1028318--6/16/2006--MICRUS_ENDOVASCULAR

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{product, liability, claim}

{product, market, service}

{stock, price, operating}

{acquisition, growth, future}

{regulation, change, law}

{control, financial, internal}

{property, intellectual, protect}

{stock, price, share}

{customer, product, revenue}

{personnel, key, retain}

{financial, litigation, operation}

{operation, natural, condition}

{operation, international, foreign}

We are currently involved in a patent litigation action involving Boston Scientific Corporation and, if we do not prevail in this action, we could be liable for past damages and be prevented from making, using, selling, offering to sell, importing into the U.S. or exporting from the U.S., our microcoils, our primary product line. We have a limited operating history, have incurred significant operating losses since inception, and expect to continue to incur losses, and we cannot assure you that we will achieve profitability. Our quarterly operating and financial results and our gross margins are likely to fluctuate significantly in future periods. We may not be able to develop new products or product enhancements that will be accepted by the market. Our international operations and our relationships with physicians and other consultants require us to comply with a number of U.S. and international regulations. We are in a highly competitive market segment, face competition from large, well-established medical device manufacturers with significant resources, and may not be able to increase penetration in our markets or otherwise compete effectively. Our sales in international markets subject us to foreign currency exchange and other risks and costs that could harm our business. If we fail to increase our direct sales force in a timely manner, our business could suffer. If we fail to properly manage our anticipated growth, our business could suffer. We can provide no assurance regarding our, or our independent registered public accounting firm s, conclusions at March 31, 2007 with respect to the effectiveness of our internal controls over financial reporting. Our future capital needs are uncertain and we may need to raise additional funds in the future, and such funds may not be available on acceptable terms or at all. If we choose to acquire new and complementary businesses, products or technologies instead of developing them ourselves, we may be unable to complete these acquisitions or to successfully integrate them in a cost effective and non-disruptive manner. We are dependent on single source suppliers for components and materials used in our devices, and the loss of any of these suppliers, or their inability to supply us with an adequate supply of materials, could harm our business. Our operations are currently conducted at a single location that may be at risk from earthquakes or other natural disasters. If we are unable to effectively manage our inventory held on consignment by our intended customers, we will not achieve our expected results. We are dependent on our senior management team, key clinical advisors and scientific personnel, and the loss of any of them could harm our business. The medical device industry is characterized by patent litigation, which could be costly, result in the diversion of management s time and efforts and require us to pay damages. Our ability to protect our intellectual property and proprietary technology through patents and other means is uncertain. If we fail to obtain, or experience significant delays in obtaining, FDA clearances or approvals for our future products or product enhancements, or to comply with similar regulatory requirements in other countries where we market our products, our ability to commercially distribute and market our products could suffer. Modifications to our marketed products may require new 510(k) clearances or pre-market approvals, or may require us to cease marketing or recall the modified products until clearances are obtained. If we or our suppliers fail to comply with the FDA s quality system regulations, the manufacture of our products could be delayed. If interventionalists are unable to obtain sufficient reimbursement for procedures performed with our products, it is unlikely that our products will be widely used. Recent changes in accounting rules and regulations, such as expensing of stock options, will result in unfavorable accounting charges and could require us to change our compensation policies. We may become subject to product liability claims which could require us to pay damages that exceed our insurance coverage. We may be subject to damages resulting from claims that we or our employees have wrongfully used or disclosed alleged trade secrets of their former employers. The price of our common stock has fluctuated and we expect will continue to fluctuate substantially and you may not be able to sell your shares at or above your purchase price. Because of their significant stock ownership, our executive officers, directors and principal stockholders will be able to exert control over us and our significant corporate decisions. Future sales of our common stock may depress our stock price. We may incur increased costs as a result of recently enacted and proposed changes in laws and regulations. We may become involved in securities class action litigation that could divert management s attention and harm our business.

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1028318--6/16/2006--MICRUS_ENDOVASCULAR_CORP