KIPS BAY MEDICAL, INC. (KIPS) SPO
|Company Name||KIPS BAY MEDICAL, INC.|
|Company Address||3405 ANNAPOLIS LANE
MINNEAPOLIS, MN 55447
|Employees (as of 9/1/2012)||14|
|State of Inc||DE|
|Fiscal Year End||12/31|
|Exchange||Nasdaq SmallCap Market|
|Shares Over Alloted||1,520,270|
|Shareholder Shares Offered||--|
|Lockup Period (days)||180|
|Quiet Period Expiration||--|
We estimate that our net proceeds from the sale of the common stock offered pursuant to this prospectus will be approximately $13.3 million, or approximately $15.3 million if the underwriters exercise in full their option to purchase additional shares, assuming a public offering price of $1.48 per share, the closing price of the Company's common stock on October 15, 2012, and after deducting the underwriting discount and the estimated offering expenses that are payable by us. We intend to use the net proceeds from this offering primarily for the following purposes: • approximately $2.0 to 3.0 million to fund the process of seeking regulatory approval to market our eSVS Mesh in the United States and abroad, including human clinical trials; • approximately $1.0 to 2.0 million to fund the development and testing of additional applications of our eSVS Mesh; and • the remainder for working capital and general corporate purposes, including commercialization activities for our eSVS Mesh in select European and other international markets and for the purchase of capital equipment and expansion of facilities. The expected use of net proceeds from this offering represents our current intentions based upon our present plans and business conditions; however, there may be circumstances where a reallocation of funds is necessary. The amount and timing of our actual expenditures depend on numerous factors, including the costs of seeking regulatory approval in the United States and abroad and the costs of developing and testing additional applications of our eSVS Mesh. The costs and timing of the development, particularly conducting clinical studies and trials, regulatory approval and commercialization of medical devices are highly uncertain, are subject to substantial risks and can often change. Accordingly, we may change the allocation of use of these proceeds as a result of contingencies such as the progress and results of our clinical studies and trials and other development and commercialization activities, manufacturing requirements and regulatory or competitive developments. A portion of the net proceeds may be used to acquire or invest in complementary businesses, technologies, services or products in the event we identify opportunities for such acquisitions or investments that we believe are in the best interests of our stockholders. We have no current plans, agreements or commitments with respect to any of the foregoing acquisitions or investments, and we are not currently engaged in any negotiations with respect to any such transaction. Management will retain broad discretion in the allocation of the net proceeds of this offering. You will not have the opportunity to evaluate the economic, financial or other information on which we base our decisions on how to use the proceeds.
The development and commercialization of medical devices to treat cardiovascular disease is a highly competitive industry. Physicians and patients may select among a variety of treatments to address coronary artery disease, including pharmaceutical therapy, balloon angioplasty, stenting with bare metal or drug-eluting stents, and CABG procedures, with the selection often depending upon the health of the patient and the stage of the disease. If physicians or their patients choose alternative treatments to CABG surgery due to the disadvantages of CABG surgery, such as the failure rate of CABG surgery, or if additional alternative treatments for cardiovascular disease are developed, there may be a decrease in the number of CABG surgery procedures. The American College of Cardiology/American Heart Association treatment guidelines state that CABG is the only recommended revascularization procedure for those patients with CAD in their left main coronary artery or CAD in three or more coronary arteries. Our eSVS Mesh is designed to improve the structural characteristics and long-term performance of vein grafts in CABG surgery. If our eSVS Mesh is proven to do so successfully, we believe physicians may more frequently choose to perform CABG surgery over alternative treatments. We expect the primary competition for our eSVS Mesh to be other products or techniques to improve the effectiveness of vein grafts in CABG surgery. We are aware of three companies that have developed mesh devices to be used on the outside of blood vessels. Vascular Graft Solutions, ("VGS"), an Israeli company, is developing a product called the Fluent expandable external support system which is designed to reduce vein graft failures in CABG surgery. VGS is currently conducting its first in-human trial in the United Kingdom. According to information filed on ClinicalTrials.gov, VGS expects to enroll approximately 30 patients and complete data collection for their primary outcome measure in June 2012. Alpha Research, a Swiss company, has developed a product known as the Biocompound Graft for use in coronary and peripheral bypass operations. The product is a stainless steel braided mesh, indicated for use in coronary or peripheral bypass with patients who have irregularly shaped veins. B. Braun, a German company, has developed a product known as ProVena for use in peripheral bypass operations. The product is a woven polymer mesh, indicated for use in peripheral artery bypass operations using vein grafts. We believe that the VGS product will be a direct competitor to our eSVS Mesh if and when the results of their on-going clinical trial in Great Britain allow VGS to secure a CE Mark approval for their product. We believe that the Alpha Research and B. Braun products are not currently direct competitors to our eSVS Mesh, and are not likely to become direct competitors in the near future, because the Biocompound Graft is intended for use only with irregularly shaped veins and the ProVena is intended for use with non-coronary procedures. However, it is possible that one or both of these companies, or other potential competitors, will seek approval to use these or similar devices for procedures with similar or identical indications for use as our eSVS Mesh. The key competitive factors affecting the success of our eSVS Mesh are likely to be the effectiveness, safety profile and price of our eSVS Mesh, as compared to existing methods for CABG surgery. We believe a potential disadvantage associated with our eSVS Mesh is the possibility of allergic reaction to the implant materials. According to a July 2009 article in the Journal of Invasive Cardiology, nickel allergy after implantation of a nitinol-containing device is rare. This article described the rate of nickel allergy in cardiovascular implants to be between 0.002% and 0.02%. The article also stated that the patients with nickel allergy symptoms responded to medical management at the time of the reaction, did not require device explant, and no longer require medications for the reaction. In order to further safeguard against this rare occurrence, the eSVS Mesh instructions for use state that it is contraindicated for patients with a known allergy to nitinol. We believe another potential disadvantage associated with our eSVS Mesh is the possibility of damage to the saphenous vein during placement of our eSVS Mesh. If the physician does not select the proper size eSVS Mesh relative to the size of the vein, the saphenous vein may be damaged while placing our eSVS Mesh over the vein. For example, if too small an eSVS Mesh is chosen, there could be damage to the saphenous vein caused by stretching the vein while trying to place it inside our eSVS Mesh. We have provided specific directions in the eSVS Mesh instructions for use on how to properly size veins and place our eSVS Mesh. In addition, we provide a sizing tool with our eSVS Mesh to ensure proper vein sizing. The commercial success of our eSVS Mesh will depend upon the results of clinical trials of the technology and experience with the technology in the commercial marketplace. If the commercialization of our eSVS Mesh technology is successful, we expect that other medical device companies, many of which are larger and have greater financial resources than we do, will seek to enter into this market by introducing competing technologies.
We are a medical device company focused on developing, manufacturing and commercializing our external saphenous vein support technology, or eSVS R MESH, for use in coronary artery bypass grafting, or CABG, surgery. Our eSVS Mesh is a nitinol mesh sleeve that, when placed over a saphenous vein
graft, or SVG, during CABG surgery, is designed to improve the structural characteristics and long-term performance of the vein graft. CABG is one of the most commonly performed cardiac surgeries in the world; according to the Cleveland Clinic, each year, over 800,000 CABG surgeries are performed worldwide. In CABG procedures, surgeons harvest blood vessels, including the internal mammary artery from the chest and the saphenous vein from the leg, and attach the harvested vessels to bypass, or provide blood flow around, blocked coronary arteries. The effectiveness of the procedure, however, is often limited by the failure rate of SVGs, which has been shown in various studies to range from 7% to 26% one year after surgery and 39% ten years after surgery. Failure of these grafts, typically evidenced by partial or complete blockage and reduced or stopped blood flow, can lead to the need for further coronary interventions up to and including additional CABG procedures. We believe the use of our eSVS Mesh with SVGs in CABG surgery can improve the long-term outcomes of CABG procedures by preventing the expansion, or dilation, of the SVG and preventing the resulting injury in order to maintain the openness, or patency, of and improving blood flow through the SVG. The result would be a reduced need for costly, potentially complicated reoperations or revascularization procedures and an improved patient quality of life. We continue to achieve modest levels of sales in select international markets while we pursue additional clinical studies to demonstrate the clinical effectiveness of our eSVS Mesh. We believe these studies will support increased clinical utilization and reimbursement decisions internationally. Accordingly, we have incurred net losses of $2.7 million, $4.3 million and $10.9 million in the six months ended June 30, 2012 and the years ended December 31, 2011 and December 31, 2010, respectively. Our net loss for the year ended December 31, 2010 included a non-cash charge of $2.3 million, resulting from a modification to an investor stock purchase option exercised in February 2010, and a $5.0 million charge for the first milestone payment due and paid to Medtronic, Inc. in June 2011, one year after the first commercial sale of our eSVS Mesh. ---------- We were incorporated in Delaware in May 2007. Our principal executive offices are located at 3405 Annapolis Lane North, Suite 200, Minneapolis, MN 55447. Our telephone number is (763) 235-3540, and our website is www.kipsbaymedical.com.