established meansforrepairingthedermis,anditcompetes foracceptance in the

308、 market with the Integra Dermal Regeneration Template.Wecannotbecertainthatourdevicesandprocedureswillbeabletoreplace thoseestablishedtreatmentsorthateither physicians or the medical community in general will accept and utilize our devices or any other medicalproducts that we may develop.For example

309、,market acceptance of our bone graft substitutes will depend on ourability to demonstrate that our existing bone graft substitutes and technologies are an attractive alternative toexisting treatment options.Additionally,if there are negativeevents in the industry,whether real or perceived,therecould

310、 be a negative impact onthe industryasawhole.Forexample,we believethat somein the medical communityhave lingering concerns over the risk of disease transmission through the use of natural bone graft substitutes.In addition,our future success depends,in part,on our ability to develop additional produ

311、cts.Even if wedetermine that a product candidate has medical benefits,the cost of commercializing that product candidate couldbe too high to justify development.Competitors could develop products that are more effective,achieve morefavorable reimbursement status from third-party payors,including Med

312、icare,Medicaid and third-party healthinsurance,cost less or are ready for commercial introduction before our products.If we are unable to developadditional commercially viable products,our future prospects could be adversely affected.Market acceptance of our products depends on many factors,includin

313、g our ability to convince prospectivecollaborators and customers that our technology is an attractive alternative to other technologies,to manufactureproducts in sufficient quantities and at acceptable costs,and to supply and service sufficient quantities of ourproducts directly or through our distr

314、ibution alliances.In addition,unfavorable reimbursement methodologies,oradverse determinations of third-party payors,including Medicare,Medicaid and third-party health insurance,against our products or third-party determinations that favor a competitors product over ours,could harmacceptance or cont

315、inued use of our products.The industry is subject to rapid and continuous change arisingfrom,among other things,consolidation,technological improvements and the pressure on third-party payors andproviderstoreducehealthcare costs.Oneormoreofthesefactorsmayvaryunpredictably,andsuchvariations couldhave

316、 a material adverse effect on our competitive position.We may not be able to adjust our contemplated plan ofdevelopment to meet changing market demands.Our intellectual property rights may not provide meaningful commercial protection for our products,potentially enabling third parties to use our tec

317、hnology or very similar technology and could reduce ourability to compete in the market.Tocompete effectively,wedepend,inpart,onourabilitytomaintain theproprietary natureofourtechnologiesand manufacturing processes,which includes the ability to obtain,protect and enforce patents on our technologyand

318、 to protect our trade secrets.We own or have licensed patents that cover aspects of some of our product lines.However,our patents may not provide us with any significant competitive advantage.Others may challenge ourpatents and,as a result,our patents could be narrowed,invalidated or rendered unenfo

319、rceable.Competitors maydevelop products similar to oursthat our patents do not cover.In addition,our current and future patent applicationsmay 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.Paten

320、t and Trademark Office,and the approval or rejection of patentapplications usually takes approximately three years.18Our competitive position depends,in part,upon unpatented trade secrets which we may be unable to protect.Our competitive position also depends upon unpatented trade secrets,which are

321、difficult to protect.We cannotassure you that others will not independently develop substantially equivalent proprietary information andtechniques or otherwise gain access to our trade secrets,that our trade secrets will not be disclosed or that wecan effectively protect our rights to unpatented tra

322、de secrets.In an effort to protect our trade secrets,we require our employees,consultants and advisors to executeproprietary information and invention assignment agreements upon commencement of employment or consultingrelationships with us.These agreements provide that,except in specified circumstan

323、ces,all confidential infor-mation developed or made known to the individual during the course of their relationship with us must be keptconfidential.Wecannotassureyou,however,that theseagreements willprovidemeaningful protection forourtradesecrets or other proprietary information in the event of the

324、 unauthorized use or disclosure of confidentialinformation.Oursuccesswilldependpartly onourability tooperatewithoutinfringingormisappropriatingtheproprietaryrights of others.Wemaybesuedforinfringingtheintellectual propertyrightsofothers.Inaddition,wemayfinditnecessary,ifthreatened,to initiate a laws

325、uit seeking a declaration from a court that we do not infringe the proprietary rights ofothers or that their rights are invalid or unenforceable.If we do not prevail in any litigation,in addition to anydamages we might have to pay,we would be required to stop the infringing activity or obtain a lice

326、nse for theproprietary rightsinvolved.Anyrequired license maybeunavailable tousonacceptable terms,oratall.Inaddition,some licenses may be nonexclusive and allow our competitors to access the same technology we license.Currently we are in the process of renegotiating an agreement with our licensor co

327、vering the licensing ofcertain technology related to bone demineralization.There is no assurance that we that wewill be able to renew theagreement,which terminates in August 2008.If we fail to obtain a required license orare unable to design ourproduct soasnot to infringe on the proprietaryrights of

328、 others,we may be unable to sell some of our products,and this potential inability could have a materialadverse effect on our revenues and profitability.We may be involved in lawsuits relating to our intellectual property rights and promotional practices,whichmay be expensive.Toprotect orenforce our

329、intellectual property rights,we may haveto initiate ordefend legal proceedings,suchas infringement suits or interference proceedings,against or by third parties.For example,Codman&Shurtleff,Inc.,a division of Johnson&Johnson,commenced an action in May 2006 seeking declaratory relief that itsDURAFORM

330、 product does not infringe our patent covering our duraplasty products and that our patent is invalidand unenforceable.In addition,we may have to institute proceedings regarding our competitors promotionalpractices ordefendproceedingsregardingourpromotional practices.Litigation iscostly,and,evenifwe

331、prevail,thecost of that litigation could affect our profitability.In addition,litigation is time-consuming and could divertmanagement attention and resources away from our business.In addition,in response to our claims against otherparties,those parties could assert counterclaims against us.It may b

332、e difficult to replace some of our suppliers.Outside vendors,some of whom are sole-source suppliers,provide key components and raw materials used inthe manufacture of our products.Although we believe that alternative sources for many of these components andraw materials are available,any supply inte

333、rruption in a limited or sole-source component or raw material couldharm our ability to manufacture our products until a new or alternative source of supply is identified and qualified.In addition,an uncorrected defect or suppliers variation in a component or raw material,either unknown to us orincompatible with our manufacturing process,could harm our ability to manufacture products.We may not be