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1、INTEGRA LIMITS UNCERTAINTYFor InvestorsFor HospitalsFor SurgeonsFor Patients2014 Annual ReportTotal RevenuesSelected Financial Data:2014 Revenues by Geographic AreaUnited StatesEuropeRest of World2014 Revenues by SegmentSegment%of Total Revenues Key Product Areas 2014 RevenuesU.S.NeurosurgeryU.S.Ins
2、trumentsU.S.ExtremitiesU.S.Spine&OtherInternational26%17%15%19%23%Regenerative solutions for dural repair;tissue ablation,cranial positioning,neuro critical careSpecialty hand-held surgical instruments for the hospital and offi ce-based sett ings;surgical headlights,retractorsRegenerative solutions
3、for nerve,tendon,skin and wound;fi xation and joint replacement in small bone orthopedicsSpinal fusion hardware;orthobiologics;private label*Select product lines from each of Neurosurgery,Instruments,Extremities and Spine$245 Million$158 Million$143 Million$171 Million$211 MillionAbout IntegraRegion
4、2014 Revenues$714 Million$106 Million$108 MillionOperating Cash FlowDiluted Earnings Per ShareIn 2012,we generated$59.1 million in cash fl ows from operations,which was reduced by a$29.8 million tax withholding payment in connection with the release of certain deferred stock units and$30.6 million o
5、f accreted interest paid at the maturity of our 2012 Senior Convertible Note.*Revised for accounting principle change for the medical device excise tax.*Integra LifeSciences,a world leader in medical technology,is dedicated to limiting uncertainty for caregivers,so they can concentrate on providing
6、the best patient care.Founded in 1989 and headquartered in Plainsboro,NJ Employs approximately 3,400 employees worldwide Traded on NASDAQ under IARTIntegra strives to grow profi tably through the Execute,Optimize and Accelerate Growth strategy,off ering innovative solutions,including leading regener
7、ative technologies,in specialty surgical solutions,orthopedics and tissue technologies,and orthobiologics and spinal fusion hardware.To Our Stockholders:Twenty-five years ago,Dr.Richard Caruso established Integra with a vision of using regenerative medicineproducts to help heal and regenerate tissue
8、,and his dream has been realized.Today,Integra is a leading medicaltechnology company providing solutions for a broad number of orthopedic,tissue and surgical specialties,with asignificant portion of our revenue coming from products that help heal and regenerate tissue.Over the last few years,we hav
9、e implemented our strategy to optimize our Company,execute consistentlyand accelerate growth.During 2014,we made significant progress on each of these fronts,and I believe we are atan exciting and pivotal point in our transformation.2014 Highlights2014 was a successful year,with accomplishments span
10、ning the breadth of the organization.We:Grew our revenue to$928 million(14%growth constant currency);Worked to address the FDA Warning Letter related to our Aasco,Puerto Rico manufacturing facility,which resulted in a successful resolution in January 2015;Realigned our five business segments into a
11、simplified,three-divisional global structure with greaterfocus on international expansion;Announced plans to spin off the spine business,which we believe will allow both companies(Integraand the new SeaSpine)to drive better results and grow faster;Completed three acquisitions during the year,includi
12、ng the DuraSeal product line,MicroFrance andXomed manual ENT and laparoscopy manual instruments,and Metasurg foot and ankle productportfolio;Announced the expansion and extension of our credit facility,which provides Integra with up to$900million of borrowing capacity,enabling increased M&A activity
13、;Appointed several new senior executives,including a Chief Financial Officer,Chief Scientific Officer,and President of the Orthopedics and Tissue Technologies division;Advanced the development of our diabetic foot ulcer(DFU)strategy,including the submission of theclinical study results to a peer-rev
14、iewed journal,which we expect to be published later in 2015;Launched several significant products,including a reverse shoulder,a new total foot system,and a“thin”version of our IntegraWound Matrix;Increased investments in our channel strategy and business to expand our presence in extremities andsup
15、port demand for our skin product,strengthening International infrastructure with in-countrymanagers,and enhancing our Enterprise selling efforts with dedicated account managers;Initiated our global enterprise resource management system,reducing the number of operating systemsfrom 27 to 11;andFinaliz
16、ed our new state-of-the-art Collagen Manufacturing Center in Plainsboro,New Jersey,andclosed two facilities in Burlington,Massachusetts and Andover,England.Community and PhilanthropyIntegra continued its tradition of giving back.The Company and its colleagues contributed to several localcommunities
17、and causes,including breast cancer,diabetes and multiple sclerosis.Integra donated products,valued at over$60 million,to surgical missions and educational efforts,and made a$25,000 grant to theWounded Warriors Project.The Integra Foundation made grants totaling almost$400,000,in support ofcharitable
18、,research and educational programs.Executing Our Growth StrategyDuring 2014,we made significant progress toward achieving our long-term goals.We created an office of the Chief Scientific Officer,to better prioritize and balance the needs of near-termand long-term product development and clinical pri
19、orities.We also created Global Franchise Leaders and madekey talent moves both within and outside the United States,to leverage our market leadership positions in theU.S.and establish a stronger presence in fast-growing international markets.We established an Enterprise Sales Organization and advanc
20、ed our IDN and government accounts strategy.This group will focus on executive-level sales for group purchasing organizations,integrated delivery networksand government programs.We are already beginning to see success with multiple new contracts to supplyproducts to a broader customer base.We contin
21、ued to advance our IntegraDermal Regeneration Template for the treatment of DFU towardproduct commercialization.In January 2015,we filed a Premarket Approval(PMA)Supplement application withthe U.S.Food and Drug Administration(FDA)for this new indication of use.If approved,we are hopeful thatIntegra
22、will be able to offer a leadership therapy to help surgeons and patients achieve closure of these difficult-to-heal wounds,with commercialization in 2016.We introduced a new“thin”version of our Integra Wound Matrix,which can be used on a broad number ofwounds and has particular advantages for second
23、 degree burns.We launched our reverse shoulder,furtherbuilding out our upper extremities portfolio and entering a new$700 million market.In January 2015,we announced the resolution of an FDA Warning Letter at our Aasco,Puerto Ricomanufacturing facility.Over the last two years,we have made significan
24、t quality improvements and gainedmanufacturing efficiencies.We completed construction and began pilot production runs in our new CollagenManufacturing Center.This state-of-the-art facility provides us with capacity to meet the expected future demandfor our collagen-based products.In May 2014,we bega
25、n the successful roll-out of our Enterprise Resource Planning system,and by year-end,over 80%of the companys revenue base was up and running on this system.These changes position us wellto accelerate growth over the next few years.Executing Our Optimization StrategyIn November 2014,we announced the
26、creation of a simplified,three-division global corporate structure withgreater focus on international growth,and aligned our resources to our divisions,increasing our ability to makefaster,more customer-focused decisions.We combined our Neurosurgery and Instruments businesses into thenewly created S
27、pecialty Surgical Solutions segment,which we believe will give us the focus and expertise toaccelerate growth both organically and by leveraging adjacent market opportunities within these businesses.Earlier in the year,we created the Orthopedics and Tissue Technologies division to focus on wound car
28、eand upper and lower extremities applications,and expand on our regenerative capabilities.We expect toaccelerate growth by increasing our investments in both channel and R&D in these two clinical areas.We also announced plans to spin off the third division,our Spine hardware and orthobiologics busin
29、ess,toexisting shareholders as part of a tax-free distribution.As a pure-play spine company,the new SeaSpine willhave a compelling portfolio of hardware products and a market leading portfolio of orthobiologic solutions.Webelieve that an independent company will create more shareholder value,and tha
30、t both companies will growfaster separately than they would together.Ultimately,it is our colleagues who make a company,and through their commitment and hard work,aresimplifying many of our processes and increasing our efficiency.We remain dedicated to their ongoingdevelopment and training,and to em
31、powering them to work together on our important,ongoing initiatives.Looking AheadFollowing the significant number of accomplishments of 2014,we are optimistic about our prospects for2015.We are developing new products and entering new markets,and are on our way to achieving our long-termgrowth and p
32、rofitability objectives sooner than 2018.None of this would be possible without the dedication and commitment of our hardworking colleagues atIntegra.I want to thank them for the great accomplishments they have made this year,for Integra and ultimately,for patients.They have embraced change and rise
33、n to the numerous challenges before them,and I am grateful fortheir ongoing support of our company and our mission.I would also like to thank you,our investors,for your continued support.Together,we have built a strongfoundation,and I look forward to the opportunities ahead of us.I am truly proud to
34、 be part of an organization that makes such a positive improvement in the lives ofmillions of patients around the world.Sincerely,Peter ArduiniPresident and Chief Executive OfficerSTOCK PERFORMANCE GRAPHThe following line graph and table compare,for the period from December 31,2009 through December
35、31,2014,the yearly change in the cumulative total stockholder return on the Companys common stock with thecumulative total return of the Nasdaq U.S.Benchmark TR Index and the Nasdaq Medical Equipment(Subsector).The graph assumes that the value of the investment in the Companys common stock and there
36、levant index was$100 at December 31,2009 and that all dividends were reinvested.The closing market priceof the Companys common stock on December 31,2014 was$54.23 per share.Comparison of Five Year Cumulative Total ReturnValue of Investment of$100 on December 31,2009200920102011201220132014$0$50$100$
37、150$200$250Integra LifeSciences Holdings CorporationNASDAQ Medical Equipment(Subsector)NASDAQ US Benchmark TR IndexComparison of Cumulative Total Return among Integra LifeSciences Holdings Corporation,the Nasdaq Medical Equipment(Subsector)and the Nasdaq US Benchmark TR Index12/0912/1012/1112/1212/1
38、312/14Integra LifeSciences Holdings Corporation$100$128$84$106$129$147NASDAQ Medical Equipment(Subsector)$100$105$104$119$166$205NASDAQ US Benchmark TR Index$100$118$118$137$183$206The graph and table above depict the past performance of the Companys stock price.The Company neithermakes nor endorses
39、 any predictions as to future stock performance.UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWASHINGTON,DC 20549FORM 10-K(Mark One)ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31,2014orTRANSITION REPORT PURSUANT TO SECTION 1
40、3 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period fromtoCOMMISSION FILE NO.0-26224INTEGRA LIFESCIENCES HOLDINGS CORPORATION(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)DELAWARE51-0317849(STATE OR OTHER JURISDICTION OFINCORPORATION OR ORGANIZATION)(I.R.S.EMPLOYERIDENT
41、IFICATION NO.)311 ENTERPRISE DRIVEPLAINSBORO,NEW JERSEY08536(ZIP CODE)(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)REGISTRANTS TELEPHONE NUMBER,INCLUDING AREA CODE:(609)275-0500SECURITIES REGISTERED PURSUANT TO SECTION 12(b)OF THE ACT:Title of Each ClassName of Exchange on Which RegisteredCommon Stock,Pa
42、r Value$.01 Per ShareThe Nasdaq Stock Market LLCSECURITIES REGISTERED PURSUANT TO SECTION 12(g)OF THE ACT:NONEIndicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the SecuritiesAct.Yes No Indicate by check mark if the registrant is not required to file r
43、eports pursuant to Section 13 or 15(d)of theSecurities Exchange Act.Yes No Indicate by check mark whether the registrant:(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12 months(or for such shorter period that the regis
44、trantwas required to file such reports),and(2)has been subject to such filing requirements for the past90 days.Yes No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site,ifany,every Interactive Data File required to be submitted and posted
45、pursuant to Rule 405 of Regulation S-T(232.405of this chapter)during the preceding 12 months(or for such shorter period that the registrant was required to submitand post such files).Yes No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contai
46、nedherein,and will not be contained,to the best of registrants knowledge,in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.Indicate by check mark whether the registrant is a large accelerated filer,an accelerated f
47、iler,a non-acceleratedfiler or a smaller reporting company.See the definitions of“large accelerated filer”,“accelerated filer”and“smallerreporting company”in Rule 12b-2 of the Exchange Act.(Check one):Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting company(Do not check
48、 if a smaller reporting company)Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the ExchangeAct).Yes No As of June 30,2014,the aggregate market value of the registrants common stock held by non-affiliates wasapproximately$1,182.3 million based upon the cl
49、osing sales price of the registrants common stock on The NasdaqGlobal Market on such date.The number of shares of the registrants Common Stock,$0.01 par value,outstanding asof February 25,2015 was 32,778,546.DOCUMENTS INCORPORATED BY REFERENCE:Certain portions of the registrants definitive proxy sta
50、tement relating to its scheduled May 22,2015 AnnualMeeting of Stockholders are incorporated by reference in Part III of this report.INTEGRA LIFESCIENCES HOLDINGS CORPORATIONTABLE OF CONTENTSPagePART IItem 1.Business.1Item 1A.Risk Factors.13Item 1B.Unresolved Staff Comments.31Item 2.Properties.31Item
51、 3.Legal Proceedings.31Item 4.Mine Safety Disclosures.32PART IIItem 5.Market for Registrants Common Equity,Related Stockholder Matters and Issuer Purchasesof Equity Securities.33Item 6.Selected Financial Data.34Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operatio
52、ns.35Item 7A.Quantitative and Qualitative Disclosures About Market Risk.61Item 8.Financial Statements and Supplementary Data.62Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosures.62Item 9A.Controls and Procedures.62Item 9B.Other Information.63PART IIIItem 10.
53、Directors,Executive Officers and Corporate Governance.64Item 11.Executive Compensation.64Item 12.Security Ownership of Certain Beneficial Owners and Management and Related StockholderMatters.64Item 13.Certain Relationships,Related Transactions,and Director Independence.64Item 14.Principal Accountant
54、 Fees and Services.64PART IVItem 15.Exhibits and Financial Statements Schedules.65SIGNATURES.79PART IITEM 1.BUSINESSOVERVIEWThe terms“we,”“our,”“us,”“Company”and“Integra”refer to Integra LifeSciences Holdings Corporation,a Delaware corporation,and its subsidiaries,unless the context suggests otherwi
55、se.Integra,headquartered in Plainsboro,New Jersey,is a world leader in medical technology.The Companyemploys approximately 3,400 people around the world who are dedicated to limiting uncertainty for surgeons,sothat they can concentrate on providing the best patient care.Integra offers innovative sol
56、utions,including leadingregenerative technologies,specialty surgical solutions,orthopedics and tissue technologies,and spine hardwareand orthobiologics.Revenues grew to$928.3 million in 2014,an increase of 11%from$836.2 million in 2013.Integra was founded on a technology platform to repair and regen
57、erate tissue with engineered collagendevices.The Company has developed numerous product lines for applications ranging from burn and deep tissuewounds to regeneration of dura mater in the brain and repair of nerve and tendon.Over the past 25 years,Integrahas grown by building upon this core regenera
58、tive technology,acquiring businesses in markets with overlappingcustomer bases,and developing products to further meet the needs of our target customers.VISIONWe aspire to be a multi-billion dollar,diversified global medical technology company that helps patients bylimiting uncertainty for medical p
59、rofessionals,and is a high quality investment for shareholders.We will achievethese goals by delivering on our Brand Promises to our customers worldwide and by becoming a top player in allmarkets in which we compete.STRATEGYOur strategy is built around three pillarsoptimize,execute,and accelerate gr
60、owth.These three pillarssupport our strategic initiatives to optimize our infrastructure,deliver on our commitments through improvedplanning and communication,and grow by introducing new products to the market through internal development,geographic expansion,and strategic acquisitions.This is an es
61、sential strategic approach for two reasons.First,the costs inherent in operating a medicaltechnology company have increased at an accelerating rate in recent years and continue to rise.Scale is thereforecorrelated with rates of profitability in our industry.Second,our operating footprint is more com
62、plex and lessefficient than it needs to be,in part because we have not taken full advantage of the more than 40 acquisitions inour history.While we have demonstrated that we can quickly and profitably integrate new products andbusinesses,and have an active program to evaluate similar opportunities,w
63、e must simplify our structure andprocesses into singular,common systems in order to continue to add scale efficiently and profitably.To that end,our executive leadership team has set forth several near-term objectives aligned to this strategy:Portfolio Optimization.Our investments in innovative prod
64、uct development should result in a multi-generational pipeline for our key products.Consistent with Integras competitive advantage,our productdevelopment efforts,which are now under the leadership of our new Chief Scientific Officer,will focus onregenerative technologies and other projects with the
65、potential for significant returns on investment.We are alsofunding clinical evidence to support successful launches and improved reimbursement for existing products.These recent planning efforts have contributed to a much more active schedule of product launches for 2015.Further,we are focusing the
66、investments we make into core strategic areas,and to that end,we decided in 2014to spin-off our spine business.We also continue to identify low-growth,low-margin products and productfranchises for discontinuation and will continue to look at other ways of optimizing our portfolio.1Geographic Expansi
67、on.We generate less than one quarter of our revenues from markets outside theUnited States,whereas most large medical technology companies produce around half of their revenuesinternationally.We therefore see an opportunity to accelerate revenue growth by increasing our internationalpresence.We are
68、securing ownership or other control of our product registrations and distribution system,andexpanding our commercial infrastructure in key markets.We also have a prioritized plan for registering andlaunching our existing products in countries where we already have some selling presence,but are missi
69、ng keyleading brands.We expect the commercial focus on key markets and a mix of products that carry both highmargins and relevant price points to increase our international business to a larger proportion of our overallrevenues.Strategic Corporate Development.Over the years,we have successfully acqu
70、ired and in-licensedbusinesses,products and technologies to grow our business.Our corporate development program is a corecompetency,and an important part of our strategy is to continue to pursue strategic transactions and licensingagreements to increase scale.Heading into 2015,integrating the MicroF
71、rance and Metasurg acquisitions will be akey objective,as will identifying additional opportunities.Acquisitions,in particular,may expand internationaldistribution,add a technology,increase the scale of one of our current portfolios,or provide access into anadjacent growth area.We focus our efforts
72、on the clinical areas of wound care,small bone orthopedics,andspecialty surgical applications.In addition to acquisitions,we will be investing in targeted additions to our salesorganization to improve market coverage.Our corporate development capabilities are increasingly important toremain competit
73、ive in todays environment.Structural Cost Reduction.Our manufacturing and distribution footprint is larger and more complex than itneeds to be.Over the past three years,we have closed six manufacturing facilities and consolidated thoseactivities into existing sites.We have ongoing efforts in place t
74、o generate higher marginal profit and increasecash flow by continuing to optimize our manufacturing and distribution operations.In addition,we have acentrally led strategic sourcing and procurement effort,which has lowered our direct costs for certain purchasedgoods.We expect this strategy to lower
75、our costs further and to reduce our expenditures on goods and services.In conjunction with these activities,we are optimizing our inventory planning to increase cycles and decreaseworking capital requirements.In November 2014 we also announced plans to operate in three global divisionsbeginning in 2
76、015 reducing to two after the spin-off of the spine business,which is a reduction from five.Thisshould create efficiencies in several support function areas,and,also should drive cost savings and improve ourcash flows.Common Systems Implementations.Our initiatives rely upon the reduction of complex
77、processes across ourglobal operations.In 2014,we successfully placed approximately 80%of our revenues onto a common enterpriseresource planning system(“ERP”).In 2015,we aim to bring more of our manufacturing operations onto the sameERP system.This effort will provide more useful management informati
78、on and much reduced administrativecomplexity.We also are building a common corporate quality system,which will enable a consistent approachacross locations,reduce redundancies,and increase overall efficiency in this important function.Finally,we made three key executive hires during 2014Mark Augusti
79、,President,Orthopedics and TissueTechnologies;Ken Burhop,Chief Scientific Officer;and Glenn Coleman,Chief Financial Officer.In addition,we are investing in training programs to develop our leadership deeper in the organization.These initiatives,investments,and talent development efforts will strengt
80、hen the foundation necessary to support a faster growing,multi-billion dollar global medical technology company.Our strategy to execute,optimize and accelerate growthwill enable us to become a company that helps limit uncertainty for our customers and touches millions ofpatients each year,while driv
81、ing returns for our shareholders.BUSINESS SEGMENTSWe currently manufacture and sell our products in the following five reportable business segments:U.S.Neurosurgery,U.S.Extremities,U.S.Instruments,U.S.Spine and Other,and International.We includedfinancial information regarding our reportable busines
82、s segments and certain geographic information under2“Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations”and inNote 14,“Segment and Geographic Information”to our consolidated financial statements.U.S.NeurosurgeryOur U.S.Neurosurgery sales organization sells a
83、full line of products specifically for neurosurgery andneuro critical care.We have products for each step of a cranial procedure and the care of the patient aftersurgery.Our key products include dural repair products(both dural closure and dural sealants),tissueablation equipment,intracranial monito
84、ring equipment,cranial stabilization equipment,and cerebral spinalfluid management devices.We sell equipment used in the neurosurgery operating room and neurosurgeryintensive care unit.We sell our products through directly employed sales representatives.U.S.ExtremitiesExtremity reconstruction is a g
85、rowing area of the orthopedic market.We define extremityreconstruction to mean the repair of soft tissue and the orthopedic reconstruction of bone in the foot,ankleand leg below the knee(Lower Extremity),and the hand,wrist,elbow and shoulder(Upper Extremity).Ourkey regenerative technologies provide
86、treatment of acute and chronic wounds,peripheral nerve repair andprotection and tendon repair,and bone graft substitutes.Our hardware products include bone and jointfixation devices,implants and instruments for osteoarthritis,rheumatoid arthritis,wrist and shoulderarthroplasty,carpal tunnel syndrome
87、,and cubital tunnel syndrome.We sell our products through a largedirect sales organization and through specialty distributors focused on their respective surgical disciplines.U.S.InstrumentsOur U.S.Instruments business is among the largest surgical instrument suppliers in the United States.Our portf
88、olio includes over 60,000 instrument patterns and surgical products sold into a broad universe ofusers,including hospitals,surgery centers,and physician,dental and veterinary offices.In addition to sellinghand-held instruments,we sell surgical headlight systems and table-mounted retractors.While we
89、reach theAcute/Hospital segment primarily with a direct sales force,we reach the diverse Alternate Site market withdistributors.U.S.Spine and OtherOur U.S.Spine and Other segment offers comprehensive spinal fusion technologies that surgeons usealong the full length of the spine,as well as a broad an
90、d differentiated offering of related orthobiologics.Our key spinal hardware products include integrated interbody fusion devices,minimally invasive solutions,and deformity correction.We market and sell a complete line of orthobiologics,including demineralizedbone products,collagen ceramic matrices a
91、nd pure synthetic bone grafting solutions.We sell our productsthrough specialty distributors focused on our spine and orthopedic surgeon customers,as well as throughsome direct sales representatives.This segment also includes private-label sales of a broad set of our regenerative medicine technologi
92、es.Our customers are other large medical technology companies that sell to end markets primarily inorthopedics and wound care.InternationalThe International segment sells similar products to those discussed above,but they are managedthrough the following geographies:(i)Europe,Middle East and Africa,
93、and(ii)Latin/South America,Asia-Pacific,Australia,New Zealand and Canada.We sell direct into Europe,Australia,New Zealand,andCanada and utilize distributors in our other international markets.In November 2014,we announced plans to spin-off our spine business and reorganize our remainingsegments.We s
94、ee opportunities for growth in our spine business and believe that the orthobiologics platform will3help capture additional market share.After a thorough and strategic review,we concluded that a spin-off is thebest option for our shareholders,customers and employees and will maximize the benefit to
95、both companiesIntegra and SeaSpine.This form of separation should enable both organizations to grow faster separately thanthey would together.The spin-off of the spine business is part of a larger move to realign the Integra portfolio.Specifically,beginning in 2015 we are integrating our current fiv
96、e business divisions into three,and,following the spin-off,Integra will have a simplified,two-division global structure.Neurosurgery and Instruments will be combinedworldwide to create a new division called Specialty Surgical Solutions.Orthopedics and Tissue Technologieswill be consolidated worldwid
97、e and will include the extremities business,comprising small bone orthopedics andwound care.A notable change is that we will no longer look at international as a separate reporting segment;rather,wewill run each business globally,looking at both domestic and international sales.We will continue to i
98、nvest inand operate an international commercial structure,providing a consistent approach for our internationalcustomers.PRODUCTS OVERVIEWWe offer thousands of products for the medical specialties we target.We distinguish ourselves byemphasizing the importance of regenerative technology,which we def
99、ine as surgical implants derived from ourproprietary collagen matrix technology and other biologic platforms that enable or facilitate the bodys healingprocess and are resorbed.Our objective is to develop,acquire or otherwise provide products that will limituncertainty for hospitals and surgeons.The
100、se products include our regenerative technology implants,metalimplants,instruments and equipment for small bone orthopedic surgery,specialty surgical applications and spine.RESEARCH AND DEVELOPMENT STRATEGYOur research and development activities focus on identifying unmet surgical needs and addressi
101、ng thoseneeds with innovative solutions and products.We apply our core competency in regenerative technology toproducts for neurosurgical,orthopedic and spinal applications,and we have extensive programs in neuro-monitoring,cranial stabilization,tissue ablation,spine,extremity fixation,joint arthrop
102、lasty,and dermalregeneration.In addition to our activities aimed at acquiring or in-licensing new products,we are optimizing ourcurrent portfolio through product franchise review and rationalization.We are focusing our development effortson innovative products with an emphasis on clinical research a
103、nd product efficacy.Regenerative Technology.Because implants derived from our regenerative technology platform represent afast-growing,high-margin opportunity for us,we allocate a large portion of our research and development budgetto these products.Our regenerative technology development program ap
104、plies our expertise in bioengineering of arange of biomaterials including natural collagen and human tissues as well as synthetics such as polymers andceramics.The unique product designs are used for neurosurgical,orthopedic and spinal surgery applications,aswell as dermal regeneration,tendon and ne
105、rve repair,and chronic and acute wounds.Integra recently finished amulti-center,randomized,controlled clinical trial under the United States Food and Drug Administration(“FDA”)Investigational Device Exemption(“IDE”)comparing the safety and effectiveness of INTEGRADermal Regeneration Template to the
106、standard of care for the treatment of diabetic foot ulcers.This pivotal trialenrolled 307 patients at 32 sites,and all patients were followed for up to 28 weeks.This data formed thefoundation for the Premarket Approval Supplement application that we filed with the FDA,which we announcedin February 2
107、015.In addition,the Company is pursuing a publication of the data in a peer-reviewed journal.AnFDA approval and published data will form the key to securing reimbursement.Assuming FDA approval andtimely publication of the peer-reviewed journal article,the Company anticipates commercializing the resu
108、ltingDFU product mid-2016.Extremity Reconstruction.We develop fixation devices and other implants and instruments for upper andlower extremities.4Spine.Our expertise in implant engineering,biomaterials development and biomechanical testing provides astrong foundation for developing new products for
109、the spine.Additionally,we hold a number of spine patentsthat serve as a platform for future products,with particular emphasis in minimally invasive technologies.Whilewe plan to continue filling the gaps in our portfolio so that our current customers can use our products for moreprocedures,we are als
110、o developing novel technologies and new indications.We have based our strong orthobiologic product development capability on our human tissue-based bonematrix technology as well as our collagen and ceramic-based technologies.We have relied upon advancedbioengineering principles in the design of our
111、orthobiologics products and have created one of the most completeofferings of bone grafting solutions on the market.We continue to develop new products using thesetechnologies and we will continue to invest in the development of new novel technologies for tissue regeneration.Neurosurgery.We focus on
112、 expanding the market for our dural repair products,and on developing the nextgeneration tissue ablation system.Instruments.We work with a number of mainly German instrument partners to bring new patterns to themarket,enabling us to add new instruments with minimal R&D expense.Our lighting franchise
113、 is among themost dynamic,leading to ongoing development in LED technology.COMPETITIONOur competition in extremity reconstruction includes the DePuy/Synthes business of Johnson&Johnson,Stryker Corporation,Tornier,Inc.,Wright Medical Group,Inc.,and Zimmer,Inc.,as well as other majororthopedic compani
114、es that carry a full line of small bone and joint fixation and soft tissue products.Competitors in the spine and orthobiologics markets include Bacterin,Baxter,DePuy/Synthes Spine,aJohnson&Johnson company,Biomet,Inc.,Globus Medical Inc.,Medtronic,NuVasive,Inc.,K2M,LDR,Orthofix,RTI Surgical,Stryker C
115、orporation,and Zimmer.Our primary competitors in the neurosurgery markets are Johnson&Johnson,Medtronic,Inc.,and StrykerCorporation.In addition,many of our neurosurgery product lines compete with smaller specialized companiesand larger companies that do not otherwise focus on neurosurgery.Within the
116、 instruments market,we compete with the Aesculap division of B.Braun Medical Inc.,as well asV.Mueller,a division of C.R.Bard.In addition,we compete with Symmetry Surgical and many smallerinstrument companies in the reusable and disposable specialty instruments markets.We rely on the depth andbreadth
117、 of our sales and marketing organization and our procurement operation to maintain our competitiveposition in surgical instruments and allied surgical products.Finally,in certain cases our products compete primarily against medical practices that treat a conditionwithout using a medical device or an
118、y particular product,such as medical practices that use autograft tissueinstead of our dermal regeneration products,duraplasty products and nerve repair products.Depending on theproduct line,we compete on the basis of our products features,strength of our sales force or distributor,sophistication of
119、 our technology and cost effectiveness of our solution to the customers medical requirements.GOVERNMENT REGULATIONWe are a manufacturer and marketer of medical devices,and therefore are subject to extensive regulation bythe FDA and the Center for Medicare Services of the U.S.Department of Health and
120、 Human Services and otherfederal governmental agencies and,in some jurisdictions,by state and foreign governmental authorities.Theseregulations govern the introduction of new medical devices,the observance of certain standards with respect tothe design,manufacture,testing,labeling(such as issuing a
121、final rule in 2013 for a unique device identifier forvirtually all medical devices),promotion and sales of the devices,the maintenance of certain records,the abilityto track devices,the reporting of potential product defects,the import and export of devices,and other matters.5Our Plainsboro,New Jers
122、ey manufacturing facility was inspected by the FDA during the third quarter of2011 which resulted in the issuance of FDA Form 483 observations,and we subsequently received a warningletter from the FDA on December 21,2011 related to that inspection.The Plainsboro warning letter was closedout effectiv
123、e September 24,2013,because the FDA concluded that the Company had addressed the issues raisedin the warning letter and previous inspectional observations.The FDA inspected our Andover,UK facility in June 2012,which resulted in the issuance of FDA Form 483Observations.We subsequently received a Warn
124、ing Letter on November 1,2012.On April 25,2014,we receiveda letter from the FDA stating that while it had accepted the Corrective Action Plan for the Andover Facility,thewarning letter would not be closed out until the FDA conducted an inspection of the Andover facility andconcluded that the violati
125、ons stated in the FDA warning letter had been addressed.On December 31,2014,weclosed the Andover Facility and delisted it as an FDA registered facility.The FDA inspected our Aasco,Puerto Rico facility in October and November 2012,and issued a warningletter for that facility on February 13,2013.On No
126、vember 26,2013,the FDA completed its second inspection ofthe Aasco facility and issued a new Form 483 with six additional observations.On September 30,2014,theFDA completed its third inspection of the Aasco facility,concluded that the Company had addressed the issuesraised in the Warning Letter and
127、previous inspectional observations,and issued no other inspectionalobservations.The Aasco warning letter was closed out effective January 14,2015,because the FDA concludedthat the Company had addressed the issues raised in the warning letter and previous inspectional observations.The regulatory proc
128、ess of obtaining product approvals and clearances can be onerous and costly.The FDArequires,as a condition to marketing a medical device in the United States,that we secure a PremarketNotification clearance pursuant to Section 510(k)of the Federal Food,Drug and Cosmetic Act(the“FD&C Act”)or an appro
129、ved Premarket Approval(“PMA”)application(or supplemental PMA application).Obtaining theseapprovals and clearances can take up to several years and may involve preclinical studies and clinical trials.TheFDA also may require a post-approval clinical study as a condition of approval.To perform clinical
130、 trials forsignificant risk devices in the United States on an unapproved product,we are required to obtain an IDE from theFDA.The FDA may also require a filing for FDA approval prior to marketing products that are modifications ofexisting products or new indications for existing products.Moreover,a
131、fter clearance/approval is given,if theproduct is shown to be hazardous or defective,the FDA and foreign regulatory agencies have the power towithdraw the clearance or approval,as the case may be,or require us to change the device,its manufacturingprocess or its labeling,to supply additional proof o
132、f its safety and effectiveness or to recall,repair,replace orrefund the cost of the medical device.Because we currently export medical devices manufactured in theUnited States that have not been approved by the FDA for distribution in the United States,we are required toobtain approval/registration
133、in the country to which we are exporting and maintain certain records relating toexports and make these available to the FDA for inspection,if required.Human Cells,Tissues and Cellular and Tissue-Based ProductsIntegra manufactures medical devices derived from human tissue(demineralized bone tissue).
134、The FDA has specific regulations governing human cells,tissues and cellular and tissue-based products,orHCT/Ps.An HCT/P is a product containing,or consisting of,human cells or tissue intended for transplantationinto a human patient.Examples include bone,ligament,skin and cornea.Some HCT/Ps fall with
135、in the definition of a biological product,medical device or drug regulated under theFD&C Act.These biologic,device or drug HCT/Ps must comply both with the requirements exclusivelyapplicable to HCT/Ps and,in addition,with requirements applicable to biologics,devices or drugs,includingpremarket clear
136、ance or approval from the FDA.Section 361 of the Public Health Service Act(“PHSA”),authorizes the FDA to issue regulations to preventthe introduction,transmission or spread of communicable disease.HCT/Ps regulated as“361”HCT/Ps are6subject to requirements relating to registering facilities and listi
137、ng products with the FDA,screening and testingfor tissue donor eligibility,Good Tissue Practice when processing,storing,labeling,and distributing HCT/Ps,including required labeling information,stringent record keeping,and adverse event reporting.The American Association of Tissue Banks(“AATB”)has is
138、sued operating standards for tissue banking.Compliance with these standards is a requirement in order to become an AATB-accredited tissue establishment.In addition,some states have their own tissue banking regulations.We are licensed or have permits for tissuebanking in California,Florida,New York a
139、nd Maryland.National Organ Transplant Act.Procurement of certain human organs and tissue for transplantation issubject to the restrictions of the National Organ Transplant Act(“NOTA”),which prohibits the transfer of certainhuman organs,including skin and related tissue for valuable consideration,but
140、 permits the reasonable paymentassociated with the removal,transportation,implantation,processing,preservation,quality control and storage ofhuman tissue and skin.We reimburse tissue banks for their expenses associated with the recovery,storage andtransportation of donated human tissue that they pro
141、vide to us for processing.We include in our pricing structureamounts paid to tissue banks to reimburse them for their expenses associated with the recovery and transportationof the tissue,in addition to certain costs associated with processing,preservation,quality control and storage ofthe tissue,ma
142、rketing and medical education expenses,and costs associated with development of tissueprocessing technologies.NOTA payment allowances may be interpreted to limit the amount of costs andexpenses that we may recover in our pricing for our products,thereby reducing our future revenue andprofitability.P
143、ostmarket Requirements.After a device is cleared or approved for commercial distribution,numerousregulatory requirements apply.These include the FDA Quality System Regulations which cover the proceduresand documentation of the design,testing,production,control,quality assurance,labeling,packaging,st
144、erilization,storage and shipping of medical devices;the FDAs general prohibition against promoting productsfor unapproved or off-labeluses;the Medical Device Reporting regulation,which requires that manufacturersreport to the FDA if their device may have caused or contributed to a death or serious i
145、njury or malfunctioned ina way that would likely cause or contribute to a death or serious injury if it were to recur;and the Reports ofCorrections and Removals regulation,which require manufacturers to report recalls and field corrective actionsto the FDA if initiated to reduce a risk to health pos
146、ed by the device or to remedy a violation of the FD&C Act.We also are required to register with the FDA as a medical device manufacturer.As such,ourmanufacturing sites are subject to periodic inspection by the FDA for compliance with the FDAs Quality SystemRegulations.These regulations require that
147、we manufacture our products and maintain our documents in aprescribed manner with respect to design,manufacturing,testing and control activities.Further,we are requiredto comply with various FDA requirements and other legal requirements for labeling and promotion.If the FDAbelieves that a company is
148、 not in compliance with applicable regulations,it may issue a warning letter,instituteproceedings to detain or seize products,issue a recall order,impose operating restrictions,enjoin futureviolations and assess civil penalties against that company,its officers or its employees and may recommendcrim
149、inal prosecution to the U.S.Department of Justice.Medical device regulations also are in effect in many of the countries in which we do business outside theUnited States.These laws range from comprehensive medical device approval and Quality System requirementsfor some or all of our medical device p
150、roducts to simpler requests for product data or certifications.The numberand scope of these requirements are increasing.Under the European Union Medical Device Directive,medicaldevices must meet the Medical Device Directive standards and receive CE Mark Certification prior to marketingin the Europea
151、n Union(the“EU”).CE Mark Certification requires a comprehensive Quality System program,comprehensive technical documentation and data on the product,which are then reviewed by a Notified Body.ANotified Body is an organization designated by the national governments of the European Union member states
152、to make independent judgments about whether a product complies with the requirements established by eachCE marking directive.The Medical Device Directive,ISO 9000 series and ISO 13485 are recognizedinternational quality standards that are designed to ensure that we develop and manufacture quality me
153、dical7devices.Other countries are also instituting regulations regarding medical devices.Compliance with theseregulations requires extensive documentation and clinical reports for all of our products,revisions to labeling,and other requirements such as facility inspections to comply with the registr
154、ation requirements.A recognizedNotified Body audits our facilities annually to verify our compliance with the ISO 13485 Quality Systemstandard.In the EU,our products that contain human derived tissue,including demineralized bone material,are notmedical devices as defined in the Medical Device Direct
155、ive(93/42/EC).They are also not medicinal products asdefined in Directive 2001/83/EC.Today,regulations,if applicable,are different from one EU member state tothe next.Because of the absence of a harmonized regulatory framework and the proposed regulation foradvanced therapy medicinal products in the
156、 EU,the approval process for human-derived cell or tissue-basedmedical products may be extensive,lengthy,expensive,and unpredictable.Certain countries,as well as the EU,have issued regulations that govern products that contain materialsderived from animal sources.Regulatory authorities are particula
157、rly concerned with materials infected with theagent that causes bovine spongiform encephalopathy(“BSE”),otherwise known as mad cow disease.Theseregulations affect our dermal regeneration products,duraplasty products,biomaterial products for the spine,nerve and tendon repair products and certain othe
158、r products,all of which contain material derived from bovinetissue.Although we take great care to provide that our products are safe and free of agents that can cause disease,products that contain materials derived from animals,including our products,may become subject to additionalregulation,or eve
159、n be banned in certain countries,because of concern over the potential for prion transmission.Significant new regulations,a ban of our products,or a movement away from bovine-derived products becauseof an outbreak of BSE could have a material adverse effect on our current business or our ability to
160、expand ourbusiness.See“Item 1A.Risk FactorsCertain of our products contain materials derived from animal sourcesand may become subject to additional regulation.”In the United States,we are subject to laws and regulations pertaining to healthcare fraud and abuse,including anti-kickback laws and physi
161、cian self-referral laws that regulate the means by which companies in thehealth care industry may market their products to hospitals and health care professionals and may compete bydiscounting the prices of their products.The delivery of our products is subject to regulation regardingreimbursement,a
162、nd federal healthcare laws apply when a customer submits a claim for a product that isreimbursed under a federally funded healthcare program.These rules require that we exercise care in structuringour sales and marketing practices and customer discount arrangements.See“Item 1A.Risk FactorsOversighto
163、f the medical device industry might affect the manner in which we may sell medical devices and compete in themarketplace.”Our international operations subject us to laws regarding sanctioned countries,entities and persons,customs,import-export,laws regarding transactions in foreign countries,the U.S
164、.Foreign Corrupt Practices Actand local anti-bribery and other laws regarding interactions with healthcare professionals.Among other things,these laws restrict,and in some cases can prevent,United States companies from directly or indirectly sellinggoods,technology or services to people or entities
165、in certain countries.In addition,these laws require that weexercise care in structuring our sales and marketing practices in foreign countries.Our research,development and manufacturing processes involve the controlled use of certain hazardousmaterials.We are subject to country-specific,federal,stat
166、e and local laws and regulations governing the use,manufacture,storage,handling and disposal of these materials and certain waste products.We believe that ourenvironmental,health and safety procedures for handling and disposing of these materials comply with thestandards prescribed by the controllin
167、g laws and regulations.However,risk of accidental releases or injury fromthese materials is possible.These risks are managed to minimize or eliminate associated business impacts.In theevent of this type of accident,we could be held liable for damages that may result,and any liability could exceedour
168、 resources.We could be subject to a regulatory shutdown of a facility that could prevent the distribution andsale of products manufactured there for a significant period of time and we could suffer a casualty loss that could8require a shutdown of the facility in order to repair it,any of which could
169、 have a material,adverse effect on ourbusiness.Although we continuously strive to maintain full compliance with respect to all applicable globalenvironmental,health and safety laws and regulations,we could incur substantial costs to fully comply withfuture laws and regulations,and our operations,bus
170、iness or assets may be negatively affected.Furthermore,global environmental,health and safety compliance is an ongoing process.Integra has compliance procedures inplace for Employee Health&Safety programs,driven by a centrally led organizational structure that ensuresproper implementation,which is e
171、ssential to our overall business objectives.In addition to the above regulations,we are and may be subject to regulation under country-specific federaland state laws,including,but not limited to,requirements regarding record keeping,and the maintenance ofpersonal information,including personal healt
172、h information.As a public company,we are subject to thesecurities laws and regulations,including the Sarbanes-Oxley Act of 2002.We also are subject to other present,and could be subject to possible future,local,state,federal and foreign regulations.Third-Party Reimbursement.Healthcare providers that
173、 purchase medical devices generally rely on third-party payors,including,in the United States,the Medicare and Medicaid programs and private payors,such asindemnity insurers,employer group health insurance programs and managed care plans,to reimburse all or partof the cost of the products.As a resul
174、t,demand for our products is and will continue to be dependent in part onthe coverage and reimbursement policies of these payors.The manner in which reimbursement is sought andobtained varies based upon the type of payor involved and the setting in which the product is furnished andutilized.Reimburs
175、ement from Medicare,Medicaid and other third-party payors may be subject to periodicadjustments as a result of legislative,regulatory and policy changes as well as budgetary pressures.Possiblereductions in,or eliminations of,coverage or reimbursement by third-party payors,or denial of,or provision o
176、funeconomical reimbursement for new products,as a result of these changes may affect our customersrevenueand ability to purchase our products.Any changes in the healthcare regulatory,payment or enforcementlandscape relative to our customers healthcare services has the potential to significantly affe
177、ct our operationsand revenue.INTELLECTUAL PROPERTYWe seek patent and trademark protection for our key technology,products and product improvements,bothin the United States and in selected foreign countries.When determined appropriate,we have enforced and planto continue to enforce and defend our pat
178、ent and trademark rights.In general,however,we do not rely solely onour patent and trademark estate to provide us with any significant competitive advantages as it relates to ourexisting product lines.We also rely upon trade secrets and continuing technological innovations to develop andmaintain our
179、 competitive position.In an effort to protect our trade secrets,we have a policy of requiring ouremployees,consultants and advisors to execute proprietary information and invention assignment agreementsupon commencement of employment or consulting relationships with us.These agreements also provide
180、that allconfidential information developed or made known to the individual during the course of their relationship withus must be kept confidential,except in specified circumstances.AccuDrain,Accell,Accell Evo3,Advansys,Atoll,Ascension,BioFix,BioMotion,Bold,Budde,Buzz,Camino,Capture,CRW,Coral,CUSA,D
181、aytona,DigiFuse,DuraGen,DuraSeal,DynaGraftII,First Choice,Hallu,HeliCote,HeliPlug,HeliTape,HeliMend,Helistat,Helitene,Hollywood,Integra,Integra Mozaik,IPP-ON,Jarit,Licox,LimiTorr,Luxtec,Malibu,Manta Ray,MemoFix,MicroFrance,Miltex,Movement,NanoMetalene,NeuraGen,NeuraWrap,NewPort,NuGrip,Omni-Tract,Ort
182、hoBlastII,OSV II,Qwix,Padgett,Panta,PyroSphere,Redmond,Ruggles,SafeGuard,SeaSpine,Sonoma,Subtalar MBA,TenoGlide,Ti6,Tibiaxys,Titan,Trel-X,Trel-XC,Trel-XPress,TruArch,Uni-CP,Uni-Clip,Zuma,and the Integra logo aresome of the material trademarks of Integra LifeSciences Corporation and its subsidiaries.
183、MAYFIELDis aregistered trademark of SM USA,Inc.,and is used by Integra under license.9EMPLOYEESAt December 31,2014,we had approximately 3,400 employees engaged in production and productionsupport(including warehouse,engineering and facilities personnel),quality assurance/quality control,researchand
184、development,regulatory and clinical affairs,sales,marketing,administration and finance.Except for certainemployees at our facilities in France and Mexico,none of our employees is subject to a collective bargainingagreement.FINANCIAL INFORMATION ABOUT GEOGRAPHIC AREASFinancial information about our g
185、eographical areas is set forth under“Item 7.Managements Discussionand Analysis of Financial Condition and Results of OperationsGeographic Product Revenues and Operations”and in our financial statements Note 14,“Segment and Geographic Information,”to our consolidated financialstatements.SOURCES OF RA
186、W MATERIALSIn general,raw materials essential to our businesses are readily available from multiple sources.For reasonsof quality assurance,availability,or cost effectiveness,certain components and raw materials are available onlyfrom a sole supplier.Our policy is to maintain sufficient inventory of
187、 components so that our production will notbe significantly disrupted even if a particular component or material is not available for a period of time.Certain of our products,including our dermal regeneration products,duraplasty products,biomaterialproducts for the spine,nerve and tendon repair prod
188、ucts and certain other products,contain material derived frombovine tissue.We take great care to provide that our products are safe and free of agents that can cause disease.In particular,the collagen used in the products that Integra manufactures is derived only from the deep flexortendon of cattle
189、 less than 24 months old from New Zealand,a country that has never had a reported case ofbovine spongiform encephalopathy,or from the United States.The World Health Organization classifiesdifferent types of cattle tissue for relative risk of BSE transmission.Deep flexor tendon is in the lowest-riskc
190、ategory for BSE transmission(the same category as milk,for example),and is therefore considered to have anegligible risk of containing the agent that causes BSE.Certain of our demineralized bone matrix products contain human tissue in the form of ground cortical andcancellous bone.We source the bone
191、 tissue only from FDA and the American Association of Tissue Banks(“AATB”)registered and inspected tissue banks.The donors are rigorously screened,tested,and processed inaccordance with the FDA and AATB requirements.Only donated tissue from FDA and AATB registered,inspected,non-profit tissue banks i
192、s qualified to source for our raw materials.Additionally,each donor must passall of the FDA-specified bacterial and viral testing before the raw material is distributed to Integra for furtherprocessing.We receive with each donor lot a certification of the safety of the raw material from the tissue b
193、anksmedical director.As an added assurance of safety,each lot of bone is released into the manufacturing process only after ourstaff of quality assurance microbiologists screen the incoming bone and serology test records.During ourmanufacturing process,the bone particles are subjected to our proprie
194、tary process and terminally sterilized.Wehave demonstrated through our testing that this type of rigorous processing further enhances the safety andeffectiveness of our demineralized bone material products.SEASONALITYRevenues during our fourth quarter tend to be stronger than other quarters because
195、many hospitals increasetheir purchases of our products during the fourth quarter to coincide with the end of their budget cycles.Ingeneral,our first quarter usually has lower revenues than the preceding fourth quarter,the second and third10quarters have higher revenues than the first quarter,and the
196、 fourth quarter revenues are the highest in the year.The main exceptions to this pattern occur because of material intervening acquisitions.AVAILABLE INFORMATIONWe are subject to the informational requirements of the Securities Exchange Act of 1934,as amended,(the“Exchange Act”).In accordance with t
197、he Exchange Act,we file annual,quarterly and special reports,proxystatements and other information with the Securities and Exchange Commission.You may view our financialinformation,including the information contained in this report,and other reports we file with the Securities andExchange Commission
198、,on the Internet,without charge as soon as reasonably practicable after we file them withthe Securities and Exchange Commission,in the“SEC Filings”page of the Investor Relations section of ourwebsite at .You may also obtain a copy of any of these reports,without charge,from ourinvestor relations dep
199、artment,311 Enterprise Drive,Plainsboro,NJ 08536.Alternatively,you may view or obtainreports filed with the Securities and Exchange Commission at the SEC Public Reference Room at 100 F Street,N.E.in Washington,D.C.20549,or at the Securities and Exchange Commissions Internet site at www.sec.gov.Pleas
200、e call the Securities and Exchange Commission at 1-800-SEC-0330 for further information on the operationof the public reference facilities.11SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTSWe have made statements in this report,including statements under“Business”and“ManagementsDiscussion and Analy
201、sis of Financial Condition and Results of Operations”that constitute forward-lookingstatements within the meaning of Section 27A of the Securities Act of 1933,as amended(the“Securities Act”),and Section 21E of the Exchange Act.These forward-looking statements are subject to a number of risks,uncerta
202、inties and assumptions about us including,among other things:general economic and business conditions,both nationally and in our international markets;our expectations and estimates concerning future financial performance,financing plans and the impactof competition;anticipated trends in our busines
203、s;anticipated demand for our products,particularly capital equipment;our ability to produce collagen-based products in sufficient quantities to meet sales demands;our expectations concerning our ongoing restructuring,integration and manufacturing transfer andexpansion activities;existing and future
204、regulations affecting our business,and enforcement of those regulations;our ability to obtain additional debt and equity financing to fund capital expenditures and workingcapital requirements and acquisitions;physicians willingness to adopt our recently launched and planned products,third-party payo
205、rswillingness to provide or continue reimbursement for any of our products and our ability to secureregulatory approval for products in development;initiatives launched by our competitors;our ability to protect our intellectual property,including trade secrets;our ability to complete acquisitions,in
206、tegrate operations post-acquisition and maintain relationshipswith customers of acquired entities;our ability to remediate all matters identified in FDA warning letters that we received or may receive;andother risk factors described in the section entitled“Risk Factors”in this report.You can identif
207、y these forward-looking statements by forward-looking words such as“believe,”“may,”“could,”“might,”“will,”“estimate,”“continue,”“anticipate,”“intend,”“seek,”“plan,”“expect,”“should,”“would”and similar expressions in this report.We undertake no obligation to publicly update or revise anyforward-looki
208、ng statements,whether as a result of new information,future events or otherwise.In light of theserisks and uncertainties,the forward-looking events and circumstances discussed in this report may not occur andactual results could differ materially from those anticipated or implied in the forward-look
209、ing statements.12ITEM 1A.RISK FACTORSRisks Related to Our BusinessOur operating results may fluctuate.Our operating results,including components of operating results such as gross margin and cost of productsales,may fluctuate from time to time,and such fluctuations could affect our stock price.Our o
210、perating resultshave fluctuated in the past and can be expected to fluctuate from time to time in the future.Some of the factorsthat may cause these fluctuations include:economic conditions worldwide,which could affect the ability of hospitals and other customers to purchaseour products and could re
211、sult in a reduction in elective and non-reimbursed operative procedures;the impact of acquisitions;the impact of our restructuring activities;the timing of significant customer orders,which tend to increase in the fourth quarter to coincide with theend of budget cycles for many hospitals;market acce
212、ptance of our existing products,as well as products in development;the timing of regulatory approvals;changes in the rates of exchange between the U.S.dollar and other currencies of foreign countries in whichwe do business,such as the euro,British pound,Swiss franc,Canadian dollar,Japanese yen,and A
213、ustraliandollar;expenses incurred and business lost in connection with product field correction actions or recalls;potential backorders and lost sales resulting from stoppages in production relating to product recalls or fieldcorrective actions;changes in the cost or decreases in the supply of raw m
214、aterials,including energy and steel;our ability to manufacture and ship our products efficiently or in sufficient quantities to meet sales demands;the timing of our research and development expenditures;expenditures for major initiatives;reimbursement for our products by third-party payors such as M
215、edicare,Medicaid,private and public healthinsurers and foreign governmental health systems;the ability of our new commercial sales representatives to obtain sales targets in a reasonable time frame;peer-reviewed publications discussing the clinical effectiveness of the products we sell;inspections o
216、f our manufacturing facilities for compliance with Quality System Regulations(GoodManufacturing Practices)which could result in Form 483 observations,warning letters,injunctions or otheradverse findings from the FDA or from equivalent regulatory bodies,and corrective actions,proceduralchanges and ot
217、her actions that we determine are necessary or appropriate to address the results of thoseinspections,any of which may affect production and our ability to supply our customers with our products;the increased regulatory scrutiny of certain of our products,including products which we manufacture foro
218、thers,could result in their being removed from the market;andthe impact of goodwill and intangible asset impairment charges if future operating results of the acquiredbusinesses are significantly less than the results anticipated at the time of the acquisitions.13The industry and market segments in
219、which we operate are highly competitive,and we may be unable tocompete effectively with other companies.In general,there is intense competition among medical device companies.We compete with establishedmedical technology companies in many of our product areas.Competition also comes from early-stagec
220、ompanies that have alternative technological solutions for our primary clinical targets,as well as universities,research institutions and other non-profit entities.Many of our competitors have access to greater financial,technical,research and development,marketing,manufacturing,sales,distribution,a
221、dministrative,consultingand other resources than we do.Our competitors may be more effective at developing commercial products.Ourcompetitors may be able to gain market share by offering lower-cost products or by offering products that enjoybetter reimbursement methodologies from third-party payors,
222、such as Medicare,Medicaid,private and publichealth insurers and foreign governmental health systems.Our competitive position will depend on our ability to achieve market acceptance for our products,developnew products,implement production and marketing plans,secure regulatory approval for products u
223、nderdevelopment,obtain and maintain reimbursement coverage under Medicare,Medicaid and private healthcareinsurance,obtain patent protection and to produce products consistently in sufficient quantities to meet demand.We may need to develop new applications for our products to remain competitive.Tech
224、nological advances byone or more of our current or future competitors or their achievement of superior reimbursement from Medicare,Medicaid and private healthcare insurance could render our present or future products obsolete or uneconomical.Our future success will depend upon our ability to compete
225、 effectively against current technology as well as torespond effectively to technological advances.Competitive pressures could adversely affect our profitability.Additionally,purchasing decisions of our customers may be based on clinical evidence or comparativeeffectiveness studies and,because of ou
226、r vast array of products,we might not be able to fund the studiesnecessary or provide the required information to compete effectively.Other companies may have more resourcesavailable to fund such studies.For example,competitors have launched and have been developing products tocompete with our durap
227、lasty products,extremity reconstruction implants,neuro critical care monitors andultrasonic tissue ablation devices,among others.Our primary competitors in the neurosurgery markets are Medtronic,Inc.,Johnson&Johnson,and StrykerCorporation.In addition,many of our neurosurgery product lines compete wi
228、th smaller specialized companies orlarger companies that do not otherwise focus on neurosurgery.Our competitors in extremity reconstructioninclude the DePuy/Synthes business of Johnson&Johnson,Stryker Corporation,and Zimmer Inc.,as well asother major orthopedic companies that carry a full line of re
229、constructive products.We also compete with WrightMedical Group,Inc.,Tornier,Inc.and other companies in the extremity reconstruction market category.Ourcompetitors in the spinal implant and orthobiologics markets include Bacterin,Baxter,DePuy Synthes Spine,aJohnson&Johnson company,Biomet,Inc.,Globus
230、Medical,Medtronic,NuVasive,K2M,LDR,Orthofix,RTISurgical,Stryker and Zimmer and several smaller,biologically focused companies.In surgical instruments,wecompete with the Aesculap division of B.Braun Medical,Inc.,as well as V.Mueller,a division of C.R.Bard.Inaddition,we compete with Symmetry Surgical
231、and many smaller instrument companies in the reusable anddisposable specialty instruments markets.Our private-label products face diverse and broad competition,depending on the market addressed by the product.Finally,in certain cases our products compete primarilyagainst medical practices that treat
232、 a condition without using a device or any particular product,such as themedical practices that use autograft tissue instead of our dermal regeneration products,duraplasty products andnerve repair products.Our plan to separate our Spine business into a separate,independent medical technology company
233、 issubject to various risks and uncertainties and may not be completed in accordance with the expected plansor anticipated timeline,or at all.On November 3,2014,we announced a plan to separate our Spine business into a separate,independent publiccompany.The separation which is expected to be complet
234、ed before September 2015,is subject to board approval of14the final terms of the separation and certain other customary conditions,including confirmation of the tax-freenature of the transaction,and the effectiveness of a registration statement that will be filed with the SEC.Unanticipated developme
235、nts,including both the Spine and legacy businesses ability to respond to thechanges in its end markets that could affect demand for those companies products,changes in businessrelationships with customers or their purchases from each company,each companys ability to resolve anymanufacturing issues t
236、hat could disrupt its ability to timely deliver products to customers,possible delays inobtaining necessary tax opinions,regulatory approvals or clearances,uncertainty of the financial markets andexecuting the separation,could delay or prevent the completion of the proposed separation or cause the p
237、roposedseparation to occur on terms or conditions that are different or less favorable than expected.We expect that theprocess of completing the proposed separation will be time-consuming and involve significant costs andexpenses,which may be significantly higher than what we currently anticipate an
238、d may not yield a discerniblebenefit if the separation is not completed.In addition,in order to complete the proposed separation in a timelymanner,we could agree to provide significant transition services that could further increase our costs and distractus from operating our business.Executing the
239、proposed separation will require significant time and attentionfrom our senior management and key employees,which could distract them from operating our business,disruptoperations and result in the loss of business opportunities,which could adversely affect our business andfinancial results.We may a
240、lso experience increased difficulties in attracting,retaining and motivating keyemployees during the pendency of the separation and following its completion,which could harm our businesses.The proposed separation of the Spine business may not achieve some or all of the anticipated benefits.Even if t
241、he proposed separation of the Spine business is completed,we may not realize any or all of theanticipated strategic,financial,operational,marketing or other benefits from the spin-off,including eachcompanys ability to benefit from the new focus or to achieve anticipated growth rates,margins and scal
242、e and toexecute on its strategy generally.As separate,independent,publicly traded companies,each of the twocompanies will be smaller with a narrower business focus and may be more vulnerable to changing marketconditions,which could materially and adversely affect their respective business,financial
243、condition and resultsof operations.Further,there can be no assurance that the combined value of the common stock of the twopublicly-traded companies will be equal to or greater than what the value of our common stock would have beenhad the proposed separation not occurred.Our current strategy involv
244、es growth through acquisitions,which requires us to incur substantial costs andpotential liabilities for which we may never realize the anticipated benefits.In addition to internally generated growth,our current strategy involves growth through acquisitions.Between January 1,2012 and December 31,201
245、4,we have acquired 4 businesses at a total cost of approximately$349.3 million.We may be unable to continue to implement our growth strategy,and our strategy ultimately may beunsuccessful.A significant portion of our growth in revenues has resulted from,and is expected to continue toresult from,the
246、acquisition of businesses complementary to our own.We engage in evaluations of potentialacquisitions and are in various stages of discussion regarding possible acquisitions,certain of which,ifconsummated,could be significant to us.Any new acquisition could result in material transaction expenses,inc
247、reased interest and amortization expense,increased depreciation expense,increased operating expense,andpossible in-process research and development charges for acquisitions that do not meet the definition of a“business,”any of which could have a material adverse effect on our operating results.Certa
248、in businesses that weacquire may not have adequate financial,disclosure,regulatory,quality or other compliance controls at the timewe acquire them.As we grow by acquisition,we must manage and integrate the new businesses to bring theminto our systems for financial,disclosure,compliance,regulatory an
249、d quality control,realize economies of scale,and control costs.In addition,acquisitions involve other risks,including diversion of management resourcesotherwise available for development of our business and risks associated with entering markets in which our15marketing teams and sales force has limi
250、ted experience or where experienced distribution alliances are notavailable.Our future profitability will depend in part upon our ability to develop further our resources to adapt tothese new products or business areas and to identify and enter into or maintain satisfactory distribution networks.We
251、may not be able to identify suitable acquisition candidates in the future,obtain acceptable financing orconsummate any future acquisitions.If we cannot integrate acquired operations,manage the cost of providingour products or price our products appropriately,our profitability could suffer.In additio
252、n,as a result of ouracquisitions of other healthcare businesses,we may be subject to the risk of unanticipated business uncertainties,regulatory and other compliance matters or legal liabilities relating to those acquired businesses for which thesellers of the acquired businesses may not indemnify u
253、s,for which we may not be able to obtain insurance(oradequate insurance),or for which the indemnification may not be sufficient to cover the ultimate liabilities.Our future financial results could be adversely affected by impairments or other charges.Since we have grown through acquisitions,we have$
254、363.9 million of goodwill and$50.1 million ofindefinite-lived intangible assets as of December 31,2014.Under the authoritative guidance for determining theuseful life of intangible assets,we are required to test both goodwill and indefinite-lived intangible assets forimpairment on an annual basis ba
255、sed upon a fair value approach,rather than amortizing them over time.We arealso required to test goodwill and indefinite-lived intangible assets for impairment between annual tests if anevent occurs such as a significant decline in revenues or cash flows for certain products,or the discount ratesuse
256、d in the calculations of discounted cash flow change significantly,or circumstances change that would morelikely than not reduce our enterprise fair value below its book value.If such a decline,rate change orcircumstance were to materialize,we may record an impairment of these intangible assets that
257、 could be materialto the financial statements.See“Managements Discussion and Analysis of Financial Condition and Results ofOperationsCritical Accounting Estimates”of this report.The guidance on long-lived assets requires that we assess the impairment of our long-lived assets,includingfinite-lived in
258、tangible assets,whenever events or changes in circumstances indicate that the carrying value maynot be recoverable as measured by the sum of the expected future undiscounted cash flows.As of December 31,2014,we had$589.6 million of finite-lived intangible assets.At December 31,2014 our trade names h
259、ave a carrying value of$77.2 million and decisions relating to ourtrade names may occur over time.Additionally,we may discontinue certain products in the future as we continueto assess the profitability of our product lines.As a result,we may need to record impairment charges oraccelerate amortizati
260、on on certain trade names or technology-related intangible assets in the future.The value of a medical device business is often volatile,and the assumptions underlying our estimates madein connection with our assessments under the guidance may change as a result of that volatility or other factorsou
261、tside our control and may result in impairment charges.The amount of any such impairment charges could besignificant and could have a material adverse effect on our reported financial results for the period in which thecharge is taken and could have an adverse effect on the market price of our secur
262、ities,including the notes and thecommon stock into which they may be converted.The adoption of healthcare reform in the United States and initiatives sponsored by other governments mayadversely affect our business,results of operations and/or financial condition.Our operations may be substantially a
263、ffected by potential fundamental changes in the political,economicand regulatory landscape of the healthcare industry.Government and private sector initiatives to limit the growthof healthcare costs are continuing in the U.S.,and in many other countries where we do business,causing themarketplace to
264、 put increased emphasis on the delivery of more cost-effective treatments.These initiatives includeprice regulation,competitive pricing,coverage and payment policies,comparative effectiveness of therapies,technology assessments and managed-care arrangements.16In March 2010,significant reforms to the
265、 U.S.healthcare system were adopted in the form of the PatientProtection and Affordable Care Act(the“Affordable Care Act”).The Affordable Care Act includes provisionsthat,among other things,reduce and/or limit Medicare reimbursement,require all individuals to have healthinsurance(with limited except
266、ions)and impose new and/or increased taxes.Specifically,the law requires themedical device industry to subsidize healthcare reform by implementing a 2.3%excise tax on the sale of certainmedical devices by a manufacturer,producer or importer of such devices in the United States.Because thesubstantial
267、 majority of our revenues is generated in the United States,the Affordable Care Act has affected ourfinancial results since it came into effect after December 31,2012.In addition,the Affordable Care Act also requires detailed disclosure of gifts and other remuneration madeto healthcare professionals
268、,which may have a negative impact on our relationships with customers and ability toseek input on product design or involvement in research.Other provisions of the Affordable Care Act could meaningfully change the way healthcare is developedand delivered in the United States,and may adversely affect
269、 our business and results of operations.There are many programs and requirements for which the details have not yet been fully established orconsequences not fully understood,and it is unclear what the full impact of the legislation will be.We cannotpredict what healthcare programs and regulations w
270、ill ultimately be implemented at the U.S.federal or statelevel,or the effect of any future legislation or regulation in the United States or elsewhere.That said,anychanges that lower reimbursements for our products or reduce medical procedure volumes could have a materialadverse effect on our busine
271、ss,financial condition and results of operations.We continue to monitor theimplementation of such legislation and,to the extent new market or industry trends or new governmentalprograms evolve,we will have implemented or will consider implementing programs to respond.Initiatives sponsored by governm
272、ent agencies,legislative bodies and the private sector to limit the growth ofhealthcare costs,including price regulation and competitive pricing,are ongoing in other markets where we dobusiness.Further,the Affordable Care Act encourages hospitals and physicians to work collaboratively throughshared
273、savings programs,such as accountable care organizations,as well as other bundled payment initiatives,which may ultimately result in the reduction of medical device purchases and the consolidation of medical devicesuppliers used by hospitals.Changes in the healthcare industry may require us to decrea
274、se the selling price for our products,mayreduce the size of the market for our products,or may eliminate a market,any of which could have anegative impact on our financial performance.Trends toward managed care,healthcare cost containment and other changes in government and privatesector initiatives
275、 in the United States and other countries in which we do business are placing increased emphasison the delivery of more cost-effective medical therapies that could adversely affect the sale and/or the prices ofour products.For example:as mentioned above,the Affordable Care Act,which is intended to e
276、xpand access to health insurancecoverage over time,has resulted in and will continue to result in major changes in the United Stateshealthcare system that have had and could continue to have an adverse effect on our business,includinga 2.3%excise tax on U.S.sales of most medical devices,implemented
277、in 2013,which has adverselyaffected our earnings;third-party payors of hospital services and hospital outpatient services,including Medicare,Medicaid,private and public health insurers and foreign governmental health systems,annually revise theirpayment methodologies,which can result in stricter sta
278、ndards for reimbursement of hospital chargesfor certain medical procedures or the elimination of reimbursement;17foreign governmental health systems have revised,and continue to consider whether to revise,theirpayment methodologies,which have resulted and could continue to result in stricter standar
279、ds forreimbursement of hospital charges for certain medical procedures leading to less governmentreimbursement,thereby putting downward pricing pressure on our products or rendering someuneconomical;Medicare,Medicaid,private and public health insurer and foreign governmental cutbacks could createdow
280、nward price pressure on our products;in the United States,local Medicare coverage as well as commercial carrier coverage determinationswill reduce or eliminate reimbursement or coverage for certain of our wound matrix products as well asother collagen products in most regions,negatively affecting ou
281、r market for these products,and futuredeterminations could reduce or eliminate reimbursement or coverage for these products in otherregions and could reduce or eliminate reimbursement or coverage for other products;there has been a consolidation among healthcare facilities and purchasers of medical
282、devices in theUnited States,some of whom prefer to limit the number of suppliers from whom they purchase medicalproducts,and these entities may decide to stop purchasing our products or demand discounts on ourprices;there has been a growing movement of physicians becoming employees of hospitals and
283、otherhealthcare entities,which aligns surgeon product choices with his or her employers purchasingdecisions,and adds to pricing pressures;in the United States,we are party to contracts with group purchasing organizations,which negotiatepricing for many member hospitals,that require us to discount ou
284、r prices for certain of our productsand limit our ability to raise prices for certain of our products,particularly surgical instruments;there is economic pressure to contain healthcare costs in domestic and international markets,and,regardless of the consolidation discussed above,providers generally
285、 are exploring ways to cut costs byeliminating purchases or driving reductions in the prices that they pay for medical devices;there are proposed and existing laws,regulations and industry policies in domestic and internationalmarkets regulating the sales and marketing practices and the pricing and
286、profitability of companies inthe healthcare industry;proposed laws or regulations will permit hospitals to provide financial incentives to doctors forreducing hospital costs(known as gainsharing),will award physician efficiency(known as physicianprofiling),and will encourage partnerships with health
287、care service and goods providers to reduceprices;the prevalence of physician-owned distributorships catering to the spinal surgery market has reducedand may continue to reduce our ability to compete effectively for business from surgeons who ownsuch distributorships;andthere have been initiatives by
288、 third-party payors and foreign governmental health systems to challengethe prices charged for medical products that could affect our ability to sell products on a competitivebasis.Any and all of the above factors could materially and adversely affect our levels of revenue and ourprofitability.We ar
289、e subject to stringent domestic and foreign medical device regulation and any adverse regulatoryaction may materially adversely affect our financial condition and business operations.Our products,development activities and manufacturing processes are subject to extensive and rigorousregulation by nu
290、merous government agencies,including the FDA and comparable foreign agencies.To varying18degrees,each of these agencies monitors and enforces our compliance with laws and regulations governing thedevelopment,testing,manufacturing,labeling,marketing and distribution of our medical devices.The process
291、 ofobtaining marketing approval or clearance from the FDA and comparable foreign regulatory agencies for newproducts,or for enhancements or modifications to existing products,couldtake a significant amount of time;require the expenditure of substantial resources;involve rigorous and expensive pre-cl
292、inical and clinical testing,as well as increased post-marketsurveillance;involve modifications,repairs or replacements of our products;andresult in limitations on the indicated uses of our products.We cannot be certain that we will receive required approval or clearance from the FDA and foreignregul
293、atory agencies for new products or modifications to existing products on a timely basis.The failure toreceive approval or clearance for significant new products or modifications to existing products on a timely basiscould have a material adverse effect on our financial condition and results of opera
294、tions.Both before and after a product is commercially released,we have ongoing responsibilities under FDAregulations.For example,we are required to comply with the FDAs Quality System Regulation,which mandatesthat manufacturers of medical devices adhere to certain quality assurance requirements pert
295、aining to,amongother things,validation of manufacturing processes,controls for purchasing product components,anddocumentation practices.As another example,the Federal Medical Device Reporting regulation requires us toprovide information to the FDA whenever there is evidence that reasonably suggests
296、that a device may havecaused or contributed to a death or serious injury or,that a malfunction occurred which would be likely to causeor contribute to a death or serious injury upon recurrence.Compliance with applicable regulatory requirements issubject to continual review and is monitored rigorousl
297、y through periodic inspections by the FDA,which mayresult in observations on Form 483,and in some cases warning letters,that require corrective action.If the FDAwere to conclude that we are not in compliance with applicable laws or regulations,or that any of our medicaldevices are ineffective or pos
298、e an unreasonable health risk,the FDA could ban such medical devices,detain orseize such medical devices,order a recall,repair,replacement,or refund of such devices,or require us to notifyhealth professionals and others that the devices present unreasonable risks of substantial harm to the publichea
299、lth.The FDA has been increasing its scrutiny of the medical device industry and the government is expected tocontinue to scrutinize the industry closely with inspections,and possibly enforcement actions,by the FDA orother agencies.Additionally,the FDA may restrict manufacturing and impose other oper
300、ating restrictions,enjoinand restrain certain violations of applicable law pertaining to medical devices,and assess civil or criminalpenalties against our officers,employees,or us.The FDA may also recommend prosecution to the Department ofJustice.Any adverse regulatory action,depending on its magnit
301、ude,may restrict us from effectivelymanufacturing,marketing and selling our products.In addition,negative publicity and product liability claimsresulting from any adverse regulatory action could have a material adverse effect on our financial condition andresults of operations.We have an outstanding
302、 FDA warning letter related to our Andover,England facility(“Andover Facility”).On April 25,2014,we received a letter from the FDA stating that while it accepted the Corrective Action Planfor the Andover Facility,the warning letter would not be closed out until the FDA conducted an inspection of the
303、Andover facility and concluded that the violations stated in the FDA warning letter had been addressed.OnDecember 31,2014,we closed the Andover Facility and delisted it as an FDA registered facility.While we have taken measures to enhance our Quality System and are no longer operating under warningl
304、etters,we cannot assure you that future inspections by FDA and the standards they apply will not result in awarning letter for any facility in the future.19The FDA Safety and Innovation Act(“FDASIA”),which includes the Medical Device User FeeAmendments of 2012(“MDUFA III”),as well as other medical d
305、evice provisions,went into effect October 1,2012.This includes performance goals and user fees paid to the FDA by medical device companies when theyregister and list with the FDA and when they submit an application to market a device in the U.S.This will affectthe fees paid to the FDA over the five-
306、year period that FDASIA is in effect.As part of FDASIA,there areadditional requirements regarding FDA Establishment Registration and Listing of Medical Devices.All U.S.andforeign manufacturers must register and list medical devices for sale in the U.S.All of our facilities comply withthese requireme
307、nts.That said,we also source products from foreign contract manufacturers.From this businesspractice,it is possible that some of our foreign contract manufacturers will not comply with these requirementsand choose not to register with the FDA.In such an event,we will need to determine if there are a
308、lternativeforeign contract manufacturers who comply with the FDA Establishment Registration requirements.If such aforeign contract manufacturer is a sole supplier of one of our products,there is a risk that we may not be able tosource another supplier.The FDA issued a final rule on September 24,2013
309、 to establish a system to adequately identify devicesthrough distribution and use.This rule requires the label of medical devices to include a unique device identifier(“UDI”),except where the rule provides for an exception or alternative placement.The labeler must submitproduct information concernin
310、g devices to FDAs Global Unique Device Identification Database(“GUDID”),unless subject to an exception or alternative.The system established by this rule requires the label and devicepackage of each medical device to include a UDI and requires that each UDI be provided in a plain-text versionand in
311、a form that uses automatic identification and data capture technology.If the device is intended to be usedmore than once and intended to be reprocessed before each use,then there is a requirement for the UDI to bedirectly marked on the device itself.This regulation will require significant resources
312、 and expense to complywith the regulation.We have complied with the initial requirements of this regulation for our Class III productsby meeting the September 2014 deadline for labeling and entering the data in FDAs GUDID Database.In addition,some of our orthobiologics products are subject to FDA an
313、d certain state regulations regardinghuman cells,tissues,and cellular or tissue-based products,which include requirements for EstablishmentRegistration and listing,donor eligibility,current good tissue practices,labeling,adverse-event reporting,andinspection and enforcement.Some states have their ow
314、n tissue banking regulation.We are licensed or havepermits as a tissue bank in California,Florida,New York and Maryland.In addition,tissue banks may undergovoluntary accreditation by the AATB.The AATB has issued operating standards for tissue banking.Compliancewith these standards is a requirement i
315、n order to become a licensed tissue bank.Finally,the FDA issued regulations regarding“Current Good Manufacturing Practice Requirements forCombination Products”on January 22,2013.These regulations apply to some of our product lines that have beendesignated by the FDA as Combination Products.There hav
316、e been and will be additional costs associated withcompliance with the FDA Good Manufacturing Practice Requirements regulations for Combination Products.We manufacture medical devices that are subject to various electrical safety standards.Many countries haveadopted the recommendations of the Intern
317、ational Electrotechnical Commission(“IEC”)for the safety andeffectiveness of medical electrical equipment.The IEC is a non-profit,non-governmental international standardsorganization that prepares and publishes International Standards for all electrical,electronic and relatedtechnologies.Their updat
318、ed standards were implemented in some markets starting in July 2012 and havecontinued to be adopted over the following years worldwide.If we cannot comply with these standards,we maynot be able to sell some of our products in the affected markets.Most of our affected products have already beenmodifi
319、ed to meet these standards and are substantially in compliance with these standards.Except in limitedcircumstances,we do not anticipate any delays in selling our products in the markets that have adopted the IECupdated standards.In addition,the FDCA permits device manufacturers to promote products s
320、olely for the uses and indicationsset forth in the approved product labeling.A number of enforcement actions have been taken against20manufacturers that promote products for“off-label”uses,including actions alleging that federal health careprogram reimbursement of products promoted for“off-label”use
321、s are false and fraudulent claims to thegovernment.The failure to comply with“off-label”promotion restrictions can result in significant financialpenalties and a required corporate integrity agreement with the federal government imposing significantadministrative obligations and costs,and potential
322、evaluation from federal health care programs.Foreign governmental regulations have become increasingly stringent and more common,and we maybecome subject to even more rigorous regulation by foreign governmental authorities in the future.Penalties fora companys noncompliance with foreign governmental
323、 regulation could be severe,including revocation orsuspension of a companys business license and criminal sanctions.Any domestic or foreign governmentalmedical device law or regulation imposed in the future may have a material adverse effect on our financialcondition and business operations.Certain
324、of our products contain materials derived from animal sources and may become subject toadditional regulation.Certain of our products,including our dermal regeneration products,duraplasty products,biomaterialproducts for the spine,nerve and tendon repair products and certain other products,contain ma
325、terial derived frombovine tissue.In 2014 approximately 23%of our revenues were attributable to products containing materialderived from bovine tissue.Products that contain materials derived from animal sources,including food,pharmaceuticals and medical devices,are subject to scrutiny in the media an
326、d by regulatory authorities.Regulatory authorities are concerned about the potential for the transmission of disease from animals to humansvia those materials.This public scrutiny has been particularly acute in Japan and Western Europe with respect toproducts derived from animal sources,because of c
327、oncern that materials infected with the agent that causesbovine spongiform encephalopathy,otherwise known as BSE or mad cow disease,may,if ingested or implanted,cause a variant of the human Creutzfeldt-Jakob Disease,an ultimately fatal disease with no known cure.Cases ofBSE in cattle discovered in C
328、anada and the United States have increased awareness of the issue inNorth America.In 2013,the World Organization for Animal Health(“OIE”)recommended that the United Statesrisk classification for BSE be upgraded from controlled risk to negligible risk.We take care to provide that our products are saf
329、e and free of agents that can cause disease.In particular,wehave qualified a source of collagen from a country outside the United States that is considered BSE-free.TheWorld Health Organization classifies different types of cattle tissue for relative risk of BSE transmission.Deepflexor tendon is in
330、the lowest-risk categories for BSE transmission(the same category as milk,for example),andis therefore considered to have a negligible risk of containing the agent that causes BSE(an improperly foldedprotein known as a prion).Nevertheless,products that contain materials derived from animals,includin
331、g ourproducts,could become subject to additional regulation,or even be banned in certain countries,because ofconcern over the potential for the transmission of prions.Significant new regulation,or a ban of our products,could have a material adverse effect on our current business or our ability to ex
332、pand our business.Certain countries,such as Japan,China,Taiwan and Argentina,have issued regulations that require ourcollagen products be processed from bovine tendon sourced from countries where no cases of BSE haveoccurred,and the EU has requested that our dural replacement products and other prod
333、ucts that are used inneurological tissue be sourced from bovine tendon sourced from a country where no cases of BSE have occurred.Currently,we purchase our tendon from the United States and New Zealand.New Zealand has never had a caseof BSE.We received approval in the United States,the EU,Japan,Taiwan,China,Argentina as well as othercountries for the use of New Zealand-sourced tendon in the manufa
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