1、LIMITING UNCERTAINTY IS HOW WE MAKE A DIFFERENCE.Integra 2010 Annual ReportTotal RevenuesOperating Cash FlowDiluted Earnings Per ShareSelected Financial Data:Company at a GlanceFoundedin1989andheadquarteredinPlainsboro,NJGrowingshareinspineandextremityreconstructionwithintheorthopedicmarketMarketlea
2、dershipinneurosurgeryandmedicalinstrumentsEmploysapproximately3,000worldwideSellsthroughdirectrepsintheU.S.,Canada,majorEuropeanmarketsandAustralia,andthroughdistributorsintheseandover100countries2010 Revenues by Geographic AreaRegion2010RevenuesUnitedStates$561.2Europe$89.4AsiaPacific$40.6OtherFore
3、ign$40.92010RevenuesbyProductCategoryProduct Category%of Total Revenues Key Product Areas YTD 2010 RevenuesOrthopedics40%MISspinesystem,traditionalspinefusion,$290Millionextremityreconstruction,orthobiologics,skin&woundNeurosurgery37%Duralgraft,cranialstabilization,$275MillionCSFmanagement,ultrasoni
4、caspiration,neuromonitoringInstruments23%Generalandspecialtyhand-heldsurgical$167Millioninstrumentsinthehospitalandoffice-basedsettings,surgicalheadlightsTo our Stockholders:In 2010,each of our diverse product categories significantly improved notwithstanding the stillchallenging economy,reflecting
5、ourstrongcustomer relationships andourcommitment tothe hospitalsandsurgeonswe serve.We deepened and extended the maturity of ourcapital structure through a majorrefinancing,which will permit us to make disciplined acquisitions and substantial investments in newand more efficient processes and produc
6、tion capacity.We invested in infrastructure and people toprepare our business for further growth when the hospital economy strengthens.We have entered moremarkets around the world,introduced new products that fulfill important needs,and increased our topand bottom lines.In2010,welaunched ournewcorpo
7、rate brand tobetter communicate ourcommitment tohelpsurgeonslimit uncertainty.To that end,we are focusing onmaking ourproducts and processessimpler,involvingsurgeons in new product development,and having the best professionals with the best training toanticipate our customers needs.Here are some of
8、the achievements of 2010 that will fuel growth and profitability in the years to come:Strategic Investments.We are investing in new systems and initiatives to make ourprocesseslesstime-consuming andmoreefficient.Westreamlined ourmanufacturing anddistribution footprint by closing our West Boylston an
9、d Hawthorne facilities and movingtheir functions into other sites,and consolidating several sites in Ohio.We beganconstruction of a new regenerative medicine plant in Plainsboro.We substantiallyincreased our regulatory and quality departments around the company.We opened anew Medical Education Cente
10、r in Irvine,California and we are currently expanding oursales,marketing and product development facility in Northeast Ohio.Cash Management.This year,we completed a major refinancing of our senior creditfacility,doubling its size to$600 million and extending its maturity through August 10,2015.We ge
11、nerated$105 million in operating cash flow.Acquisitions.We bought smaller companies in 2010 than in recent years.We purchaseda surgical lighting technology for our surgical instruments group,and acquired ourdistributor of extremity reconstruction products in Australia.In 2011,we remain focusedon ort
12、hopedics,neurosurgery and instruments,and plan to seek out additional businessopportunities to extend our reach in those markets.Talent.We added more than 250 employees in 2010,and in so doing were able tocapitalize on the downsizing of our competitors.Business AccomplishmentsIn 2010,we met several
13、important strategic goals and achieved a number of milestones,including:Increasing revenues by 7%as reported and on a constant currency basis;IncreasingreportedadjustedEBITDAby4%(forareconciliation ofGAAPNetIncometoadjusted EBITDA,please see our Form 8-K filed February 24,2011);Increasing reported e
14、arnings per share by 25%and adjusted earnings per share by14%;andLaunching 18 new products throughout our sales organizations.Product Category HighlightsOrthopedics:Extremity Reconstruction:In 2010,we launched 4 new products and achieved recordrevenue.We added sales professionals,growing our field p
15、resence into one of thelargest direct extremity reconstruction sales forces in the United States.Spine:We completed our second full year in the spinal hardware market,expandedour distribution network and leveraged the combined portfolio of implants andorthobiologics.In parallel with distribution act
16、ivities,we focused internal resourceson the development of new products.We launched a total of 8 new implants.The workof 2010 built a foundation on which we can grow our well-integrated product offeringin spine.Neurosurgery:We continued to gain share as the market leader in neurosurgery,with thelarg
17、est direct sales force callingon neurosurgeonsin the United States.The improved economyhelped the capital equipment lines in this group,and our implants and disposables grewaccording to plan.Instruments:After unprecedented hospital budget cuts and customer inventory reduc-tions in 2009,2010 marked a
18、 return to more normal business conditions.We continue torenew and expand our group purchasing organization and integrated delivery networkcontracts and provide the highest quality instruments to our customers.Investments in Future GrowthWhile we have carefully managed cash and realized cost savings
19、 during 2010,we are spending more inareas that will support growth well into the future,including research and development and sales andmarketing.In 2011,we will continue to invest in these areas and in capital infrastructure.First,we plan to invest to support our most rapidly growing businesses.For
20、 example,we are planning toincrease our selling and marketing expense faster than our revenue growth to benefit the extremityreconstructionlinesand ourbusinessesinLatinAmerica andAsiaPacific,allofwhich aregrowingfasterthan thecompany in general.We arealsospending moreonresearchanddevelopmentand comp
21、liance tolimit uncertainty and ensure that we operate efficiently in an increasingly regulated industry.We are investing our capital in a new version of our enterprise resource management system across ourorganization.This roughly$30 million of expenses and an additional$30 million capital expenditu
22、recommitment over the next four years will streamline business processes throughout the company andenable our employees to serve our surgeons and hospitals and their patients more effectively.Our three-year program to expand our regenerative medicine manufacturing facilities in New Jerseyand Puerto
23、Rico is on track.We spent approximately$12 million last year and expect to spend anadditional$20 million over the next two years.One of the years highlights was the recruitment of our new President and Chief Operating Officer,PeteArduini.Pete recently left Baxter,where he was Corporate Vice Presiden
24、t and President of MedicationDelivery.There,Petewas responsible for a$4.8 billion global division with diversified products,rangingfrom intravenous solutions and medical devices to pharmaceuticals.In addition to his accomplishmentsthere,Pete has a broad range of management experience,including GE He
25、althcare,where he managedthe computerized tomography business and global repair and service.We are delighted that Pete hasjoined our team and proud that Integra has become the kind of company that can recruit top executivesfrom the best firms in the industry.Gerry Carlozzi retired as Chief Operating
26、 Officer at the end of 2010.I want to express my appreciationfor Gerrys numerous contributions to the growth of Integra over the last seven years.It has been apleasure to work with him.His contributions have strengthened our leadership team and increased ourability to execute on key operating object
27、ives.Gerry has focused the company on growth opportunitiesfor our existing products and technologies and the integration of newly acquired businesses.He hasbeen a great partner in building this company.2011 and BeyondOur substantial new branding campaign has been very well received by our customers.
28、At the core ofthis initiative are applying the word and spirit of our Brand Promises and Integra values to themanagement and development of the entire organization,which will foster competitive advantage,increase market share,drive value beyond individual products,leverage our broad product portfoli
29、o,and position Integra as a better choice for surgeons.We rely upon our energized employees,who are atthe core of our Brand Promises,to make this possible.We are proud that Integra has been able to adapt and grow in an ever changing healthcare environment.We have approximately 3,000 employees led by
30、 an experienced,talented management team.Together,we are dedicated to providing our customers,the surgeons,with products and services that limituncertainty.We know that these busy surgeons do not have a minute to waste and must make criticaldecisionseveryday;weaimtohelpthemcontinuetomaketherightdeci
31、sionsandfocusonwhatismostimportant the patients.Ourteamemergedstronglyfromthechallenges that theeconomypresentedusinthepastfewyears.Weare a company that is determined to run smarter,faster and better,seize the opportunities before us,andthrive in our economic environment.Thank you,our stockholders,f
32、or your continued support.Sincerely,Stuart EssigChief Executive OfficerSTOCK PERFORMANCE GRAPHThe following line graph and table compare,for the period from December 31,2005 throughDecember 31,2010,the yearly change in the cumulative total stockholder return on the Companyscommon stock with the cumu
33、lative total return of the Nasdaq Stock Market U.S.Index and theNasdaq Medical Devices,Instruments and Supplies,Manufacturers and Distributors Index.The graphassumes that the value of the investment in the Companys common stock and the relevant index was$100 at December 31,2005 and that all dividend
34、s were reinvested.The closing market price of theCompanys common stock on December 31,2010 was$47.30 per share.Comparison of Five Year Cumulative Total ReturnValue of Investment of$100 on December 31,2005$0$50$100$150$200200520062007201020092008Integra LifeSciences Holdings CorporationNasdaq Medical
35、 Devices,Instruments and Supplies,Manufacturers and Distributors IndexNasdaq Stock Market-US IndexComparison of Cumulative Total Return among Integra LifeSciences Holdings Corporation,the Nasdaq Medical Devices,Instruments and Supplies,Manufacturers andDistributors Index,and the Nasdaq Stock Market
36、U.S.Index12/0512/0612/0712/0812/0912/10Integra LifeSciences Holdings Corporation$100$120$118$100$104$133Nasdaq Medical Devices,Instruments and Supplies,Manufacturers and Distributors Index$100$105$134$72$105$112Nasdaq Stock Market-U.S.Index$100$110$119$57$83$98The graph and table above depict the pa
37、st performance of the Companys stock price.TheCompany neither makes nor endorses any predictions as to future stock performance.UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington,DC 20549Form 10-K(Mark One)ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For
38、 the fiscal year ended December 31,2010nTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period fromtoCOMMISSION FILE NO.0-26224INTEGRA LIFESCIENCES HOLDINGS CORPORATION(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)Delaware51-0317849(S
39、TATE OR OTHER JURISDICTION OF(I.R.S.EMPLOYERINCORPORATION OR ORGANIZATION)IDENTIFICATION NO.)311 Enterprise Drive08536PLAINSBORO,NEW JERSEY(ZIP CODE)(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)REGISTRANTS TELEPHONE NUMBER,INCLUDING AREA CODE:(609)275-0500SECURITIES REGISTERED PURSUANT TO SECTION 12(b)OF
40、 THE ACT:Title of Each ClassName of Exchange on Which RegisteredCommon Stock,Par Value$.01 Per ShareThe Nasdaq Stock Market LLCSECURITIES REGISTERED PURSUANT TO SECTION 12(g)OF THE ACT:NONEIndicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the Securiti
41、esAct.Yes No nIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d)of the Securities ExchangeAct.Yes nNo Indicate by check mark whether the registrant:(1)has filed all reports required to be filed by Section 13 or 15(d)of the SecuritiesExchange Acto
42、f1934duringthepreceding 12months(orforsuchshorterperiodthat theregistrantwasrequiredtofilesuchreports),and(2)has been subject to such filing requirements for the past 90 days.Yes No nIndicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site,if an
43、y,everyInteractive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T(232.405 of this chapter)during thepreceding 12 months(or for such shorter period that the registrant was required to submit and post such files).Yes No nIndicate bycheck mark ifdisclosureofdelinqu
44、ent filerspursuanttoItem 405ofRegulation S-Kisnotcontained herein,andwill notbe contained,to the best of registrants knowledge,in definitive proxy or information statements incorporated by reference in Part III ofthis Form 10-K or any amendment to this Form 10-K.Indicate by check mark whether the re
45、gistrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,or a smallerreporting company.See the definitions of“large accelerated filer,”“accelerated filer”and“smaller reporting company”in Rule 12b-2 ofthe Exchange Act.(Check one):Large accelerated filer Accelerated filer nNo
46、n-accelerated filer nSmaller reporting company n(Do not check 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 nNo As of June 30,2010,the aggregate market value of the registrants common stock held by non
47、-affiliates was approximately$780.1 million based upon the closing sales price of the registrants common stock on The Nasdaq Global Market on such date.Thenumber of shares of the registrants Common Stock outstanding as of February 21,2011 was 28,603,792.DOCUMENTS INCORPORATED BY REFERENCE:Certain po
48、rtions of the registrants definitive proxy statement relating to its scheduled May 17,2011 Annual Meeting ofStockholders are incorporated by reference in Part III of this report.TABLE OF CONTENTSPagePART IItem 1.Business.1Item 1A.Risk Factors.12Item 1B.Unresolved Staff Comments.25Item 2.Properties.2
49、5Item 3.Legal Proceedings.25PART IIItem 4.ReservedItem 5.Market for Registrants Common Equity,Related Stockholder Matters and Issuer Purchasesof Equity Securities.26Item 6.Selected Financial Data.27Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations.28Item 7A.
50、Quantitative and Qualitative Disclosures About Market Risk.45Item 8.Financial Statements and Supplementary Data.46Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.46Item 9A.Controls and Procedures.46Item 9B.Other Information.47PART IIIItem 10.Directors,Exec
51、utive Officers and Corporate Governance.48Item 11.Executive Compensation.48Item 12.Security Ownership of Certain Beneficial Owners and Management and Related StockholderMatters.48Item 13.Certain Relationships,Related Transactions,and Director Independence.48Item 14.Principal Accountant Fees and Serv
52、ices.48PART IVItem 15.Exhibit and Financial Statements Schedules.49Signatures.57PART IITEM 1.BUSINESSOVERVIEWThe terms“we,”“our,”“us,”“Company”and“Integra”refer to Integra LifeSciences Holdings Corporation,aDelaware corporation,and its subsidiaries unless the context suggests otherwise.Integra,headq
53、uartered in Plainsboro,New Jersey,is a world leader in medical devices.We employ approx-imately 3,000 people around the world who are dedicated to limiting uncertainty for surgeons,so they canconcentrate on providing the best patient care.Integra offers innovative solutions in orthopedic surgery,neu
54、ro-surgery,spinesurgery,andreconstructiveandgeneralsurgery.Revenuesgrewto$732.1millionin2010,anincreaseof 7%from$682.5 million in 2009.Integras orthopedic products include devices and implants for foot and ankle,hand and wrist,tendon andperipheral nerveprotection andrepair,woundrepair andspine.Integ
55、ra isa leader incranial neurosurgery,offering abroad portfolio ofimplants,devices,instruments andsystemsusedin neurosurgery,neuromonitoring,neurotrauma,andrelated critical care.IntheUnitedStates,weare oneofthelargestprovidersofsurgical instruments tohospitals,surgery centers and alternate care sites
56、,including physician and dental offices.STRATEGYOur goal is to become a global leader in the development,manufacturing and marketing of medical devices,implants and instruments.Key elements of our strategy include:Limiting Uncertainty.We work with customers whose time is at a premium.We are committe
57、d to limitthe surgeons uncertainty by making our products and processes simpler,involving surgeons in new productdevelopment,and ensuring that we have the best trained professionals who can anticipate the needs of ourcustomers.Driving a cohesive corporate identity.We have defined a clear brand posit
58、ion around limitinguncertainty and are tying our individual products to the Integra brand.Marketing innovative medical devices.We develop innovative medical devices for orthopedic andspinal surgery,neurosurgery,and general surgery.Investing in sales distribution channels to increase market penetrati
59、on.Around the world,we employmore than 500 direct sales professionals and engage a large network of distributors to sell our products.Therecruitment,management,and training of sales organizations is one of our core competencies.Achieving economies of scale.We are integrating facilities around the wo
60、rld to become more efficient,and are simplifying our product lines.Developing innovative products based on core technologies.We are a leader in regenerative medicine.Our proprietary highly purified collagen scaffold technology provides the foundation of our products forduraplasty,dermal regeneration
61、,nerve and tendon repair,and bone repair and regeneration.Acquiring orin-licensing productsthatfitexisting saleschannels.Weacquire businessesandacquire orin-license newproductsto increase the efficiencyandsize ofoursalesforce,stimulate the development ofnewproducts,and extend the commercial lives of
62、 existing products.We have completed seven acquisitions sincethe beginning of 2008,have demonstrated that we can quickly and profitably integrate new products andbusinesses,and have an active program to evaluate similar opportunities.Our strategy allowsusto expand ourpresence in hospitals and other
63、health care facilities,to integrate acquiredproductseffectively,tocreate strongsalesplatforms,andtodriveshort-andlong-termrevenueandearningsgrowth.1SALES AND DISTRIBUTIONWe sell products in three market categories Orthopedics,Neurosurgery and Instruments.Within theOrthopedics category,we sell throug
64、h a large direct sales organization and through specialty distributors focusedon their respective surgical specialties.Neurosurgery sells products through directly-employed sales representa-tives.Instruments are sold through two sales channels,both directly and through distributors and wholesalers,d
65、epending on the customer call point.PRODUCTS OVERVIEWIntegra is a fully integrated medical device companyoffering thousands of products for the medical specialtieswhich we target.Our objective is to develop,acquire or otherwise provide any product that will limit uncertainty inthe surgical theatre.T
66、hese products include implants,instruments and equipment for orthopedic surgery,neuro-surgery and general surgery.We distinguish ourselves by emphasizing the importance of the relatively new field ofregenerative medicine which we define as surgical implants derived from our proprietary collagen matr
67、ixtechnology.In 2010,approximately 23%of our revenues came from regenerative medicine.While these products vary incomposition and structure,they operate under similar principles.We build our matrix products from collagen,which is the basic structural protein that binds cells together in the body.Our
68、 matrices(whether for the dura mater,dermis,peripheral nerves,tendonorbone)provideascaffoldtosupporttheinfiltrationofthepatientsowncellsandthe growth of blood vessels.Eventually,those infiltrating cells consume the collagen of the implanted matrix andpromote the development of new native extracellul
69、ar matrix.In their interaction with the patients body,ourcollagen matrices inhibit the formation of scar tissue,so the implant is absorbed over time,leaving healthy nativetissue in its place.This basic technology can be applied to many different procedures.We sell these regenerativemedicine products
70、 through most of our sales channels.ORTHOPEDICS PRODUCT PORTFOLIOOur orthopedics market category includes products sold by our Extremity Reconstruction and Spine salesorganizations.Integra Extremity Reconstruction Product PortfolioExtremity reconstruction is a growing area of the orthopedic market.W
71、e define extremity reconstruction tomean the repair of soft tissue and the orthopedic reconstruction of bone in the foot,ankle and leg below the knee,and the hand,wrist,elbow and arm below the shoulder.Skin and Wound.Our dermal repair and regeneration products are used to treat acute and chronic wou
72、nds.Integras matrix wound dressings are indicated for the management of wounds,including partial and full-thickness wounds,pressure ulcers,venous ulcers,diabetic ulcers,chronic vascular ulcers,tunneled/underminedwounds,surgical wounds(donor sites/grafts,post-laser surgery,podiatric,and wound dehisce
73、nce),trauma wounds(abrasions,lacerations,second-degree burns,and skin tears)and draining wounds.We estimate that the marketopportunity for products used to treat trauma and chronic wounds in the United States is approximately$1 billion.There are currently 24 million people with diabetes in the Unite
74、d States.Approximately 15%of these patientsincur one or more diabetic foot ulcers during their lifetime.This population is also 15 times more likely to suffer anamputation due to non-healing diabetic foot ulcers.However,approximately 85%of all amputations are prevent-able if proper intervention is p
75、rovided.Approximately 500,000 adults seek treatment for venous leg ulcers annuallyin the United States.Bone and Joint Fixation Devices and Instruments.We offer the extremity reconstruction surgeon acomprehensive set of bone and joint fixation devices for upper and lower extremity reconstruction,incl
76、udingorthopedic implants and surgical devices for small bone and joint procedures involving the foot,ankle,hand,wristand elbow.Our products address both the trauma and reconstructive segments of the extremities market,anestimated$1 billion market in the United States.2Lower Extremity.We are a leadin
77、g developer and marketer of specialty implants and instruments specif-ically designed for foot and ankle surgery.Our customers include orthopedic and podiatric surgeons specializing inlower extremity injuries,of which there are approximately 2,300 and 6,200,respectively,in the United States.Wehave a
78、 full suite oforthopedic procedure sets toaddresspathology inthe forefoot,midfoot,hindfoot,andankle.Thelower extremity market is estimated to be in excess of$700 million in the United States.Upper Extremity.For upper extremity reconstruction,we are recognized for the premier implant for wristarthrop
79、lasty,a procedure that restores the function of the arthritic wrist.Our other leading products in thistherapeutic area areusedinsmall bonefixation,treatment ofcarpel tunnelsyndromeandtreatment ofcubital tunnelsyndrome.The upper extremity market is estimated to be nearly$250 million in the United Sta
80、tes.Bone Graft Substitutes for Extremity Reconstruction.Our comprehensive line of synthetic bone graftsubstitute products includes three distinct products a bone void filler manufactured from beta tri-calciumphosphate and type I bovine collagen;demineralized bone matrix(“DBM”);and demineralized bone
81、 matrixpremixed with cancellous bone.Bone graft substitutes are used in many of the more than 700,000 extremity fusionand osteotomy procedures annually.The extremity reconstruction bone graft market is estimated at more than$50 million annually in the United States.Nerve and Tendon.Surgeons who spec
82、ialize in foot or hand orthopedic surgery often have to repair nervesand tendons.To address these needs,we offer regenerative medicine products for peripheral nerve repair andprotection and tendon repair.We estimate that the worldwide market for the repair of severed,injured,compressedand scarred pe
83、ripheral nerves is approximately$50 million.Tendon and ligament injuries are some of the mostcommon musculoskeletal disorders.Industry sources estimate that there are approximately 700,000 tendon andligament repair procedures in the United States annually.Integra Spine Product PortfolioOrthopedic an
84、d neurological spine surgeons treat debilitating pain arising from disorders,which includedegenerative disk disease(“DDD”),deformity,trauma and tumors.DDD is the most common disorder and isexpected to increase in the United States due to the aging population.To treat the pain arising from spinal dis
85、orders,surgeonsmayneedtoperformspinal fusionprocedures.Weoffercomprehensivespinalfusiontechnologies that areused from the occiput to the sacrum,and a full line of related orthobiologics.In 2010,the United States spinal implant market,consisting of thoracolumbar fusion devices,cervical fusiondevices,
86、interbody fusion devices,and motion preservation technologies,was valued at approximately$5 billion.The United States market size for bone graft substitutes in orthopedic spinal procedures is estimated to be over$500 million.Spinal Fusion Implant Technologies.In 2010,over 250,000 interbody fusion de
87、vices were implanted inpatientsacrosstheUnitedStates.The2010estimated marketsizeforinterbodyfusiondeviceswasover$1.5billion.The market is usually divided by region(cervical or thoracolumbar)and approach(anterior,lateral,posterior,ortransforaminal).Interbody/vertebral body replacements are shaped lik
88、e a cage and used to hold the graft in placeduring a fusion procedure.Interbody devices are placed in the disc space and filled with bone graft or bone typematerial.According to industry sources,in 2010,the anterior interbody market was valued at over$200 million.Since its launch in early 2009,our p
89、roprietary fusion device has been implanted widely throughout the UnitedStates.Ournextgeneration fusiondevicetechnologyprovidesaninternallockingmechanism thatenhancesimplantstability and reduces the risk of unintended expulsion.In 2010,we launched new implants to aid surgeons withthoracolumbar,cervi
90、cal and deformity procedures as follows:Anterior Interbody Fusion Devices.The device used in the thoracolumbar region is an anteriorinterbody device that combines our novel internal locking mechanism with an integrated screw system.Thissystem is widely used to limit the uncertainty around implant st
91、ability and expulsion.The integrated screwsreduce the need for a surgeon to provide additional posterior fixation and simplifies the procedures.Cervical Fixation.To treat disorders of the cervical spine,in 2010 we launched our third anteriorcervical plating system.The new system provides an easy to
92、useone-step locking mechanism on a narrow,lowprofile platewith intuitive instrumentation.The result is an elegantsolution forsurgeonswhodesire simplicity3in anterior cervical procedures.In 2010,the anterior cervical fixation market was estimated to be nearly$800 million.Deformity Correction.To enhan
93、ce our treatment options for deformity procedures,in 2010 welaunched a stainless steel implant system that provides additional construct strength and stiffness,whichmay be necessary to correct abnormal curvitures of the spine.The launch of this system marks an importantstep in the evolution of the I
94、ntegra Spine deformity franchise,which we plan to continue to build.Thedeformity market is estimated to be nearly$400 million.Orthobiologics.We market and sell a range of innovative bone graft substitutes and other related medicaldevices that are used to enhance the repair and regeneration of bone i
95、n spinal and other orthopedic surgicalprocedures.Minimally InvasiveSolutions.Wedesign,develop,manufacture andsellspinalimplant productsfocusedonminimally invasive surgery and motion preservation techniques using the technology from the acquisition of ISTand our own internal product initiatives.Minim
96、ally invasive fixation systems offer surgeons an opportunity todeliver pedicle screws with a small incision,potentially reducing blood loss and recovery time.NEUROSURGERY PRODUCT PORTFOLIOOur Integra Neurosurgery sales organization sells a full line of products specifically for neurosurgery andneuro
97、critical care.Wehaveproductsforeachstepofacranialprocedureandthecareofthepatientaftersurgery.Wesell equipment used in the neurosurgery operating room and neurosurgery intensive care unit(“NICU”).Tissue Ablation Equipment.Our tissue ablation equipment uses high frequency acoustic pulses to selec-tive
98、ly dissect soft tissues according to their density.Integras CUSA tissue ablation system thereby facilitates theablation of unwanted tissue(such as tumors)adjacent to or attached to vital structures,helping to limit uncertaintyfor the surgeon.The CUSA tissue ablation system has been the leading ultra
99、sonic surgical aspirator for over25 years,and the related accessories for these products generate a recurring revenue stream.Our systems are used in over 100,000 procedures annually at over 2,000 centers around the world for theremoval of brain tumors,epilepsy foci,and gynecological and liver tumors
100、.According to industry sources,the totalUnited States market for ultrasonic tissue ablation products is estimated at over$60 million.Applications forultrasonic tissueablation technology continue to expand,both within neurosurgery andin other surgical specialties,and we are developing accessories to
101、meet these new clinical applications.Dural Repair Products.In the United States,over 225,000 craniotomy procedures are performed each yearrepresenting a market estimated to be over$500 million.Most of these surgeries require an incision of the duramater,which is the tough,fibrous membrane that surro
102、unds and protects the brain and spinal cord.The incisionmust be repaired,either by suturing or applying a dural graft to prevent cerebrospinal fluid leaks and facilitatehealing.Since our introduction of the original DuraGen Dural Graft Matrix in 1999,the first onlay collagen graftfor dural repair,we
103、 have become the market leader in sutureless closure of dural defects in the United States.Ourdural repair products are alternatives to tissue being removed and grafted from another location in the patientsbody.Cerebral Spinal Fluid(“CSF”)Management Devices.CSF drainage is an important component ofm
104、anaging the intracranial pressure of the neurologically compromised patient or a patient undergoing abdominalaortic aneurysm surgery.Over 250,000 procedures are performed annually in the United States using lumbar orventricular drainage systems,including permanently implanted shunt systems and exter
105、nal ventricular drainage,representing an estimated$150 million market.Hydrocephalus is a condition in which the primary characteristic is excessive accumulation of CSF in thebrain.It is most commonly treated by inserting a shunt catheter into theventricular system of the brain.The shunt isdesignedto
106、diverttheflowofCSFoutofthebraintoanappropriate drainage site,suchastheperitoneal cavityorthehearts right atrium,and through a pressure control valve to maintain a normal level of CSF.Each year there areapproximately 50,000 new shunt implants and revision cases to treat hydrocephalus.Integra currentl
107、y offers adiverse line of hydrocephalus management products,including a wide variety of valves and ventricular,lumbar,4peritoneal and cardiac catheters.In 2010,Integra introduced new valve systems for the treatment of hydrocephalusthat are designed to treat hydrocephalus by regulating the drainage o
108、f cerebrospinal fluid(CSF)from the lumbarspine.Intracranial Monitoring Equipment.The NICU monitors a patients post-operative condition,followingmost neurosurgical procedures involving craniotomy.We offer the leading products for monitoring intracranialpressure and brain tissue oxygenation and also o
109、ffer equipment for the drainage of excess CSF.Our monitoring systems are also used in the treatment of traumatic brain injury(“TBI”).TBI is a major publichealth problem and costs the United States an estimated$56 billion a year.More than five million Americans alivetoday have had a TBI,resulting in
110、a permanent need for help in performing daily activities,and TBI survivors areoften left with significant cognitive,behavioral,and communicative disabilities.Research has shown that not allbrain damage occurs at the moment of impact,but frequently evolves over the ensuing hours and days after theini
111、tial injury.The secondary damage may be controlled,in part,by using our products to monitor and manageintracranial pressure and brain tissue oxygen.Cranial Stabilization Equipment.Most neurosurgery procedures require rigid fixation of the head.OurMAYFIELD line of cranial stabilization equipment rigi
112、dly fixes the head in an orientation determined by thesurgeon.The device fixes the head via skull pins that are held in a frame that is anchored to the operating table andcanbeadjustedinmultipleplanesofmovementtoproperlypositiontheheadforthesurgicalprocedure.Thissystemis used worldwide in over 400,0
113、00 brain procedures annually.Intraoperative real time imaging is being utilized more frequently in neurosurgical procedures and we marketstabilization equipment that is made from a composite material that reduces the distortion in images compared tometal systems.INSTRUMENTS PRODUCT PORTFOLIOWe are t
114、he largest surgical instrument company in the United States,providing more than 60,000 instrumentpatterns andsurgical productstohospitals,surgerycenters,anddental,podiatry,veterinaryandphysician offices.Inaddition tohand-heldinstruments,wesellsurgicalheadlight systemsandtable-mounted retractors.Ouri
115、nstrumentsare sold and marketed via separate organizations to acute care and alternate site customers.The Jarit and Miltex brands of hand-held reusable surgical instrumentation encompass all of the clinicalspecialties within the acute care and alternate site clinical setting.Our markets include mini
116、mally invasiveendoscopy surgery,general surgery,cardiovascular,neurosurgery,gynecological,orthopedic,ear,nose and throat,ophthalmology and all other venues that provide surgical care inside and outside the hospital setting.We are also amajor player in animal health specialties,such as dentistry and
117、orthopedics,as well as the emerging life sciencessector.Integra is a premium manufacturer of dental instruments related to hygiene,oral surgery,periodontal andendodontic instrumentation.We offer the dental market the largest array of choices in extraction forceps,marketleadership insterilization cas
118、settes,andunique intra-oral lighting technologies.The Miltexbrand hassuccessfullyincorporated Integras regenerative medicine materials into its oral surgery and periodontal offerings.RESEARCH AND DEVELOPMENT STRATEGYOur research and development activities focus on identifying unmet surgical needs an
119、d meeting those needswith innovative solutions and products.We apply our core competency in regenerative medicine to products forneurosurgical,orthopedic and spinal applications,and have extensive programs in neuro-monitoring andCSF management,cranial stabilization,tissue ablation,surgical instrumen
120、ts and spine,soft tissue,extremitysmall bone,and joint fixation.Our activities include the acquisition or in-licensing of new products.Regenerative Medicine.Because regenerative medicine implants represent a fast-growing,high-marginopportunity for us,we allocate a large portion of our research and d
121、evelopment budget to these products.Ourregenerative medicine development program applies our expertise in biomaterials and collagen matrices to5neurosurgical,orthopedic and spinal surgery applications,as well as dermal regeneration,tendon and nerve repair,and chronic and acute wounds.Extremity Recon
122、struction.We develop fixation devices and other implants and instruments for upper andlower extremities.Our objective is to launch 3-5 important new products a year.Spine.Ourexpertise inimplant engineering,biomaterials developmentandbiomechanical testing providesastrong foundation for developing new
123、 products for the spine.Additionally,Integra holds a number of spine patentsthat serve as a platform for future products,with particular emphasis in minimally invasive technologies.While weplan to continue filling the gaps in our portfolio so our current customers can use our products for more proce
124、dures,we are also developing novel technologies and new indications.We have based our strong orthobiologic product development capability that on our bone matrix technologyand our collagen technology,which is the basis of our osteoconductive collagen ceramic scaffold.We continue todevelop line exten
125、sions based on these foundation technologies that further complete our offerings.In 2010,wecreated a complete portfolio of orthobiologic products specifically for our spine distribution network.We willcontinue to invest in the development of new novel technologies for bone grafting.Neurosurgery.Our
126、research and product development efforts are focused on protecting and extending ourleadership positions in dural repair,developing the next generation tissue ablation system,a new critical care neuromonitoring system,and an advanced hydrocephalus shunt valve.COMPETITIONOur competition in extremity
127、reconstruction includes Johnson&Johnson,Synthes,Inc.,Stryker Corporation,Tornier,Inc.,Wright Medical Group,Inc.Zimmer,Inc.,and Small Bone Innovations,Inc.,as well as other majororthopedic companies that carry a full line of small bone and joint fixation and soft tissue products.Competitors in the sp
128、ine and orthobiologics markets include Medtronic,Inc.,Johnson&Johnson,GlobusMedical Inc.,NuVasive,Inc.,Orthofix,Stryker Corporation,Synthes,Inc.,Zimmer,Inc.,and Alphatec Spine,Inc.,and also include several smaller,biologic-focused companies,such as Orthovita.Ourcompetitors intheneurosurgerymarketsar
129、eJohnson&Johnson,Medtronic,Inc.andStrykerCorporation.In addition,many of our neurosurgery product lines compete with smaller specialized companies and largercompanies that do not otherwise focus on neurosurgery.We compete with the Aesculap division of B.Braun Medical Inc.,as well as V.Mueller,a divi
130、sion ofCareFusion in the United States.In addition,we compete with Johnson&Johnson and many smaller instrumentcompanies in the reusable and disposable specialty instruments markets.We rely on the depth and breadth of oursales and marketing organization and our procurement operation to maintain our c
131、ompetitive position in surgicalinstruments and allied surgical products.Finally,incertain casesourproductscompeteprimarily againstmedical practices thattreat aconditionwithoutusing a medical device or any particular product,such as medical practices that use autograft tissue instead of ourdermal reg
132、eneration products,duraplasty products and nerve repair products.Depending on the product line,wecompete on the basis of our products features,strength of our sales force or distributor,sophistication of ourtechnology and cost effectiveness of our solution to the customers medical requirements.GOVER
133、NMENT REGULATIONAsa manufacturer and marketer of medical devices,we are subject to extensive regulation by the FDA and theCenterforMedicareServicesoftheU.S.DepartmentofHealthandHumanServicesandotherfederalgovernmentalagencies and,in some jurisdictions,by state and foreign governmental authorities.Th
134、ese regulations govern theintroduction of new medical devices,the observance of certain standards with respect to the design,manufacture,testing,labeling,promotion andsales ofthe devices,the maintenance ofcertain records,the ability to track devices,the reporting of potential product defects,the imp
135、ort and export of devices,and other matters.We believe that weare in substantial compliance with these governmental regulations.6The regulatory process of obtaining product approvals and clearances can be onerous and costly.The FDArequires,as a condition to marketing a medical device in the United S
136、tates,that we secure a Premarket Notificationclearance pursuant to Section 510(k)of the Federal Food,Drug and Cosmetic Act(the“FFDCA”),an approvedPremarket Approval application(or supplemental PMA application).Obtaining these approvals and clearances cantake up to several years and involves preclini
137、cal studies and clinical testing.On January 19,2011,the FDAannounced its plan to implement changes to the 510(k)Premarket Notification process.The plan delineates manychanges to the current process.The Institute of Medicine will have an opportunity to review the plan before thesechanges are made fin
138、al.These changes to the 510(k)Premarket Notification process,when final,could result inmore extensive testing,clinical trial requirements and other requirements.To perform clinical trials for significantrisk devices in the United States on an unapproved product,we are required to obtain an Investiga
139、tional DeviceExemption(“IDE”)fromthe FDA.TheFDAmayalsorequire afilingforFDAapprovalpriortomarketing productsthat are modifications of existing products or new indications for existing products.Moreover,after clearance/approval is given,if the product is shown to be hazardous or defective,the FDA and
140、 foreign regulatory agencieshave the power to withdraw the clearance or require us to change the device,its manufacturing process or itslabeling,tosupplyadditional proofofitssafetyandeffectivenessortorecall,repair,replace orrefundthecostofthemedical device.Because we currently export medical devices
141、 manufactured in the United States that have not beenapproved by the FDA for distribution in the United States,we are required to obtain approval/registration in thecountry weare exportingtoandmaintain certain recordsrelating toexportsandmake these available tothe FDAforinspection,if required.The FD
142、A Medical Device User Fee and Modernization Act of 2002 and the FDA Amendments Act of2007 established regulations governing user fees for certain regulatory submissions to the FDA.Currently user feesare required for 510(k)PMAs,certain PMA supplements,PMA annual reports,FDA establishment registration
143、sand other regulatory submissions.Human Cells,Tissues and Cellular and Tissue-Based ProductsIntegra manufactures medical devices derived from human tissue(demineralized bone tissue).The FDA has specific regulations governing human cells,tissues and cellular and tissue-based products,orHCT/Ps.An HCT/
144、P is a product containing,or consisting of,human cells or tissue intended for transplantation intoa human patient.Examples include bone,ligament,skin and cornea.Some HCT/Ps also meet the definition of a biological product,medical device or drug regulated under theFFDCA.These biologic,device or drug
145、HCT/Ps must comply both with the requirements exclusively applicable toHCT/Psand,inaddition,withrequirementsapplicable tobiologics,devicesordrugs,includingpremarketclearanceor approval from FDA.Section 361 of the Public Health Service Act(“PHSA”),authorizes the FDA to issue regulations to prevent th
146、eintroduction,transmission or spread of communicable disease.HCT/Ps regulated as“361”HCT/Ps are subject torequirements relating to registering facilities and listing products with FDA,screening and testing for tissue donoreligibility,Good Tissue Practice when processing,storing,labeling,and distribu
147、ting HCT/Ps,including requiredlabeling information,stringent record keeping,and adverse event reporting.The American Association of Tissue Banks(“AATB”)has issued operating standards for tissue banking.Compliance with these standards is a requirement in order to become an AATB-accredited tissue esta
148、blishment.Inaddition,some states have their own tissue banking regulations.We are licensed or have permits for tissue bankingin California,Florida,New York and Maryland.National Organ Transplant Act.Procurement of certain human organs and tissue for transplantation issubject to the restrictions of t
149、he National Organ Transplant Act(“NOTA”),which prohibits the transfer of certainhuman organs,including skin and related tissue for valuable consideration,but permits the reasonable paymentassociated with the removal,transportation,implantation,processing,preservation,quality control and storage ofhu
150、man tissue and skin.We reimburse tissue banks for their expenses associated with the recovery,storage andtransportation of donated human tissue that they provide to us for processing.We include in our pricing structureamountspaidtotissuebankstoreimbursethemfortheirexpensesassociated withtherecoverya
151、ndtransportation of7the tissue,in addition to certain costs associated with processing,preservation,quality control and storage of thetissue,marketing and medical education expenses,and costs associated with development of tissue processingtechnologies.NOTA payment allowances may be interpreted to l
152、imit the amount of costs and expenses that we mayrecover in our pricing for our products,thereby reducing our future revenue and profitability.Postmarket Requirements.After a device is cleared or approved for commercial distribution,numerousregulatory requirements apply.These include the FDAQuality
153、System Regulations which cover the procedures anddocumentation of the design,testing,production,control,quality assurance,labeling,packaging,sterilization,storage and shipping of medical devices;the FDAs general prohibition against promoting products for unapprovedoroff-label uses;the Medical Device
154、 Reporting regulation,whichrequires that manufacturers reporttothe FDAiftheir device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likelycause or contribute to a death or serious injury if it were to recur;and the Reports of Corrections and Removals
155、regulation,which require manufacturers to report recalls and field corrective actions to the FDA if initiated toreduce a risk to health posed by the device or to remedy a violation of the FFDCA.We are also required to register with the FDA as a medical device manufacturer.As such,our manufacturingsi
156、tes are subject to periodic inspection by the FDA for compliance with the FDAs Quality System Regulations.These regulations require that we manufacture our products and maintain our documents in a prescribed mannerwithrespecttodesign,manufacturing,testingandcontrolactivities.Further,wearerequiredtoc
157、omplywithvariousFDA requirements and other legal requirements for labeling and promotion.If the FDA believes that a company isnot in compliance with applicable regulations,it may issue a warning letter,institute proceedings to detain or seizeproducts,issue a recall order,impose operating restriction
158、s,enjoin future violations and assess civil penaltiesagainst that company,its officers or its employees and may recommend criminal prosecution to the Department ofJustice.Medical device regulations also are in effect in many of the countries outside the United States in which we dobusiness.These law
159、s range from comprehensive medical device approval and Quality System requirements forsome or all of our medical device products to simpler requests for product data or certifications.The number andscope of these requirements are increasing.Under the European Union Medical Device Directive,medical d
160、evicesmust meet the Medical Device Directive standards and receive CE Mark Certification prior to marketing in theEuropean Union(the“EU”).CE Mark Certification requires a comprehensive Quality System program,compre-hensive technical documentation and data on the product,which are then reviewed by a
161、Notified Body.A NotifiedBody is an organization designated by the national governments of the European Union member states to makeindependent judgments about whether a product complies with the protection requirements established by eachCE marking directive.The Medical Device Directive,ISO 9000 seri
162、es and ISO 13485 are recognized internationalquality standards that are designed to ensure that we develop and manufacture quality medical devices.The EU hasrevised the Medical Device Directive(93/42/EC as amended by 2007/47/EC)and these revised regulations becameeffective March 21,2010.Compliance w
163、ith these regulations requires extensive documentation and clinical reportsfor all of our products sold in the EU,as well as revisions to labeling and other requirements to comply with therevisions.A recognized Notified Body audits our facilities annually to verify our compliance with these standard
164、s.Australia,China,Japan and other countries have issued new regulations and requirements for obtaining approval ofmedical devices,including requirements governing the conduct ofclinical trials,the manufacturing of products andthe distribution of products for medical devices with which we must comply
165、 with in order to sell our products inthose countries.In the EU,our products that contain human derived tissue,including those containing demineralized bonematerial,are not medical devices as defined in the Medical Device Directive(93/42/EC).They are also notmedicinal products as defined in Directiv
166、e 2001/83/EC.Today,regulations,if applicable,are different from oneEUmember statetothenext.Duetotheabsence ofaharmonized regulatoryframeworkandtheproposedregulationfor advanced therapy medicinal products in the EU,the approval process for human-derived cell or tissue-basedmedical products may be ext
167、ensive,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 particularly concerned with materials infected with theagent that causes bovine spongiform encephal
168、opathy(“BSE”),otherwise known as mad cow disease.These8regulations affect our dermal regeneration products,duraplasty products,biomaterial products for the spine,nerveand tendon repair products and certain other products,all of which contain material derived from bovine tissue.Although we take great
169、 care to provide that our products are safe and free of agents that can cause disease,productsthat contain materials derived from animals,including our products,may become subject to additional regulation,orevenbebanned incertain countries,because ofconcern overthe potential forpriontransmission.Sig
170、nificantnewregulations,or a ban of our products,could have a material adverse effect on our current business or our ability toexpand our business.See“Item 1A.Risk Factors Certain of our products contain materials derived from animalsources and may become subject to additional regulation.”We are subj
171、ect to laws and regulations pertaining to healthcare fraud and abuse,including anti-kickback lawsand physician self-referral laws that regulate the means by which companies in the health care industry may markettheir products to hospitals and health care professionals and may compete by discounting
172、the prices of theirproducts.Thedeliveryofourproductsissubjecttoregulation regardingreimbursement,andfederal healthcare lawsapply when a customer submits a claim for a product that is reimbursed under a federally funded healthcareprogram.These rules require that we exercise care in structuring our sa
173、les and marketing practices and customerdiscount arrangements.See“Item 1A.Risk Factors Oversight of the medical device industry might affect themanner in which we may sell medical devices and compete in the marketplace.”Our international operations subject us to laws regarding sanctioned countries,e
174、ntities and persons,customs,import-export,lawsregardingtransactionsinforeign countriesandthe U.S.ForeignCorruptPractices Actandlocallaws regarding interactions with healthcare professionals.Among other things,these laws restrict,and in somecases prohibit,United States companies from directly or indi
175、rectly selling goods,technology or services to peopleor entities in certain countries.In addition,these laws require that we exercise care in structuring our sales andmarketing practices in foreign countries.Our research,development and manufacturing processes involve the controlled use of certain h
176、azardousmaterials.We are subject to federal,state and local laws and regulations governing the use,manufacture,storage,handling and disposalofthese materials andcertain wasteproducts.Although webelieve that oursafety proceduresfor handling and disposing of these materials comply with the standards p
177、rescribed by the controlling laws andregulations,the risk ofaccidental contamination or injury from these materials cannot be eliminated.In the eventofthis type of accident,we could be held liable for any damages that may result and any liability could exceed ourresources.Although we believe that we
178、 are in compliance in all material respects with applicable environmentallaws and regulations,we could incur significant costs to comply with environmental laws and regulations in thefuture,and our operations,business or assets could be materially adversely affected by current or futureenvironmental
179、 laws or regulations.In addition to the above regulations,we are and may be subject to regulation under federal and state laws,including,but not limited to,requirements regarding occupational health and safety,laboratory practices and themaintenance ofpersonalinformation,includingpersonalhealthinfor
180、mation.Asapubliccompany,wearesubjecttothe securities 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 purchase med
181、ical devices generally rely on third-party payors,including the Medicare and Medicaid programs and private payors,such as indemnity insurers,employer group health insurance programs and managed care plans,to reimburse all or part of the cost of theproducts.As a result,demand for our products is and
182、will continue to be dependent in part on the coverage andreimbursement policies of these payors.The manner in which reimbursement is sought and obtained varies basedupon the type of payer involved and the setting in which the product is furnished and utilized.Reimbursement fromMedicare,Medicaid and
183、other third-party payors may be subject to periodic adjustments as a result of legislative,regulatoryandpolicychanges aswellasbudgetary pressures.Possiblereductions in,oreliminations of,coverageorreimbursement by third-party payors as a result of these changes may affect our customers revenue and ab
184、ility topurchase our products.Anychanges in the healthcare regulatory,payment or enforcement landscape relative to ourcustomers healthcare services has the potential to significantly affect our operations and revenue.9INTELLECTUAL PROPERTYWe seek patent and trademark protection for our key technolog
185、y,products and product improvements,both inthe United States and in selected foreign countries.When determined appropriate,we have enforced and plan tocontinue to enforce and defend our patent and trademark rights.In general,however,we do not rely solely on ourpatent and trademark estate to provide
186、us with any significant competitive advantages as it relates to our existingproduct lines.We alsorely upontrade secrets andcontinuing technological innovations todevelopandmaintain ourcompetitive position.In an effort to protect our trade secrets,we have a policy of requiring our employees,consultan
187、ts and advisors to execute proprietary information and invention assignment agreements upon com-mencement of employment or consulting relationships with us.These agreements also provide that all confidentialinformation developed or made known to the individual during the course of their relationship
188、 with us must be keptconfidential,except in specified circumstances.AccuDrain,Accell,Accell Evo3,Advansys,AtollTM,AuragenTM,Bold,Budde,BuzzTM,Camino,CRW,CoralTM,CUSA,CUSA Excel,DenLite,DissectronTM,DuraGen,DuraGen Plus,DynaGraftII,Hallu,HeliCote,HeliPlug,HeliTape,HeliMEND,HINTEGRA,ICOSTM,Inforce,Int
189、egra,IntegraMozaikTM,Integra OS,Jarit,LICOX,LimiTorrTM,Luxtec,Manta RayTM,Miltex,NeuraGen,NeuraWrapTM,Newdeal,Omni-Tract,OrthoBlastII,OSVII,Qwix,Padgett,Panta,Paramount,Radionics,RedmondTM,RugglesTM,SafeGuard,Selector,Subtalar MBA,TenoGlide,TetherTM,Trel-XTM,Trel-XC,Tibiaxys,Uni-CPTM,Uni-Clip,Univer
190、sal2TM,Ventrix,XKnife and the Integra logo are some of the material trademarks ofIntegraLifeSciences Corporation anditssubsidiaries.MAYFIELDisaregistered trademark ofSMUSA,Inc.,andis used by Integra under license.EMPLOYEESAtDecember 31,2010,we hadapproximately 3,000employees engaged in production an
191、dproduction support(including warehouse,engineering and facilities personnel),quality assurance/quality control,research anddevelopment,regulatory and clinical affairs,sales,marketing,administration and finance.Except for certainemployees at our facilities in France and Mexico,none of our employees
192、is subject to a collective bargainingagreement.FINANCIAL INFORMATION ABOUT GEOGRAPHIC AREASFinancial information about our geographical areas is set forth under“Item 7.Managements Discussion andAnalysis of Financial Condition and Results of Operations International Revenues and Operations”and in our
193、financial statements Note 13,“Segment and Geographic Information,”to our Consolidated Financial Statements.SOURCES OF RAW MATERIALSIn general,rawmaterials essential to ourbusinessesare readily available from multiple sources.Forreasons ofquality assurance,availability,orcosteffectiveness,certain com
194、ponents andrawmaterials are available onlyfromasole supplier.Our policy is to maintain sufficient inventory of components so that our production will not besignificantly disrupted even if a particular component or material is not available for a period of time.Certain ofourproducts,including ourderm
195、al regeneration products,duraplastyproducts,biomaterial productsfor the spine,nerve and tendon repair products and certain other products,contain material derived from bovinetissue.Wetakegreatcaretoprovidethatourproductsaresafeandfreeofagentsthatcancausedisease.Inparticular,the collagen used in the
196、products that Integra manufactures isderivedonly from the deep flexortendon ofcattle lessthan 24 months old from New Zealand,a country that has never had a reported case of bovine spongiformencephalopathy,or from the United States.We are also qualifying sources of collagen from another country that
197、isconsidered BSE-free.The World Health Organization classifies different types of cattle tissue for relative risk ofBSE transmission.Deep flexor tendon is in the lowest-risk category for BSE transmission(the same category asmilk,for example),and is therefore considered to have a negligible risk of c
198、ontaining 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 tissue only from FDA and the American Association of Tissue Banks10(“AATB”)registered and inspected tissue banks.The donors
199、are rigorously screened,tested,and processed inaccordancewith the FDAandAATB requirements.Onlydonated tissuefromFDAandAATBregistered,inspected,non-profit tissue banks is qualified to source for our raw materials.Additionally,each donor must pass all of theFDA-specified bacterial and viral testing be
200、fore the raw material is distributed to Integra for further processing.Wereceive with each donor lot a certification of the safety of the raw material from the tissue banks medical director.Asan added assurance of safety,each lot ofbone is released into the manufacturing process only after our staff
201、of quality assurance microbiologists screens the incoming bone and serology test records.During our manufac-turing process,the bone particles are subjected to our proprietary process and terminally sterilized.We havedemonstrated through our testing that this type of rigorous processing further enhan
202、ces the safety and effectivenessof our demineralized bone material products.SEASONALITYRevenues during our fourth quarter tend to be stronger than other quarters because many hospitals increasetheir purchases of our products during the fourth quarter to coincide with the end of their budget cycles.A
203、VAILABLE INFORMATIONWe are subject to the informational requirements of the Securities Exchange Act of 1934,as amended,(the“Exchange Act”).In accordance with the Exchange Act,we file annual,quarterly and special reports,proxystatements and other information with the Securities and Exchange Commissio
204、n.You may view our financialinformation,including the information contained in this report,and other reports we file with the Securities andExchange Commission,onthe Internet,without charge assoonasreasonably practicable after we file them with theSecurities and Exchange Commission,in the“SEC Filing
205、s”page of the Investor Relations section of our website .You may also obtain a copy of any of these reports,without charge,from our investorrelations department,311 Enterprise Drive,Plainsboro,NJ 08536.Alternatively,you may view or obtain reportsfiled with the Securities and Exchange Commission at t
206、he SEC Public Reference Room at 100 F Street,N.E.inWashington,D.C.20549,or at the Securities and Exchange Commissions Internet site at www.sec.gov.Please callthe Securities and Exchange Commission at 1-800-SEC-0330 for further information on the operation of the publicreference facilities.SPECIAL NO
207、TE REGARDING FORWARD-LOOKING STATEMENTSWe have made statements in this report,including statements under“Business”and“Managements Dis-cussion and Analysis of Financial Condition and Results of Operations”that constitute forward-looking statementswithin the meaning of Section 27A of the Securities Ac
208、t of 1933,as amended(the“Securities Act”),andSection 21E of the Exchange Act.These forward-looking statements are subject to a number of risks,uncertaintiesand assumptions about us including,among other things:general economic and business conditions,both nationally and in our international markets;
209、our expectations and estimates concerning future financial performance,financing plans and the impact ofcompetition;anticipated trends in our business;anticipated demand for our products,particularly capital equipment products;our expectations concerning our ongoing restructuring,integration and man
210、ufacturing transfer and expan-sion activities;existing and future regulations affecting our business;our ability to obtain additional debt and equity financing to fund capital expenditures and working capitalrequirements and acquisitions;11 physicianswillingnesstoadoptourrecently launchedandplannedp
211、roducts,third-party payorswillingnessto provide or continue reimbursement for these products and our ability to secure regulatory approval forproducts in development;initiatives launched by our competitors;our ability to protect our intellectual property,including trade secrets;our ability to comple
212、te acquisitions,integrate operations post-acquisition and maintain relationships withcustomers of acquired entities;work stoppages at our facilities;and other risk factors described in the section entitled“Risk Factors”in this report.You can identify these forward-looking statements by forward-looki
213、ng words such as“believe,”“may,”“could,”“might,”“will,”“estimate,”“continue,”“anticipate,”“intend,”“seek,”“plan,”“expect,”“should,”“would”and similar expressions in this report.We undertake no obligation to publicly update or revise any forward-lookingstatements,whether as a result of new informatio
214、n,future events or otherwise.In light of these risks anduncertainties,the forward-looking events and circumstances discussed in this report may not occur and actualresults could differ materially from those anticipated or implied in the forward-looking statements.ITEM 1A.RISK FACTORSRisks Related to
215、 Our BusinessOur operating results may fluctuate.Our operating results,including components of operating results such as gross margin and cost of productsales,mayfluctuate fromtime totime,andsuchfluctuations could affect ourstockprice.Ouroperating results havefluctuated in the past and can be expect
216、ed to fluctuate from time to time in the future.Some of the factors that maycause these fluctuations include:current economic conditions,which could affect the ability of hospitals and other customers to purchase ourproducts and could result in a reduction in elective and non-reimbursed operative pr
217、ocedures;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 acceptance of our existing products,as well as products in developm
218、ent;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 and the British pound;expenses incurred and business lost in connection with product field corrections or recalls;changes i
219、n the cost or decreases in the supply of raw materials,including energy and steel;our ability to manufacture our products efficiently;the timing of our research and development expenditures;reimbursement for our products by third-party payors such as Medicare,Medicaid and private healthinsurers;insp
220、ections of our manufacturing facilities for compliance with Quality System Regulations(Good Man-ufacturing Practices)which could result in Form 483 observations,warning letters,injunctions or otheradverse findings from the FDA or from equivalent regulatory bodies;and12 FDAs reform to the 510(k)Prema
221、rket Notification process which could make it more difficult to obtainclearance of our medical devices and could result in the requirement of clinical trial data in order to obtainFDA clearance.The industry and market segments in which we operate are highly competitive,and we may be unable tocompete
222、 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-stage companiesthat have alternative technological solutions for our primary
223、 clinical targets,as well as universities,researchinstitutions and other non-profit entities.Many of our competitors have access to greater financial,technical,research and development,marketing,manufacturing,sales,distribution,administrative,consulting and otherresources than we do.Our competitors
224、may be more effective at developing commercial products.Our competitorsmay be able to gain market share by offering lower-cost products or by offering products that enjoy betterreimbursement methodologies from third-party payors,such as Medicare,Medicaid and private healthcareinsurance.Our competiti
225、ve 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 under devel-opment,obtain and maintain reimbursement coverage under Medicare,Medicaid and private healthcare insur
226、anceand obtain patent protection.We may need to develop new applications for our products to remain competitive.Technological advances by one or more of our current or future competitors or their achievement of superiorreimbursement from Medicare,Medicaid and private healthcare insurance could rende
227、r our present or futureproducts obsolete or uneconomical.Our future success will depend upon our ability to compete effectively againstcurrent technology as well as to respond effectively to technological advances.Competitive pressures couldadversely affect our profitability.For example,competitors
228、have launched and have been developing products tocompete with our duraplasty products,extremity reconstruction implants,neuro critical care monitors andultrasonic tissue ablation devices,among others.Our largest competitors in the neurosurgery markets are Medtronic,Inc.,Johnson&Johnson and StrykerC
229、orporation.In addition,many of our neurosurgery product lines compete with smaller specialized companies orlarger companies that do not otherwise focus on neurosurgery.Our competitors in extremity reconstruction includeJohnson&Johnson,Synthes,Inc.andStrykerCorporation,aswellasothermajororthopedic co
230、mpanies that carryafull line of reconstructive products.We also compete with Wright Medical Group,Inc.,Small Bone Innovations,Inc.,Tornier,Inc.and other companies in the extremity reconstruction market category.Our competitors in thespinal implant and orthobiologics markets include Medtronic,Inc.,Jo
231、hnson&Johnson,Synthes,Inc.,StrykerCorporation,Zimmer,Inc.,NuVasive,Inc.,Globus Medical,Inc.,Alphatec Spine,Inc.,Orthofix and severalsmaller,biologically focused companies suchasOsteotech andOrthovita.Insurgical instruments,we competewithV.Mueller,as well as the Aesculap division of B.Braun Medical,I
232、nc.In addition,we compete with Johnson&Johnsonand many smaller instrument companies in the reusable and disposable specialty instruments markets.Ourprivate-label products face diverse and broad competition,depending on the market addressed by the product.Finally,in certain cases our products compete
233、 primarily against medical practices that treat a condition withoutusinga device oranyparticular product,suchasthe medical practices that useautograft tissue instead ofourdermalregeneration products,duraplasty products and nerve repair products.Our current strategy involves growth through acquisitio
234、ns,which requires us to incur substantial costsand potential liabilities for which we may never realize the anticipated benefits.Inaddition to internally generated growth,ourcurrent strategy involvesgrowththroughacquisitions.Since thebeginning of 2008,we have acquired 7 businesses or product lines a
235、t a total cost of approximately$177.2 million.We may be unable to continue to implement our growth strategy,and our strategy ultimately may beunsuccessful.Asignificant portion ofourgrowthinrevenues hasresulted from,andisexpected tocontinue toresultfrom,the acquisition of businesses complementary to
236、our own.We engage in evaluations of potential acquisitionsand are in various stages of discussion regarding possible acquisitions,certain of which,if consummated,could be13significant to us.Any new acquisition could result in material transaction expenses,increased interest andamortization expense,i
237、ncreased depreciation expense,increased operating expense,and possible in-processresearch and development charges for acquisitions that do not meet the definition of a“business,”any of whichcould have a material adverse effect on our operating results.Certain businesses that we acquire may not havea
238、dequate financial,disclosure,regulatory,quality or other compliance controls at the time we acquire them.As wegrow by acquisition,we must manage and integrate the new businesses to bring them into our systems for financial,disclosure,compliance,regulatory and quality control,realize economies of sca
239、le,and control costs.In addition,acquisitions involve other risks,including diversion of management resources otherwise available for ongoingdevelopment of our business and risks associated with entering markets in which our marketing and sales force haslimited experienceorwhereexperienced distribut
240、ionalliances arenotavailable.Ourfutureprofitability willdependin part upon our ability to develop further our resources to adapt to these new products or business areas and toidentify and enter into or maintain satisfactory distribution networks.We may not be able to identify suitableacquisition can
241、didates in the future,obtain acceptable financing or consummate any future acquisitions.If wecannot integrate acquired operations,manage the costofprovidingourproductsorprice ourproductsappropriately,our profitability could suffer.In addition,as a result of our acquisitions of other healthcare busin
242、esses,we may besubject to the risk of unanticipated business uncertainties,regulatory and other compliance matters or legalliabilities relating to those acquired businesses for which the sellers of the acquired businesses may not indemnifyus,for which we may not be able to obtain insurance(or adequa
243、te insurance),or for which the indemnification maynot be sufficient to cover the ultimate liabilities.Our future financial results could be adversely affected by impairments or other charges.Sincewehavegrownthroughacquisitions,wehave$261.9million ofgoodwilland$49.7millionofindefinite-lived intangibl
244、e assets as of December 31,2010.Under the authoritative guidance for determining the useful life ofintangible assets,we are required to test both goodwill and indefinite-lived intangible assets for impairment on anannual basis based upon a fair value approach,rather than amortizing them over time.We
245、 are also required to testgoodwill and indefinite-lived intangible assets for impairment between annual tests if an event occurs such as asignificant decline in revenues or cash flows for certain products,or the discount rates used in the calculations ofdiscounted cash flow change significantly,or c
246、ircumstances change that would more likely than not reduce ourenterprise fair value below its book value.If such a decline,rate change or circumstance were to materialize,wemay record an impairment of these intangible assets that could be material to the financial statements.See“Managements Discussi
247、on and Analysis of Financial Condition and Results of Operations Critical AccountingEstimates”of this report.The guidance on long-lived assets requires that we assess the impairment of our long-lived assets,includingdefinite-lived intangible assets,whenever events or changes in circumstances indicat
248、e that the carrying value maynot be recoverable as measured by the sum of the expected future undiscounted cash flows.As of December 31,2010,we had$145.2 million of definite-lived intangible assets.Decisions relating to our trade names may occur over time as our re-branding strategy is implemented.A
249、dditionally,we may discontinue certain products in the future as we continue to assess the profitability of ourproduct lines.As a result,we may need to record impairment charges or accelerate amortization on certain tradenames or technology-related intangible assets in the future.Thevalue of a medic
250、al device business is oftenvolatile,and the assumptions underlying our estimates made inconnection with ourassessments under theguidance may change asaresult ofthat volatility orother factors outsideour control and may result in impairment charges.The amount of any such impairment charges could be s
251、ignificantand could have a material adverse effect on our reported financial results for the period in which the charge is takenand could have an adverse effect on the market price of our securities,including the notes and the common stockinto which they may be converted.14Current economic condition
252、s may adversely affect the ability of hospitals,other customers,suppliersand distributors to access funds or otherwise have available liquidity,which could reduce orders for ourproducts or interrupt our production or distribution or result in a reduction in elective and non-reimbursedoperative proce
253、dures.Current economic conditions may adversely affect the ability of hospitals and other customers to access fundsto enable them to fund their operating and capital budgets.As a result,hospitals and other customers may reducebudgetsorputall orpart oftheir budgetsonholdorclose their operations,which
254、could haveanegativeeffect onoursales,particularly the sales of more expensive capital equipment such as our ultrasonic surgical aspirators,neuromonitors and stereotactic products,or result in a reduction in elective and non-reimbursed procedures.Governmental austerity policies in Europe and other ma
255、rkets have reduced and may continue to reduce the amountof money available to purchase medical products,including our products.The disruption in the global financial markets and the economic downturn may adversely impact theavailability and cost of credit.Ourabilitytorefinanceourindebtednessandtoobt
256、ainfinancingforacquisitionsorothergeneralcorporateandcommercial purposes will depend on our operating and financial performance and is also subject to prevailingeconomicconditionsandtofinancial,businessandotherfactorsbeyondourcontrol.Inthefallof2008,globalcreditmarkets and the financial services ind
257、ustry experienced a period of unprecedented turmoil characterized by thebankruptcy,failure or sale of various financial institutions,a general tightening of credit,and an unprecedentedlevel of market intervention from the United States and other governments.To market our products under development w
258、e will first need to obtain regulatory approval.Further,if wefail to comply with the extensive governmental regulations that affect our business,we could be subject topenalties and could be precluded from marketing our products.Asa manufacturer and marketer of medical devices,we are subject to exten
259、sive regulation by the FDA and theCenterforMedicareServicesoftheU.S.DepartmentofHealthandHumanServicesandotherfederalgovernmentalagencies and,in some jurisdictions,by state and foreign governmental authorities.These regulations govern theintroduction of new medical devices,the observance of certain
260、standards with respect to the design,manufacture,testing,labeling,promotion andsales ofthe devices,the maintenance ofcertain records,the ability to track devices,the reporting of potential product defects,the import and export of devices and other matters.We are facing anincreasing amount ofscrutiny
261、andcompliance costsasmore states areimplementing regulationsgoverningmedicaldevices,pharmaceuticals and/or biologics which affect many of our products.As a result,we have beenimplementing additional procedures,controls and tracking and reporting processes,as well as payingadditional permit and licen
262、se fees,where required.Our products under development are subject to FDA approval or clearance prior to marketing for commercialuse.The processofobtaining necessary FDAapprovals orclearances can take years andis expensive and uncertain.The FDA has announced a reform of the 510(k)Premarket Notificati
263、on process that could make it more difficult toobtain clearance for our medical devices,especially for innovative devices.The FDA has proposed changes forwhich FDA clearance to market would possibly require clinical data,more extensive manufacturing informationand postmarket data.The FDA is also pro
264、posing that an FDA inspection of the manufacturing facility may berequired for certain products prior to clearance of the 510(k),which is similar to the requirements of a Class IIIdevice.As part of the 510(k)reform,the FDA proposes to issue regulations defining grounds and procedures forrescission o
265、f 510(k)applications that have previously been cleared to market.The FDA may also require the moreextensive PMA process for certain products.Our inability to obtain required regulatory approval on a timely or acceptable basis could harm our business.Further,approval or clearance may place substantia
266、l restrictions on the indications for which the product may bemarketed or to whom it may be marketed,warnings that may be required to accompany the product or additionalrestrictions placed onthesaleand/oruseoftheproduct.Furtherstudies,including clinical trialsandFDAapprovals,may be required to gain
267、approval for the use of a product for clinical indications other than those for which theproduct was initially approvedor cleared or for significant changes to the product.These studies could take years to15complete and could be expensive,and there is no guarantee that the results will convince the
268、FDA to approve orclear the additional indication.Any negative outcome in our clinical trials,including as a result of any interimanalysis which we may do with respect to our clinical trials from time to time,could adversely affect our ability tolaunch new products,which could affect our sales and ou
269、r ability to achieve reimbursement for new or existingproducts.In addition,for products with an approved PMA,the FDA requires annual reports and may require post-approval surveillance programs and/or studies to monitor the products safety and effectiveness.Results of post-approval programs may limit
270、 or expand the further marketing of the product.We are also seeing third-party payorsrequire clinical trial data for products cleared through the 510(k)process in order to continue reimbursementcoverage.These clinical trials could takeyears to complete and be expensive and there is noguarantee that
271、the FDAwill approve the additional indications for use.There is also no guarantee that the payors will agree to continuereimbursement or provide additional coverage based upon these clinical trials.If the FDA does not approve theadditional indications for use,our ability to obtain reimbursement for
272、these products and our ability to competeagainst alternative products or technologies could suffer and,consequently,affect our sales.Another risk ofapplication to the FDArelates to the regulatory classification of new products or proposednewuses for existing products.In the filing of each applicatio
273、n,we make a judgment about the appropriate form andcontent of the application.If the FDA disagrees with our judgment in any particular case and,for example,requiresusto file a PMAapplication rather than allowingusto market for approved useswhilewe seek broader approvals orrequires extensive addition
274、al clinical data,the time and expense required to obtain the required approval might besignificantly increased or approval might not be granted.Our manufacturing facilities must be in compliance with FDA Quality System Regulations(current GoodManufacturing Practices).In addition,approved products ar
275、e subject to continuing FDA requirements relating toquality control and quality assurance,maintenance of records,reporting of adverse events and product recalls,documentation,and labeling and promotion of medical devices.For example,some of our orthobiologics productsare subject to FDA and certain s
276、tate regulations regarding human cells,tissues,and cellular or tissue-basedproducts,which include requirements for establishment registration and listing,donor eligibility,current goodtissue practices,labeling,adverse-event reporting,and inspection and enforcement.Some states have their owntissue ba
277、nking regulation.We are licensed or have permits as a tissue bank in California,Florida,New York andMaryland.In addition,tissue banks may undergo voluntary accreditation by the AATB.The AATB has issuedoperating standards for tissue banking.Compliance with these standards is a requirement in order to
278、 become alicensed tissue bank.The FDA and foreign regulatory authorities require that our products be manufactured according to rigorousstandards.These andfuture regulatory requirements couldsignificantly increase ourproduction orpurchasing costsand could even prevent us from making or obtaining our
279、 products in amounts sufficient to meet market demand.Ifwe ora third-party manufacturer change ourapproved manufacturing process,the FDAmay require a newapprovalbefore that process may be used.Failure to develop our manufacturing capability could mean that,even if we wereto develop promising new pro
280、ducts,we might not be able to produce them profitably,as a result of delays andadditional capital investment costs.All of our manufacturing facilities,both international and domestic,are also subject to inspections by or underthe authority of the FDA and other regulatory agencies.Failure to comply w
281、ith applicable regulatory requirementscould subject us to issuance of Form 483 observations,warning letters or enforcement action by the FDA or otheragencies,including product seizures,recalls,withdrawal of clearances or approvals,restrictions on or injunctionsagainst marketing our product or produc
282、ts based on our technology,cessation of operations and civil and criminalpenalties,any of which could materially affect our business.Weare alsosubjecttotheregulatoryrequirements ofcountries outsidethe UnitedStateswherewedobusiness.For example,under the European Union Medical Device Directive,all med
283、ical devices must meet the MedicalDevice Directive standards in order to obtain CE Mark Certification prior to marketing in the EU.CE MarkCertification requires a comprehensive Quality System program,comprehensive technical and clinicaldocumentation and data on the product,which a Notified Body in t
284、he EU reviews.In addition,we must becertified to the ISO 13485:2003 Quality System standards and maintain this certification in order to market ourproducts in the EU,Canada,Japan,Latin America,countries in the Asia-Pacific region and most other countries16outside the United States.The EU has revised
285、 the Medical Device Directive(93/42/EC as amended by 2007/47/EC).Compliance with these regulations requires extensive documentation,clinical reports for all products sold inthe EU and other requirements.Requirements to meet these regulations can be costly and are mandatory to marketour products in t
286、he EU.Many other countries have instituted new medical device regulations and/or revised currentmedical device regulations.These regulations often require extensive documentation,including clinical data andmay require audits of our manufacturing facilities in order to gain approval to sell our produ
287、cts in that country.There are also associated fees with these new regulations.These regulations are required for all new products andre-registration of our medical devices,and may involve lengthy and expensive reviews.Our products that contain human derived tissue,including those containing deminera
288、lized bone matrices,arenot medical devices in the EU as defined in the Medical Device Directive(93/42/EC).They are also not medicinalproducts as defined in Directive 2001/83/EC.Today,regulations,if applicable,differ from one EU member state tothe next.Because of the absence of a harmonized regulator
289、y framework and the proposed regulation for advancedtherapy medicinal products in the EU,as well as for other countries,the approval process for human-derived cell ortissue based medical products may be extensive,lengthy,expensive,and unpredictable.Among others,some of ourorthobiologics products are
290、 subject to EU member states regulations that govern the donation,procurement,testing,coding,traceability,processing,preservation,storage,and distribution of human tissues and cells andcellular or tissue-based products.These EU member states regulations include requirements for registration,listing,
291、labeling,adverse-event reporting,and inspection and enforcement.Some EU member states have their owntissue banking regulations.In addition,certain EU member states have instituted new requirements for additionaltesting that may be prohibitive to obtaining approval in those member states.Certain of o
292、ur products contain materials derived from animal sources and may become subject toadditional regulation.Certain ofourproducts,including ourdermal regeneration products,duraplastyproducts,biomaterial productsfor the spine,nerve and tendon repair products and certain other products,contain material d
293、erived from bovinetissue.Products that contain materials derived from animal sources,including food,pharmaceuticals and medicaldevices,are increasingly subject to scrutiny in the media and by regulatory authorities.Regulatory authorities areconcerned about the potential for the transmission of disea
294、se from animals to humans via those materials.Thispublic scrutiny has been particularly acute in Japan and Western Europe with respect to products derived fromanimal sources,because of concern that materials infected with the agent that causes bovine spongiformencephalopathy,otherwise known as BSE o
295、r mad cow disease,may,if ingested or implanted,cause a variantof the human Creutzfeldt-Jakob Disease,an ultimately fatal disease with no known cure.Cases of BSE in cattlediscovered in Canada and the United States have increased awareness of the issue in North America.We take care to provide that our
296、 products are safe and free of agents that can cause disease.In particular,wehave qualified a source ofcollagen from a country outside the United States that is considered BSE-free.The WorldHealth Organization classifies different types of cattle tissue for relative risk of BSE transmission.Deep fle
297、xortendon is in the lowest-risk categories for BSE transmission(the same category as milk,for example),and istherefore considered to have a negligible risk of containing the agent that causes BSE(an improperly folded proteinknown as a prion).Nevertheless,products that contain materials derived from
298、animals,including our products,maybecome subject to additional regulation,or even be banned in certain countries,because of concern over thepotential for the transmission of prions.Significant new regulation,or a ban of our products,could have a materialadverse effect on our current business or our
299、ability to expand 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 have occurred,andthe EUhasrequested that ourdural replacement productsandot
300、her products that are usedinneurological tissuebe sourced from bovine tendon sourced from a country where no cases of BSE have occurred.Currently,wepurchase our tendon from the United States and New Zealand.We received approval in the EU,Japan,Taiwan,China and Argentina for the use of New Zealand-so
301、urced tendon in the manufacturing of our products.If we cannotcontinue touseorqualifyasourceoftendonfromNewZealand oranothercountrythat hasneverhadacase ofBSE,we will not be permitted to sell our collagen products in certain countries.17Certain of our products are derived from human tissue and are s
302、ubject to additional regulations andrequirements.We manufacture medical devices derived from human tissue(demineralized bone tissue).The FDA hasspecific regulations governing human cells,tissuesand cellular and tissue-based products,orHCT/Ps.AnHCT/Pisa product containing or consisting of human cells
303、 or tissue intended for transplantation into a human patient.Examples include bone,ligament,skin and cornea.Some HCT/Ps also meet the definition of a biological product,medical device or drug regulated under theFFDCA.Section 361 of the PHSAauthorizes the FDA to issue regulations to prevent the intro
304、duction,transmissionor spread of communicable disease.HCT/Ps regulated as“361”HCT/Ps are subject to requirements relating toregistering facilities and listing products with FDA,screening and testing for tissue donor eligibility,Good TissuePractice,or GTP,when processing,storing,labeling,and distribu
305、tion HCT/Ps,including required labelinginformation,stringent record keeping;and adverse event reporting.These biologic,device or drug HCT/Psmust comply both with the requirements exclusively applicable to 361 HCT/Ps and,in addition,with requirementsapplicable to biologics,devices or drugs,including
306、premarket clearance or approval.The American Association of Tissue Banks(“AATB”)has issued operating standards for tissue banking.Compliancewiththesestandardsisarequirement inordertobecome alicensed tissuebank.Inaddition,somestateshave their own tissue banking regulations.We are licensed or have per
307、mits as a tissue bank in California,Florida,New York and Maryland.In addition,procurement of certain human organs and tissue for transplantation is subject to the restrictions ofthe National Organ Transplant Act(“NOTA”),which prohibits the transfer of certain human organs,including skinand related t
308、issue for valuable consideration,but permits the reasonable payment associated with the removal,transportation,implantation,processing,preservation,quality control and storage of human tissue and skin.Wereimbursetissuebanksfortheir expensesassociated withthe recovery,storage andtransportation ofdona
309、ted humantissue that they provide to us for processing.We include in our pricing structure amounts paid to tissue banks toreimbursethemfortheirexpensesassociated withtherecoveryandtransportationofthetissue,inadditiontocertaincosts associated with processing,preservation,quality control and storage o
310、f the tissue,marketing and medicaleducation expenses,and costs associated with development of tissue processing technologies.NOTA paymentallowances may be interpreted to limit the amount of costs and expenses that we may recover in our pricing for ourproducts,thereby reducing our future revenue and
311、profitability.If we were to be found to have violated NOTAsprohibition on the sale or transfer of human tissue for valuable consideration,we would potentially be subject tocriminal enforcement sanctions,which could materially and adversely affect our results of operations.In the EU,regulations,if ap
312、plicable,differ from one EU member state to the next.Because of the absence of aharmonized regulatory framework and the proposed regulation for advanced therapy medicinal products in the EU,as well as for other countries,the approval process for human derived cell or tissue based medical products ma
313、y beextensive,lengthy,expensive,and unpredictable.Among others,some of our orthobiologics products are subject toEU member states regulations that govern the donation,procurement,testing,coding,traceability,processing,preservation,storage,and distribution of human tissues and cells and cellular or t
314、issue-based products.TheseEU member statesregulations include requirements for registration,listing,labeling,adverse-event reporting,andinspection and enforcement.Some EU member states have their own tissue banking regulations.Lack of market acceptance for our products or market preference for techn
315、ologies that compete with ourproducts could reduce our revenues and profitability.We cannot be certain that our current products or any other products that we may develop or market willachieve or maintain market acceptance.Certain of the medical indications that can be treated by our devices canalso
316、 be treated by other medical devices or by medical practices that do not include a device.The medicalcommunity widely accepts many alternative treatments,and certain of these other treatments have a long history ofuse.Forexample,theuseofautograft tissueisawell-established meansforrepairingthedermis,
317、anditcompetes foracceptance in the market with the Integra Dermal Regeneration Template.18Wecannotbecertainthatourdevicesandprocedureswillbeabletoreplace thoseestablishedtreatmentsorthateither physicians or the medical community in general will accept and utilize our devices or any other medicalprod
318、ucts that we may develop.For example,market acceptance of our bone graft substitutes will depend on ourability to demonstrate that our bone graft substitutes and technologies are an attractive alternative to existingtreatment options.Additionally,ifthere are negativeeventsintheindustry,whetherreal o
319、rperceived,there couldbea negative impact on the industry as a whole.For example,we believe that some in the medical community havelingering concerns over the risk of disease transmission through the use of natural bone graft substitutes.In addition,our future success depends,in part,on our ability
320、to develop additional products.Even if wedetermine that a product candidate has medical benefits,the cost of commercializing that product candidate couldbe too high tojustify development.Competitors could develop productsthat are more effective,achieve ormaintainmore favorable reimbursement status f
321、rom third-party payors,including Medicare,Medicaid and third-party healthinsurance,cost less or are ready for commercial introduction before our products.If we are unable to developadditional commercially viable products,our future prospects could be adversely affected.Market acceptance of our produ
322、cts depends on many factors,including our ability to convince prospectivecollaborators and customers that our technology is an attractive alternative to other technologies,to manufactureproducts in sufficient quantities and at acceptable costs,and to supply and service sufficient quantities of ourpr
323、oducts directly or through our distribution alliances.In addition,unfavorable reimbursement methodologies,oradverse determinations of third-party payors,including Medicare,Medicaid and third-party health insurance,against our products or third-party determinations that favor a competitors product ov
324、er ours,could harmacceptance or continued use of our products.The industry is subject to rapid and continuous change arisingfrom,among other things,consolidation,technological improvements,the pressure on third-party payors andproviders to reduce healthcare costs,and healthcare reform legislation.On
325、e or more of these factors may varyunpredictably,and such variations could have a material adverse effect on our competitive position.We may not beable to adjust our contemplated plan of development to meet changing market demands.Our intellectual property rights may not provide meaningful commercia
326、l protection for our products,potentially enabling third parties to use our technology or very similar technology and could reduce ourability to compete in the market.Tocompeteeffectively,wedepend,inpart,onourabilitytomaintain theproprietary natureofourtechnologiesand manufacturing processes,which i
327、ncludes the ability to obtain,protect and enforce patents on our technologyandtoprotectourtrade secrets.Weownorhavelicensedpatentsthat coveraspectsofsomeofourproductlines.Ourpatents,however,may not provide uswith anysignificant competitive advantage.Others may challenge our patentsand,as a result,ou
328、r patents could be narrowed,invalidated or rendered unenforceable.Competitors may developproducts similar to oursthat ourpatents donot cover.Inaddition,ourcurrent andfuture patent applications may notresult in the issuance of patents in the United States or foreign countries.Further,there is a subst
329、antial backlog ofpatentapplications attheU.S.PatentandTrademarkOffice,andtheapprovalorrejection ofpatentapplications maytake several years.Our competitive position depends,in part,upon unpatented trade secrets which we may be unable toprotect.Our competitive position also depends upon unpatented tra
330、de secrets,which are difficult to protect.We cannotassure you that others will not independently develop substantially equivalent proprietary information andtechniques or otherwise gain access to our trade secrets,that our trade secrets will not be disclosed or that wecan effectively protect our rig
331、hts to unpatented trade secrets.In an effort to protect our trade secrets,we require our employees,consultants and advisors to executeconfidentiality and invention assignment agreements upon commencement of employment or consultingrelationships with us.These agreements provide that,except in specifi
332、ed circumstances,all confidentialinformation developed or made known to the individual during the course of their relationship with us must bekept confidential.We cannot assureyou,however,that these agreements will provide meaningful protection for our19trade secrets or other proprietary information
333、 in the event of the unauthorized use or disclosure of confidentialinformation.Our success will depend partly on our ability to operate without infringing or misappropriating theproprietary rights of others.Wemaybesuedforinfringingtheintellectual propertyrightsofothers.Inaddition,wemayfinditnecessary,ifthreatened,to initiate a lawsuit seeking a declaration from a court that we do not infringe the
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