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1、1999 Annual Report toStockholdersPresidents MessageTo Our Stockholders:This was a year of great strategic change for Integra.In 1999,we initiated a repositioning of our business to focus selectively onattractive niche markets.Implementation of this strategy included the purchase of the NeuroCare Gro
2、up of companies in March 1999 andthe execution of an agreement with Johnson&Johnson Medical,Division of Ethicon,Inc.,that provides them with exclusive marketingand distribution rights to INTEGRAs Artificial Skin worldwide,excluding Japan.As a result of these transactions and two additionalacquisitio
3、ns in early 2000,we formed our Integra NeuroSciences segment and reorganized the remainder of our products into our IntegraLifeSciences segment.Our efforts have had their rewards.In 1999,we sold over 1,000 different products to almost 2000 hospitals and other customers inmore than 60 countries.Total
4、 revenues increased$25.0 million,or 143%,from$17.5 million in 1998 to$42.5 million in 1999.The increasewas primarily a result of the NeuroCare acquisition.A majority of the products in the Integra NeuroSciences segment,which accounted for 54%of our total revenues in 1999,wereacquired in the NeuroCar
5、e acquisition.Integra NeuroSciences is a leading provider of implants,instruments and monitors used inneurosurgery,neurotrauma and related critical care.Integra NeuroSciences sells its products in the United States primarily through a directsales organization,and through a network of specialized dis
6、tributors outside the United States.The Integra LifeSciences segment,which accounted for 46%of our total revenues in 1999,now operates as a provider of innovativeproducts and development activities through strategic alliances with marketing partners and distributors.The Johnson&Johnsonagreement allo
7、wed Integra LifeSciences to focus further on strategic collaborative initiatives.Under the agreement,we will continue tomanufacture INTEGRAs Artificial Skin and will collaborate to conduct research and development and clinical research aimed atexpanding indications and developing future products in
8、the field of skin repair and regeneration.Our research and development activities are also beginning to bear fruit.Last year saw launches of two internally developed products,the DuraGenu Dural Graft Matrix for repair of the dura mater during surgery of the cranium and spine,and the Biomend ExtendAb
9、sorbable Collagen Membrane,for the guided repair of tissue following periodontal surgery.The DuraGenu graft promises to be one ofIntegra NeuroSciencess most rapidly growing products during 2000.Biomend Extend complements our existing portfolio of collagendental products sold through Sulzer Medica Lt
10、d.In connection with Integras patent infringement lawsuit brought against Merck KGaA and other parties,the Company was awarded$15 million in damages by the jury,which found that Merck KGaA had willfully induced infringement of Integras patents.We expect anappeal of the various decisions of the court
11、 and a request for a new trial,a reduction in damages,or other judgment not withstanding theverdict.While Integra LifeSciences always prefers to structure strategic alliances or to partner its technology rather than litigate,thisdecision validates the strategic significance of our intellectual prope
12、rty.We expect this decision will lead the way to many moreconstructive interactions with strategic collaborative partners.Soros Private Equity Partners LLC became an important partner for Integra in 1999.Through their acquisition of Series B andSeries C Convertible Preferred Stock,various Soros inve
13、stment affiliates have invested over$15 million in the company to date.This newcapital helped us to finance the acquisition program we began last year.Neal Moszkowski,a Soros partner(and a former colleague of mineat Goldman,Sachs&Co.),joined our Board of Directors in connection with those transactio
14、ns.Neals contribution has already beensignificant.As we move into the year 2000,we continue our focus on becoming the market leader in neurosurgery.Early this year,we acquiredClinical Neuro Systems for$6.8 million.Clinical Neuro Systems is a manufacturer of drainage systems and cranial access kits f
15、or theneurosurgery market.In April 2000 we acquired the Selectors Ultrasonic Aspirator,Rugglesu Surgical Instrumentation and SpemblyMedical cryosurgery product lines for a price of$12.0 million.These acquisitions allowed us to increase the size of Integra NeuroSciencesssales and field clinical organ
16、ization to approximately 45 specialists.Finally,Edmund Zalinski,a Director of the company since its inception in 1989,has chosen to step down from the Board of Directors.Eds guidance over the last eleven years has been instrumental in the strategic development of the Company,and we thank him for his
17、 yearsof service.I expect that in the year 2000,Integra will continue the transformation that it began last year.Acceleration of our revenue growth andachieving profitability remain a clear objective for all of our management and associates.I appreciate your ongoing support.Sincerely,Stuart M.EssigP
18、resident and Chief Executive OfficerSECURITIES AND EXCHANGE COMMISSIONWASHINGTON,DC 20549FORM 10-KANNUAL REPORT PURSUANT TO SECTION 13 OFTHE SECURITIES EXCHANGE ACT OF 1934For the fiscal year endedCommission File No.0-26224December 31,1999INTEGRA LIFESCIENCES HOLDINGSCORPORATION(Exact name of regist
19、rant as specified in its charter)Delaware51-0317849(State or other jurisdiction of(I.R.S.employerincorporation or organization)identification no.)105 Morgan Lane08536Plainsboro,New Jersey(Zip Code)(Address of principal executive offices)Registrants telephone number,including area code:(609)275-0500S
20、ecurities registered pursuant to Section 12(b)of the Act:NoneSecurities registered pursuant to Section 12(g)of the Act:Common Stock,par value$.01 per share(Title of class)Indicate by check mark whether the registrant:(1)has filed all reports required to be filed bySection 13 or 15(d)of the Securitie
21、s Exchange Act of 1934 during the preceding 12 months(or forsuch shorter period that the registrant was required to file such reports),and(2)has been subject tosuch filing requirements for the past 90 days.Yes(No 9Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regu
22、lation S-K isnot contained herein,and will not be contained,to the best of registrants knowledge,in definitiveproxy or information statements incorporated by reference in Part III of this Form 10-K or anyamendment to this Form 10-K.9The aggregate market value of the registrants Common Stock held by
23、non-affiliates of theregistrant as of March 24,2000 was approximately$134 million.(Reference is made to page 26 hereinfor a statement of the assumptions upon which this calculation is based.)The number of shares of the registrants Common Stock outstanding as of March 24,2000 was16,312,345.DOCUMENTS
24、INCORPORATED BY REFERENCECertain portions of the registrants definitive proxy statement relating to its scheduled May 16,2000 Annual Meeting of Stockholders are incorporated by reference in Part III of this report.PART IItem 1.BusinessThe terms we,our,us and Integra refer to Integra LifeSciences Hol
25、dings Corporationand its subsidiaries unless the context suggests otherwise.Integra develops,manufactures and markets medical devices,implants and biomaterials.Ouroperations consist of(1)Integra NeuroSciences,which is a leading provider of implants,instruments,and monitors used in neurosurgery,neuro
26、trauma,and related critical care and(2)Integra LifeSciences,which develops and manufactures a variety of medical products and devices,including products basedon our proprietary tissue regeneration technology which are used to treat soft tissue and orthopedicconditions.Integra NeuroSciences sells pri
27、marily through a direct sales organization,and IntegraLifeSciences sells primarily through strategic alliances and distributors.Integra was founded in 1989 and over the next decade built a product portfolio based onresorbable collagen and a product and development platform based on technologies dire
28、cted towardtissue regeneration.During 1999,we expanded into the neurosurgical market,an attractive nichemarket,through acquisitions and new products.Our 1999 revenues increased to$42.5 million ascompared to$17.5 million in 1998.In 1999,we sold over 1,000 different products to over 1,900 hospitals an
29、d other customers in morethan 60 countries.We generate revenues from product sales,strategic alliances and royalties andinvested$8.7 million in research and development relating to new products using our biomaterials,peptide chemistry and collagen engineering technologies.Integra Neurosciences accou
30、nted for 54%of total revenues in 1999.We market these products toneurosurgeons and critical care units,which comprise a focused group of hospital-based practitioners.As a result,we are able to access this market through a cost-effective sales and marketinginfrastructure.For the majority of the produ
31、cts we manufacture under Integra LifeSciences,we partner withmarket leaders,which we believe allows us to achieve our growth objectives cost effectively whileenabling us to focus our management efforts on developing new products.Our strategic alliancesinclude Johnson&Johnson Medical,a division of Et
32、hicon,Inc.,Sulzer Medica Ltd.,the Linvatecdivision of CONMED Corporation,Bionx Implants,Inc.,the Genetics Institute division of AmericanHome Products Corporation,the Sofamor-Danek division of Medtronic,Inc.and Baxter Healthcare.StrategyOur goal is to become a leader in the development,manufacture an
33、d marketing of medicaldevices,implants and biomaterials in the markets in which we compete.Our products are principallyused in the diagnosis and treatment of acute or chronic neurosurgical,soft-tissue and orthopedicconditions and we intend to expand our presence in those markets.Key elements of our
34、strategyinclude the following:Expand our neurosurgery market presence.Through acquisitions and internal growth,we haverapidly grown Integra NeuroSciences into a leading provider of devices for the neurosurgery market.We believe there exists additional growth potential in this market through:Increasi
35、ng market share of existing product lines;Expanding our product portfolio through acquisitions;and Continuing development and promotion of innovative products,such as our recently introducedDuraGent Dural Graft Matrix.2Continue to develop new and innovative medical products.As evidenced by our devel
36、opment ofINTEGRAs Artificial Skin,Biomends and DuraGent,we have a leading proprietary resorbableimplant franchise.INTEGRAs Artificial Skin is a proprietary resorbable collagen used to enable thehuman body to regenerate functional dermal tissue.In 1999,we introduced our DuraGent dural graftmatrix to
37、close brain and spine casings.We are currently developing a variety of innovativeneurosurgical and non-neurosurgical medical products using our resorbable collagen technology as wellas expanded applications for our existing products.Continue to form strategic alliances for Integra LifeSciences produ
38、cts.We have collaborated withleading companies to develop and market the majority of our non-neurosurgical product lines.Theseproducts address large and diverse markets,and we believe that they can be more cost effectively soldthrough marketing partners than through developing our own sales infrastr
39、ucture.We recentlypartnered with Johnson&Johnson Medical to market our INTEGRAs Artificial Skin and intend topursue additional strategic alliances selectively.Additional strategic acquisitions.Since March 1999 we have completed or entered into contractsfor three acquisitions in the neurosurgical mar
40、ket.We intend to seek additional acquisitions in thismarket and seek strategic acquisitions in other niche medical technology areas characterized by highmargins,fragmented competition and focused target customers.ProductsWe manufacture and market a broad range of medical products for the diagnosis a
41、nd treatment ofspinal and cranial disorders,soft tissue repair and orthopedic conditions.We are also actively engagedin a variety of research and development programs relating to new products or product enhancementsutilizing our tissue regeneration technology.Our products and products under developm
42、ent aresummarized in the following table.Integra NeuroSciencesProductApplicationStatusCaminos and Ventrixs fiber optic-For continuous pressure andMarketedbased intracranial pressuretemperature monitoring of themonitoring systems and Clinicalbrain following injury,andNeuro Systemst drainage systemsdr
43、ainage of excess fluid&cranial access kitsHeyerSchultes neurosurgicalSpecifically designed for theMarketedshuntsmaintenance of the chroniccondition,hydrocephalus(i.e.,excess pressure in the brain)DuraGent Dural Graft MatrixGraft to close brain and spineMarketed(absorbable collagen-based)casingRedmon
44、dt neurosurgical andSpecialized surgicalMarketedspinal instrumentsinstruments for use in brain orspinal surgeryNeuro-Navigationals flexibleFor minimally invasive surgicalMarketedendoscopes for neurosurgeryaccess to the brainHelitenes Microfibrillar HemostatControl of bleeding duringApproved in Europ
45、e;Pendingsurgeryapproval for neurosurgical usein U.S.Peripheral nerve conduitRepair of peripheral nervesDevelopment3Integra LifeSciencesProductApplicationStatusMarketing/Development PartnerINTEGRAs Artificial SkinRegenerate dermis andMarketedJohnson&Johnsonskin defectsMedical,Century Medical,Inc.Bio
46、Mends and BiomendsUsed in guided tissueMarketedSulzer MedicaExtend,Absorbableregeneration in periodontalCollagen MembranesurgeryArticular cartilage repairRegeneration of jointDevelopmentDePuy division of Johnsoncartilage&JohnsonCollagen material for useFracture management/DevelopmentGenetics Institu
47、te(AHP),with boneenabling spinal fusionMedtronic Sofamor Danekmorphogenetic protein(rhBMP-2)Tyrosine polycarbonates forFixation or alignment ofDevelopmentLinvatec(CONMED),fixation devices such asfracturesBionx Implants,Inc.resorbable screws,plates,pins,wedges and nailsVitaCufftProvides protection ag
48、ainstMarketedBard Access Systems,Inc.,infection arising from long-Arrow International,Incterm cathetersBioPatchtAnti-microbial woundMarketedJohnson&JohnsondressingMedicalHelitenes andControl of bleedingMarketedSold through variousHelistatsabsorbabledistributorscollagen hemostaticagentsCollaCotes,Col
49、laTapesUsed to control bleeding inMarketedSulzer Medicaand CollaPlugsdental surgeryabsorbable wounddressingsSundts ShuntCarotid endarterectomyMarketedSold directly and throughshunts for shunting bloodvarious distributorsduring surgical proceduresinvolving blood vesselsINTEGRA NEUROSCIENCESIn General
50、We manufacture and market a multi-line offering of innovative neurosurgical devices used forbrain and spine injuries.We intend to be the neurosurgeons and intensive care units one-stop shopfor these products.For the intensive care unit,we sell the Caminos and Ventrixs lines of intracranialpressure(I
51、CP)monitoring systems and external drainage systems manufactured under the Caminos,Heyer-Schultes and Clinical Neuro Systemst brand names.For the operating room,we sell a widerange of products,including cerebrospinal fluid(CSF)shunting products,the DuraGent Dural GraftMatrix,Neuro Navigationals endo
52、scopes,and Redmondt neurosurgical instruments.We sell our neurosurgical products in the United States through a direct sales force organized intofive regions each with a region manager.We employ 27 direct sales personnel called neurospecialists4covering 40 territories.We intend to increase the numbe
53、r of sales personnel to 40.We also employseven clinical development specialists who directly educate and train both the neurospecialists and ourcustomers in the use of our products.In addition,we employ a physician as medical director,and aPh.D.in neurosciences as scientific director.The sales organ
54、ization has approximately doubled in sizesince the acquisition of the first neurosciences business in early 1999.We believe this expansion allowsfor smaller,more focused territories,greater participation in trade shows and more extensive marketingefforts.Outside of the United States,we sell our prod
55、ucts through approximately 60 specializedneurosurgical distributors and dealers.IndustryIntegra NeuroSciences addresses the market need created by trauma cases and hydrocephalusthrough its established market positions in ICP monitoring,neurosurgical shunting,neuroendoscopyand specialty neurosurgical
56、 instrumentation.Integra NeuroSciences currently has more than 3,000 ICPmonitors installed worldwide.ICP monitors are used by neurosurgeons in diagnosing and treating cases of severe head traumaand other diseases.There are approximately 400,000 cases of head trauma each year in the UnitedStates.Hydr
57、ocephalus is an incurable condition resulting from an imbalance between the amount of CSFproduced by the body and the rate at which CSF is absorbed by the brain.This condition causes theventricles of the brain to enlarge and the pressure inside the head to increase.Hydrocephalus often ispresent at b
58、irth,but may also result from head trauma,spina bifida,intraventricular hemorrhage,intracranial tumors and cysts.The most common method of treatment of hydrocephalus is the insertionof a shunt into the ventricular system of the brain to divert the flow of CSF out of the brain.Apressure valve then ma
59、intains the CSF at normal levels within the ventricles.According to theHydrocephalus Association,hydrocephalus affects approximately one in 500 children born in the UnitedStates.Approximately 80%of total CSF shunt sales address birth-related hydrocephalus with theremaining 20%addressing surgical pro
60、cedures involving excess CSF due to head trauma.Integra NeuroSciencess design,manufacture and production of minimally invasive neuroendoscopyproducts addresses what we believe is significant growth potential in the neuroendoscopy marketresulting from an increasing number of neurosurgeons embracing m
61、inimally invasive surgicaltechniques.We believe that the worldwide market for neuroendoscopy products will grow more quicklythan most other neurosurgical device lines.This growth is expected,in part,because of the introductionof new procedures called third ventriculostomies which are increasingly su
62、bstituting for shunt placementfor patients who meet the criteria.Accordingly,we believe that our Neuro Navigationals line ofdisposable,semi-flexible,fiber-optic scopes will continue to grow and that the Neuro Navigationals lineaddresses the needs of neurosurgeons employing these techniques.Our DuraG
63、ent product line addresses the market for dural substitutes,including cranial andspinal procedures.Integra NeuroSciencess broad line of neurosurgery and spinal instrumentation products,includinghand-held spinal and neurosurgery instruments such as retractors,kerrisons,dissectors and curettes,address
64、es the market for neurosurgical instruments.ProductsIntracranial Pressure Product Line.Integra NeuroSciences sells the Caminos and Ventrixs lines ofintracranial pressure monitoring systems.Core technologies in the intracranial pressure monitoringproduct line include the design and manufacture of the
65、 disposable catheters used in the monitoring5systems,patented pressure transducer technology,optical detection/fiber optic transmission technology,sensor characterization and calibration technology and monitor design and manufacture.The research,development and manufacture of Integra NeuroSciencess
66、ICP monitoring products are located in SanDiego,California.External Drainage System Product Line.Integra NeuroSciencess external drainage systems aremanufactured under the Caminos,Heyer-Shultes and Clinical Neuro Systemst brand names.Wemanufacture the drainage systems in both Anasco,Puerto Rico(for
67、sale under the Caminos andHeyer-Schultes brand names)and in Exton,Pennsylvania(for sale under the Clinical Neuro Systemstbrand name).Shunts for Hydrocephalus Management.Our line of shunting products for hydrocephalusmanagement includes the Novus,LPV and Pudenz shunts,ventricular,peritoneal and cardi
68、ac catheters,physician-specified hydrocephalus management shunt kits,Ommaya CSF reservoirs and Spetzler lumbarand syringo-peritoneal shunts.Shunts are implanted in the patient to drain excess CSF from theventricles of the brain into the peritoneal cavity or externally.Integra NeuroSciencess hydrocep
69、halusmanagement shunt manufacturing operations are located in the Anasco,Puerto Rico facility.DuraGent Product Line.The DuraGent Dural Graft Matrix is a resorbable collagen matrixindicated for the repair of the dura mater.The dura mater is the thick membrane that contains theCSF within the brain and
70、 the spine.The dura mater must be penetrated during brain surgery,and isoften nicked or otherwise damaged during spinal surgery.In either case,surgeons often close or repairthe dura mater with a graft.The graft may consist of other tissue taken from elsewhere in the patientsbody,or it may be one of
71、the dural substitute products currently on the market which are made ofsynthetic materials,processed human cadaver,or bovine pericardium.We believe that each of theprevailing methods for repairing the dura mater suffer from shortcomings addressed by the DuraGentDural Graft Matrix.We manufacture the
72、DuraGent Dural Graft Matrix product in our Plainsboro,New Jersey facility.Our DuraGent product is an engineered resorbable collagen implant that has been shown inclinical trials to be an effective means for closing the dura mater without the need for suturing,whichallows the neurosurgeon to conclude
73、 the operation more efficiently.In addition,because theDuraGent product is ultimately resorbed by the body and replaced with new natural tissue,the patientavoids some of the risks associated with a permanent implant inside the cranium.Redmondt Product Line.We provide neurosurgeons and spine surgeons
74、 with a full line ofspecialty hand-held spinal and neurosurgical instruments sold under the Redmondt brand name.Theseproducts include retractors,kerrisons,dissectors and curettes.Major product segments include spinalinstruments,microsurgical neuro instruments,and products customized by Integra Neuro
75、Sciences andsold through other companies and distributors.We import most of these instruments from Germany.Neuro Navigationals Endoscope Product Line.We manufacture and sell disposable minimallyinvasive neuroendoscopy products under the Neuro Navigationals brand name.These fiber opticinstruments are
76、 used to facilitate minimally invasive neurosurgery.Neuroendoscopy manufacturingoperations are located in San Diego,California.Helitenes Neurosurgical Hemostat Product Line.Helitenes hemostatic agent consists ofmicrofibular collagen,and is intended to control bleeding during surgery.Outside of the U
77、nited States,it is indicated for use in neurosurgery,in addition to general surgery.During 2000,IntegraNeuroSciences will begin to sell Helitenes outside of the United States for use in neurosurgery.Peripheral Nerve Conduit Product Line.Although peripheral nerves are one of the few tissues ofthe bod
78、y that spontaneously regenerate,in the majority of cases they fail to make useful,functionalconnections.Consequently,peripheral nerve injuries often result in permanent loss of sensation and6motor control.At present,there is no product on the market that regenerates peripheral nerves.Theconventional
79、 method of treatment for a severed peripheral nerve is microsurgical repair or nerve grafts.Our peripheral nerve regeneration device is a collagen tube designed to facilitate regeneration of thesevered nerve and to act as a bridge between the severed nerve ends.The collagen conduit supportsnerve reg
80、eneration and is then absorbed into the body.Our pre-clinical studies have demonstrated theclosure of 5-cm gaps in peripheral nerves in non-human primates with restored nerve function.Ourproprietary resorbable conduit for regenerating and reconnecting peripheral nerves is expected to enterclinical t
81、rials in Europe in humans during the first half of 2000.INTEGRA LIFESCIENCESIn GeneralIntegra LifeSciences develops and markets tissue regeneration products and sells surgical productsthat are primarily sold outside of neurosurgery and neurotrauma.Many of the current products ofIntegra LifeSciences
82、are built on our expertise in resorbable collagen products.Integra LifeSciencessresearch and development programs are generally constructed around strategic alliances with leadingmedical device companies.ProductsINTEGRAs Artificial Skin.INTEGRAs Artificial Skin is designed to enable the human body t
83、oregenerate functional dermal tissue.Human skin consists of the epidermis and the dermis.Theepidermis is the thin,outer layer that serves as a protective seal for the body and the dermis is thethicker layer underneath that provides structural strength and flexibility and supports the viability of th
84、eepidermis through a vascular network.The body normally responds to severe damage to the dermis byproducing scar tissue in the wound area.This scar tissue is accompanied by contraction that pulls theedges of the wound closer which,while closing the wound,often permanently reduces flexibility.Insever
85、e cases,this contraction leads to a reduction in the range of motion for the patient,whosubsequently requires extensive physical rehabilitation or reconstructive surgery.Physicians treatingsevere wounds,such as full-thickness burns,seek to minimize scarring and contraction.INTEGRAs Artificial Skin w
86、as designed to minimize scar formation and wound contracture in fullthickness skin defects.INTEGRAs Artificial Skin consists of two layers,a thin collagen-glycosaminoglycan sponge and a silicone membrane.The product is applied with the sponge layer incontact with the excised wound.The sponge materia
87、l serves as a template for the growth of newfunctional dermal tissue.The outer membrane layer acts as a temporary substitute for the epidermis tocontrol water vapor transmission,prevent re-injury and minimize bacterial contamination.INTEGRAs Artificial Skin is marketed and sold,except in Japan,by Jo
88、hnson&Johnson Medical.INTEGRAs Artificial Skin was approved by the FDA under a premarket approval application(PMA)for the post-excisional treatment of life-threatening full-thickness or deep partial-thickness thermalinjury where sufficient autograft is not available at the time of excision or not de
89、sirable due to thephysiological condition of the patient.The FDAs approval order includes requirements to provide acomprehensive practitioner training program and to conduct a post approval study at multiple clinicalsites.We have enrolled more than the required number of patients in the post-approva
90、l study,andexpect to file the results with the FDA this year.We estimate that the worldwide market for use of skin replacement products(such as INTEGRAsArtificial Skin)in the treatment of severe burns is only about$75 million.However,the potentialmarket for the use of INTEGRAs Artificial Skin for re
91、constructive surgery and the treatment ofchronic wounds is much larger,which we estimate to be in excess of$1 billion.In June 1999,IntegraLifeSciences entered into a strategic alliance with Johnson&Johnson Medical to distributeINTEGRAs Artificial Skin throughout the world,except Japan.As part of tha
92、t strategic alliance,7Johnson&Johnson Medical has agreed to pay for clinical trials to support applications to the FDA forthese broader indications.We cannot be certain that such clinical trials will be completed,or thatINTEGRAs Artificial Skin will receive the approvals necessary to permit Johnson&
93、Johnson Medicalto promote it for such indications.BioMends Absorbable Collagen Membrane.Integra LifeSciences has also developed the BioMendsAbsorbable Collagen Membrane for use in guided tissue regeneration in periodontal surgery.TheBioMends membrane is inserted between the gum and the tooth after s
94、urgical treatment of periodontaldisease,preventing the gum tissue from interfering with the regeneration of the periodontal ligamentthat holds the tooth in place.The BioMends product is intended to be absorbed after approximatelyfour to seven weeks,avoiding the requirement for additional surgical pr
95、ocedures to remove a non-absorbable membrane.The BioMends Absorbable Collagen Membrane is sold through the Calcitekdivision of Sulzer Medica.It has been approved for marketing in the United States and has receivedCE Mark certification for sales in the European Union.Sulzer Medica is seeking regulato
96、ry approval inJapan.BioMends Extend was developed by Integra LifeSciences and has the same indication for use asBioMends except that it absorbs in approximately 16 weeks.The product has received FDA clearanceto market,and has been submitted for CE mark certification and for approval in Canada and Ja
97、pan.Cartilage Repair Products.Damaged articular cartilage,which connects the skeletal joints,isassociated with the onset of progressive pain,degeneration and,ultimately,long-term osteoarthritis.Normal articular cartilage does not effectively heal.The conventional procedure for treating traumaticdama
98、ge to cartilage involves smoothing damaged portions of the tissue and removing free-floatingmaterial from the joint using arthroscopic surgery with the objective of reducing pain and restoringmobility.However,this therapy does not stop joint surface degeneration,often requires two or moresurgeries a
99、nd results in the formation of fibrocartilage,which is rough and non-weight bearing overprolonged periods.Moreover,the long-term result of this procedure often is permanent reduction ofjoint mobility and an increased risk of developing osteoarthritis.We are developing a device to allow in vivo regen
100、eration of the patients own articular cartilage.This technology will allow the patients body to regenerate a smooth,weight-bearing surface.Ourobjective in developing this cartilage-specific technology is to produce a product that provides theproper matrix system to allow the natural regeneration of
101、the patients cartilage,with full restoration offunction and diminished risk of osteoarthritis.The product under development would use our proprietary peptide technology to encourage cellsto grow into the template once implanted into the patient.Our peptide portfolio includes bioactiveagents designed
102、 to mimic natural proteins to promote cell adhesion,cell survival and other importantcellular functions.Our product would employ proprietary designs based on multiple layers of collagenmaterial of varying but tightly controlled densities and pore sizes to provide a scaffold for allproliferation and
103、cartilage formation.Simultaneously it would prevent the in-growth of unwanted cellsthat could lead to scar tissue formation.We anticipate that the device will be absorbed into the bodyover a period of several weeks.Pre-clinical studies involving several variations of the above protocolsare in progre
104、ss.Collagen matrices for use with rhBMP-2.We supply the Genetics Institute division of AmericanHome Products with absorbable collagen sponges for use in developing bone regeneration implants.Since 1994,we have supplied absorbable collagen sponges for use with Genetics Institutes recombinanthuman bon
105、e morphogenic protein-2(rhBMP-2).Recombinant human BMP-2 is a manufactured versionof human protein naturally present in very small quantities in the body.Genetics Institute is developingrhBMP-2 for clinical evaluation in several areas of bone repair and augmentation.Spine applicationsare being devel
106、oped through a related collaboration with Medtronic Sofamor Danek in North America.8Tyrosine polycarbonates for orthopedic implants.We are continuing to develop additionalbiomaterial technologies that enhance the rate and quality of healing and tissue regeneration withsynthetic biodegradable scaffol
107、ds that support cell attachment and growth.We are developing a newclass of resorbable polycarbonates created through the polymerization of tyrosine,a naturally occurringamino acid.A well-defined and commercially scaleable manufacturing process prepares these materials.Device fabrication by tradition
108、al techniques such as compression molding and extrusion is readilyachieved.We believe that this new biomaterial will be useful in promoting full bone healing whenimplanted in damaged sites.This material is currently being developed for orthopedic and tissueengineering applications where strength and
109、 bone compatibility are critical issues for success of healing.We have entered into agreements to supply the material to Bionx Implants,Inc.and the Linvatecdivision of CONMED,in each case for specified orthopedic implants.No medical device containing thematerial has yet been approved for sale.Other
110、Surgical Products.Other current products of Integra LifeSciences include the VitaCufftcatheter access infection control device(sold to Bard Access Systems,Inc.,Arrow International,Inc.and the Quinton division of Tyco International Ltd.),the BioPatcht anti-microbial wound dressing(sold to Johnson&Joh
111、nson Medical),and a wide range of resorbable collagen products for hemostasis(sold to Sulzer Calcitek for use in periodontal surgery,and to Baxter International and otherdistributors under the Helistats and Helitenes Absorbable Collagen Hemostatic Agent names).All ofthe foregoing products are manufa
112、ctured at our Plainsboro,New Jersey manufacturing facility.Finally,our line of Sundts carotid endarterectomy shunts is used to divert blood to vital organs(such as the brain)during carotid artery surgical procedures.Carotid shunts are manufactured at ourmedical-grade silicone manufacturing facility
113、in Anasco,Puerto Rico,and sold directly and throughdistributors.SALES AND MARKETINGOur sales and marketing strategy for our product lines differ based on the type of market and ourassessment of how we can maximize our resources and make the greatest impact on the respectivemarket.We market our Integ
114、ra NeuroSciences products to neurosurgeons and critical care units,whichcomprise a focused group of hospital-based practitioners.As a result,we are able to access this marketthrough a cost-effective sales and marketing infrastructure.For the majority of the products wemanufacture under Integra LifeS
115、ciences,we partner with market leaders,which we believe allows us toachieve our growth objectives cost effectively while enabling us to focus our management efforts ondeveloping new products.The non-neurosurgical products represent large,diverse markets,and webelieve that they can be more cost effec
116、tively promoted through leveraging leading marketing partnersthan through developing a sales infrastructure ourselves.Our strategic alliances include Johnson&Johnson Medical,a division of Ethicon,Inc.,Sulzer Medica Ltd.,the Linvatec division of CONMEDCorporation,Bionx Implants,Inc.,the Genetics Inst
117、itute division of American Home ProductsCorporation,the Sofamor Danek division of Medtronic,Inc.and Baxter Healthcare.STRATEGIC ALLIANCESWe use distribution alliances to market the majority of our Integra LifeSciences products.We havealso entered into collaborative agreements relating to research an
118、d development programs involving ourtechnology.These arrangements are described below.9In June 1999,Integra LifeSciences entered into a strategic alliance with Johnson&JohnsonMedical to distribute INTEGRAs Artificial Skin throughout the world,except in Japan.Johnson&Johnson Medical is responsible fo
119、r marketing and selling the product,has agreed to make significantminimum product purchases,and will provide$2 million annual funding for research,development andcertain clinical trials for the first five years of the alliance and thereafter based on a percentage of netsales.In addition,Johnson&John
120、son Medical is obligated to make contingent payments to IntegraLifeSciences in the event of certain clinical developments and to assist in the expansion of ourmanufacturing capacity as we achieve certain sales targets.Under the agreement,we are obligated tomanufacture the product and are responsible
121、 for continued research and development.In 1997,we signed an exclusive importation and sales agreement for INTEGRAs Artificial Skin inJapan with Century Medical Inc.,a subsidiary of ITOCHU Corporation.Under this agreement,Century Medical,Inc.is conducting a clinical trial in Japan at its own expense
122、 to obtain Japaneseregulatory approvals for the sale of INTEGRAs Artificial Skin in Japan.In February 1998,we announced the signing of a strategic alliance with Johnson&JohnsonsDePuy division(DePuy)to develop and market a new product to regenerate joint cartilage.IntegraLifeSciences has agreed to de
123、velop an absorbable,collagen-based implant,designed in combinationwith its proprietary RGD peptide technology,that will allow the body to repair and regenerate articularcartilage found in the knee and other joints.DePuy will market the product worldwide.Under theterms of the agreement,DePuy will mak
124、e payments of up to$13 million as Integra meets variousmilestones,and will fund all necessary development costs beyond the pre-clinical phase.If a product issuccessfully developed,we will be responsible for manufacturing the product and for future productdevelopment.In addition to the cartilage prog
125、ram,Integra LifeSciences has several other programs orientedtoward the orthopedic market.These programs include alliances for the development of resorbableorthopedic implants made of our proprietary tyrosine polycarbonate technology with Bionx Implants,Inc.and Linvatec and an alliance with Genetics
126、Institute for the development of collagen matrices tobe used in conjunction with Genetics Institutes recombinant human bone morphogenetic protein-2(rhBMP-2).If approved,rhBMP-2 is expected to be used in conjunction with our matrices toregenerate bone.Genetics Institute is developing products based o
127、n rhBMP-2 for applications inorthopedics,oral and maxillofacial surgery and spine surgery.Spine applications are being developedthrough a related collaboration with Medtronic Sofamor Danek in North America.In September 1998,we announced two strategic alliances with Linvatec and Bionx Implants,Inc.fo
128、r developing fixation devices using Integras polymer technology.Under the agreements with Linvatecand Bionx Implants,those companies have responsibility for clinical trials and any necessary regulatoryfilings,as well as certain minimum annual purchase payments.Products covered under the agreementwit
129、h Linvatec include a resorbable line of interference screws,as well as tacks and anchors used inreconstruction of the anterior cruciate ligament and posterior cruciate ligament,fixation of ligamentsand tendons in the knee and shoulder,and bone-tendon-bone procedures.Linvatec also intends todevelop p
130、olymer implants for use in bladder neck suspension procedures.Products covered under theagreement with Bionx Implants include a resorbable line of screws,plates,pins,wedges and nails usedfor the fixation and/or alignment of fractures or osteotomies in all areas of the musculoskeletal systemexcept in
131、 the spine and cranium.Sulzer Medicas dental division,Sulzer Calcitek,has marketed and sold BioMends since 1995,BioMend Extendt since 1999 and CollaCotes,CollaPlugs and CollaTapes since 1992.RESEARCH STRATEGYThe Company has either acquired or secured the proprietary rights to several important scien
132、tificplatforms.These technologies provide support for the Companys critical applications in neurosciences10and tissue regeneration,and additional opportunities for generating near-term and long-term revenuesfrom medical applications.The Company has been able to identify and bring together critical p
133、latformtechnology components from which it works to develop solutions for both tissue regeneration andneurosciences.The Company spent approximately$8.7 million,$8.2 million and$6.2 million during 1999,1998and 1997,respectively,on research and development activities.Research and development activitie
134、sfunded by government grants and contract development revenues amounted to$1.9 million,$1.8million and$490,000 during 1999,1998 and 1997,respectively.GOVERNMENT REGULATIONOur research and development activities and the manufacturing and marketing of our existing andfuture products are subject to reg
135、ulation by numerous governmental agencies in the United States andin other countries.The FDA and comparable agencies in other countries impose mandatory proceduresand standards for the conduct of clinical trials and the production and marketing of products fordiagnostic and human therapeutic use.The
136、 FDA product approval process has different regulations fordrugs,biologics,and medical devices.The FDA currently classifies our proposed regenerative medicineproducts as medical devices.Review Process For Medical DevicesThere are two types of FDA review/approval procedures for medical devices:a Prem
137、arketNotification Section 510(k)(510(k)and a PMA application.A 510(k)requires submission ofsufficient data to demonstrate substantial equivalence to a device marketed prior to May 28,1976,or toa device marketed after that date which has been classified into Class I or Class II which has receivedprem
138、arket notification 510(k)clearance.Although the mandated period for FDA review is 90 days,actual review times can be substantially longer,and the sponsor cannot market the device until FDAclearance is obtained.For those devices that involve new technology and/or that present significantsafety and ef
139、fectiveness issues,510(k)submissions may require significantly more time for FDA reviewand may require submission of more extensive safety and effectiveness data,including clinical trial data.Among the conditions for clearance to market of a 510(k)submission is the requirement that theprospective ma
140、nufacturers quality control and manufacturing procedures conform to the FDAs currentQuality System Regulations.In complying with standards set forth in these regulations,manufacturersmust expend time,money and effort for production and quality control to ensure full technicalcompliance at all times.
141、Manufacturing establishments,both international and domestic,are also subjectto inspections by or under the authority of the FDA.Although,at present,the FDA generally does notinspect such establishments prior to clearance of a 510(k)submission,it is establishing a program ofconducting Quality System
142、 inspections for new devices in the future as a standard practice.The Medical Device Amendments of 1976 amended the Federal Food,Drug and Cosmetics Act toestablish three regulatory classes for medical devices,based on the level of control required to assuresafety and effectiveness.Class III Devices
143、are defined as life-supporting and life-sustaining devices,devices of substantial importance in preventing impairment of human health or devices that presentpotentially unreasonable risk of illness or injury.Class III devices are those for which there isinsufficient information to show that Class I
144、or Class II controls can provide a reasonable assurance ofsafety or effectiveness.The PMA application review process for Class III devices was established toevaluate the safety and effectiveness of these devices on a product by product basis.Manufacturers thatwish to market Class III devices must su
145、bmit and receive approval of a PMA application from theFDA.The FDA has substantial content and format requirements for PMA applications,which includeclinical and non-clinical safety and effectiveness data,labeling,manufacturing processes and quality11assurance programs.As part of the PMA application
146、 process,the PMA application may be referred toan FDA Advisory Panel for review.Additionally,final approval of the product is dependent on aninspection of the manufacturing facility for compliance with FDA Quality System Regulations.All studies in the United States in humans for the purpose of inves
147、tigating the safety andeffectiveness of an investigational significant risk medical device must be conducted under theInvestigational Device Exemption(IDE)regulations.An IDE application to the FDA includes allpreclinical biocompatibility testing,investigational protocols,patient informed consents,re
148、ports of allprior investigations,manufacturing and quality control information.It takes a number of years frominitiation of the project until submission of a PMA application to the FDA,and requires theexpenditure of substantial resources.If a PMA application is submitted,however,there can be noassur
149、ance on the length of time for the review process at the FDA or that the FDA will approve thePMA application.Under either the 510(k)submission or PMA application process,manufacturing establishments,foreign and domestic,are subject to periodic inspections by the FDA for compliance with QualitySystem
150、 Regulations.The Company and each of its operating subsidiaries are subject to suchinspections.To gain approval for the use of a product for clinical indications other than those for whichthe product was initially evaluated or for significant changes to the product,further studies,includingclinical
151、trials and FDA approvals,are required.In addition,for products with an approved PMAapplication,the FDA requires postapproval reporting and may require postapproval surveillanceprograms to monitor the products safety and effectiveness.Results of post-approval programs maylimit or expand the further m
152、arketing of the product.International Regulatory RequirementsWe are preparing for the changing international regulatory environment.ISO 9000 is aninternational recognized set of guidelines that are aimed at ensuring the manufacture and developmentof quality products.We were audited under ISO standar
153、ds in 1997 and received certification to ISO9001,a full quality system.In 1998,we underwent a surveillance audit and renewed our certification toISO 9001.We are required to be audited on an annual basis by a recognized notified body to maintaincertification.Companies that meet ISO standards are inte
154、rnationally recognized as functioning under aquality system.Approval of a product by regulatory authorities in international countries must beobtained prior to the commencement of marketing of the product in such countries.The requirementsgoverning the conduct of clinical trials and product approval
155、s vary widely from country to country,andthe time required for approval may be longer or shorter than that required for FDA approval of thePMA application.In June 1998,the European Union Medical Device Directive became effective,andall medical devices must meet the Medical Device Directive standards
156、 and receive CE markcertification.CE mark certification involves a comprehensive quality system program,and submission ofdata on a product to the notified body in Europe.Other United States Regulatory RequirementsIn addition to the regulatory framework for product approvals,we are and may be subject
157、 toregulation under federal and state laws,including requirements regarding occupational health andsafety;laboratory practices;and the use,handling and disposal of toxic or hazardous substances.Wemay also be subject to other present and possible future local,state,federal and foreign regulations.Our
158、 research,development and manufacturing processes involve the controlled use of certainhazardous materials.We are subject to federal,state and local laws and regulations governing the use,manufacture,storage,handling and disposal of such materials and certain waste products.Although webelieve that o
159、ur safety procedures for handling and disposing of such materials comply with thestandards prescribed by such laws and regulations,the risk of accidental contamination or injury from12these materials cannot be completely eliminated.In the event of such an accident,we could be heldliable for any dama
160、ges that result and any such liability could exceed our resources.Although webelieve that we are in compliance in all material respects with applicable environmental laws andregulations,there can be no assurance that we will not incur significant costs to comply withenvironmental laws and regulation
161、s in the future,nor that our operations,business or assets will not bematerially adversely affected by current or future environmental laws or regulations.PATENTS AND INTELLECTUAL PROPERTYWe pursue a policy of seeking patent protection of our technology,products and productimprovements both in the U
162、nited States and in selected foreign countries.When determinedappropriate,we have and plan to continue to enforce and defend our patent rights.In general,however,we do not rely on our patent estate to provide us with any significant competitive advantages.We rely upon trade secrets and continuing te
163、chnological innovations to develop and maintain ourcompetitive position.We continue to develop a substantial database of information concerning ourresearch and development.We have taken security measures to protect our data and are in the processof exploring ways to enhance further the security of o
164、ur data.In an effort to protect our trade secrets,we have a policy of requiring our employees,consultants and advisors to execute proprietaryinformation and invention assignment agreements upon commencement of employment or consultingrelationships with us.These agreements provide that all confidenti
165、al information developed or madeknown to the individual during the course of their relationship with us must be kept confidential,except in specified circumstances.COMPETITIONThe largest competitors of Integra NeuroSciences in the neurosurgery markets are the PS Medicaldivision of Medtronic,Inc.,the
166、 Codman division of Johnson&Johnson,the Valleylab division of TycoInternational Ltd.,and NMT Neurosciences,a division of NMT Medical,Inc.In addition,various ofthe Integra NeuroSciences product lines compete with smaller specialized companies or largercompanies that do not otherwise focus on neurosur
167、gery.The products of Integra LifeSciences facediverse and broad competition,depending on the market addressed by the product.In addition,certaincompanies are known to be competing particularly in the area of skin substitution or regeneration,including Organogenesis and Advanced Tissue Sciences.Final
168、ly,in certain cases competition consistsprimarily of current medical practice,rather than any particular product(such as autograft tissue as asubstitute for INTEGRAs Artificial Skin).Depending on the product line,we compete on the basis ofour products features,strength of our sales organization or m
169、arketing partner,sophistication of ourtechnology,and cost effectiveness of our solution to the customers medical requirements.EMPLOYEESAt December 31,1999,we had approximately 450 full-time employees engaged in production andproduction support(including warehouse,engineering,and facilities personnel
170、),quality assurance/quality control,research and development,regulatory and clinical affairs,sales/marketing andadministration and finance.None of our current employees are subject to a collective bargainingagreement.RECENT DEVELOPMENTSIn March 2000,we agreed to acquire from NMT Medical,Inc.(NMT)the
171、 Selectors UltrasonicAspirator,Rugglest Surgical Instrumentation and Spembly Medical Cryosurgery product lines,including certain assets and liabilities,for an acquisition price of$12.0 million.The acquisition isexpected to close by April 15,2000.One of our subsidiaries will acquire the Selectors Ult
172、rasonicAspirator and Spembly Medical Cryosurgery product lines through the purchase of the stock of certain13of NMTs subsidiaries,each organized under the laws of the United Kingdom.In addition,one of oursubsidiaries will acquire related assets located in the United States,as well as the inventory,c
173、ustomerlist and certain other assets of the Rugglest line of instruments for the neurosurgeon.The Selectors Ultrasonic Aspirator products and the Rugglest surgical instruments will be soldthrough Integra NeuroSciences,and the Spembly Medical Cryosurgery products will be sold throughIntegra LifeScien
174、ces.The Selectors Ultrasonic Aspirator uses very high frequency sound waves topulverize cancer tumors,and allows the surgeon to remove the damaged tumor tissue by aspiration.The Rugglest line of surgical instruments complements and supplements our Redmondt instrumentsline,but has historically had si
175、gnificantly higher revenues.Finally,the Spembly Medical Cryosurgeryproducts allow surgeons to use low temperatures to more easily extract diseased tissue.We also acquired the manufacturing facility in Andover,England that manufactures the ultrasonicaspirator and cryosurgery products.The Andover faci
176、lity employs approximately 65 employees.TheRugglest instruments are purchased from various manufacturers and resold under the Rugglest brandname.SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTSWe have made statements in this report,including statements under Managements Discussionand Analysis of Fi
177、nancial Condition and Results of Operations and Business,which constituteforward-looking statements within the meaning of Section 27A of the Securities Act of 1933 andSection 21E of the Securities Exchange Act of 1934.These forward-looking statements are madepursuant to the safe harbor provisions of
178、 the Securities Litigation Reform Act of 1995 and are subjectto a number of risks,uncertainties and assumptions about Integra,including,among other things:general economic and business conditions,both nationally and in our international markets;our expectations and estimates concerning future financ
179、ial performance,financing plans and theimpact of competition;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 andworking capital requirements;our ability to complete acqui
180、sitions and integrate and manage new businesses;and other risk factors described below under Risk Factors.You can identify these forward-looking statements by forward-looking words such as believe,may,could,will,estimate,continue,anticipate,intend,seek,plan,expect,should,would and similar expression
181、s in this report.We undertake no obligation to publicly update or revise any forward-looking statements,whetheras a result of new information,future events or otherwise.In light of these risks and uncertainties,theforward-looking events and circumstances discussed in this report may not occur and ac
182、tual resultscould differ materially from those anticipated or implied in the forward-looking statements.RISK FACTORSThe Company believes that the following important factors,among others,have affected,and inthe future could affect,the Companys business and results of operations and could cause theCo
183、mpanys future results to differ materially from its historical results and those expressed in anyforward-looking statements made by the Company.Such factors are not meant to represent an14exhaustive list of the risks and uncertainties associated with the Companys business.These factors aswell as oth
184、er factors may affect the Companys future results and the Companys stock price,particularly on a quarterly basis.We expect to continue to incur operating losses and may never achieve profitability.To date,we have experienced significant operating losses in funding the research,development,manufactur
185、ing and marketing of our products and may continue to incur operating losses.AtDecember 31,1999,we had a cumulative deficit of$94.3 million.Our ability to achieve profitabilitydepends in part upon our ability,either independently or in collaboration with others,to successfullymanufacture and market
186、our products and services.There can be no assurance that we will everachieve a profitable level of operations or that profitability,if achieved,can be sustained on an ongoingbasis.We may be unable to raise necessary additional financing.We may need to raise additional funds in the future in order to
187、 implement our business plan,toconduct research and development,to fund marketing programs or to acquire complementarybusinesses,technologies or services.Our committed sources of capital are limited.Any requiredadditional financing may be unavailable on terms favorable to us,or at all.If we raise ad
188、ditional fundsby issuing equity securities,our stockholders may experience significant dilution of their ownershipinterest and these securities may have rights senior to those of the holders of our common stock.Ifadditional financing is not available when required or is not available on acceptable t
189、erms,we may beunable to fund our expansion,develop or enhance our products and services,take advantage ofbusiness opportunities or respond to competitive pressures.Our operating results may fluctuate from time to time,which could affect the value of our common stock.Our operating results have fluctu
190、ated in the past and can be expected to fluctuate from time totime in the future.Some of the factors that may cause these fluctuations include:the impact of acquisitions;the timing of significant customer orders;market acceptance of our existing products,as well as products in development;the timing
191、 of regulatory approvals;the timing of payments received under collaborative arrangements and strategic alliances;our ability to manufacture our products efficiently;and the timing of our research and development expenditures.The industry and market segments in which we operate are highly competitiv
192、e,and we may not be able tocompete effectively with other companies with greater financial resources than we have.In general,the medical technology industry is characterized by intense competition.We competewith established pharmaceutical and medical technology companies.Competition also comes from
193、earlystage companies that have alternative technological solutions for our primary clinical targets,as well asuniversities,research institutions and other non-profit entities.Many of our competitors have access togreater financial,technical,research and development,marketing,manufacturing,sales,dist
194、ribution,services and other resources than we do.Further,our competitors may be more effective atimplementing their technologies to develop commercial products.15Our competitive position will depend on our ability to achieve market acceptance for our products,implement production and marketing plans
195、,secure regulatory approval for products underdevelopment,obtain patent protection and secure adequate capital resources.We may need to developnew applications for our products to remain competitive.Our present or future products could berendered obsolete or uneconomical by technological advances by
196、 one or more of our current or futurecompetitors.Our future success will depend upon our ability to compete effectively against currenttechnology as well as to respond effectively to technological advances.We can not assure you thatcompetitive pressures will not adversely affect our profitability.Ou
197、r current strategy involves growth through acquisitions,which require us to incur substantial costs andpotential liabilities for which we may never realize the anticipated benefits.In addition to internal growth,our current strategy involves growth through acquisitions.There canbe no assurance that
198、we will be able to continue to implement our growth strategy,or that this strategywill ultimately be successful.A significant portion of our growth in net revenue has resulted from,andis expected to continue to result from,the acquisition of businesses complementary to our own.Weengage in evaluation
199、s of potential acquisitions and are in various stages of discussion regarding possibleacquisitions,certain of which,if consummated,could be significant to us.Acquisitions by us may resultin significant transaction expenses,increased interest and amortization expense,increased depreciationexpense and
200、 increased operating expense,any of which could have a material adverse effect on ouroperating results.As we grow by acquisitions,we must be able to integrate and manage the newbusinesses to realize economies of scale and control costs.In addition,acquisitions involve other risks,including diversion
201、 of management resources otherwise available for ongoing development of ourbusiness and risks associated with entering new markets with which our marketing and sales force haslimited experience or where experienced distribution alliances are not available.Our future profitabilitywill depend in part
202、upon our ability to further develop our resources to adapt to the particulars of suchnew products or business areas and to identify and enter into satisfactory distribution networks.Wemay not be able to identify suitable acquisition candidates in the future,obtain acceptable financing orconsummate a
203、ny future acquisitions.Any failure by us to integrate acquired operations,manage thecost of providing our products or price our products appropriately may have a material adverse effecton our operating results.In addition,as a result of our acquisitions of other healthcare businesses,wemay be subjec
204、t to the risk of unanticipated business uncertainties or legal liabilities relating to suchacquired businesses for which we may not be indemnified by the sellers of the acquired businesses.Future acquisitions may also result in potentially dilutive issuances of equity securities.To market our produc
205、ts under development we will first need to obtain regulatory approval.Further,if we fail to comply with the extensive governmental regulations that affect our business,wecould be subject to penalties and could be precluded from marketing our products.Our research and development activities and the m
206、anufacturing,labeling,distribution andmarketing of our existing and future products are subject to regulation by numerous governmentalagencies in the United States and in other countries.The FDA and comparable agencies in othercountries impose mandatory procedures and standards for the conduct of cl
207、inical trials and theproduction and marketing of products for diagnostic and human therapeutic use.The FDA and otherregulatory authorities require that our products be manufactured according to rigorous standards.These regulatory requirements may significantly increase our production or purchasing c
208、osts and mayeven prevent us from making or obtaining our products in amounts sufficient to meet market demand.If we,or a third party manufacturer,change our approved manufacturing process,the FDA will requirea new approval before that process could be used.Failure to develop our manufacturing capabi
209、lity maymean that even if we develop promising new products,we may not be able to produce them profitably,as a result of delays and additional capital investment costs.Manufacturing facilities,both internationaland domestic,are also subject to inspections by or under the authority of the FDA.16Our p
210、roducts under development are subject to approval by the FDA prior to marketing forcommercial use.The process of obtaining necessary FDA approvals can take years and is expensive andfull of uncertainties.Our inability to obtain required regulatory approval on a timely or acceptablebasis could harm o
211、ur business.Further,approval may place substantial restrictions on the indicationsfor which the product may be marketed or to whom it may be marketed.To gain approval for the useof a product for clinical indications other than those for which the product was initially evaluated or forsignificant cha
212、nges to the product,further studies,including clinical trials and FDA approvals arerequired.In addition,for products with an approved PMA application,the FDA requires postapprovalreporting and may require postapproval surveillance programs to monitor the products safety andeffectiveness.Results of p
213、ost approval programs may limit or expand the further marketing of theproduct.Approved products are subject to continuing FDA requirements relating to quality control andquality assurance,maintenance of records and documentation and labeling and promotion of medicaldevices.In addition,failure to com
214、ply with applicable regulatory requirements could subject us toenforcement action,including product seizures,recalls,withdrawal of clearances or approvals,restrictions on or injunctions against marketing our product or products based on our technology,andcivil and criminal penalties.Medical device l
215、aws and regulations are also in effect in many countries outside the United States.These range from comprehensive device approval requirements for some or all of our medical deviceproducts to requests for product data or certifications.The number and scope of these requirementsare increasing.The req
216、uirements governing the conduct of clinical trials and product approvals varywidely from country to country.Failure to comply with applicable federal,state and foreign medicaldevice laws and regulations would result in fines or other censures or preclude our ability to marketproducts.Because approxi
217、mately 25%of our 1999 revenues are derived from international sales,anydelay or withdrawal of approval or change in international regulations could have an adverse effect onour revenues and profitability.See BusinessGovernment Regulation.Lack of market acceptance for our products or market preferenc
218、e for technologies which compete with ourproducts would reduce our revenues and profitability.We cannot be certain that our current products,or any other products that we develop or market,will achieve or maintain market acceptance.Certain of the medical indications that can be treated byour devices
219、 can also be treated by other medical devices.Currently,the medical community widelyaccepts many alternative treatments,and these other treatments have a long history of use.We cannotbe certain that our devices and procedures will be able to replace such established treatments or thateither physicia
220、ns or the medical community in general will accept and utilize our devices or any othermedical products that we may develop.In addition,our future success depends,in part,on our abilityto develop additional products.Even if we determine that a product candidate has medical benefits,thecost of commer
221、cializing that product candidate may be too high to justify development.In addition,competitors may develop products that are more effective,cost less,or are ready for commercialintroduction before our products.If we are unable to develop additional,commercially viable products,our future prospects
222、will be adversely affected.Market acceptance of our products depends on many factors,including our ability to convinceprospective collaborators and customers that our technology is an attractive alternative to othertechnologies,manufacture products in sufficient quantities and at an acceptable cost
223、and place andservice,directly,or through our strategic alliances,sufficient quantities of our products.In addition,ourtechnology could be harmed by limited funding available for product and technology acquisitions by ourcustomers,as well as internal obstacles to customer approvals of purchases of ou
224、r products.Theindustry is subject to rapid and continuous change arising from,among other things,consolidation andtechnological improvements.One or more of these factors may vary unpredictably,which could17materially adversely affect our competitive position.We may not be able to compete effectively
225、 oradjust our contemplated plan of development to meet changing market conditions.Our business depends significantly on key relationships with third parties which we may not be able toestablish and maintain.Our revenue stream and our business strategy depend in part on our entering into and maintain
226、ingcollaborative or alliance agreements with third parties concerning product marketing as well as researchand development programs.Our ability to enter into agreements with collaborators depends in part onconvincing them that our technology can help achieve and accelerate their goals and strategies
227、.Thismay require substantial time,effort and expense on our part with no guarantee that a strategicrelationship will result.We may not be able to establish or maintain these relationships oncommercially acceptable terms.Our future agreements may not ultimately be successful.Even if weenter into coll
228、aborative or alliance agreements,our collaborators could terminate these agreements orthey could expire before meaningful developmental milestones are reached.The termination orexpiration of any of these relationships could have a material adverse effect on our business.Much of the revenue that we m
229、ay receive under these collaborations will depend upon ourcollaborators ability to successfully commercially introduce,market and sell new products derived fromour products.Our success depends in part upon the performance by these collaborators of theirresponsibilities under these agreements.Some co
230、llaborators may not perform their obligations as we expect.Some of the companies wecurrently have alliances with or are targeting as potential alliances offer products competitive with ourproducts or may develop competitive production technologies or competitive products outside of theircollaboratio
231、ns with us that could have a material adverse effect on our competitive position.Inaddition,our role in the collaborations is mostly limited to the production aspects.As a result,we may also be dependent on collaborators for other aspects of the development,preclinical and clinical testing,regulator
232、y approval,sales,marketing and distribution of our products.Ifour current or future collaborators do not effectively market our products or develop additionalproducts based on our technology,our revenues from sales and royalties will be significantly reduced.The intellectual property rights we rely
233、upon to protect the technology underlying our productsmay not be adequate,which could enable third parties to use our technology or very similar technologyand could reduce our ability to compete in the market.Our ability to compete effectively will depend,in part,on our ability to maintain the propr
234、ietarynature of our technologies and manufacturing processes,which includes the ability to obtain,protectand enforce patents on our technology and to protect our trade secrets.You should not rely on ourpatents to provide us with any significant competitive advantage.Others may challenge our patents
235、and,as a result,our patents could be narrowed,invalidated or rendered unenforceable.Competitors maydevelop products similar to ours which are not covered by our patents.In addition,our current andfuture patent applications may not result in the issuance of patents in the United States or foreigncoun
236、tries.Further,there is a substantial backlog of patent applications at the U.S.Patent andTrademark Office,and the approval or rejection of patent applications may take several years.Our success will depend partly on our ability to operate without infringing or misappropriating the proprietaryrights
237、of others.We may be sued for infringing the intellectual property rights of others.In addition,we may find itnecessary,if threatened,to initiate a lawsuit seeking a declaration from a court that we do not infringethe proprietary rights of others or that these rights are invalid or unenforceable.If w
238、e do not prevail inany litigation,in addition to any damages we might have to pay,we would be required to stop the18infringing activity or obtain a license.Any required license may not be available to us on acceptableterms,or at all.In addition,some licenses may be nonexclusive,and therefore,our com
239、petitors mayhave access to the same technology licensed to us.If we fail to obtain a required license or are unableto design around a patent,we may be unable to sell some of our products,which could have a materialadverse affect on our business,financial condition and results of operations.We may be
240、 involved in lawsuits to protect or enforce our intellectual property rights,which may be expensive.In order to protect or enforce our intellectual property rights,we may have to initiate legalproceedings against third parties,such as infringement suits or interference proceedings.Intellectualproper
241、ty litigation is costly,and,even if we prevail,the cost of such litigation could affect ourprofitability.In addition,litigation is time consuming and could divert management attention andresources away from our business.We may also provoke these third parties to assert claims against us.Our competit
242、ive position is dependent in part upon unpatented trade secrets,which we may not be able toprotect.Our competitive position is also dependent upon unpatented trade secrets.Trade secrets aredifficult to protect.We can not assure you that others will not independently develop substantiallyequivalent p
243、roprietary information and techniques or otherwise gain access to our trade secrets,thatsuch trade secrets will not be disclosed,or that we can effectively protect our rights to unpatentedtrade secrets.In an effort to protect our trade secrets,we have a policy of requiring our employees,consultantsa
244、nd advisors to execute proprietary information and invention assignment agreements uponcommencement of employment or consulting relationships with us.These agreements provide that allconfidential information developed or made known to the individual during the course of theirrelationship with us mus
245、t be kept confidential,except in specified circumstances.There can be noassurance,however,that these agreements will provide meaningful protection for our trade secrets orother proprietary information in the event of the unauthorized use or disclosure of confidentialinformation.We are exposed to a v
246、ariety of risks relating to international sales,including fluctuations inexchange rates,commercial unavailability of,and/or governmental restrictions on access to,foreignexchange and delays in collection of accounts receivable.We generate significant sales outside the United States,a substantial por
247、tion of which areconducted with customers who generate revenue in currencies other than the U.S.dollar.As a result,currency fluctuations between the U.S.dollar and the currencies in which such customers do businessmay impact the demand for our products in foreign countries where the U.S.dollar has i
248、ncreasedcompared to the local currency.We cannot predict the effects of exchange rate fluctuations upon ourfuture operating results because of the number of currencies involved,the variability of currencyexposure and the potential volatility of currency exchange rates.As a result of the announced ac
249、quisition of the NMT businesses,we will generate revenues andincur operating expenses in British pounds sterling.To the extent that we are unable to pay all of suchoperating expenses with revenues generated in British pounds sterling or are required to exchangerevenues generated in British pounds st
250、erling into U.S.dollars,we will experience currency exchangerisk with respect to such British pounds sterling denominated revenues or expenses.Changes in the health care industry may require us to decrease the selling price for our productsor could result in a reduction in the size of the market for
251、 our products,and limit the means by whichwe may discount our products,each of which could have a negative impact on our financialperformance.19Trends toward managed care,health care cost containment,and other changes in government andprivate sector initiatives in the United States and other countri
252、es in which we do business are placingincreased emphasis on the delivery of more cost-effective medical therapies which could adverselyaffect the sale and/or the prices of our products.For example:major third-party payors of hospital services,including Medicare,Medicaid and private healthcare insure
253、rs,have substantially revised their payment methodologies during the last few yearswhich has resulted in stricter standards for reimbursement of hospital charges for certainmedical procedures;Medicare,Medicaid and private health care insurer cutbacks could create downward pricepressure in 20our targ
254、et markets;proposals were adopted recently that will change the reimbursement procedures for the capitalexpenditure portion of the cost of providing care to Medicare patients;numerous legislative proposals have been considered that would result in major reforms in theU.S.health care system that coul
255、d have an adverse effect on our business;there has been a consolidation among health care facilities and purchasers of medical devices inthe United States who prefer to limit the number of suppliers from whom they purchase medicalproducts,and these entities may decide to stop purchasing our products
256、 or demand discounts onour prices;there is economic pressure to contain health care costs in international markets;there are proposed and existing laws and regulations in domestic and international marketsregulating pricing and profitability of companies in the health care industry;and there have be
257、en recent initiatives by third party payors to challenge the prices charged formedical products which could affect our ability to sell products on a competitive basis.Both the pressure to reduce prices for our products in response to these trends and the decreasein the size of the market as a result
258、 of these trends could adversely affect our levels of revenues andprofitability of sales,which could have a material adverse effect on our business.In addition,there are laws and regulations that regulate the means by which companies in thehealth care industry may compete by discounting the prices o
259、f their products.Although we exercisecare in structuring our customer discount arrangements to comply with such laws and regulations,therecan be no assurance that(1)government officials charged with responsibility for enforcing such lawswill not assert that such customer discount arrangements are in
260、 violation of such laws or regulations,or(2)government regulators or courts will interpret such laws or regulations in a manner consistent withour interpretation.Our dependence on suppliers for materials could impair our ability to manufacture our products.Outside vendors,some of whom are sole-sourc
261、e suppliers,provide key components and rawmaterials used in the manufacture of our products.Although we believe that alternative sources forthese components and raw materials are available,any supply interruption in a limited or sole sourcecomponent or raw material could harm our ability to manufact
262、ure our products until a new source ofsupply is identified and qualified.In addition,an uncorrected defect or suppliers variation in acomponent or raw material,either unknown to us or incompatible with our manufacturing process,could harm our ability to manufacture products.We may not be able to fin
263、d a sufficient alternativesupplier in a reasonable time period,or on commercially reasonable terms,if at all,and our ability toproduce and supply our products could be impaired.21If any of our manufacturing facilities were damaged and/or our manufacturing processesinterrupted,we could experience los
264、t revenues and our business could be seriously harmed.We manufacture our products in a limited number of facilities.Damage to our manufacturing,development or research facilities due to fire,natural disaster,power loss,communications failure,unauthorized entry or other events could cause us to cease
265、 development and manufacturing of some orall of our products.We may have significant product liability exposure and our insurance may not cover all potential claims.We face an inherent business risk of exposure to product liability and other claims in the eventthat our technologies or products are a
266、lleged to have caused harm.We may not be able to obtaininsurance for such potential liability on acceptable terms with adequate coverage,or at reasonablecosts.Any potential product liability claims could exceed the amount of our insurance coverage or maybe excluded from coverage under the terms of t
267、he policy.Our insurance,once obtained,may not berenewed at a cost and level of coverage comparable to that then in effect.We are subject to other regulatory requirements relating to occupational health and safety and the use ofhazardous substances which may impose significant compliance costs on us.
268、In addition to the regulatory framework for product approval,manufacturing and marketing,weare and may be subject to regulation under federal and state laws,including requirements regardingoccupational health and safety,laboratory practices,and the use,handling and disposal of toxic orhazardous subs
269、tances.Our research,development and manufacturing processes involve the controlleduse of certain hazardous materials.We are subject to federal,state and local laws and regulationsgoverning the use,manufacture,storage,handling and disposal of such materials and certain wasteproducts.Although we belie
270、ve that our safety procedures for handling and disposing of such materialscomply with the standards prescribed by such laws and regulations,the risk of accidental contaminationor injury from these materials cannot be completely eliminated.In the event of such an accident,wecould be held liable for a
271、ny damages that result and any such liability could exceed the limits or falloutside the coverage of our insurance and could exceed our resources.We may not be able to maintaininsurance on acceptable terms,or at all.We may incur significant costs to comply with environmentallaws and regulations in t
272、he future.We may also be subject to other present and possible future local,state,federal and foreign regulations.Future sales of our common stock may depress our stock price.Sales of our common stock,or the perception that such sales could occur,could cause the marketprice of our common stock to de
273、cline and impair our ability to raise additional capital in the futurethrough the sale of equity securities.The loss of key personnel could harm our business.We believe our success depends on the contributions of a number of our key personnel,includingStuart M.Essig,President and Chief Executive Off
274、icer of Integra.If we lose the services of keypersonnel,that loss could materially harm our business.We maintain key person life insurance onMr.Essig.In addition,recruiting and retaining qualified personnel will be critical to our success.Thereis a shortage in the industry of qualified management an
275、d scientific personnel,and competition forthese individuals is intense.There can be no assurance that we will be able to attract additional andretain existing personnel.22Our stock price may continue to be highly volatile and our stockholders may not be able to resell their sharesat or above the pri
276、ce they paid for them.The stock market in general,and the stock prices of medical device companies,biotechnologycompanies and other technology-based companies in particular,have experienced significant volatilitythat often has been unrelated to the operating performance of and beyond the control of
277、any specificpublic companies.The market price of Integra common stock has fluctuated widely in the past and islikely to continue to fluctuate in the future.Factors that may have a significant impact on the marketprice of Integra common stock include:shortfall in our revenues or earnings relative to
278、the levels expected by securities analysts;future announcements concerning Integra or its competitors,including the announcement ofacquisitions;changes in the prospects of our business partners or suppliers;developments regarding our patents or other proprietary rights or those of our competitors;qu
279、ality deficiencies in our products;competitive developments,including technological innovations by us or our competitors;government regulation,including the FDAs review of our products and developments;changes in recommendations of securities analysts and rumors that may be circulated aboutIntegra o
280、r our competitors;public perception of risks associated with our operations;conditions or trends in the medical device and biotechnology industries;additions or departures of key personnel;and sales of our common stock.Any of these factors could immediately,significantly and adversely affect the tra
281、ding price ofIntegra common stock.We do not intend to pay dividends in the foreseeable future.We do not anticipate paying any cash dividends on our common stock in the foreseeable future.We intend to retain future earnings to fund our growth.Accordingly,our stockholders will not receive areturn on t
282、heir investment in our common stock through the payment of dividends in the foreseeablefuture and may not realize a return on their investment even if they sell their shares.As a result,ourstockholders may not be able to resell their shares at or above the price they paid for them.Any futurepayment
283、of dividends to our stockholders will depend on decisions that will be made by our board ofdirectors and will depend on then existing conditions,including our financial condition,contractualrestrictions,capital requirements and business prospects.Our major stockholders could make decisions adverse t
284、o the interests of other stockholders.The Companys directors and executive officers and affiliates of certain directors own or control amajority of the outstanding voting securities of the Company and are generally able to elect alldirectors,to determine the outcome of corporate actions requiring st
285、ockholder approval and otherwiseto control the business.Such control could preclude any unsolicited acquisition of Integra andconsequently adversely affect the market price of the common stock.Furthermore,we are subject toSection 203 of the Delaware General Corporation Law,which could have the effec
286、t of delaying orpreventing a change of control.Year 2000 related system failures or malfunctions could harm our business.As of the date of this report,our systems have operated without any apparent Year 2000 relatedproblems and appear to be Year 2000 compliant.We are not aware that any of our primar
287、y vendors orsystems maintained by third parties have experienced significant Year 2000 compliance problems.However,while no such problem has been discovered as of the date of this report,Year 2000 issuesmay not become apparent immediately and,therefore,Integra may be affected in the future.We willco
288、ntinue to monitor the issue and work to remediate any Year 2000 issues that may arise.Item 2.PropertiesOur principal executive offices are located in Plainsboro,New Jersey.Principal manufacturing andresearch facilities are located in Plainsboro,New Jersey,San Diego,California and Anasco,PuertoRico.I
289、n addition,we lease several smaller facilities to support additional administrative and storageoperations.Our total manufacturing and research space approximates 82,000 square feet.Our IntegraLifeSciences products are manufactured in and distributed through the Plainsboro facility.Our IntegraNeuroSc
290、iences products are manufactured in the Plainsboro,San Diego and Anasco facilities and aredistributed through the Plainsboro and San Diego facilities.In March 2000,we leased a warehousefacility in Cranbury,New Jersey that will serve as the national distribution center for all of ourproducts in the U
291、nited States.In connection with the acquisition of the business,including certainassets and liabilities,of Clinical Neuro Systems in January 2000,we assumed a lease for an FDAregistered and inspected manufacturing facility in Exton,Pennsylvania.All of our facilities are leased.All of our manufacturi
292、ng and distribution facilities are FDA registered and inspected.We believethat our manufacturing facilities are suitable for their intended purposes and have capacities adequatefor current and projected needs for existing products.Some capacity of the plants is being converted,with any needed modifi
293、cation,to meet the current and projected requirements of existing and futureproducts.Item 3.Legal ProceedingsIn July 1996,the Company filed a patent infringement lawsuit in the United States District Courtin San Diego against Merck KGaA,a German corporation,Scripps Research Institute,a Californianon
294、profit corporation,and David A.Cheresh,Ph.D.,a research scientist with Scripps seeking damagesand injunctive relief.The complaint charged,among other things,that the defendant Merck KGaAwillfully and deliberately induced,and continues to willfully and deliberately induce,defendants ScrippsResearch I
295、nstitute and Dr.David A.Cheresh to infringe certain of the Companys patents.Thesepatents are part of a group of patents granted to The Burnham Institute and licensed by the Companythat are based on the interaction between a family of cell surface proteins called integrins and thearginine-glycine-asp
296、artic acid(known as RGD)peptide sequence found in many extracellular matrixproteins.The defendants filed a countersuit asking for an award of defendants reasonable attorneyfees.In March 2000 a jury returned a verdict,finding that Merck KGaA had willfully inducedinfringement of the Companys patents a
297、nd awarded the Company$15.0 million in damages,which maybe adjusted by the court.The Company expects that post-trial motions will be filed,and that MerckKGaA will appeal various decisions of the court and request a new trial,a reduction in damages,or ajudgment as a matter of law notwithstanding the
298、verdict.We cannot accurately predict the ultimateresolution of this matter and have not reflected the verdict in our financial statements.Bruce D.Butler,Ph.D.,Bruce A.McKinley,Ph.D.,and C.Lee Parmley(the Optex Claimants),each parties to a Letter Agreement(the Letter Agreement)with Camino NeuroCare,I
299、nc.(Camino)dated as of December 18,1996,have alleged that Camino breached the terms of theLetter Agreement prior to our acquisition of the NeuroCare Group(Caminos prior parent company).The Letter Agreement contains arbitration provisions and Integra and the Optex Claimants have23agreed to negotiate
300、rather than seek arbitration for a limited time.While we believe that Camino hasvalid legal and factual defenses,the Optex Claimants have asserted unspecified significant damages,and we believe that the Optex Claimants are likely to pursue arbitration under the Letter Agreement ifthe matter is not s
301、ettled otherwise.We cannot predict the outcome of such an arbitration,were it totake place.In addition,we have asserted a right to indemnification from the seller of the NeuroCarebusinesses,but there can be no assurance that indemnification,if any,will be obtained.The Company is also subject to othe
302、r claims and lawsuits in the ordinary course of its business.Inthe opinion of management,such other claims are either adequately covered by insurance or otherwiseindemnified,and are not expected,individually or in the aggregate,to result in a material adverseeffect on the financial condition of the
303、Company.The Companys financial statements do not reflectany material amounts related to possible unfavorable outcomes of the matters above or others.However,it is possible that the Companys results of operations,financial position and cash flows in aparticular period could be materially affected by
304、these contingencies.Item 4.Submission of Matters to A Vote of Security HoldersNo matters were submitted to a vote of security holders during the fourth quarter of the fiscal yearcovered by this report.Additional Information:The following information is furnished in this Part I pursuant to Instructio
305、n 3 to Item 401(b)ofRegulation S-K.Executive OfficersThe executive officers of the Company serve at the discretion of the Board of Directors.The onlyfamily relationship between any of the executive officers and directors of the Company is thatMr.Holtz is the nephew of Richard E.Caruso,Ph.D.,who is C
306、hairman of the Companys Board ofDirectors.The following information indicates the position and age of the Companys executive officersas of the date of this report and their previous business experience.NameAgePositionStuart M.Essig,Ph.D.38President and Chief Executive OfficerGeorge W.McKinney,III,Ph
307、.D.56Executive Vice President and Chief OperatingOfficerJohn B.Henneman,III.38Senior Vice President,Chief AdministrativeOfficer and General CounselJudith E.OGrady.49Senior Vice President,Regulatory,QualityAssurance and Clinical AffairsMichael D.Pierschbacher,Ph.D.48Senior Vice President Research and
308、Development,General Manager,CorporateResearch CenterDavid B.Holtz.33Vice President,Finance and TreasurerStuart M.Essig,Ph.D.has served as President and Chief Executive Officer and a director of theCompany since December 1997.Before joining the Company,Mr.Essig supervised the medicaltechnology practi
309、ce at Goldman,Sachs&Co.as a managing director.Mr.Essig had ten years of broadhealth care experience at Goldman Sachs serving as a senior merger and acquisitions advisor to a broadrange of domestic and international medical technology,pharmaceutical and biotechnology clients.Mr.Essig received an A.B.
310、degree from the Woodrow Wilson School of Public and InternationalAffairs at Princeton University and an MBA and a Ph.D.degree in Financial Economics from the24University of Chicago,Graduate School of Business.Mr.Essig also serves on the Board of Directors ofVital Signs Incorporated and St.Jude Medic
311、al Corporation.George W.McKinney,III,Ph.D.has served the Company as Vice Chairman,Executive VicePresident and Chief Operating Officer since May 1997 and as a member of the Board of Directorssince December 1992.Between 1990 and 1997,Dr.McKinney was Managing Director of BeaconVenture Management Corpor
312、ation,a venture capital firm.Between 1992 and 1997,Dr.McKinney alsoserved as President and Chief Executive Officer of Gel Sciences,Inc.and GelMed,Inc.,a privatelyheld specialty materials firm with development programs in both the industrial and medical productsfields.From 1983 to 1989,Dr.McKinney wa
313、s a Managing Director at American Research&Development,a venture capital firm.Between 1986 and 1989,he also served as President and ChiefExecutive Officer of American Superconductor,Inc.,a development stage firm in the specialtymaterials field.From 1965 to 1983,Dr.McKinney worked for Corning Glass W
314、orks(now Corning,Inc.),a specialty materials firm,in a variety of manufacturing,engineering,and financial positions.AtCorning,he served as President of Corning Designs,a subsidiary which he founded,as Secretary to theManagement Committee,as Director of Business Development and Planning,as Treasurer,
315、International,as Assistant Treasurer,Domestic,and as Financial and Control Manager for theEngineering Division.Dr.McKinney holds an S.B.in Management from MIT and a Ph.D.in StrategicPlanning from Stanford University.John B.Henneman,III is the Companys Senior Vice President,Chief Administrative Offic
316、er andGeneral Counsel.Prior to joining the Company in August 1998,Mr.Henneman served NeuromedicalSystems,Inc.,a public company developer and manufacturer of in vitro diagnostic equipment,invarious capacities for more than four years.From 1994 until June 1997,Mr.Henneman was VicePresident of Corporat
317、e Development,General Counsel and Secretary.From June 1997 throughNovember 1997,he served in the additional capacity of interim Co-Chief Executive Officer and fromDecember 1997 to August 1998 Mr.Henneman was Executive Vice President,US Operations,andChief Legal Officer.In March 1999,Neuromedical Sys
318、tems,Inc.filed a petition under Chapter 11 ofthe federal bankruptcy laws.From 1986 to 1994,Mr.Henneman practiced law in the CorporateDepartment of Latham&Watkins(Chicago,Illinois).Mr.Henneman received his A.B.(Politics)fromPrinceton University in 1983 and his J.D.from the University of Michigan Law
319、School in 1986.Judith E.OGrady,Senior Vice President of Regulatory Affairs,Quality Assurance and ClinicalResearch,has served the Company since 1985.Ms.OGrady has worked in the areas of medical devicesand collagen technology for over 20 years.Prior to joining the Company,Ms.OGrady worked forColla-Tec
320、,Inc.,a Marion Merrell Dow Company.During her career Ms.OGrady has held positionswith Surgikos,a Johnson&Johnson company,and was on the faculty of Boston University College ofNursing and Medical School.Ms.OGrady obtained the FDA approval for INTEGRAs Artificial Skin,the first regenerative product ap
321、proved by the FDA.She also has obtained approvals for several otherproduct lines for the Company.In addition,Ms.OGrady obtained the CE Mark Certification forapprovals in the European Union as well as a multitude of other international approvals.She has beenpivotal in the ISO 9001 Certification of th
322、e Company.She is a member of the NIST group onstandards for clinical outcomes as well as on the Board of Directors for the New Jersey League ofNursing.Ms.OGrady has presented professional programs and lectures,both nationally andinternationally.She received her BS degree from Marquette University an
323、d MSN in Nursing fromBoston University.Michael D.Pierschbacher,Ph.D.joined the Company in October 1995 as Senior Vice President,Research and Development.In May 1998 he was named Senior Vice President and Director of theCorporate Research Center.From June 1987 to September 1995,Dr.Pierschbacher serve
324、d as SeniorVice President and Scientific Director of Telios Pharmaceuticals,Inc.(Telios)which was acquired bythe Company in connection with the reorganization of Telios under Chapter 11 of the federal25bankruptcy code.He was a co-founder of Telios in May 1987 and is the co-discoverer and developer o
325、fTelios matrix peptide technology.Before joining Telios as a full-time employee in October 1988,he wasa staff scientist at the Burnham Institute for five years and remained on staff there in an adjunctcapacity until the end of 1997.He received his post-doctoral training at Scripps Clinical and Resea
326、rchFoundation and at the Burnham Institute.Dr.Pierschbacher received his Ph.D.in Biochemistry fromthe University of Missouri.David B.Holtz joined the Company as Controller in 1993 and has served as Vice President,Finance and Treasurer since March 1997.His responsibilities include managing all accoun
327、ting andinformation systems functions.Before joining the Company,Mr.Holtz was an associate with Coopers&Lybrand,L.L.P.in Philadelphia and Cono Leasing Corporation,a private leasing company.Hereceived a BS degree in Business Administration from Susquehanna University in 1989 and has beencertified as
328、a public accountant.PART IIItem 5.Market for Registrants Common Equity and Related Stockholder MattersThe Companys Common Stock trades on The Nasdaq National Market under the symbol IART.The following table represents the high and low sales prices for the Companys Common Stock foreach quarter for th
329、e last two years.All outstanding common share and per share amounts have beenretroactively adjusted to reflect a one-for-two reverse stock split of the Companys Common Stock onMay 18,1998.HighLow1999First Quarter.$5.188$3.00Second Quarter.$7.50$3.875Third Quarter.$10.375$5.625Fourth Quarter.$6.4375$
330、5.3751998First Quarter.$10.75$8.125Second Quarter.$9.75$6.125Third Quarter.$8.00$4.375Fourth Quarter.$5.25$3.25The closing price for the Common Stock on March 24,2000 was$14.75.For purposes ofcalculating the aggregate market value of the shares of Common Stock of the Company held by non-affiliates,a
331、s shown on the cover page of this report,it has been assumed that all the outstanding shareswere held by non-affiliates except for the shares held by directors and executive officers of theCompany and stockholders owning 10%or more of outstanding shares.However,this should not bedeemed to constitute
332、 an admission that all such persons are,in fact,affiliates of the Company.Furtherinformation concerning ownership of the Companys Common Stock by executive officers,directors andprincipal stockholders will be included in the Companys definitive proxy statement to be filed with theSecurities and Exch
333、ange Commission.The Company does not currently pay any cash dividends on its Common Stock and does notanticipate paying as such dividends in the foreseeable future.The number of stockholders of record as of March 24,2000 was approximately 850,which includesstockholders whose shares were held in nominee name.The number of beneficial stockholders at thatdate was over 6,700.26Item 6.Selected Financia
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