1318310--2/25/2010--ev3

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Adverse worldwide economic conditions may have other adverse implications on our business, operating results and financial condition. Disruptions in the global financial markets could impact the ability of our counterparties and others to perform their obligations to us and our ability to obtain any additional future financing if needed or desired. Our business, financial condition, results of operations and cash flows could be significantly and adversely affected if certain types of healthcare reform programs are adopted in our key markets and other administration and legislative proposals are enacted into law. Our marketing activities are subject to regulation regarding the promotion of off-label uses, which restrict our ability to market our products. If we are found to have improperly promoted off-label use of our products, we may become subject to enforcement action by the FDA or the U.S. Department of Justice and/or incur significant liabilities. Any off-label use of our products also may result in injuries that could lead to product liability claims against us. Our business strategy relies on assumptions about the market for our products, which, if incorrect, would adversely affect our business and operating results. If we fail to comply with laws prohibiting kickbacks and false or fraudulent claims and other similar laws, we could be subject to criminal and civil penalties and exclusion from governmental health care programs, which could have a material adverse effect on our business and operating results. Some of our products are emerging technologies or have only recently been introduced into the market. If physicians do not recommend and endorse them or if our working relationships with physicians deteriorate, our products may not be accepted in the marketplace, which would adversely affect our business and operating results. We acquired Chestnut Medical Technologies, Inc. primarily for its Pipeline Embolization Device. If the Pipeline Embolization Device cannot be shown to be safe and effective in clinical trials, is not approvable or not commercially successful, or if we do not receive the pre-market approval letter from the FDA for any reason, then the benefits of our acquisition of Chestnut may never be fully realized. Demand for our plaque excision products in the United States has suffered due in part, we believe, to the lack of long-term clinical data regarding their safety and efficacy. Future long-term data regarding the safety and efficacy of our plaque excision products may not be positive or consistent with data currently available, which would adversely affect their market acceptance and our operating results. The demand for our products, the prices which customers and patients are willing to pay for our products and the number of procedures performed using our products depend upon the ability of our customers and patients to obtain sufficient third party reimbursement for their purchases of our products. Our stents and plaque excision products generate a significant portion of our product sales. Accordingly, if sales of these products were to decline, our operating results would be adversely affected. Our products face the risk of technological obsolescence, which, if realized, could have a material adverse effect on our business and operating results. Our future success depends in part on the introduction of new products. Failure to introduce and market new products in a timely fashion that are accepted by the marketplace could adversely affect our business and operating results. A number of our proposed products are in the early stages of development and some are in clinical trials. If the development of these products is not successfully completed or if these trials are unsuccessful, or if the FDA or other regulatory agencies require additional trials to be conducted, these products may not be commercialized and our business prospects may suffer. Our future success depends in part on our ability to sell our products internationally. There are risks inherent in operating internationally and selling and shipping our products and purchasing our components internationally, which may adversely impact our business, operating results and financial condition. Fluctuations in the rate of exchange between the U.S. dollar and foreign currencies in which we transact business could adversely affect our financial results or cause our results to fluctuate. A substantial portion of our assets consist of goodwill and intangible assets and any impairment in the value of our goodwill and intangible assets would have the effect of decreasing our earnings or increasing our losses. Consolidation in the healthcare industry could lead to demands for price concessions or to the exclusion of some suppliers from certain of our markets, which could have an adverse effect on our business, financial condition or operating results. Our group purchasing organization contracts are up for renewal during 2010 and if such contracts are not renewed, our net sales could suffer. We may be subject to intellectual property litigation and infringement claims, which could cause us to incur liabilities and costs, prevent us from selling our products, cause us to redesign our products, require us to enter into costly license agreements and result in other adverse consequences. If our patents and other intellectual property rights do not adequately protect our products, we may lose market share to our competitors, which would harm our business. We manufacture our products at single locations. Any disruption in these manufacturing facilities, any patent infringement claims with respect to our manufacturing process or otherwise any inability to manufacture a sufficient number of our products to meet demand could adversely affect our business and operating results. Our dependence on key suppliers puts us at risk of interruptions in the availability of our products, which could reduce our net sales and adversely affect our operating results. In addition, increases in prices for raw materials and components used in our products could adversely affect our operating results. Our inability to successfully grow through future acquisitions, our failure to integrate any acquired businesses successfully into our existing operations or our discovery of previously undisclosed liabilities could negatively affect our business and operating results. Our products and our product development and marketing activities are subject to extensive regulation as a result of which we may not be able to obtain required regulatory approvals for our products in a cost-effective manner or at all, which could adversely affect our business and operating results. Our failure to comply with applicable regulatory requirements also may result in us not being able to meet the demands of our customers and our customers canceling orders or purchasing products from our competitors, which could adversely affect our business and operating results. If we or others identify side effects after any of our products are on the market, we may be required to withdraw our products from the market, which would hinder or preclude our ability to generate sales. Our manufacturing facilities are subject to extensive governmental regulation with which compliance is costly and which expose us to penalties for non-compliance. Our operations are subject to environmental, health and safety, and other laws and regulations, with which compliance is costly and which expose us to penalties for non-compliance. We may require additional capital in the future, which may not be available or may be available only on unfavorable terms. In addition, any equity financings may be dilutive to our stockholders. Our quarterly operating results are subject to substantial fluctuations and you should not rely on them as an indication of our future results. We may become obligated to make large milestone payments that are not reflected in our consolidated financial statements in certain circumstances, which would negatively impact our cash flows. In addition, due to changes in applicable generally accepted accounting principles, the milestone payment for our recent acquisition of Chestnut likely could negatively impact our future operating results. We rely on independent sales distributors and sales associates to market and sell our products outside of the United States, Canada, Australia and Europe. We are exposed to product liability claims that could have an adverse effect on our business and operating results. We face competition from other companies, which could adversely impact our business and operating results. We rely on our management information systems for accounting and finance, inventory management, distribution and other functions and to maintain our research and development and clinical data. If our information systems fail to adequately perform these functions or if we experience an interruption in their operation, our business and operating results could be adversely affected. We face a risk of non-compliance with certain financial covenants in our loan agreement with Silicon Valley Bank. If we are unable to meet the financial or other covenants under the agreement or negotiate future waivers or amendments of the covenants, we could be in default under the agreement, which would give Silicon Valley Bank a range of remedies, including declaring all outstanding debt to be due and payable, foreclosing on the assets securing the loan agreement and/or ceasing to provide additional revolving loans or letters of credit, which could have a material adverse effect on us. The restrictive covenants in our loan agreement could limit our ability to conduct our business and respond to changing economic and business conditions and may place us at a competitive disadvantage relative to other companies that are subject to fewer restrictions. If we remain profitable, we cannot assure you that our net operating losses will be available to reduce our tax liability. Risks Related to our Common Stock One of our principal stockholders and its affiliates are able to influence matters requiring stockholder approval and could discourage the purchase of our outstanding shares at a premium. Certain of our principal stockholders may have conflicts of interests with our other stockholders or our company in the future. Our corporate documents and Delaware law contain provisions that could discourage, delay or prevent a change in control of our company. A large percentage of our outstanding common stock is held by insiders, and, as a result, the trading market for our common stock may not be as liquid as the stock of other public companies, and our common stock price could be volatile.

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1318310--2/25/2010--ev3_Inc.