1318310--3/13/2008--ev3

related topics

{property, intellectual, protect}

{product, liability, claim}

{stock, price, operating}

{customer, product, revenue}

{tax, income, asset}

{operation, international, foreign}

{regulation, government, change}

{product, candidate, development}

{product, market, service}

{cost, regulation, environmental}

{acquisition, growth, future}

{cost, operation, labor}

{provision, law, control}

{condition, economic, financial}

{debt, indebtedness, cash}

{system, service, information}

{personnel, key, retain}

{financial, litigation, operation}

{loss, insurance, financial}

We have experienced and may continue to experience difficulties in integrating FoxHollow s operations into ours and may not be unable to realize the anticipated cost savings, net sales and other potential benefits of our acquisition of FoxHollow in a timely manner or at all. As a result, our business, operating results and stock price may be adversely affected. Elevated inventory levels of our SilverHawk product at some of our customers adversely affected our operating results for the fourth quarter 2007 and are expected to continue to adversely affect our operating results into the second half of 2008. As a result of the resignation of John B. Simpson, M.D. Ph.D. as a director of our company, Merck Co., Inc. has the right to terminate the collaboration and license agreement with us. Any loss of revenue from our relationship with Merck as a result of Merck s termination of the agreement or otherwise could have a significant adverse affect on our operating results and our stock price. In order to be successful, we must retain and motivate key employees. Any failure to do so could adversely affect our business and operating results. 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 business strategy relies on assumptions about the market for our products, which, if incorrect, would adversely affect our business prospects and profitability. 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. Our family of self-expanding stents generates a significant portion of our net sales. Accordingly, if sales of these products were to decline, our operating results and business prospects would be adversely affected. Our future success depends in part on the introduction of new products. Accordingly, any failure to develop 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 U.S. Food and Drug Administration, or 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 SilverHawk and our other 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 net sales, operating results and financial condition. Fluctuations in foreign currency exchange rates could result in declines in our reported net sales and earnings. If third parties claim that we infringe upon their intellectual property rights, we may incur liabilities and costs and may have to redesign or discontinue selling the affected product. We are currently a party to a number of intellectual property claims, which are costly to defend and the resolution of which could have a material adverse effect on our business and results of operations. 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. Significant and unexpected claims under our EverFlex self-expanding stent worldwide fracture-free guarantee program in excess of our reserves could significantly harm our business, operating results and financial condition. 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. Charges resulting from the application of the purchase method of accounting relating to our acquisition of FoxHollow may adversely affect the market value of our common stock following the acquisition. We have incurred and expect to continue to incur significant transaction and integration-related costs in connection with our acquisition of FoxHollow and the integration of FoxHollow s operations into ours. 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. 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 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 may also 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. Our marketing activities are subject to regulation regarding the promotion of off-label uses, which restrict our ability to market our products and could adversely affect our growth. Any off-label use of our products may result in injuries that could lead to product liability claims against us. 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 net 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. Our quarterly operating and financial results may fluctuate in future periods. We may become obligated to make large milestone payments that are not reflected in our financial statements in certain circumstances, which would negatively impact our cash flows from operations. We rely on independent sales distributors and sales associates to market and sell our products outside of the United States, Canada and Europe. If we fail to comply with the U.S. Federal Anti-Kickback Statute and similar state laws, we could be subject to criminal and civil penalties and exclusion from the Medicare, Medicaid and other federal health care programs, which could have a material adverse effect on our business and operating results. If our distribution agreement with Invatec Technology Center GmbH expires or terminates and we are unable to commercially launch on a timely basis our own products to replace the products we currently distribute for Invatec in the United States or if we are unable to enter into a substitute arrangement with another third party or if there is a disruption in the supply of Invatec products that we distribute, our net sales and operating results would be adversely impacted. We are exposed to product liability claims that could have an adverse effect on our business and operating results. Our net sales could decline significantly if drug-eluting stents become a dominant therapy in the peripheral vascular stent market and we are not able to develop or acquire a drug-eluting stent to market and sell. We face competition from other companies, many of which have substantially greater resources than us and may be able to more effectively develop, market and sell their products than we can, which could adversely impact our business, net sales and operating results. Consolidation in the medical technology industry would exacerbate these risks. We rely on our management information systems for 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. 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 become profitable, we cannot assure you that our net operating losses will be available to reduce our tax liability. A substantial portion of our assets consist of goodwill and an impairment in the value of our goodwill would have the effect of decreasing our earnings or increasing our losses. 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.

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1318310--3/13/2008--ev3_Inc.