As filed with the Securities and Exchange Commission on November 29, 2001
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM S-8/S-3
REGISTRATION STATEMENT
(Including registration of shares for resale by means of a Form S-3 Prospectus)
Under
The Securities Act of 1933
____________________
THERASENSE, INC.
(Exact name of Registrant as specified in its charter)
____________________
Delaware 94-3267373
(State of incorporation) (I.R.S. Employer Identification Number)
1360 South Loop Road
Alameda, CA 94502
(Address of principal executive offices)
____________________
1997 STOCK PLAN
(Full title of the plan)
____________________
W. Mark Lortz
President and Chief Executive Officer
TheraSense, Inc.
1360 South Loop Road
Alameda, CA 94502
(510 749-5400
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
____________________
Copy to:
Karen A. Dempsey, Esq.
Wilson Sonsini Goodrich & Rosati
Professional Corporation
One Market, Spear Street Tower, Suite 3300
San Francisco, CA 94105
(415) 947-2000
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CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
To be To be Price Offering Registered
Registered Registered Per Share Price Fee
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Common Stock, par value $0.001 per share
Issued under the 1997 Stock Plan................... 1,657,172 shares $39,457,265.32 $23.81 $9,430.29
====================================================================================================================================
(1) The estimated Proposed Maximum Offering Price Per Share was determined pursuant to Rule 457(c) under the Securities Act of
1933, as amended, to be equal to the average between the ask and bid price reported in the Nasdaq National Market on November 23,
2001.
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RESALE PROSPECTUS
THERASENSE, INC.
1,657,172 SHARES OF COMMON STOCK
_______________
This Registration Statement on Form S-8/S-3 is being filed pursuant to
General Instruction C to Form S-8 for the purpose of registering the resale of
1,657,172 shares of common stock previously issued under our 1997 Stock Plan.
This resale prospectus relates to 1,657,172 shares of the common stock of
TheraSense, Inc., which may be offered from time to time by the selling
stockholders listed on page 16 of this prospectus. It is anticipated that the
selling stockholders will offer the shares for sale at prevailing market prices
on the date of sale. We will not receive any proceeds from the sale of these
shares. The selling stockholders will bear the expense of all sales commissions
and similar expenses. Any other expenses incurred by us in connection with this
registration and offering, and not borne by the selling stockholders, will be
borne by us.
The shares registered hereby were acquired by the selling stockholders
under our 1997 Stock Plan.
Our common stock is quoted on the Nasdaq National Market under the symbol
"THER". The last reported sale price for our common stock on the Nasdaq National
Market was $23.85 per share on November 28, 2001.
_______________
CONSIDER CAREFULLY THE RISK FACTORS
BEGINNING ON PAGE 3 IN THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
_______________
The date of this prospectus is November 29, 2001.
TABLE OF CONTENTS
Prospectus
Page
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Where to Find More Information About TheraSense.................. 1
Information Incorporated by Reference............................ 1
TheraSense, Inc.................................................. 2
Risk Factors..................................................... 3
Use of Proceeds.................................................. 16
Selling Stockholders............................................. 16
Plan of Distribution............................................. 18
Experts.......................................................... 19
Indemnification of Directors and Officers........................ 19
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. The selling stockholders are offering to sell, and
seeking offers to buy, shares of TheraSense common stock only in jurisdictions
where offers and sales are permitted. The information contained in this
prospectus is accurate as of the date of this prospectus, regardless of the time
of delivery of this prospectus or any sale of the shares.
In this prospectus, unless indicated otherwise, "TheraSense," the
"Company," "we," "us" and "our" refer to TheraSense, Inc.
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, including the section entitled "Risk Factors," may contain
forward-looking statements. These statements relate to future events or our
future financial performance and involve known and unknown risks, uncertainties
and other factors that may cause our or our industry's actual results, levels of
activity, performance or achievements to be materially different from any future
results, levels of activity, performance or achievements expressed or implied by
the forward-looking statements. These risks and other factors include those
listed under "Risk Factors" and elsewhere in this prospectus. In some cases, you
can identify forward-looking statements by terminology such as "may," "will,"
"should," "expects," "plans," "anticipates," "believes," "estimates,"
"predicts," "intends," "potential," "continue" or the negative of these terms or
other comparable terminology. These statements are only predictions. Actual
events or results may differ materially.
We believe that it is important to communicate our future expectations to
investors. However, there may be events in the future that we are not able to
accurately predict or control and that may cause our actual results to differ
materially from the expectations we describe in our forward-looking statements.
Investors are cautioned that all forward-looking statements involve risks and
uncertainties, and actual results may differ materially from those discussed as
a result of various factors, including those factors described in the "Risk
Factors" section of this prospectus.
Potential investors should not place undue reliance on our forward-looking
statements. Before you invest in our common stock, you should be aware that the
occurrence of the events described in the "Risk Factors" section and elsewhere
in this prospectus could harm our business, prospects, operating results and
financial condition.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements.
WHERE TO FIND MORE INFORMATION ABOUT THERASENSE
We have filed a registration statement on Form S-8/S-3 with the SEC for the
stock the selling stockholders are offering by this prospectus. This prospectus
does not include all of the information contained in the registration statement
and its exhibits. We have included all material terms of the registration
statement and the related exhibits that are referred to in this prospectus. You
should refer to the registration statement and its exhibits for additional
information. We are also required to file annual, quarterly and special
reports, proxy statements and other information with the SEC.
You can read our SEC filings, including the registration statement, over
the Internet at the SEC's web site at www.sec.gov. You may also read and copy
any document we file with the SEC at its public reference facilities at 450
Fifth Street, N.W., Washington, D.C. 20549 and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. You may also obtain copies of
the documents at prescribed rates by writing to the Public Reference Section of
the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC
at 1-800-SEC-0330 for further information on the operation of the public
reference facilities.
INFORMATION INCORPORATED BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents that we have previously filed with the SEC or
documents that we will file with the SEC in the future. The information
incorporated by reference is considered to be part of this prospectus, and later
information that we file with the SEC will automatically update and supercede
this information. We incorporate by reference the documents listed below, and
any future filings made with the SEC under Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act, until the selling stockholders sell all of the shares
registered hereby. This prospectus is part of a Registration Statement we filed
with the SEC. The documents we incorporate by reference are:.
(1) Our Registration Statement on Form S-1 (File No. 333-64456) filed
pursuant to Rule 424(b) under the Securities Act of 1933, as amended,
declared effective on October 11, 2001.
(2) Our Quarterly Report on Form 10-Q for the quarter ended September 30,
2001 filed on November 14, 2001.
(3) The description of our common stock contained in our Registration
Statement on Form 8-A declared effective by the Commission on October
11, 2001 pursuant to Section 12(g) of the Securities Exchange Act of
1934, as amended, and any description of any of our securities
contained in any registration statement filed after the date hereof
under Section 12 of the Exchange Act, including any amendment or
report filed for the purpose of updating any such description.
We also incorporate by reference all documents that we subsequently file
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to
the filing of a post-effective amendment which indicates that all securities
registered have been sold or which deregisters all securities then remaining
unsold, and shall be deemed to be incorporated by reference in this registration
statement and to be part hereof from the date of filing of such documents.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address: TheraSense, Inc., 1360 South Loop Road,
Alameda, California; 94502, attention: Corporate Secretary; the telephone number
is (510) 749-5400.
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THERASENSE, INC.
Because this is only a summary, it does not contain all the information
that may be important to you. You should read the entire prospectus, especially
"Risk Factors" before deciding to invest in our common stock.
We develop, manufacture and sell easy to use glucose self-monitoring
systems that dramatically reduce the pain of testing for people with diabetes.
Our first product, FreeStyle, received FDA clearance in January 2000, and we
began selling FreeStyle in the United States in June 2000. FreeStyle utilizes
patented technologies that can accurately measure glucose concentrations from a
tiny 0.3 microliter sample of blood, as opposed to competitive products that
require from 1.0 to 10.0 microliters of blood. Our tiny sample size is easily
obtained by lancing the forearm, thigh, calf, upper arm or hand and therefore
avoids the pain associated with drawing a larger blood sample from the
fingertip. These alternate sites are significantly less painful to lance than
the traditional fingertip test site, which is more densely populated with highly
sensitive nerve endings but yields the larger blood volumes required by
competitive products. Nine out of ten people in our clinical studies found
using FreeStyle less painful than their current finger-stick-based system.
We believe that FreeStyle is well positioned to capture a meaningful share
of the blood glucose self-monitoring market. The blood glucose self-monitoring
market is the largest self-test market for medical diagnostic products in the
world, with a size of approximately $2.0 billion in the United States and $3.5
billion worldwide in 2000. It is estimated that the worldwide blood glucose
self-monitoring market will amount to $9.0 billion by 2005. We believe that
FreeStyle and other products based on our proprietary technologies can expand
this market by substantially reducing the pain associated with testing and
thereby bring non-testers into the market and encourage under-testers to test
more regularly. We are also developing a Continuous Glucose Monitoring System
that is intended to permit people with diabetes to accurately and discreetly
measure their glucose levels on a continuous basis.
Our direct sales force promotes FreeStyle in the United States to health
care professionals who advise patients on the monitoring and management of their
diabetes. We distribute and sell FreeStyle in the United States to large
national retailers, through wholesalers, and directly to end users over the
telephone and through our website. In September 2000, we entered into an
agreement with Disetronic Group for the exclusive distribution of FreeStyle in
selected European countries. In March 2001, we obtained the CE Mark, which
permits us to commercially distribute FreeStyle throughout the European Union.
Disetronic commenced sales in Germany and Sweden in May 2001. In April 2001, we
entered into an agreement with Nipro Corporation for the exclusive distribution
of FreeStyle in Japan, and an application for approval to market FreeStyle in
Japan was recently submitted. Disetronic and Nipro are the leading suppliers of
insulin pumps in Europe and Japan, respectively. Insulin pump users are
typically highly motivated insulin- dependent diabetes patients who frequently
test their blood glucose levels.
-2-
RISK FACTORS
An investment in our common stock offered by this prospectus involves a
substantial risk of loss. You should carefully consider these risk factors,
together with all of the other information included in this prospectus, before
you decide to purchase shares of our common stock. The risks and uncertainties
described below are not the only ones we face. Additional risks and
uncertainties not presently known to us or that we currently deem immaterial may
also impair our operations. The occurrence of any of the following risks could
harm our business. In that case, the trading price of our common stock could
decline, and you may lose all or part of your investment.
We have limited operating experience and a history of net losses and may never
achieve or maintain profitability.
We have a limited history of operations and have focused primarily on
research and development, product engineering, clinical trials and seeking FDA
regulatory clearance to market our products. We received FDA clearance for
FreeStyle, our first commercial product, in January 2000, and we commenced
commercial shipments in June 2000. We have generated only limited revenues from
the sale of our products to date and have incurred losses every year since 1997.
We incurred losses of $13.1 million in 1999, $43.6 million in 2000 and $39.9
million in the nine months ended September 30, 2001. As of September 30, 2001,
we had an accumulated deficit of approximately $102.6 million. It is possible
that we will never generate sufficient revenues from product sales to achieve
profitability. Even if we do achieve significant revenues from our product
sales, we expect that increased operating expenses will result in significant
operating losses over the next several quarters as we, among other things:
. expand our domestic and international selling and marketing activities
as we attempt to gain market share for FreeStyle;
. increase our research and development efforts to improve our existing
products and develop new products such as our Continuous Glucose
Monitoring System;
. perform clinical research and trials in an effort to obtain governmental
clearance and approval for the commercial sale of our Continuous Glucose
Monitoring System; and
. expand our facilities in Alameda, California, including an expansion of
our test strip manufacturing capacity.
We will need to significantly increase the revenues we receive from sales
of our products. We may be unable to do so, and therefore, may never achieve
profitability. Even if we do achieve profitability, we may not be able to
sustain or increase profitability on a quarterly or annual basis.
We have limited experience manufacturing our FreeStyle test strips in
substantial quantities, and if we are unable to purchase additional equipment or
are otherwise unable to meet customer demand, we may not improve our sales
growth sufficiently to achieve profitability.
To be successful, we must manufacture our FreeStyle test strips in
substantial quantities at acceptable costs. If we do not succeed in
manufacturing sufficient quantities of our test strips to meet customer demand,
we could lose customers and fail to acquire new customers, if they choose a
competitor's product because our product is not available. We currently
manufacture our FreeStyle test strips using a process with which we have limited
experience. If demand for FreeStyle increases, we will need to purchase
additional specialized equipment with substantial lead times and obtain
additional raw materials in order to increase the output
-3-
volume of our test strips. If we are unable to obtain the necessary equipment or
raw materials to effectively manufacture and meet customer demand for our
FreeStyle test strips, we may not improve our sales growth sufficiently to
achieve profitability.
We expect to derive substantially all of our future revenue from sales of
FreeStyle, a product we recently introduced, and this product could fail to
generate significant revenues and achieve market acceptance.
Currently, the primary products we market are the FreeStyle System kit,
FreeStyle lancets and FreeStyle test strips, all of which we commercially
introduced in June 2000. Our FreeStyle products are expected to account for
substantially all of our revenues for at least the next several years.
Accordingly, our success depends upon the acceptance by people with diabetes, as
well as health care providers and third-party payors of FreeStyle as a preferred
blood glucose self-monitoring device. As a relatively new company in the area of
glucose self-monitoring, we may have difficulty raising the brand awareness
necessary to generate interest in FreeStyle.
To date, only a limited number of people have used FreeStyle, and people
with diabetes or the medical community may not endorse FreeStyle as a preferred
blood glucose self-monitoring device. In addition, FreeStyle may not achieve
market acceptance on a timely basis, if at all, due to:
. the significant influence of established glucose monitoring products;
. the ability of some of our competitors to price products below a price
at which we can competitively manufacture and sell our products;
. cost constraints; and
. the introduction or acceptance of competing products or technologies.
Furthermore, FreeStyle may not encourage more active testing, and
participants in the glucose self-monitoring market may gravitate toward more
established brands. If we are unable to successfully market and sell our
FreeStyle products, we may not be able to generate significant revenues or
achieve profitability because we do not have alternative products.
In addition, to encourage market acceptance of our products, we currently
distribute the FreeStyle System kit at a financial loss through samples,
discounts and rebates. In order to generate sufficient revenues in the future,
we will therefore have to rely on recurring revenue from the repeated purchase
of our FreeStyle test strips. If FreeStyle does not gain sufficient market share
to generate significant recurring revenue from the sale of our test strips, we
may not achieve profitability.
We face competition from competitors with greater resources, which may make it
more difficult for us to achieve significant market penetration.
The market for medical devices is intensely competitive, subject to rapid
change and significantly affected by new product introductions and other market
activities of industry participants. We compete directly with Roche Diagnostics
Corporation, LifeScan, Inc., a division of Johnson & Johnson, MediSense, a
division of Abbott Laboratories, and Bayer AG, which currently account for
approximately 90% of the worldwide sales of blood glucose self-monitoring
systems. Each of these companies is either publicly traded or a division of a
publicly-traded company, and enjoys several competitive advantages, including:
-4-
. significantly greater name recognition;
. established relations with health care professionals, customers and
third-party payors;
. additional lines of products, and the ability to offer rebates or bundle
products to offer higher discounts or incentives to gain a competitive
advantage;
. established distribution networks and relationships with retailers; and
. greater resources for product development, sales and marketing and
patent litigation.
These companies and others have developed and will continue to develop and
acquire new products that compete directly with our products. In addition, our
competitors spend significantly greater funds for the research, development,
promotion and sale of new and existing products. These resources can allow them
to respond more quickly to new or emerging technologies and changes in customer
requirements. For all the foregoing reasons, we may not be able to compete
successfully against our current and future competitors.
If we fail to obtain or maintain necessary FDA clearances or approvals for
products, or if approvals are delayed, we will be unable to commercially
distribute and market our products in the United States.
Our products are medical devices that are subject to extensive regulation
in the United States and in foreign countries where we do business. Unless an
exemption applies, each medical device that we wish to market in the United
States must first receive either 510(k) clearance or premarket approval from the
FDA. Either process can be lengthy and expensive. The FDA's 510(k) clearance
process usually takes from four to twelve months from the date the application
is complete, but may take longer. Although we have obtained 510(k) clearance for
our initial product, FreeStyle, our 510(k) clearance can be revoked if safety or
effectiveness problems develop. The premarket approval process is much more
costly, lengthy and uncertain. It generally takes from one to three years from
the date the application is complete or even longer. However, achieving a
completed application is a process that may take numerous clinical trials and
require the filing of amendments over time.
We expect that our Continuous Glucose Monitoring System under development
will require premarket approval. Therefore, even if the product is successfully
developed, it may not be commercially available for a number of years. We may
not be able to obtain additional clearances or approvals in a timely fashion, or
at all. Delays in obtaining clearance or approval could adversely affect our
revenues and profitability.
Modification to our marketed devices may require new 510(k) clearances or
premarket approvals or require us to cease marketing or recall the modified
devices until these clearances are obtained.
Any modification to an FDA cleared device that could significantly affect
its safety or effectiveness, or that would constitute a major change in its
intended use, requires a new FDA 510(k) clearance or possibly premarket
approval. The FDA requires every manufacturer to make this determination in the
first instance, but the FDA can review any such decision. We have modified
aspects of FreeStyle since receiving regulatory approval, but we believe that
new 510(k) clearances are not required. We may make additional modifications to
FreeStyle and future products after they have received clearance or approval,
and in appropriate circumstances, determine that new clearance or approval is
unnecessary. The FDA may not agree with any of our decisions not to seek new
clearance or approval. If the FDA requires us to seek 510(k) clearance or
premarket approval for any modifications to a previously cleared product, we may
be required to cease marketing or recall the modified device until we obtain
this clearance or approval. Also, in these circumstances, we may be subject to
significant regulatory fines or penalties.
-5-
If the FDA does not clear our recent FreeStyle labeling changes, we may be
required to include significantly more restrictive labeling, cease marketing
FreeStyle under this labeling or recall FreeStyle.
In June 2001, we submitted additional information to the FDA in support of
a labeling change we previously implemented. This labeling change sought to
clarify the safe and effective use of FreeStyle in light of physiological
differences between the finger and alternate blood glucose testing sites. The
FDA has decided to review our submission as a 510(k). Because FreeStyle is
currently being marketed with the revised more cautionary labeling, unless and
until we obtain clearance of that 510(k), we are technically out of compliance
with FDA regulations. In response, the FDA could require us to cease marketing
FreeStyle with the more cautionary labeling, publish a public health
notification disclosing warnings regarding the use of blood glucose monitoring
systems that can be utilized with blood samples obtained from sites other than
the fingertip or recall FreeStyle until we obtain 510(k) clearance. Also, in
these circumstances, we may be subject to significant regulatory fines or
penalties.
We will work closely with the FDA to address their questions and resolve
any issues around our labeling. On October 19, 2001, we had an individual
meeting with the FDA where we specifically discussed our pending FreeStyle
510(k). In addition, on October 29, 2001 we attended a scheduled meeting of the
FDA's Clinical Chemistry and Clinical Toxicology Panel to provide advice and
recommendations on the types of data and/or labeling needed in 510(k)
submissions for blood glucose monitoring systems that can be utilized with blood
samples obtained from sites other than the fingertip. However, the FDA may not
accept our cautionary language as sufficient, and the FDA could require us to
include significant restrictions on use in the labeling. In discussions with the
FDA, we have been informed that, since the labeling changes are due to human
physiology, all manufacturers of off-fingertip glucose self-monitoring products
are being treated the same, and when such a manufacturer has submitted a
labeling change similar to ours, the FDA has required a 510(k). If the FDA
orders us to cease marketing FreeStyle with its current labeling, to recall such
product, to pay fines or penalties, or to include significant restrictions on
use in the FreeStyle labeling, our sales growth would be adversely impacted, and
we may not reach profitability.
If our suppliers or we fail to comply with the FDA's Quality System Regulation,
our manufacturing operations could be delayed, and our product sales and
profitability could suffer.
Our manufacturing processes for our FreeStyle test strips, as well as the
manufacturing processes utilized by our suppliers of FreeStyle meters, lancing
devices and lancets, are required to comply with the FDA's Quality System
Regulation, which covers the methods and documentation of the design, testing,
production, control, quality assurance, labeling, packaging, storage and
shipping of our products. The FDA enforces the Quality System Regulation through
unannounced inspections. We recently went through a Quality System Regulation
inspection at our facilities in Alameda, California and have submitted a
corrective action plan to the FDA addressing the observations noted in the
audit. The manufacturing line for our FreeStyle meters at Flextronics
International USA Inc. has not been inspected to date. If we or one of our
suppliers fail a Quality System Regulation inspection or if our corrective
action plan is not sufficient, our operations could be disrupted and our
manufacturing delayed. If we fail to take adequate corrective action in response
to any FDA observations, we could face various enforcement actions, which could
include a shut-down of our manufacturing operations and a recall of our
products, which would cause our product sales and profitability to suffer.
Furthermore, our key component suppliers may not currently be or may not
continue to be in compliance with applicable regulatory requirements.
Our products are subject to product recalls even after receiving FDA clearance
or approval, which would harm our reputation.
-6-
The FDA and similar governmental authorities in other countries have the
authority to require the recall of our products in the event of material
deficiencies or defects in design or manufacture. A government mandated or
voluntary recall by us could occur as a result of component failures,
manufacturing errors or design defects, including our new labeling for
FreeStyle. Any recall of product would divert managerial and financial resources
and harm our reputation with customers.
Because the medical device industry is litigious, we may be sued for allegedly
violating the intellectual property rights of others.
The medical technology industry has in the past been characterized by a
substantial amount of litigation and related administrative proceedings
regarding patents and intellectual property rights. In addition, major medical
device companies have used litigation against emerging growth companies as a
means of gaining a competitive advantage.
Should third parties file patent applications or be issued patents claiming
technology also claimed by us in pending applications, we may be required to
participate in interference proceedings in the U.S. Patent and Trademark Office
to determine the relative priorities of our inventions and the third parties'
inventions. We could also be required to participate in interference proceedings
involving our issued patents and pending applications of another entity. An
adverse outcome in an interference proceeding could require us to cease using
the technology or to license rights from prevailing third parties.
Third parties may claim we are using their patented inventions and may go
to court to stop us from engaging in our normal operations and activities. These
lawsuits are expensive to defend and conduct and would also consume and divert
the time and attention of our management. A court may decide that we are
infringing a third party's patents and may order us to cease the infringing
activity. The court could also order us to pay damages for the infringement.
These damages could be substantial and could harm our business, financial
condition and operating results. We have recently received a letter from the
exclusive licensee of a recently issued patent alleging that FreeStyle infringes
the patent and requesting that we contact the licensee regarding sublicense
opportunities. We are evaluating the patent and have responded to the letter
indicating that we would be willing to discuss potential sublicensing terms.
If we were unable to obtain any necessary license following a determination
of infringement or an adverse determination in litigation or in interference or
other administrative proceedings, we would have to redesign our products to
avoid infringing a third party's patent and could temporarily or permanently
have to discontinue manufacturing and selling some of our products. If this were
to occur, it would negatively impact future sales.
If we fail to protect our intellectual property rights, our competitors may take
advantage of our ideas and compete directly against us.
We rely on patent protection, as well as a combination of copyright, trade
secret and trademark laws, and nondisclosure, confidentiality agreements and
other contractual restrictions to protect our proprietary technology. However,
these legal means afford only limited protection and may not adequately protect
our rights or permit us to gain or keep any competitive advantage. For example,
our patents may be challenged, invalidated or circumvented by third parties. Our
patent applications, including those already allowed, may not be issued as
patents in a form that will be advantageous to us. We may not be able to prevent
the unauthorized disclosure or use of our technical knowledge or other trade
secrets by employees. Furthermore, the laws of foreign countries may not protect
our intellectual property rights to the same extent as the laws of the United
States. Even if our intellectual property rights are adequately protected,
litigation may be necessary
-7-
to enforce our intellectual property rights, which could result in substantial
costs to us and result in a substantial diversion of management attention. If
our intellectual property is not adequately protected, our competitors could use
our intellectual property to enhance their products. This would harm our
competitive position, decrease our market share or otherwise harm our business.
The prosecution and enforcement of patents licensed to us by third parties are
not within our control, and without these technologies, our products may not be
successful and our business would be harmed.
We rely on licenses to use various technologies that are material to our
business. We do not own the patents that underlie these licenses. The licenses
from Asulab, SA and Unilever PLC grant us the right under specific patents to
make and sell diagnostic devices for diabetes monitoring that contain the
inventions claimed in the licensed patents. Our rights to use these technologies
and employ the inventions claimed in the licensed patents are subject to our
licensors abiding by the terms of those licenses. In addition, we do not control
the prosecution of the patents to which we hold licenses, and we do not control
the strategy for determining when any patents to which we hold licenses should
be enforced. Instead, we rely upon our licensors to determine the appropriate
strategy for prosecuting and enforcing those patents.
If we are unable to continue to develop innovative products in the glucose
monitoring market, our business would be harmed.
The glucose monitoring market is subject to rapid technological change and
product innovations. Our products are based on our proprietary technology, but
our competitors may succeed in developing or marketing products that will be
technologically superior to ours. In addition, over $44 billion is spent
annually on diabetes treatment and the National Institutes for Health and other
supporters of diabetes research are continually seeking ways to prevent or cure
diabetes. Therefore, our products may also be rendered obsolete by technological
breakthroughs in diabetes prevention, monitoring or treatment.
We are currently developing additional enhancements for FreeStyle, as well
as new products such as our Continuous Glucose Monitoring System. Marketing of
these products will require FDA and other regulatory clearances and approvals.
Development of these products will require additional research and development
expenditures. We may not be successful in developing, marketing or manufacturing
these new products. In addition, several of our competitors are in various
stages of development of products similar to our Continuous Glucose Monitoring
System, and the FDA has approved two of these products. If any of our
competitors succeeds in developing a commercially viable product and obtains
government approval or successfully commercializes its FDA-approved product,
this could negatively affect our future revenues.
We have limited sales and marketing experience and any failure to expand sales
of FreeStyle will negatively impact future revenues.
We currently have limited experience in marketing and selling our products.
We received regulatory clearance for our initial product in January 2000 and
commenced commercial shipments in June 2000. We currently sell our products in
the United States directly, using a sales organization that we assembled
following regulatory clearance. Our products require a complex marketing and
sales effort targeted at health care professionals, diabetes educators, people
with diabetes, retail pharmacists and national retailers. We significantly
expanded our sales and marketing teams in 2000, and we are continuing this
expansion in 2001 and we expect this expansion to continue in 2002. We will face
significant challenges and risks in training, managing and retaining these
teams, including managing geographically dispersed efforts and adequately
training our people in the use and benefits of our products. We may not be able
to hire sufficient additional personnel to create increasing demand for our
products. In addition, we have distribution arrangements for the
-8-
sale of our products internationally and are dependent upon the sales and
marketing efforts of our third-party distributors. These distributors may not
commit the necessary resources to effectively market and sell our products.
Further, they may not be successful in selling our products. Our financial
condition would be harmed if our marketing and sales efforts are unsuccessful.
We currently depend on single suppliers and manufacturers for our FreeStyle
products, and the loss of any of these suppliers or manufacturers could harm our
business.
Our FreeStyle meters, along with our FreeStyle lancing devices and lancets,
are each currently manufactured according to our specifications by single third-
party manufacturers. The meters, lancing devices and lancets are manufactured
from components purchased from outside suppliers, and some of these components
are currently single-sourced. Our FreeStyle test strips, which we manufacture
ourselves, are comprised of several components obtained from single-source
suppliers. In the event we are unable, for whatever reason, to obtain components
from suppliers, or if our contract manufacturers are unable to meet our
manufacturing requirements, we may not be able to obtain components from
alternate suppliers or engage an additional manufacturer in a timely manner. Any
disruption or delay in shipments of FreeStyle meters, test strips, lancing
devices or lancets could result in the loss of customers or the failure to
acquire new customers, if they choose a competitor's product because our product
is not available. Such a disruption or delay would negatively affect our
revenues.
We outsource several key parts of our operations and any interruption in the
services provided could prevent us from expanding our business.
We currently outsource several aspects of our business, including the
manufacture of FreeStyle meters, lancing devices and lancets, the functioning of
our procurement systems and the operation of our customer service function.
Since outsourcing leaves us without direct control over these business
functions, interruptions in the services of our third-party providers may be
difficult or impossible to remedy in a timely fashion. In addition, we may be
unable to obtain the necessary resources from our third-party providers to meet
realized growth in our business.
We may have difficulty managing our growth.
We expect to continue to experience significant growth in the scope of our
operations and the number of our employees. This growth may continue to place a
significant strain on our management and operations. Our ability to manage this
growth will depend upon our ability to attract, hire and retain skilled
employees. Our success will also depend on the ability of our officers and key
employees to continue to implement and improve our operational and other
systems, to manage multiple, concurrent development projects and to hire, train
and manage our employees. Our future success is heavily dependent upon growth
and acceptance of new products. If we cannot scale our business appropriately or
otherwise adapt to anticipated growth and new product introduction, our
business, financial condition and results of operations will be adversely
affected.
Our success will depend on our ability to attract and retain key personnel and
scientific staff.
We believe our future success will depend upon our ability to successfully
manage our growth, including attracting and retaining scientists, engineers and
other highly skilled personnel. Our employees may terminate their employment
with us at any time and are not subject to employment contracts. Hiring
qualified management and technical personnel will be difficult due to the
limited number of qualified professionals. Competition for these types of
employees is intense in the field of diabetes monitoring and management. We have
in the past experienced difficulty in recruiting qualified personnel. If we fail
to attract and retain
-9-
personnel, particularly management and technical personnel, we may not be able
to execute on our business plan.
Our products carry return policies that do not permit us to recognize revenue
from sales to retailers and wholesalers prior to resale to end users.
Our return policy allows end users in the United States to return FreeStyle
System kits to us for any reason for a full refund within 30 days of purchase.
In addition, our FreeStyle System kits and FreeStyle test strips currently have
an 18 month shelf life, and retailers and wholesalers in the United States can
return these products to us within six months after this expiration date. If we
experience significant returns from retailers, wholesalers or end users, this
could seriously harm our business and results of operations. As a result of
these rights to return and the unavailability of historical return rates, we
defer revenue recognition on sales of test strips until resold by the retailers
and wholesalers to end users, and we defer revenue recognition on FreeStyle
System kits until 30 days after purchase by the end user.
Because we lack a sufficient historical basis from which we could estimate
return rates, we are required to rely on data estimates provided to us by third-
party data providers in order to recognize revenue from sales to end users by
retailers and wholesalers. These data estimates may cause imprecise revenue
recognition, as these third-party data providers may not provide consistent,
reliable data. Further, we do not know how long we will be required to rely on
these estimates, although we believe that we will have a sufficient historical
basis from which we can estimate return rates beginning with the quarter ending
September 30, 2002.
If we do not provide quality customer service, we would lose customers and our
operating results would suffer.
Our ability to provide superior customer service to our customers, health
care professionals and educators is critical. To effectively compete, we must
build strong brand awareness among our customers, much of which is based upon
personal referrals. In order to gain these referrals, we must provide customer
service representatives who are able and available to provide our customers with
answers to questions regarding our products. This will require us to continue to
build and maintain customer service operations, for which we currently rely on a
single third-party provider. We will require increased staff at our third-party
provider to further support a growth in new customers. Any failures or
disruption to our customer services operations, or the termination of our
contract with our only third-party provider, could cause us to lose customers.
We currently have only one distributor in Europe and one distributor in Japan,
and if these distributors are not successful or we are unable to attract
additional distributors, we may never realize significant international
revenues.
In September 2000, we entered into an agreement for the exclusive marketing
and sale of FreeStyle in several European countries, subject to regulatory
approval. In May 2001, our third-party distributor commercially introduced
FreeStyle in Germany and Sweden. In April 2001, we entered into an agreement for
the exclusive marketing and sale of FreeStyle in Japan, subject to regulatory
approval. We will be dependent on these distributors in those markets, and we
will need to attract additional distributors in other markets. If our current or
future third-party distributors do not succeed, we may never realize significant
international revenues.
-10-
Complying with international regulatory requirements is an expensive, time-
consuming process and approval is never certain.
International sales of our products are subject to strict regulatory
requirements. The review process varies from country to country, is typically
lengthy and expensive, and approval is never certain. Nipro Corporation, our
exclusive distributor in Japan, submitted an application for approval to market
FreeStyle in Japan with the Ministry of Health, Labor and Welfare. Failure to
receive the approval in Japan or in other countries would prevent us from
expanding international sales of FreeStyle, which would negatively impact our
future revenues.
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 an acquired business or
technology in a cost-effective and non-disruptive manner.
Our success depends on our ability to continually enhance and broaden our
product offerings in response to changing technologies, customer demands and
competitive pressures. Accordingly, we may, in the future, acquire complementary
businesses, products, or technologies instead of developing them ourselves. We
do not know if we will be able to complete any acquisitions, or whether we will
be able to successfully integrate any acquired business, operate it profitably
or retain its key employees. Integrating any business, product or technology we
acquire could be expensive and time consuming, disrupt our ongoing business and
distract our management. If we are unable to integrate any acquired entities,
products or technologies effectively, our business will suffer. In addition, any
amortization of goodwill or other assets or charges resulting from the costs of
acquisitions could harm our business and operating results.
Any adverse changes in reimbursement procedures by Medicare or other third-party
payors may limit our ability to market and sell our products.
In the United States, glucose self-monitoring devices and test strips are
generally covered by Medicare and other third-party payors, which provide for
reimbursement of all or part of the cost of the product. Medicare and other
third-party payors are increasingly scrutinizing whether to cover new products
and the level of reimbursement for covered products. FreeStyle is currently
being reimbursed through Medicare, Medicaid, open formulary plans and certain
preferred provider organizations.
International market acceptance of our products may depend, in part, upon
the availability of reimbursement within prevailing health care payment systems.
Reimbursement and health care payment systems in international markets vary
significantly by country, and include both government sponsored health care and
private insurance. We may not obtain international reimbursement approvals in a
timely manner, if at all. Our failure to receive international reimbursement
approvals may negatively impact market acceptance of our products in the
international markets in which those approvals are sought.
We believe that in the future, reimbursement will be subject to increased
restrictions both in the United States and in international markets. Third-party
reimbursement and coverage may not be available or adequate in either the United
States or international markets. Future legislation, regulation or reimbursement
policies of third-party payors may adversely affect the demand for our existing
products or our products currently under development or our ability to sell our
products on a profitable basis. The lack of third-party payor coverage or the
inadequacy of reimbursement could have a material adverse effect on our
business, financial condition and results of operations.
-11-
If we become subject to product liability claims, we may be required to pay
damages that exceed our insurance coverage.
Our business exposes us to potential product liability claims that are
inherent in the testing, production, marketing and sale of human diagnostic
products. While we believe that we are reasonably insured against these risks,
we may not be able to obtain insurance in amounts or scope sufficient to provide
us with adequate coverage against all potential liabilities. Currently, we
maintain product liability insurance in the amount of $20.0 million. A product
liability claim in excess of our insurance coverage would have to be paid out of
cash reserves and would harm our reputation in the industry.
We are subject to additional risks associated with international operations.
We believe that a significant amount of our future revenues may come from
international sales, and these sales are subject to a number of risks. For
example, foreign regulatory agencies often establish requirements different from
those in the United States. Fluctuations in exchange rates of the U.S. dollar
against foreign currencies may affect demand for our products overseas. In
addition, our international sales may be adversely affected by export license
requirements, the imposition of governmental controls, political and economic
instability, trade restrictions, changes in tariffs and difficulties in staffing
and managing international operations.
If we require future capital, we may not be able to secure additional funding in
order to expand our operations and develop new products.
We may seek additional funds from public and private stock offerings,
borrowings under lease lines of credit or other sources. This additional
financing may not be available on a timely basis on terms acceptable to us, or
at all. This financing may be dilutive to stockholders or may require us to
grant a lender a security interest in our assets. The amount of money we will
need will depend on many factors, including:
. revenues generated by sales of FreeStyle and our future products, if
any;
. expenses we incur in developing and selling our products;
. the commercial success of our research and development efforts; and
. the emergence of competing technological developments.
If adequate funds are not available, we may have to delay development or
commercialization of our products or license to third parties the rights to
commercialize products or technologies that we would otherwise seek to
commercialize. We also may have to reduce marketing, customer support or other
resources devoted to our products. Any of these results would harm our financial
condition.
We may have warranty claims that exceed our reserves.
FreeStyle meters carry a five-year warranty against defects in materials
and workmanship. We will be responsible for all claims, actions, damages, liens,
liabilities, costs and expenses for defects attributable to the FreeStyle meter.
We have established reserves for the liability associated with product
warranties. However, any unforeseen warranty exposure could adversely affect our
operating results.
All of our operations are currently conducted at a single location, and a
disaster at this facility is possible and could result in a prolonged
interruption of our business.
-12-
We currently conduct all our scientific, test strip manufacturing and
management activities at a single location in Alameda, California near known
earthquake fault zones. In addition, our facilities were built on fill material
dredged from the San Francisco Bay in the 1960s. Our sole supplier of FreeStyle
meters also currently manufactures these devices at a single facility in San
Jose, California near known earthquake fault zones. We have taken precautions to
safeguard our facilities, including insurance, health and safety protocols, and
off-site storage of computer data. However, a natural disaster, such as an
earthquake, fire or flood, could cause substantial delays in our operations,
damage or destroy our manufacturing equipment or inventory, and cause us to
incur additional expenses. A disaster could seriously harm our business and
adversely affect our reputation with customers. The insurance we maintain
against fires, floods, and earthquakes may not be adequate to cover our losses
in any particular case.
Power outages in California may adversely affect us.
We conduct all of our scientific, test strip manufacturing and management
activities in California and rely on a continuous power supply to conduct
operations. Our sole-source supplier of FreeStyle meters is currently
manufacturing our meters in a single facility that is also in California.
California's current energy crisis could substantially disrupt our operations
and increase our expenses. California has recently implemented, and may in the
future continue to implement, rolling blackouts throughout the state. If
blackouts interrupt our power supply, we may be temporarily unable to continue
operations at our facilities, which includes the manufacture and production of
our FreeStyle test strips. Interruptions in our ability to continue operations
at our facilities could delay our shipments of FreeStyle test strips, delay the
development of our products, and disrupt communications with our customers,
suppliers and third-party manufacturing operations. Future interruptions could
result in lost revenue and damage our reputation, either of which could harm our
business and results of operations. Furthermore, shortages in wholesale
electricity supplies have caused power prices to increase. If wholesale prices
continue to increase, our operating expenses will likely increase, which will
have a negative effect on our operating results.
We may be liable for contamination or other harm caused by materials that we
use, and changes in environmental regulations could cause us to incur additional
expense.
Our research and development and clinical processes involve the use of
potentially harmful biological materials as well as hazardous materials. We are
subject to federal, state and local laws and regulations governing the use,
handling, storage and disposal of hazardous and biological materials and we
incur expenses relating to compliance with these laws and regulations. If
violations of environmental, health, and safety laws occur, we could be held
liable for damages, penalties and costs of remedial actions. These expenses or
this liability could have a significant negative impact on our financial
condition. We may violate environmental, health and safety laws in the future as
a result of human error, equipment failure, or other causes. Environmental laws
could become more stringent over time, imposing greater compliance costs and
increasing risks and penalties associated with violations. We are subject to
potentially conflicting and changing regulatory agendas of political, business,
and environmental groups. Changes to or restrictions on permitting requirements
or processes, hazardous or biological material storage or handling might require
an unplanned capital investment and/or relocation. Compliance with new laws or
regulations could harm our business, financial condition and results of
operations.
Our common stock has recently become publicly traded, and we expect that the
price of our common stock may fluctuate substantially.
We consummated the initial public offering of our common stock in October
2001. Accordingly, there has only been a public market for shares of our common
stock since October 2001. An active public
-13-
trading market may not develop or, if developed, may not be sustained. Further,
we expect that the market price of our common stock may fluctuate substantially.
The market price for our common stock may be affected by a number of factors,
including:
. volume and timing of orders for our products;
. our ability to develop, obtain regulatory clearance for, and market,
new and enhanced products on a timely basis;
. the announcement of new products or product enhancements by us or our
competitors;
. announcements of technological or medical innovations in the
monitoring or treatment of diabetes;
. product liability claims or other litigation;
. quarterly variations in our or our competitors' results of operations;
. changes in governmental regulations or in the status of our regulatory
approvals or applications;
. changes in the availability of third-party reimbursement in the United
States or other countries;
. changes in earnings estimates or recommendations by securities
analysts; and
. general market conditions and other factors, including factors
unrelated to our operating performance or the operating performance of
our competitors.
The sales of a substantial number of shares of our common stock, including
shares that will become eligible for sale in the near future, may adversely
affect the market price for our common stock
Sales of a substantial number of shares of our common stock in the public
market or the market perception that these sales may occur, could significantly
and negatively affect the market price for our common stock. As of September 30,
2001, we had 39,052,222 shares of common stock outstanding after giving effect
to the issuance of 6,900,000 shares of common stock in our October 2001 initial
public offering and the automatic conversion of all of our outstanding shares of
preferred stock into an equal number of shares of common stock immediately prior
to the closing of our October 2001 initial public offering. The 6,900,000
shares of our common stock sold in our October 2001 initial public offering are
freely tradable. The remaining 32,152,222 of these shares are subject to a
lock-up agreement under which the holders of these shares have agreed not to
sell or otherwise dispose of their shares of common stock until 180 days after
the effective date of our October 2001 initial public offering. All of these
shares will be available for sale after the expiration of the lock-up period on
April 10, 2002, and approximately 16.0 million of these shares will be subject
to volume restrictions because they are held by our affiliates. In addition,
U.S. Bancorp Piper Jaffray Inc., the lead underwriter of our initial public
offering, may waive these lock-up restrictions prior to the expiration of the
lock-up period without prior notice.
In addition, the holders of approximately 27,243,164 shares of common stock
and warrants exercisable for shares of common stock will have rights (after
giving effect to the automatic conversion of all of our outstanding shares of
preferred stock into an equal number of shares of common stock immediately
-14-
prior to the closing of our October 2001 initial public offering), subject to
some conditions, to require us to file registration statements covering their
shares or to include their shares in registration statements that we may file
for ourselves or other stockholders. Furthermore, if we were to include in a
company-initiated registration statement shares held by those holders pursuant
to the exercise of their registration rights, those sales could impair our
ability to raise needed capital by depressing the price at which we could sell
our common stock.
Our principal stockholders, executive officers and directors own a significant
percentage of our stock, and as a result, the trading price for our shares may
be depressed and these stockholders can take actions that may be adverse to
investors' interests.
Our executive officers and directors and entities affiliated with them
beneficially own, in the aggregate, approximately 37.0% of our common stock as
of September 30, 2001 after giving effect to the issuance of 6,900,000 shares of
common stock in our October 2001 initial public offering and the automatic
conversion of all of our outstanding shares of preferred stock into an equal
number of shares of common stock immediately prior to the closing of our October
2001 initial public offering. This significant concentration of share ownership
may adversely affect the trading price for our common stock because investors
often perceive disadvantages in owning stock in companies with controlling
stockholders. These stockholders, acting together, will have the ability to
exert substantial influence over all matters requiring approval by our
stockholders, including the election and removal of directors and any proposed
merger, consolidation or sale of all or substantially all of our assets. In
addition, they could dictate the management of our business and affairs. This
concentration of ownership could have the effect of delaying, deferring or
preventing a change in control, or impeding a merger or consolidation, takeover
or other business combination that could be favorable to our investors.
Our charter documents and Delaware law may inhibit a takeover that stockholders
consider favorable and could also limit the market price of investors' stock.
Our amended and restated certificate of incorporation and bylaws will
contain provisions that could delay or prevent a change in control of our
company. Some of these provisions:
. authorize the issuance of preferred stock which can be created and
issued by the board of directors without prior stockholder approval,
commonly referred to as "blank check" preferred stock, with rights
senior to those of common stock;
. prohibit stockholder actions by written consent; and
. provide for a classified board of directors.
In addition, we are governed by the provisions of Section 203 of Delaware
General Corporate Law. These provisions may prohibit stockholders owning 15% or
more of our outstanding voting stock, from merging or combining with us. These
and other provisions in our amended and restated certificate of incorporation
and bylaws and under Delaware law could reduce the price that investors might be
willing to pay for shares of our common stock in the future and result in the
market price being lower than it would be without these provisions.
-15-
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the shares of
common stock pursuant to this prospectus. All proceeds from the sale of the
shares will be for the account of the selling stockholders, as described below.
See "Selling Stockholders" and "Plan of Distribution" described below.
SELLING STOCKHOLDERS
The following table shows the names of the selling stockholders and the
number of shares of common stock to be sold by them pursuant to this prospectus.
Except as indicated in the footnotes to this table and pursuant to applicable
community property laws, each stockholder named in the table has sole voting and
investment power with respect to the shares set forth opposite that
stockholder's name.
Applicable percentage ownership of our common stock is based on 39,490,229
shares of common stock outstanding as of November 1, 2001.
Common Stock Ownership Common Stock Ownership
Prior to Offering Number of Shares After Offering
------------------------------ of Common Stock -----------------------------
Selling Stockholders Number Percent Offered Number Percent
------------------------------------- ------------------------------ ------------------- -----------------------------
Behrad Aria.......................... 13,327 * 13,327 0 *
Debra Armstrong...................... 750 * 750 0 *
Robert Arnesen....................... 1,166 * 1,166 0 *
Jay Audett........................... 13,801 * 13,801 0 *
Nooshin Azimi........................ 8,000 * 8,000 0 *
Vijay Bahkta......................... 2,478 * 2,478 0 *
Apolinar B. Bordador III............. 702 * 702 0 *
Deborah Briggs....................... 10,349 * 10,349 0 *
Robert D. Brownell(1)................ 52,855 * 40,000 12,855 *
James Carpenter...................... 34,375 * 34,375 0 *
Michael Cloud........................ 2,343 * 2,343 0 *
Joel Colburn......................... 30,809 * 25,809 5,000 *
Frederic C. Colman................... 153,514 * 153,514 0 *
Eve Conner(2)........................ 105,999 * 105,999 0 *
Steve Drucker........................ 13,000 * 13,000 0 *
The Drucker Irrevocable Trust dated
August 5, 1992...................... 2,800 * 800 2,000 *
Robert Ewell......................... 1,172 * 1,172 0 *
Charmaine Haiss...................... 500 * 500 0 *
Claire D. Heiss TTEE for Claire D.
Heiss 2001 Revocable Trust U/A Dtd
2-20-01(3).......................... 78,424 * 68,424 10,000 *
Michael Hollingsworth................ 656 * 656 0 *
Norma Horn........................... 500 * 500 0 *
Brian Jellin......................... 2,049 * 2,049 0 *
Feng Jiang........................... 4,166 * 4,166 0 *
Robert Jin........................... 18,680 * 18,680 0 *
Dina L. Killian-Barnes............... 2,670 * 2,670 0 *
Charles Liamos(4).................... 180,375 * 180,375 0 *
Kelley Lipman........................ 22,862 * 22,862 0 *
-16-
Common Stock Ownership Common Stock Ownership
Prior to Offering Number of Shares After Offering
------------------------------ of Common Stock -----------------------------
Selling Stockholders Number Percent Offered Number Percent
------------------------------------- ------------------------------ ------------------- -----------------------------
W. Mark Lortz and Patrice Rae Lortz
Revocable Living Trust(5)........... 592,490 1.50% 592,490 0 *
William Matievich Jr................. 2,933 * 2,933 0 *
Carolyn McCorkindale................. 525 * 525 0 *
Geoff McGarraugh..................... 100,000 * 100,000 0 *
Michael McNamara(6).................. 43,344 * 43,344 0 *
Said Mortazavi....................... 12,500 * 12,500 0 *
Richard Myer......................... 1,342 * 1,342 0 *
Michael Nevares...................... 3,941 * 3,941 0 *
Kathleen O'Connor-Masse.............. 11,205 * 11,205 0 *
Jonathan Pesco....................... 2,486 * 2,486 0 *
Whitney Pieper....................... 1,587 * 1,587 0 *
Philip Plante........................ 83,800 * 73,800 10,000 *
Donald Preston....................... 3,264 * 3,264 0 *
Chuck Ray............................ 4,770 * 4,770 0 *
Travis Rowe.......................... 1,765 * 1,765 0 *
Teresa Saiers........................ 97 * 97 0 *
Hennings Sakslund.................... 40,446 * 2,946 37,500 *
James Say............................ 78,770 * 3,770 75,000 *
Harry Shamoon........................ 5,625 * 5,625 0 *
Richard Thompson(7).................. 30,000 * 30,000 0 *
Nirmala Verma........................ 885 * 885 0 *
Karen Wing........................... 5,596 * 5,596 0 *
Duane Yamasaki....................... 3,374 * 3,374 0 *
Norma Zippin......................... 20,460 * 20,460 0 *
_________________
* Less than 1%.
(1) Robert D. Brownell serves as our Vice President of Human Resources and
General Counsel.
(2) Eve A. Conner serves as our Vice President of Quality Assurance and
Regulatory Affairs.
(3) Claire D. Heiss is a Trustee of the Claire D. Heiss 2001 Revocable Trust
under Agreement dated 02-20-01 and has voting and dispositive powers over
the shares. Claire D. Heiss serves as our Vice President of Operations.
(4) Charles T. Liamos is our Chief Operating Officer and Chief Finance Officer.
(5) W. Mark Lortz is a Co-Trustee or Successor Trustee of the W. Mark Lortz and
Patrice Rae Lortz Revocable Living Trust, under Agreement dated February 10,
1999, as community property and shares voting and dispositive powers over
the shares. W. Mark Lortz serves as our Chairman of the Board, President
and Chief Executive Officer.
(6) Michael M. McNamara is a member of our board of directors.
(7) Richard P. Thompson is a member of our board of directors.
-17-
PLAN OF DISTRIBUTION
We are registering the shares on behalf of the selling stockholders,
including donees and pledges of shares received from a named selling stockholder
after the date of this prospectus. All costs, expenses and fees in connection
with the registration of the shares offered hereby will be borne by us, and all
brokerage commissions and similar selling expenses attributable to the sale of
the shares will be borne by the selling stockholders.
The selling stockholders may sell all or a portion of the shares offered
hereby from time to time in the Nasdaq National Market and such sales may be
made at prices prevailing in the Nasdaq National Market at the times of such
sales. The selling stockholders may also make private sales directly or through
a broker or brokers, who may act as agent or as principal. Further, the selling
stockholders may choose to dispose of the shares offered hereby by gift to a
third party or as a donation to a charitable or other non-profit entity. In
connection with any sales, the selling stockholders and any brokers
participating in such sales may be deemed to be underwriters within the meaning
of the Securities Act.
Any broker-dealer participating in such transactions as agent may receive
commissions from the selling stockholders (and, if such broker acts as agent for
the purchaser of such shares, from such purchaser). Usual and customary
brokerage fees will be paid by the selling stockholders. Broker-dealers may
agree with the selling stockholders to sell a specified number of shares at a
stipulated price per share, and, to the extent the broker-dealer is unable to do
so acting as agent for the selling stockholders, to purchase as principal any
unsold shares at the price required to fulfill the broker-dealer commitment to
the selling stockholders. Broker-dealers who acquire shares as principal may
thereafter resell such shares from time to time in transactions (which may
involve crosses and block transactions and which may involve sales to and
through other broker-dealers, including transactions of the nature described
above) in the over-the-counter market, in negotiated transactions or otherwise
at market prices prevailing at the time of sale or at negotiated prices, and in
connection with such resales may pay to or receive from the purchasers of such
shares commissions computed as described above.
We have advised the selling stockholders that Regulation M promulgated
under the Exchange Act may apply to sales in the market and have informed them
of the possible need for delivery of copies of this prospectus. The selling
stockholders may indemnify any broker-dealer that participates in transactions
involving the sale of the shares against certain liabilities, including
liabilities arising under the Securities Act. Any commissions paid or any
discounts or concessions allowed to any such broker-dealers, and, if any such
broker-dealers purchase shares as principal, any profits received on the resale
of such shares, may be deemed to be underwriting discounts and commissions under
the Securities Act.
Upon our being notified by the selling stockholders that any material
arrangement has been entered into with a broker-dealer for the sale of shares
through a cross or block trade, a supplemental prospectus will be filed under
Rule 424(c) of the Securities Act, setting forth the name of the participating
broker-dealer(s), the number of shares involved, the price at which such shares
were sold by the selling stockholders, the commissions paid or discounts or
concessions allowed by the selling stockholders to such broker-dealer(s), and
where applicable, that such broker-dealer(s) did not conduct any investigation
to verify the information set out in this prospectus.
Any securities covered by this prospectus which qualify for sale pursuant
to Rules 144 and 701 under the Securities Act may be sold under Rule 144 rather
than pursuant to this prospectus. In general, under Rule 144 as currently in
effect, a person (or persons whose shares are aggregated), including any person
who may be deemed to be our "affiliate," is entitled to sell within any three
month period "restricted shares" beneficially owned by him or her in an amount
that does not exceed the greater of (i) 1% of the then
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outstanding shares of common stock of the company or (ii) the average weekly
reported trading volume in shares of our common stock during the four calendar
weeks preceding such sale, provided that at least one year has elapsed since
such shares were acquired from us or any of our affiliates. Sales are also
subject to certain requirements as to the manner of sale, notice and
availability of current public information regarding TheraSense. However, a
person who has not been our "affiliate" at any time within three months prior to
the sale is entitled to sell his or her shares without regard to the volume
limitations or other requirements of Rule 144, provided that at least two years
have elapsed since such shares were acquired from us or any of our affiliates.
In general, under Rule 701 as currently in effect, any employee, consultant or
advisor of ours who purchases shares from us in connection with a compensatory
stock or option plan or other written agreement related to compensation is
eligible to resell such shares in reliance on Rule 144, but without compliance
with certain restrictions contained in Rule 144.
Furthermore, each selling stockholder is subject to a lock-up agreement
under which the selling stockholder has agreed not to transfer or dispose of,
directly or indirectly, certain shares of common stock (including all shares
beneficially owned prior to our October 2001 initial public offering) or certain
securities convertible into or exercisable or exchangeable for shares of common
stock (including all options to purchase shares of our common stock), for a
period of 180 days after the effective date of our October 2001 initial public
offering. Transfers or dispositions can be made sooner, however, with the prior
written consent of U.S. Bancorp Piper Jaffray Inc., one of the underwriters of
our October 2001 initial public offering.
There can be no assurance that the selling stockholders will sell any or
all of the shares of common stock offered hereunder.
EXPERTS
The financial statements as of December 31, 1999 and 2000, and for each of
the three years in the period ended December 31, 2000 incorporated in this
prospectus by reference to the Registration Statement on Form S-1 (No. 333-
64456), have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law permits a corporation
to include in its charter documents, and in agreements between the corporation
and its directors and officers, provisions expanding the scope of
indemnification beyond that specifically provided by the current law.
Article VIII of our amended and restated certificate of incorporation
provides for the indemnification of directors to the fullest extent permissible
under Delaware law.
Article VI of our amended and restated bylaws provides for the
indemnification of officers, directors and third parties acting on our behalf if
such person acted in good faith and in a manner reasonably believed to be in and
not opposed to our best interest, and, with respect to any criminal action or
proceeding, the indemnified party had no reason to believe his or her conduct
was unlawful.
We have entered into indemnification agreements with our directors and
executive officers, in addition to indemnification provided for in our charter
documents, and we intend to enter into indemnification agreements with any new
directors and executive officers in the future.
In October 2001, we purchased, and we intend to maintain insurance on
behalf of any person who is or was (as of October 2001) a director or officer
against any loss arising from any claim asserted against him or her and incurred
by him or her in any such capacity, subject to certain exclusions.
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THERASENSE
REGISTRATION STATEMENT ON FORM S-8
PART II
Item 3. Incorporation of Documents by Reference.
There are hereby incorporated by reference into this Registration
Statement the following documents and information heretofore filed by
TheraSense, Inc. (the "Registrant") with the Securities and Exchange Commission
(the "Commission"):
(1) The Registrant's Registration Statement on Form S-1 (File No. 333-
64456) filed pursuant to Rule 424(b) under the Securities Act of
1933, as amended, declared effective on October 11, 2001.
(2) The Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 2001 filed on November 14, 2001.
(3) The description of the Registrant's common stock contained in the
Registrant's Registration Statement on Form 8-A declared effective
by the Commission on October 11, 2001 pursuant to Section 12(g) of
the Securities Exchange Act of 1934, as amended, and any
description of any of the Registrant's securities contained in any
registration statement filed after the date hereof under Section
12 of the Exchange Act, including any amendment or report filed
for the purpose of updating any such description.
The Registrant also incorporates by reference all documents subsequently
filed by the Registrant pursuant to Sections 13(a), 13(c), 14 and 15(d) of the
Exchange Act, prior to the filing of a post-effective amendment which indicates
that all securities registered have been sold or which deregisters all
securities then remaining unsold, and shall be deemed to be incorporated by
reference in this registration statement and to be part hereof from the date of
filing of such documents.
Item 4. Description of Securities.
The class of securities to be offered is registered under Section 12(g)
of the Exchange Act.
Item 5. Interests of Named Experts and Counsel.
Not applicable.
Item 6. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law permits a
corporation to include in its charter documents, and in agreements between the
corporation and its directors and officers, provisions expanding the scope of
indemnification beyond that specifically provided by the current law.
Article VIII of the Registrant's amended and restated certificate of
incorporation provides for the indemnification of directors to the fullest
extent permissible under Delaware law.
Article VI of the Registrant's amended and restated bylaws provides for
the indemnification of officers, directors and third parties acting on the
Registrant's behalf if such person acted in good faith and in a
II-1
manner reasonably believed to be in and not opposed to the Registrant's best
interest, and, with respect to any criminal action or proceeding, the
indemnified party had no reason to believe his or her conduct was unlawful.
The Registrant has entered into indemnification agreements with our
directors and executive officers, in addition to indemnification provided for in
the Registrant's charter documents, and the Registrant intends to enter into
indemnification agreements with any new directors and executive officers in the
future.
In October 2001, the Registrant purchased and intends to maintain
insurance on behalf of any person who is or was (as of October 2001) a director
or officer against any loss arising from any claim asserted against him or her
and incurred by him or her in any such capacity, subject to certain exclusions.
Item 7. Exemption from Registration Claimed.
The issuance of the shares being offered by the Form S-3 resale
prospectus were deemed to be exempt from registration under the Securities Act
in reliance on Section 4(2) of the Securities Act or Rule 701 promulgated under
Section 3(b) of the Securities Act, as transactions by an issuer not involving a
public offering or transactions pursuant to compensatory benefit plans and
contracts relating to compensation as provided under such Rule 701. The
recipients of securities in each such transaction represented their intention to
acquire the securities for investment only and not with a view to or for sale in
connection with any distribution thereof and appropriate legends were affixed to
the share certificates and instruments issued in such transactions. All
recipients had adequate access, through their relationship with TheraSense, to
information about TheraSense.
Item 8. Exhibits.
Exhibit
Number Description
-------- ------------------------------------------------------------------
3.1(b)* Amended and Restated Certificate of Incorporation of Registrant.
3.2(b)* Amended and Restated Bylaws of Registrant.
10.1* 1997 Stock Plan.
23.1 Consent of independent accountants.
24.1 Power of Attorney (see page II-4).
_____________________
* Incorporated by reference to the Registrant's Registration Statement on
Form S-1 (File No. 333-64456), declared effective by the Securities and
Exchange Commission on October 11, 2001.
Item 9. Undertakings.
(a) The Registrant hereby undertakes:
(i) To file, during any period which offers or sales are being
made, a post-effective amendment to this registration
statement to include any material information with respect
to the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
(ii) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-2
(iii) To remove from registration by means of a post-effective
amendment any of the securities being registered which
remain unsold at the termination of the offering.
(b) The Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing
of the registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Exchange Act (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Exchange Act) that is incorporated by
reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of the Registrant pursuant to law, the
Registrant's Amended and Restated Certificate of Incorporation,
Amended and Restated Bylaws, indemnification agreements, or
otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in a successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered hereunder, the Registrant will,
unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it
is against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing this Registration Statement on Form S-8/S-3 and has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Alameda, State of
California, on this 29th day of November, 2001.
THERASENSE, INC.
By: /s/ W. Mark Lortz
-----------------------------------------
W. Mark Lortz
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints W. Mark Lortz, Charles T. Liamos and
Robert D. Brownell, and each of them, as his or her attorneys-in-fact, with full
power of substitution in each, for him or her in any and all capacities to sign
any amendments to this Registration Statement on Form S-8/S-3, and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact, or his substitutes, may do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
------------------------------------------------ ----------------------------------------------- ---------------------
/s/ W. Mark Lortz President and Chief Executive Officer November 29, 2001
-------------------------------------------- (Principal Executive Officer)
W. Mark Lortz
/s/ Charles T. Liamos Chief Finance Officer November 29, 2001
-------------------------------------------- (Principal Financial and Accounting Officer)
Charles T. Liamos
/s/ Annette J. Campbell-White Director November 29, 2001
--------------------------------------------
Annette J. Campbell-White
/s/ Mark J. Gainor Director November 29, 2001
--------------------------------------------
Mark J. Gainor
/s/ Ross A. Jaffe, M.D. Director November 29, 2001
--------------------------------------------
Ross A. Jaffe, M.D.
/s/ Michael M. McNamara Director November 29, 2001
--------------------------------------------
Michael M. McNamara
/s/ Robert R. Momsen Director November 29, 2001
--------------------------------------------
Robert R. Momsen
/s/ Ephraim Heller Director November 29, 2001
--------------------------------------------
Ephraim Heller
Director
____________________________________________
Richard P. Thompson
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INDEX TO EXHIBITS
Exhibit
Number Description
--------- ------------------------------------------------------------------
3.1(b)* Amended and Restated Certificate of Incorporation of Registrant.
3.2(b)* Amended and Restated Bylaws of Registrant.
10.1* 1997 Stock Plan.
23.1 Consent of independent accountants.
24.1 Power of Attorney (see page II-4).
______________
* Incorporated by reference to the Registrant's Registration Statement on
Form S-1 (File No. 333-64456), declared effective by the Securities and
Exchange Commission on October 11, 2001.