As filed with the Securities and Exchange Commission on August 7, 2002
Registration No. 333-_____
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
THORATEC CORPORATION
(Exact Name of Registrant as specified in its Charter)
CALIFORNIA 94-2340464
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6035 STONERIDGE DRIVE, PLEASANTON, CALIFORNIA 94588 (925) 847-8600
(Address, including zip code, and telephone number, including area code, of
Thoratec Corporation's principal executive offices)
D. KEITH GROSSMAN
6035 STONERIDGE DRIVE, PLEASANTON, CALIFORNIA 94588 (925) 847-8600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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COPIES TO:
KYLE GUSE
HELLER EHRMAN WHITE & MCAULIFFE LLP
275 MIDDLEFIELD ROAD,
MENLO PARK, CALIFORNIA 94025-3506
TELEPHONE: (650) 324-6715
FACSIMILE: (650) 324-0638
Approximate date of commencement of proposed sale to the public:
AS SOON AS PRACTICABLE FOLLOWING THE EFFECTIVENESS OF THIS
REGISTRATION STATEMENT.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the Securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration number of the earlier
effective registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box: [ ]
================================================================================
=============================================================================================
CALCULATION OF REGISTRATION FEE
=============================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) FEE
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Common Stock, no par value(2) 7,609,719 $6.88 $52,354,867 $4,817
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(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(c) under the Securities Act of 1933, as amended,
based on the average of the high and low prices of the common stock on the
Nasdaq National Market on August 2, 2002, as reported on the Nasdaq National
Market.
(2) In accordance with Rule 416 under the Securities Act of 1933, Common Stock
offered hereby shall also be deemed to cover additional securities to be
offered or issued to prevent dilution resulting from stock splits, stock
dividends or similar transactions.
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WE HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE
NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL WE SHALL FILE A FURTHER AMENDMENT
WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER
BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933
OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES, AND WE ARE NOT SOLICITING
OFFERS TO BUY THESE SECURITIES, IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED AUGUST __, 2002
PROSPECTUS
7,609,719 SHARES
THORATEC CORPORATION
COMMON STOCK
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This prospectus may only be used in connection with the resale, from time to
time, of up to 7,609,719 shares of common stock, no par value, of Thoratec
Corporation by Thermo Electron Corporation.
All of the shares covered by this prospectus were acquired from us by Thermo
Electron Corporation pursuant to an Agreement and Plan of Merger dated as of
October 3, 2000. We will not receive any of the proceeds from the sale of shares
being sold by Thermo Electron.
Our common stock is listed on the Nasdaq National Market under the symbol
"THOR." On August 6, 2002, the last reported sale price of the common stock on
the Nasdaq National Market was $6.70 per share.
INVESTING IN THE SHARES INVOLVES RISKS. "RISK FACTORS" BEGIN ON PAGE 4.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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. Thermo Electron Corporation is offering to sell,
and is seeking offers to buy, shares of our common stock only in jurisdictions
where offers and sales are permitted. The information contained in this
prospectus is accurate only as of the date of this prospectus, regardless of the
time of delivery of this prospectus or of any sale of the shares.
In this prospectus, "Thoratec," "we," "us" and "our" refer to Thoratec
Corporation.
i
TABLE OF CONTENTS
Page Page
---- ----
Business Summary........................ 1 Description of Capital Stock............15
Risk Factors............................ 4 Plan of Distribution....................17
Use of Proceeds.........................11 Legal Matters...........................18
Dividend Policy.........................12 Experts.................................19
Selling Shareholder.....................13 Where You Can Find More Information.....19
FORWARD LOOKING STATEMENTS
This prospectus, including the documents incorporated by reference in this
prospectus, includes forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events. Our actual results could differ materially from those discussed
in, or implied by, these forward-looking statements. Forward-looking statements
are identified by words such as "believe," "anticipate," "expect," "intend,"
"plan," "will," "may" and other similar expressions. In addition, any statements
that refer to expectations, projections or other characterizations of future
events or circumstances are forward-looking statements. Forward-looking
statements include, but are not necessarily limited to, those relating to:
- our ability to obtain and maintain regulatory approvals of our
products in the United States and internationally;
- results and timing of our clinical trials;
- the other competing therapies that may, in the future, be available
to heart failure patients;
- our plans to develop and market new products;
- our ability to improve our financial performance; and
- effects of the merger and integration with Thermo Cardiosystems,
Inc., which we refer to as Thermo Cardiosystems or TCA.
Factors that could cause actual results or conditions to differ from those
anticipated by these and other forward-looking statements include those more
fully described in the "Risk Factors" section and elsewhere in this prospectus
and in other documents we file with the Securities and Exchange Commission. We
are not obligated to update or revise these forward-looking statements to
reflect new events or circumstances.
You should rely only on the information contained or incorporated by
reference in this prospectus. We have not authorized anyone to provide you with
different information. You should assume that the information appearing in this
prospectus is accurate only as of the date on the front cover of this
prospectus. Our business, financial condition, results of operations and
prospects may have changed since that date.
Thoratec, the Thoratec logo, Thoralon, TLC-II, Vectra, HeartTouch, HeartMate
and HeartPak are registered trademarks, and Aria is a trademark, of Thoratec
Corporation.
ii
HEMOCHRON, ProTime, Surgicutt, Tenderlett and Tenderfoot are registered
trademarks of International Technidyne Corporation, which we refer to as ITC,
our wholly-owned subsidiary.
THE OFFERING
Common stock offered by Thoratec...................... We are not offering any of our shares
Common stock offered by the selling shareholder....... Up to 7,609,719 shares
Use of proceeds....................................... We will not receive any proceeds from the sale of
shares by the selling shareholder
Nasdaq National Market symbol.......................... "THOR"
iii
BUSINESS SUMMARY
OUR BUSINESS
We are a leading manufacturer of circulatory support products for use by
patients with congestive heart failure, or CHF. According to the American Heart
Association, 4.7 million patients in the United States suffer from CHF and an
additional 550,000 patients are diagnosed with this disease annually. We were
the first company to receive FDA approval to commercially market a ventricular
assist device, or VAD, to treat patients with late-stage heart failure, which
comprises approximately 5% of the CHF patient population. There is currently
only one FDA-approved indication for ventricular assist devices for patients
suffering from CHF -- as a bridge to heart transplant. This indication
represents a worldwide market of up to 8,000 patients annually.
We develop and market products that are used by physicians and hospitals for
cardiac assist, vascular and diagnostic applications. Our three types of
products are:
- Circulatory support products. Our circulatory support products include
ventricular assist devices for the short-term and long-term treatment of
congestive heart failure. Our products address more indications than the
products of any other cardiac-assist device company.
- Vascular graft products. We have developed small diameter grafts to
address the vascular access and coronary bypass surgery markets. These
grafts use our proprietary materials that are designed to improve
performance. Our grafts are sold in the United States and
internationally for use in hemodialysis patients and are currently in
clinical trials for coronary artery bypass applications.
- Blood coagulation testing and skin incision devices. We have a leading
market position for devices that monitor blood coagulation and perform
blood screening analysis for patients undergoing various surgical
procedures. We also offer a family of single-use skin incision devices
used to create a blood sample.
OUR MARKETS
The primary markets for our VAD products are those patients suffering from
heart failure, and in particular, from CHF. CHF is a chronic disease that occurs
when degeneration of the heart muscle reduces the pumping power of the heart,
causing the heart to become too weak to pump blood at a level sufficient to meet
the body's demands. CHF can be caused by artery or valve diseases or a general
weakening of the heart muscle itself. In addition, other conditions, such as
high blood pressure or diabetes, can also lead to CHF. We believe that the
number of patients suffering from CHF who could benefit from some form of
cardiac assist could be over 200,000 annually.
We estimate that our VADs have treated approximately 5,000 patients. Our
devices are used primarily for patients awaiting a heart transplant or
recovering from open heart surgery. However, we are pursuing approval to use our
VADs in other indications, including as an alternative to maximum drug therapy
for CHF patients who are not eligible for a heart transplant and for therapeutic
recovery to partially reverse the complications of late-stage heart failure in
certain patients.
OUR STRATEGY
We are a leading developer and manufacturer of medical devices for the CHF,
cardiac surgery and vascular graft markets. Our key strategies to maintain and
expand this leadership position are to:
- obtain approval for new indications for our products;
1
- increase penetration of existing markets;
- leverage benefits of our merger with TCA;
- offer a broad range of product solutions;
- focus on and partner with leading heart centers; and
- grow internationally.
THE MERGER WITH THERMO CARDIOSYSTEMS
On February 14, 2001, we completed our merger with Thermo Cardiosystems, a
Massachusetts-based manufacturer of cardiac assist, blood coagulation testing
and skin incision devices. As a result of the merger, we substantially increased
the size of our company and became a leading provider of circulatory support
products worldwide. We now sell VADs to virtually every leading heart transplant
center worldwide and we market three out of the four VADs approved by the FDA as
a bridge to heart transplant. At the time of the merger, we changed our name to
Thoratec Corporation. As a consequence of the merger, the selling shareholder,
Thermo Electron, owned approximately 14% of our outstanding stock on March 30,
2002.
THE REMATCH TRIAL
On November 12, 2001 the results of a clinical trial called REMATCH, or
Randomized Evaluation of Mechanical Assistance for the Treatment of Congestive
Heart Failure, were presented at the American Heart Association Scientific
Sessions and were published in a website edition of The New England Journal of
Medicine. The REMATCH trial, which cost approximately $25 million according to
one of the trial sponsors, was a collaboration among the National Institutes of
Health, or NIH, as lead sponsor, Columbia University and our company. We were a
partial sponsor of the REMATCH trial, providing approximately $3.6 million of
financial support and all necessary VAD's and related equipment.
The REMATCH trial results, as published in the New England Journal of
Medicine, involved 129 late-stage CHF patients who, because of their ages or
other diseases, were not eligible to receive one of the very limited supply of
donor organs for heart transplantation. The study was independently coordinated
by Columbia University at 21 prestigious transplant centers in the United
States. Patient enrollment for the initial study protocol began in 1998 and
concluded in June 2001. The overall purpose of the study was to evaluate the
efficacy, safety and cost effectiveness of our HeartMate ventricular assist
device versus optimal medical management, which we call "maximum drug therapy."
The REMATCH publication provided a detailed evaluation of survivability, device
safety and impact on patient quality of life.
Results from the REMATCH trial showed a significant survival benefit and
improved quality of life for patients using the HeartMate compared to maximum
drug therapy. The study showed the overall probability of one-year survival for
those on the HeartMate was 52% versus 25% for patients treated with maximum drug
therapy. The one year survival rates for patients younger than 60 years old was
74% for those patients on the HeartMate and 33% for those treated with maximum
drug therapy. The one year survival rates for patients 60 to 69 years old was
47% for those patients on the HeartMate and 15% for those treated with maximum
drug therapy. Two-year survival rates are estimated to be 23% for patients on
the HeartMate and 8% for those treated with maximum drug therapy. The median
length of survival was approximately 408 days for those on the HeartMate and 150
days for those treated with maximum drug therapy. The frequency of serious
adverse events for patients in the HeartMate group was 2.35 times
2
greater than for patients in the maximum drug therapy group, with a predominance
of infection, bleeding and malfunction of the device. Some of these adverse
events experienced by patients on the HeartMate included an ischemic stroke in
approximately 10% of the patients, half of which were major.
The overall quality of life, as measured by the patient's emotional state,
whether or not they were depressed, and their mobility, was significantly higher
at one year for patients on the HeartMate than for those treated with maximum
drug therapy. At the time the results of the REMATCH trial were published there
were 27 HeartMate patients still alive, versus 7 receiving maximum drug therapy.
Based on a review of these data, the FDA approved an IDE Supplement allowing
up to 30 additional non-randomized patients to be implanted with the HeartMate
as an alternative to maximum drug therapy. This IDE Supplement also permits
patients who were being treated with maximum drug therapy in the original study
to be implanted with the HeartMate.
On October 16, 2001, we submitted a PMA Supplement for the HeartMate for
destination therapy for patients suffering from late-stage CHF. On November 29,
2001 we received notification from the FDA that it expedited the review of our
PMA Supplement. On March 4, 2002, the FDA Circulatory System Devices Advisory
Panel, or the Panel, met to review our PMA Supplement. Based on results of the
REMATCH trial, the Panel recommended that the FDA approve our PMA Supplement,
with conditions, to provide long-term support for end-stage heart failure
patients who are not eligible for heart transplantation. We and our REMATCH
collaborators are working to address the conditions outlined by the Panel. We
have already initiated discussions with the Centers for Medicare and Medicaid
Services, formerly HCFA, regarding coverage and payment for use of the HeartMate
in this treatment.
We believe that this new application for our HeartMate device represents a
market opportunity of up to 100,000 additional patients annually in the United
States alone, which would represent a significant increase over our existing
customer base. For these patients, maximum drug therapy is currently the only
treatment available and, even with drug therapy, the 12-month mortality rate for
these patients is 75%. We believe that the HeartMate will provide a significant
survival benefit for this patient population.
RECENT DEVELOPMENTS
As of the beginning of fiscal year 2002, we adopted Statement of Financial
Accounting Standard No. 142, "Goodwill and Other Intangible Assets" ("SFAS No.
142"), which addresses the financial accounting and reporting standards for the
acquisition of intangible assets outside of a business combination and for
goodwill and other intangible assets subsequent to their acquisition. This
accounting standard requires that goodwill be separately disclosed from other
intangible assets in the statement of financial position, and no longer be
amortized but tested for impairment on a periodic basis. The provisions of this
accounting standard also require the completion of a transitional impairment
test within six months of adoption, with any impairments identified treated as a
cumulative effect of a change in accounting principle. We have completed our
transitional goodwill impairment test as of December 30, 2001 and determined
that no adjustment to the carrying value of the goodwill and purchased
intangible assets was needed.
In accordance with SFAS No. 142, we discounted the amortization of goodwill
effective as of the beginning of fiscal year 2002. In addition, we reassessed
the useful lives of our identifiable intangible assets and determined that the
lives were appropriate.
The following table presents the impact of adopting SFAS No. 142 on net loss
and net loss per share had the standard been in effect for the full year ended
December 29, 2001.
Year Ended
December 29,
2001
------------
Net loss as reported $(87,866)
Adjustments:
Amortization of goodwill, net of tax 4,196
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Adjusted net loss $(83,670)
========
As reported, basic and diluted loss per share $ (1.68)
Impact of amortization of goodwill, net of tax 0.08
--------
Adjusted basic and diluted net loss per share $ (1.60)
========
No reconciliations have been shown for the years ended January 1, 2000 and
December 30, 2000, as we had no goodwill recorded in our consolidated
financial statements.
We are a California corporation. Our principal offices are located at 6035
Stoneridge Drive, Pleasanton, California 94588. Our telephone number is (925)
847-8600, and our fax number is (925) 847-8574.
3
RISK FACTORS
An investment in our common stock involves a high degree of risk. You should
consider each of the risks and uncertainties described in this section and all
of the other information in this prospectus before deciding to invest in our
common stock. Our business, financial condition and results of operations could
be severely harmed by any of the following risks. The trading price of our
common stock could decline if any of these risks and uncertainties develop into
actual events. You may lose all or part of the money you paid to buy our common
stock.
WE HAVE A HISTORY OF NET LOSSES, AND WE MAY NOT ACHIEVE OR MAINTAIN
PROFITABILITY.
We were founded in 1976 and have a history of incurring losses from
operations. As of March 30, 2002, our accumulated deficit was approximately
$33.5 million. We anticipate that our expenses will increase as a result of
increased preclinical and clinical testing, research and development and
selling, general and administrative expenses. We could also incur significant
additional costs in connection with the merger and integration of the two
companies and in the development and marketing of new products and indicated
uses for our existing products. Such costs could prevent us from achieving or
maintaining profitability in future periods.
WE COULD FACE SIGNIFICANT CHALLENGES IN INTEGRATING TCA AND, AS A RESULT, MAY
NOT REALIZE THE EXPECTED BENEFITS OF THE MERGER.
Thoratec and TCA have different technologies, products and business
operations that have operated independently. The ongoing combination of these
businesses has been complex and costly. If we fail to integrate the employees
and products of both companies, or if we fail to complete the relocation of our
Woburn manufacturing operations to Pleasanton, the operating results of the
combined company could be adversely affected and we may not achieve the benefits
or operating efficiencies that we hoped to obtain from the merger.
PHYSICIANS MAY NOT ACCEPT OR CONTINUE TO ACCEPT OUR PRODUCTS AND PRODUCTS UNDER
DEVELOPMENT.
The success of our current and future products will require acceptance or
continued acceptance by cardiovascular and vascular surgeons and other medical
professionals. Such acceptance will depend on clinical results and the
conclusion by these professionals that our products are safe, cost-effective and
acceptable methods of treatment. Even if the safety and efficacy of our future
products are established, physicians may elect not to use them for a number of
reasons. These reasons could include the high cost of our VAD systems or
unfavorable reimbursement from health care payors. Also, economic,
psychological, ethical and other concerns may limit general acceptance of our
ventricular assist, graft and other products.
WE HAVE EXPERIENCED RAPID GROWTH AND CHANGES IN OUR BUSINESS, AND OUR FAILURE TO
MANAGE THIS AND ANY FUTURE GROWTH COULD HARM OUR BUSINESS.
As a result of the merger in February 2001, the number of our employees has
increased significantly, from 183 on December 30, 2000 to 692 on March 30, 2002.
We expect to continue to grow and we may suffer if we do not integrate and train
our new employees quickly and effectively. Our revenues may not continue to grow
at a rate sufficient to support the costs associated with an increasing number
of employees. Any future periods of rapid growth may place significant strains
on our managerial, financial and other resources. The rate of any future
expansion, in combination with our complex technologies and products, may demand
an unusually high level of managerial effectiveness in anticipating, planning,
coordinating and meeting our operational needs as well as the needs of our
customers.
4
IF WE FAIL TO SUCCESSFULLY INTRODUCE NEW PRODUCTS, OUR FUTURE GROWTH MAY SUFFER.
As part of our growth strategy, we intend to develop and introduce a number
of new products and product improvements. We also intend to develop new
indications for our existing products. If we do not introduce these new
products, product improvements and new indications on a timely basis, or if they
are not well accepted by the market, our future growth may suffer.
AMORTIZATION OF OUR INTANGIBLE ASSETS, WHICH REPRESENTS A SIGNIFICANT PORTION OF
OUR TOTAL ASSETS, WILL ADVERSELY IMPACT OUR NET INCOME AND WE MAY NEVER REALIZE
THE FULL VALUE OF OUR INTANGIBLE ASSETS.
As of March 30, 2002, we had $289.8 million of net intangible assets,
representing 60% of our total assets and 75% of our shareholders' equity. These
intangible assets consist primarily of goodwill and other intangible assets
arising from our merger and our trademarks and patented technology. Amortization
expense relating to these intangible assets for 2001 was $15.7 million. Of this
amount, $4.4 million represented amortization of goodwill, which is no longer
amortized after we adopted Statement of Financial Accounting Standards No. 142
at the beginning of 2002. Ongoing amortization of purchased intangibles will
reduce our future earnings or increase our future losses.
We may not receive the recorded value for our intangible assets if we sell
or liquidate our business or assets. The material concentration of intangible
assets increases the risk of a large charge to earnings in the event that the
recoverability of these intangible assets is impaired, and in the event of such
a charge to earnings, the market price of our common stock could be adversely
affected.
WE RELY ON SPECIALIZED SUPPLIERS AND ALTERNATIVE SUPPLIERS MAY NOT BE AVAILABLE.
We depend on a number of custom-designed components and materials supplied
by other companies including, in some cases, single source suppliers for
components and materials used in our VAD systems. We do not have long-term
written agreements with most of our vendors and receive components on a purchase
order basis. For example, Arrow International Inc., with whom we have no
long-term written contract, is the only supplier of the mechanical valves for
the Thoratec VADs and an alternative supplier may not be available. Sales of our
Thoratec VAD system accounted for approximately 29% of our revenues for 2001 and
31% of our revenues for the first three months of 2002. If we need alternative
sources for key raw materials or component parts for any reason, such
alternative sources may not be available and our inventory may not be sufficient
to fill orders before we find alternative suppliers or begin manufacturing such
components or materials ourselves. Cessation or interruption of sales of
circulatory support products would seriously harm our business, financial
condition and results of operations.
Alternative suppliers, if available, may not agree to supply us. In
addition, we may need to obtain FDA approval before using new suppliers or
manufacturing our own components or materials. Existing suppliers could also be
subject to an FDA enforcement action, which could also disrupt our supplies. If
alternative suppliers are not available, we may not have the expertise or
resources necessary to produce such materials or component parts internally. Any
interruption in supply of materials or component parts could seriously harm our
ability to manufacture products until we locate a new supply source.
IF WE FAIL TO COMPETE SUCCESSFULLY AGAINST OUR EXISTING OR POTENTIAL
COMPETITORS, OUR REVENUES OR OPERATING RESULTS MAY BE HARMED.
Competition from medical device companies and medical device subsidiaries of
health care and pharmaceutical companies is intense and is expected to increase.
Competitors for the VAD system include, for example, World Heart Corporation and
ABIOMED, Inc. Principal competitors in the vascular graft market include W.L.
Gore, Inc., C.R. Bard and Boston Scientific Corporation. The principal
5
competitors in the coagulation monitoring equipment market are the Hemotec
division of Medtronic, Inc. and Roche Holding AG. The primary competitors in the
skin incision device market are Organon Teknika B.V.; Becton, Dickson and
Company; and Owen-Mumford Ltd.
Many of our competitors have substantially greater financial, technical,
distribution, marketing and manufacturing resources than we do. Accordingly, our
competitors may be able to develop, manufacture and market products more
efficiently and at a lower cost than we can. We expect that the key competitive
factors will include the relative speeds with which we can:
- develop products;
- complete clinical testing;
- receive regulatory approvals; and
- manufacture and sell commercial quantities of products.
Additionally, our competitors may succeed in developing and marketing
technologies and products that are more effective than ours. Any such products
may render our technology and products obsolete or noncompetitive. In addition,
new surgical procedures and medications could be developed that replace or
reduce the importance of current procedures that use our products.
IF WE FAIL TO OBTAIN APPROVAL FROM THE FDA AND FROM FOREIGN REGULATORY
AUTHORITIES, WE CANNOT MARKET AND SELL OUR PRODUCTS UNDER DEVELOPMENT IN THE
UNITED STATES AND IN OTHER COUNTRIES.
Before we can market new products in the United States, we must obtain
clearance from the FDA. This process is lengthy and uncertain. In the United
States, one must obtain clearance from the FDA of a 510(k) premarket
notification or approval of a more extensive submission known as a PMA
application. If the FDA concludes that any of our products do not meet the
requirements to obtain clearance under Section 510(k) of the Federal Food, Drug,
and Cosmetic Act, then we would be required to file a PMA application. The
process for a PMA application is lengthy, expensive and typically requires
extensive preclinical and clinical trial data. Preclinical data may need to be
obtained in accordance with FDA good laboratory practices.
We may not obtain clearance of a 510(k) notification or approval of a PMA
application with respect to any of our products on a timely basis, if at all. If
we fail to obtain timely clearance or approval for our products, we will not be
able to market and sell our products, harming our ability to generate revenue.
The FDA may also limit the claims that we can make about our products. We may
also be required to obtain clearance of a 510(k) notification or PMA Supplement
from the FDA before we can market products that have been cleared that we have
now modified or for which we wish to use for new indications.
The FDA also requires us to adhere to current Good Manufacturing Practices,
or cGMP, regulations, which include production design controls, testing, quality
control, storage and documentation procedures. The FDA may at any time inspect
our facilities to determine whether we have adequate compliance. Compliance with
cGMP regulations for medical devices is difficult and costly. In addition, we
may not be found to be compliant as a result of future changes in, or
interpretations of, regulations by the FDA or other regulatory agencies. If we
do not achieve compliance, the FDA may withdraw marketing clearance, require
product recall or take other enforcement action, which in each case would harm
our business. Any change or modification in a device is required to be made in
compliance with cGMP regulations, which
6
may cause interruptions or delays in the marketing and sale of our products. The
FDA also requires device manufacturers to submit reports regarding deaths,
serious injuries and certain malfunctions.
Sales of our products outside the United States are subject to foreign
regulatory requirements that vary from country to country. The time required to
obtain approvals from foreign countries may be longer or shorter than that
required for FDA approval, and requirements for foreign licensing may differ
from FDA requirements.
The federal, state and foreign laws and regulations regarding the
manufacture and sale of our products are subject to future changes, as are
administrative interpretations and policies of regulatory agencies. If we fail
to comply with applicable federal, state or foreign laws or regulations, we
could be subject to enforcement actions. Enforcement actions could include
product seizures, recalls, withdrawal of clearances or approvals, and civil and
criminal penalties, which in each case would harm our business.
WE MAY ENCOUNTER PROBLEMS MANUFACTURING OUR PRODUCTS.
We may encounter difficulties manufacturing our products. We do not have
experience in manufacturing our products in the commercial quantities that might
be required if we receive FDA approval of several or all of the products and
indications currently under development. If we have difficulties manufacturing
our products, our business will be harmed.
SINCE WE DEPEND UPON DISTRIBUTORS, IF WE LOSE A DISTRIBUTOR OR A DISTRIBUTOR
FAILS TO PERFORM, OUR OPERATIONS WILL BE HARMED.
With the exception of Canada and most countries in Europe, we sell our VAD
and HeartMate systems in foreign markets through distributors. In addition, we
sell our vascular access graft products through the IMPRA division of C.R. Bard
Corporation, which we refer to as Impra, in the United States, Europe and
selected countries in Scandinavia, the Middle East and Northern Africa and
through Goodman Co. Ltd. in Japan. ITC had sales through a distributor,
Allegiance Healthcare, of approximately $13.5 million for 2001 and $3.3 million
in the first three months of 2002. Our agreement with Allegiance Healthcare
expired in June 2002. We are currently negotiating a renewal of the agreement
and are conducting business on the basis of purchase orders during the interim
period.
To the extent we rely on distributors, our success will depend upon the
efforts of others, over which we may have little control. If we lose a
distributor or a distributor fails to perform, our revenues will be harmed.
SINCE WE DEPEND ON THIRD PARTY REIMBURSEMENT TO OUR CUSTOMERS, IF THIRD PARTY
PAYORS FAIL TO PROVIDE APPROPRIATE LEVELS OF REIMBURSEMENT FOR OUR PRODUCTS, OUR
OPERATIONS WILL BE HARMED.
Significant uncertainty exists as to the reimbursement status of
newly-approved health care products such as ventricular assist devices and
vascular grafts. Government and other third party payors are increasingly
attempting to contain health care costs. Payors are attempting to contain costs
by, for example, limiting coverage and the level of reimbursement of new
therapeutic products. Payors are also attempting to contain costs by refusing,
in some cases, to provide any coverage of uses of approved products for disease
indications other than those for which the FDA has granted marketing approval.
To date, a majority of private insurers that we have dealt with, and
Medicare and Medicaid, have determined to reimburse some portion of the costs of
our ventricular assist devices and our diagnostic and vascular graft products.
We cannot, however, estimate what portion of such costs have been reimbursed and
our products may not continue to be approved for reimbursement. In addition,
changes in the health
7
care system may affect the reimbursability of future products. If we fail to
obtain such reimbursement or if the reimbursement levels are partially or
completely reduced, our revenues would be reduced.
OUR INABILITY TO PROTECT OUR PROPRIETARY TECHNOLOGIES OR AN INFRINGEMENT OF
OTHERS' PATENTS COULD HARM OUR COMPETITIVE POSITION.
We rely on patents, trade secrets, copyrights, know-how, trademarks, license
agreements and contractual provisions to establish our intellectual property
rights and protect our products. These legal means, however, afford only limited
protection and may not adequately protect our rights. In addition, we cannot
assure you that any of our pending patent applications will issue. The Patent
and Trademark Office, or the PTO, may deny or significantly narrow claims made
under patent applications and the issued patents, if any, may not provide us
with commercial protection. We could incur substantial costs in proceedings
before the PTO or in any future litigation to enforce our patents in court.
These proceedings could result in adverse decisions as to the validity and/or
enforceability of our patents. In addition, the laws of some of the countries in
which our products are or may be sold may not protect our products and
intellectual property to the same extent as U.S. laws, if at all. We may be
unable to protect our rights in trade secrets and unpatented proprietary
technology in these countries.
Aside from the biomaterials patents, which are utilized in the Thoratec VAD
blood pump and cannulae, and one patent covering aspects of our TLC-II, our VAD
systems are not protected by any patents. We rely principally on trade secret
protection and, to a lesser extent patents, to protect our rights to the
HeartMate. We rely principally on patents to protect our coagulation testing
equipment and skin incision devices.
We seek to protect our trade secrets and unpatented proprietary technology,
in part, with confidentiality agreements with our employees and consultants.
Although it is our policy to require that all employees and consultants sign
such agreements, we cannot assure you that every person who gains access to such
information has done so. Moreover, these agreements may be breached and we may
not have an adequate remedy.
Our products may be found to infringe prior or future patents owned by
others. We may need to acquire licenses under patents belonging to others for
technology potentially useful or necessary, and such licenses may not be
available to us. We could incur substantial costs in defending suits brought
against us on such patents or in bringing suits to protect our patents or
patents licensed by us against infringement.
We own or hold rights in some U.S. patents by virtue of the merger between
Thoratec and Thermo Cardiosystems. However, documents transferring ownership of
some of these patents have not yet been submitted to the PTO and, while
documents have been submitted to the PTO for others, those documents have not
yet been recorded by the PTO. Until documents transferring rights to us as a
result of the merger are recorded, our rights in the respective patents could be
subject to rights of others who purchased those rights from Thoratec or Thermo
Cardiosystems without knowledge of the merger.
In addition, we have received correspondence from another company alleging
that our HeartMate infringes certain patent rights of that company. We cannot
assure you that we will be successful if the matter is litigated.
PRODUCT LIABILITY CLAIMS COULD DAMAGE OUR REPUTATION AND HURT OUR FINANCIAL
RESULTS.
Our business exposes us to an inherent risk of potential product liability
claims related to the manufacturing, marketing and sale of human medical
devices. We maintain only a limited amount of product liability insurance. Our
insurance policies generally must be renewed on an annual basis. We may not be
able to maintain or increase such insurance on acceptable terms or at reasonable
costs, and such
8
insurance may not provide us with adequate coverage against potential
liabilities. A successful claim brought against us in excess of, or outside of,
our insurance coverage could seriously harm our financial condition and results
of operations. Claims against us, regardless of their merit or potential
outcome, may also reduce our ability to obtain physician endorsement of our
products or expand our business.
IF WE MAKE ACQUISITIONS OR DIVESTITURES, WE COULD ENCOUNTER DIFFICULTIES THAT
HARM OUR BUSINESS.
We may acquire companies, products or technologies that we believe to be
complementary to our business. If we do so, we may have difficulty integrating
the acquired personnel, operations, products or technologies. Acquisitions may
dilute our earnings per share, disrupt our ongoing business, distract our
management and employees and increase our expenses, which could harm our
business. We may also sell businesses or assets as part of our strategy or if we
receive offers from third parties. If we do so, we may sell an asset or business
for less than its full value.
THE LONG AND VARIABLE SALES AND DEPLOYMENT CYCLES FOR OUR VAD SYSTEMS MAY CAUSE
OUR REVENUE AND OPERATING RESULTS TO VARY SIGNIFICANTLY, WHICH INCREASES THE
RISK OF AN OPERATING LOSS FOR ANY GIVEN FISCAL QUARTER.
Our VAD systems have lengthy sales cycles and we may incur substantial sales
and marketing expenses and expend significant effort without making a sale. Even
after making the decision to purchase our VAD systems, our customers often
deploy our products slowly. For example, the length of time between initial
contact with cardiac surgeons and the purchase of our VAD systems is generally
between nine and eighteen months. As a result, it is difficult for us to predict
the quarter in which our customers may purchase our VAD systems and our revenue
and operating results may vary significantly from quarter to quarter, which
increases the risk of an operating loss for us for any given quarter.
OUR NON-U.S. SALES PRESENT SPECIAL RISKS.
Sales originating outside the United States and U.S. export sales accounted
for approximately 20% of our total revenues in 2001 and 16% of our total
revenues for the first three months of 2002. We anticipate that sales outside
the United States and U.S. export sales will continue to account for a
significant percentage of our revenues and we intend to continue to expand our
presence in international markets. Non-U.S. sales are subject to a number of
special risks. For example:
- We generally sell many of our products at a lower price outside the
United States;
- agreements may be difficult to enforce;
- receivables may be difficult to collect through a foreign country's
legal system;
- foreign customers may have longer payment cycles;
- foreign countries may impose additional withholding taxes or otherwise
tax our foreign income, impose tariffs or adopt other restrictions on
foreign trade;
- U.S. export licenses may be difficult to obtain;
- intellectual property may be more difficult to enforce in foreign
countries; and
- fluctuations in exchange rates may affect product demand and adversely
affect the profitability, in U.S. dollars, of products sold in foreign
markets where payments are made in local currencies.
9
Any of these events could harm our operations.
ANY CLAIMS RELATING TO IMPROPER HANDLING, STORAGE OR DISPOSAL OF HAZARDOUS
CHEMICALS AND BIOMATERIALS COULD BE TIME CONSUMING AND COSTLY.
Producing our products requires the use of hazardous materials, including
chemicals and biomaterials. We cannot eliminate the risk of accidental
contamination or discharge and any resultant injury from these materials.
We could be subject to civil damages in the event of an improper or
unauthorized release of, or exposure of individuals to, hazardous materials. In
addition, claimants may sue us for injury or contamination that results from our
use or the use by third parties of these materials, and our liability may exceed
our total assets. Compliance with environmental laws and regulations may be
expensive, and current or future environmental regulations may impair our
research, development or production efforts.
OUR STOCK PRICE HAS BEEN VOLATILE, IS LIKELY TO CONTINUE TO BE VOLATILE, AND
COULD DECLINE SUBSTANTIALLY.
The price of our common stock has been, and is likely to continue to be,
highly volatile. The price of our common stock could fluctuate significantly for
the following reasons:
- future announcements concerning us or our competitors;
- timing and reaction to the publication of clinical trial results;
- quarterly variations in operating results;
- charges, amortization and other financial effects relating to our
merger;
- introduction of new products or changes in product pricing policies by
us or our competitors;
- acquisition or loss of significant customers, distributors or suppliers;
- business acquisitions or divestitures;
- changes in earnings estimates by analysts;
- changes in third party reimbursement practices;
- regulatory developments and disclosure regarding completed ongoing or
future clinical trials; or
- fluctuations in the economy or general market conditions.
In addition, stock markets in general, and the market for shares of health
care stocks in particular, have experienced extreme price and volume
fluctuations in recent years which have frequently been unrelated to the
operating performance of the affected companies. These broad market fluctuations
may adversely affect the market price of our common stock. The market price of
our common stock could decline below its current price and the market price of
our stock may fluctuate significantly in the future. These fluctuations may be
unrelated to our performance.
In the past, shareholders have often instituted securities class action
litigation after periods of volatility in the market price of a company's
securities. If a shareholder files a securities class action suit against us, we
would incur substantial legal fees and our management's attention and resources
would be diverted from operating our business in order to respond to the
litigation.
10
FUTURE ISSUANCES AND SALES OF OUR STOCK COULD DILUTE SHAREHOLDER OWNERSHIP AND
CAUSE OUR STOCK PRICE TO DECLINE.
Future sales of substantial amounts of our stock in the public market, or
the perception that such sales could occur, could adversely affect the market
price of our stock. Sale of our shares and the potential for such sales,
including for example the shares covered by this prospectus, could cause our
stock price to decline.
THE OCCURRENCE OF A CATASTROPHIC DISASTER OR OTHER SIMILAR EVENTS COULD CAUSE
DAMAGE TO OUR FACILITIES AND EQUIPMENT, WHICH WOULD REQUIRE US TO CEASE OR
CURTAIL OPERATIONS.
We are vulnerable to damage from various types of disasters, including
earthquake, fire, flood, power loss, communications failures and similar events.
For example, in October 1989, a major earthquake that caused significant
property damage and a number of fatalities struck near the area in which our
Pleasanton facility is located. If any disaster were to occur, we may not be
able to operate our business at our facilities, which could seriously harm our
business and operations. The insurance we maintain may not be adequate to cover
our losses resulting from disasters or other business interruptions.
MANAGEMENT MAY INVEST OR SPEND THE PROCEEDS OF OUR RECENT OFFERING IN WAYS YOU
MAY NOT AGREE WITH AND IN WAYS THAT MAY NOT YIELD A RETURN.
Although we will not receive any proceeds from the sale of the shares
covered by this prospectus, our management will have broad discretion as to how
the net proceeds of our previous offering will be used. Investors will be
relying on the judgment of management regarding the application of the proceeds
of the offering. The results and effectiveness of the application of the
proceeds are uncertain.
FLUCTUATIONS IN FOREIGN CURRENCY EXCHANGE RATES COULD RESULT IN DECLINES IN OUR
REPORTED SALES AND EARNINGS.
Since our international sales are denominated primarily in local currencies
and not in U.S. dollars, our reported sales and earnings are subject to
fluctuations in foreign exchange rates. At present, we do not engage in hedging
transactions to protect against uncertainty in future exchange rates between
particular foreign currencies and the U.S. dollar.
THE COMPETITION FOR QUALIFIED PERSONNEL IS PARTICULARLY INTENSE IN OUR INDUSTRY.
IF WE ARE UNABLE TO RETAIN OR HIRE KEY PERSONNEL, WE MAY NOT BE ABLE TO SUSTAIN
OR GROW OUR BUSINESS.
Our ability to operate successfully and manage our potential future growth
depends significantly upon retaining key research, technical, sales, marketing,
managerial and financial personnel, and attracting and retaining additional
highly qualified personnel in these areas. We face intense competition for such
personnel, and we may not be able to attract and retain these individuals. We
compete with numerous companies, as well as universities and nonprofit research
organizations throughout all our locations. The loss of key personnel for any
reason or our inability to hire and retain additional qualified personnel in the
future could prevent us from sustaining or growing our business. Our success
will depend in large part on the continued services of our research, managerial
and manufacturing personnel. We cannot assure you that we will continue to be
able to attract and retain sufficient qualified personnel.
USE OF PROCEEDS
We will not receive any proceeds from the sale of up to 7,609,719 shares by
Thermo Electron.
11
DIVIDEND POLICY
We have never declared or paid cash dividends on our capital stock and do
not plan to pay any cash dividends in the foreseeable future. Our current policy
is to retain all of our earnings to finance future growth.
12
SELLING SHAREHOLDER
Other than its ownership of our securities pursuant to the following
agreements, Thermo Electron has not had any material relationship with us within
the past three years.
MERGER AGREEMENT
On October 3, 2000, we entered into an Agreement and Plan of Merger by and
among Thoratec, Lightning Acquisition Corp., our wholly owned subsidiary, TCA
and Thermo Electron. Pursuant to this agreement, each share of TCA common stock
outstanding immediately prior to the merger was converted into the right to
receive 0.835 of a share of our common stock. In the merger, we issued
32,226,074 shares of our common stock, of which 19,312,959 shares were issued to
Thermo Electron.
REGISTRATION RIGHTS AGREEMENT
The shares of our common stock issued in the merger to Thermo Electron are
subject to certain limitations on resale pursuant to Rules 144 and 145 as
promulgated under the Securities Act of 1933, or the Securities Act, and are not
freely transferable. Pursuant to a registration rights agreement, dated October
3, 2000, we have previously registered 11,703,240 of shares of common stock
issued to Thermo Electron in the merger. Pursuant to the registration statement
of which this prospectus forms a part, we are registering 7,609,719 shares of
common stock. As of July 31, 2002, Thermo Electron owned 7,685,544 shares of our
common stock.
In addition, we granted Thermo Electron piggy-back registration rights in
the event that we file a registration statement under the Securities Act.
Under the registration rights agreement, we agreed to indemnify Thermo
Electron against certain liabilities arising under the Securities Act. We are
required to reimburse Thermo Electron for certain expenses they incur in
investigating or defending against claims based upon untrue statements (or
alleged untrue statements) or omissions (or alleged omissions) of material facts
concerning us in this prospectus. In addition, we are required to indemnify
Thermo Electron against certain claims based on violations (or alleged
violations) by us of the Securities Act in connection with this registration.
SHAREHOLDER AGREEMENT
On October 3, 2000, we entered into a shareholder agreement with Thermo
Electron and TCA pursuant to which Thermo Electron has the right to be
represented on our Board of Directors and pursuant to which Thermo Electron
agreed to certain restrictions in respect of our common stock issued pursuant to
the merger agreement. For example, Thermo Electron agreed:
- not to directly or indirectly acquire voting securities of our company,
other than those issued in the merger, excluding those securities which
may be acquired by way of a dividend, stock split or recapitalization;
- not to sell, transfer, pledge or otherwise encumber the shares acquired
in the merger except under a registration statement or an exemption from
such registration;
- not to sell shares acquired in the merger prior to June 14, 2001;
- not to sell more than 25% of the shares acquired in the merger prior to
February 14, 2002;
13
- not to sell more than 50% of the shares acquired in the merger prior to
August 14, 2002;
- until the termination of the agreement, to irrevocably and
unconditionally ensure that our shares which are beneficially held by
Thermo Electron or its affiliates will be counted as present, in person
or by proxy, at any meeting of our company for the purposes of
establishing and maintaining a quorum; and
- that neither it nor any of its affiliates will deposit our shares
beneficially held by them in a voting trust or subject such shares to
any voting agreements or arrangements except in a limited circumstance.
The shareholder agreement will terminate when Thermo Electron beneficially
owns less than 5% of our voting securities.
CONVERTIBLE DEBENTURES
TCA had 4 3/4% subordinated convertible debentures, due 2004, outstanding
prior to the merger with Thoratec, which were guaranteed by Thermo Electron. In
connection with the merger, we obtained a letter of credit to guarantee Thermo
Electron's obligations on the debentures. We also entered into a collateral and
security agreement with the bank that issued the letter of credit for the pledge
of cash and short-term instruments of $45.0 million to support the letter of
credit. After the merger, the debentures became convertible into shares of
Thoratec common stock, at a conversion price of $37.62. In March 2002 we
redeemed all outstanding convertible subordinated debentures.
OTHER AGREEMENTS
During the past three years, Thermo Electron and its subsidiaries have had
several agreements with TCA, including the following:
- a fiscal agency agreement dated May 14, 1997 related to the convertible
debentures;
- agreements dated December 18, 1997 and June 1, 1999 related to cash
management and intercompany loans;
- subleases dated August 19, 1998 and April 1, 1997, as amended, related
to the lease of property used in TCA's operation; and
- agreements for the supply of components used in the HeartMate
HOLDINGS OF THE SELLING SHAREHOLDER
The following table sets forth information regarding beneficial ownership of
our common stock by Thermo Electron as of July 31, 2002 and information
regarding common stock to be sold by Thermo Electron. Because Thermo Electron
may sell some or all of the shares of common stock offered in this prospectus,
and because there are currently no agreements, arrangements or understandings
with respect to the sale of any of the shares of common stock offered by this
prospectus, we cannot provide an estimate of the actual amount of shares of
common stock that Thermo Electron will hold after completion of a distribution.
See "Plan of Distribution."
14
COMMON STOCK COMMON STOCK
BENEFICIALLY OWNED BENEFICIALLY OWNED
PRIOR TO OFFERING COMMON AFTER OFFERING(2)
----------------------- STOCK ---------------------
NUMBER PERCENT(1) TO BE SOLD NUMBER PERCENT(1)
------------- --------- ---------- ------ ----------
Thermo Electron Corporation 7,685,544(3) 14% 7,609,719 0 --
81 Wyman Street
Waltham, MA 02454
----------
(1) Applicable percentage of ownership is based on 56,542,048 shares of Common
Stock outstanding as of July 31, 2002.
(2) Assumes that Thermo Electron will sell all of the shares of common stock
offered in this prospectus and 75,825 shares of common stock registered
pursuant to a registration statement (number 333-61136), as amended, filed
with the SEC on May 17, 2001.
(3) Includes 75,825 shares of common stock registered pursuant to a registration
statement (number 333-61136), as amended, filed with the SEC on May 17,
2001.
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 100,000,000 shares of common stock,
no par value, and 2,500,000 shares of preferred stock, no par value.
COMMON STOCK
Holders of common stock are entitled to one vote per share on all matters to
be voted upon by our shareholders. Subject to the preferences that may be
applicable to any outstanding shares of preferred stock, the holders of common
stock are entitled to receive ratably such dividends, if any, as may be declared
by the Board of Directors out of funds legally available therefor. In the event
of our liquidation, dissolution or winding up, the holders of common stock are
entitled to share ratably in all assets remaining after payment of liabilities,
subject to the prior liquidation rights of any outstanding shares of preferred
stock. The holders of common stock are, and the shares offered by us in this
offering will be, when issued and paid for, fully paid and nonassessable. The
rights, preferences and privileges of holders of common stock are subject to,
and may be adversely affected by, the rights of the holders of shares of any
series of preferred stock which we may designate and issue in the future.
15
PREFERRED STOCK
The Board of Directors is authorized, without shareholder approval, to issue
up to 2,500,000 shares of preferred stock in one or more series, to fix the
rights, preferences, privileges and restrictions granted to, or imposed upon,
any unissued shares of preferred stock and to fix the number of shares
constituting any series and the designations of such series. The issuance of
preferred stock could decrease the amount of earnings and assets available for
distribution to the holders of common stock or could adversely affect the rights
and powers, including voting rights, of the holders of the common stock. In
certain circumstances, such issuance could have the effect of decreasing the
market price of the common stock. At the closing of the offering, no shares of
preferred stock will be outstanding and we currently have no plans to issue any
shares of preferred stock.
On May 2, 2002, we adopted a shareholder rights plan. Under the rights plan,
we distributed one purchase right for each share of common stock outstanding at
the close of business on May 17, 2002. If a person or group acquires 15% or more
of our common stock in a transaction not pre-approved by our Board of Directors,
each right will entitle its holder, other than the acquirer, to buy our common
stock at 50% of its market value for the right's then current exercise price
(initially $70.00). In addition, if an unapproved party acquires more than 15%
of our common stock, and our Company or our business is later acquired by the
unapproved party or in a transaction in which all shareholders are not treated
alike, shareholders with unexercised rights, other than the unapproved party,
will be entitled to purchase common stock of the merger party or asset buyer
with a value of twice the exercise price of the rights. Each right also becomes
exercisable for one one-thousandth of a share of our Series RP preferred stock
at the right's then current exercise price ten days after an unapproved third
party makes, or announces an intention to make, a tender offer or exchange offer
that, if completed, would result in the unapproved party acquiring 15% or more
of our common stock. Our Board of Directors may redeem the rights for a nominal
amount before an event that causes the rights to become exercisable. The rights
will expire on May 2, 2012.
In connection with the rights plan, we have designated 100,000 no par shares
of our preferred stock as Series RP preferred stock. These shares, if issued,
will be entitled to receive quarterly dividends and a liquidation preference.
There are no shares of Series RP preferred stock issued and outstanding and we
do not anticipate issuing any shares of Series RP preferred stock except as may
be required under the rights plan.
PROVISIONS OF ARTICLES OF INCORPORATION AFFECTING SHAREHOLDERS
The existence of the Series RP preferred stock and the existence of the
authorized but unissued preferred stock could have the effect of making it more
difficult for a third party to effect a change in the control of the Board of
Directors. This may discourage another person or entity from making a tender
offer for the common stock, including offers at a premium over the market price
of the common stock, and might result in a delay in changes in control of
management. In addition, these provisions could have the effect of making it
more difficult for proposals favored by the shareholders to be presented for
shareholder consideration.
We have also included in our Articles of Incorporation provisions to
eliminate the personal liability of our directors for monetary damages resulting
from breaches of their fiduciary duty to the extent permitted by the California
Corporations Code and to indemnify our directors and officers to the fullest
extent permitted by Section 317 of the California Corporations Code.
TRANSFER AGENT AND REGISTRAR
16
The transfer agent and registrar for our common stock is Computershare Trust
Company, Inc.
PLAN OF DISTRIBUTION
The shares of our common stock being offered in this prospectus were
originally issued to Thermo Electron in connection with the merger of
Cardiosystems with our wholly-owned subsidiary. The shares were issued to Thermo
Electron pursuant to a registration statement declared effective by the SEC. In
accordance with the registration rights agreement, we have filed a registration
statement on Form S-3 with the SEC to register the securities for resale. The
registration statement covers the resale of up to 7,609,719 shares of our common
stock from time to time on the Nasdaq National Market or in privately negotiated
transactions. In addition, the registration statement covers an indeterminate
number of additional shares of our common stock as may from time to time become
issuable as a result of any stock split, stock dividend, recapitalization,
combination, merger, consolidation, distribution or other similar transactions
with respect to such 7,609,719 shares. This prospectus forms a part of the
registration statement.
Under the registration rights agreement, Thermo Electron is entitled to
offer and sell shares of our common stock under this prospectus only at such
times as the registration statement is effective (and we have not advised Thermo
Electron to suspend trading). We have agreed to use reasonable commercial
efforts to keep the registration statement effective until the earlier of the
expiration of this registration or all shares of our common stock offered in
this prospectus have been sold.
Subject to the requirements of the registration rights agreement, the shares
of our common stock offered in this prospectus may be offered and sold from time
to time by Thermo Electron. Such offers and sales may be made from time to time
on a stock exchange, market or trading facility on which the securities are
traded or in privately negotiated transactions. These sales may be at prices and
on terms prevailing in the market, at prices related to the market price of our
common stock or at negotiated prices. Thermo Electron may use any one or more of
the following methods when selling the securities:
- ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
- block trades in which the broker-dealer will attempt to sell the shares
as agent but may position and resell a portion of the block as principal
to facilitate the transaction;
- purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
- a special offering, an exchange distribution or a secondary distribution
in accordance with the rules of the relevant exchange;
- privately negotiated transactions;
- agreements with broker-dealers to sell a specified number of such shares
at a stipulated price per share;
- purchases by one or more underwriters followed by a resale of such
shares by the underwriter or underwriters;
- sales "at the market" to or through a market maker or into an existing
trading market, on an exchange or otherwise, for such securities;
- by pledge to secure debts and other obligations;
17
- short sales;
- in hedge transactions and in settlement of other transactions;
- through the writing of options on the securities, whether or not the
options are listed on an options exchange; or
- a combination of any such methods of sale; and any other method
permitted by law.
Thermo Electron may also sell shares under Rule 144 under the Securities
Act, if available, rather than under this prospectus.
Broker-dealers engaged by Thermo Electron may arrange for other
broker-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the selling shareholder (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. Thermo Electron does not expect these commissions and discounts to
exceed what is customary in the types of transactions involved.
Thermo Electron and any broker-dealers, underwriters or agents that are
involved in selling the securities may be considered to be "underwriters" within
the meaning of the Securities Act in connection with such sales. If so, any
commissions received by such broker-dealers or agents and any profit on the
resale of the securities purchased by them may be considered to be underwriting
commissions or discounts under the Securities Act.
In order to comply with the securities laws of some states, the securities
must be offered or sold only through registered or licensed brokers or dealers.
In addition, in some states, the securities may not be offered or sold unless
they have been registered or qualified for sale in that particular state or
unless an exemption from the registration or qualification requirement is
available and is complied with.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the resale of shares may not simultaneously
engage in market making activities with respect to our common stock for a period
of two business days prior to the commencement of such distribution. In
addition, the selling shareholder will be subject to applicable provisions of
the Exchange Act, and the rules and regulations thereunder, including, without
limitation, Regulation M, which provisions may limit the timing of purchases and
sales of shares of our common stock by Thermo Electron.
Thermo Electron will pay all commissions, transfer taxes, and certain other
expenses associated with the sale of securities by it. Under the terms of the
Registration Rights Agreement, we paid the expenses of the preparation of this
prospectus and will also bear the expense of maintaining the effectiveness of
the registration statement of which this prospectus forms a part.
LEGAL MATTERS
Heller Ehrman White & McAuliffe LLP, Menlo Park, California will pass on the
validity of the common stock offered by this prospectus for us.
18
EXPERTS
The consolidated financial statements of Thoratec Corporation incorporated
in this prospectus, by reference from the annual report on Form 10-K of
Thoratec for the year ended December 29, 2001, have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and have been so incorporated in reliance
upon the report of such firm given upon their authority as experts in
accounting and auditing.
After reasonable effort, we were unable to obtain the consent of Arthur
Andersen LLP, independent auditors to Thoratec Corporation (formerly Thermo
Cardiosystems, Inc., a Massachusetts corporation and 60% owned subsidiary of
Thermo Electron Corporation), for the incorporation by reference of its report
for the year ended December 30, 2000 dated February 5, 2001 included in our
Annual Report on Form 10-K for the year ended December 29, 2001, as filed on
March 15, 2002. We have dispensed with the requirement to file Arthur Andersen
LLP's consent in reliance on Rule 437(a) promulgated under the Securities Act.
Because Arthur Andersen LLP has not consented to the incorporation by reference
of their report in this registration statement, you will not be able to recover
against Arthur Andersen LLP under Section 11 of the Securities Act for any
untrue statements of a material fact contained in the financial statements
audited by Arthur Andersen LLP incorporated by reference herein or any
omissions to state a material fact required to be stated therein.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference room at 450 Fifth Street, NW, Washington, D.C., 20549,
and at the SEC's public reference rooms in Chicago, Illinois and New York, New
York. Please call the SEC at 1-800-SEC-0330 for further information concerning
the public reference rooms. Our SEC filings are also available to the public on
the SEC's Website at HTTP://WWW.SEC.GOV.
We have filed with the SEC a registration statement on Form S-3 under the
Securities Act of 1933 with respect to the common stock offered in connection
with this prospectus. This prospectus does not contain all of the information
set forth in the registration statement. We have omitted certain parts of the
registration statement in accordance with the rules and regulations of the SEC.
For further information with respect to us and the common stock, you should
refer to the registration statement. Statements contained in this prospectus as
to the contents of any contract or other document are not necessarily complete
and, in each instance, you should refer to the copy of such contract or document
filed as an exhibit to or incorporated by reference in the registration
statement. Each statement as to the contents of such contract or document is
qualified in all respects by such reference. You may obtain copies of the
registration statement from the SEC's principal office in Washington, D.C. upon
payment of the fees prescribed by the SEC, or you may examine the registration
statement without charge at the offices of the SEC described above.
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. The information incorporated by reference is considered
to be part of this prospectus, and information that we file later with the SEC
will automatically update and supersede this information. We incorporate by
reference the documents listed below and any future filings we will make with
the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
of 1934.
(1) Annual Report on Form 10-K for the fiscal year ended December 29, 2001;
(2) Quarterly Report on Form 10-Q for the fiscal quarter ended March 30,
2002;
19
(3) The description of our Rights Agreement and Preferred Stock Purchase
Rights contained in our registration statement on Form 8-A, filed May 3,
2002, including any amendment or reports filed for the purpose of
updating that description.
You may request a copy of these filings at no cost, by writing or
telephoning at the following address:
Thoratec Corporation
Investor Relations
6035 Stoneridge Drive
Pleasanton, California 94588
(925) 847-8600
20
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
SEC Registration Fee ........................................ $ 4,817
NASD Filing Fee ............................................. 0
Nasdaq National Market Listing Fee .......................... 0
Transfer Agent and Registrant Fees .......................... 5,000
Accounting Fees and Expenses ................................ 15,000
Legal Fees and Expenses ..................................... 20,000
Printing and Engraving ...................................... 5,000
Miscellaneous ............................................... 5,000
-------
TOTAL ............................................... $54,817
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our articles of incorporation provides that, to the fullest extent permitted
by California law, none of our directors shall be personally liable to us or our
shareholders for monetary damages for breach of fiduciary duty as a director,
notwithstanding any other provision of law. However, a director shall be liable
to the extent required by law (i) for any breach of the director's duty of
loyalty to us or our shareholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii) in
respect of certain unlawful dividend payments or stock redemptions or
repurchases, or (iv) for any transaction from which the director derived an
improper personal benefit.
We entered into indemnification agreements with each of our directors and
anticipate that we will enter into similar agreements with any future director.
Generally, these agreements attempt to provide the maximum protection permitted
by California law with respect to indemnification. The indemnification
agreements provide that we will pay certain amounts incurred by a director in
connection with any civil or criminal action or proceeding, specifically
including actions by us or in our name (derivative suits) where the individual's
involvement is by reason of the fact that he is or was a director or officer.
For directors, such amounts include, to the maximum extent permitted by law,
attorney's fees, judgments, civil or criminal fines, settlement amounts and
other expenses customarily incurred in connection with legal proceedings. Under
the indemnification agreements, a director will not receive indemnification if
the director is found not to have acted in good faith and in a manner he
reasonably believed to be in or not opposed to our best interests. We have also
entered into similar agreements with certain of our officers and top management
personnel who are not also directors. Generally, the indemnification agreements
attempt to provide the maximum protection permitted by California law with
respect to indemnification of directors and officers.
The effect of these provisions would be to permit such indemnification by us
for liabilities arising under the Securities Act of 1933, as amended.
II-1
ITEM 16. EXHIBITS
(a). Exhibits and Index of Exhibits
EXHIBIT
NUMBER EXHIBIT
-------- -------
5.1 Opinion of Heller Ehrman White & McAuliffe LLP
23.1* Independent Auditors' Consent
23.2 Consent of Heller Ehrman White & McAuliffe LLP (contained in exhibit 5.1).
24 Power of Attorney -- Reference is made to page II-5 hereof.
----------
* After reasonable effort, we were unable to obtain the consent of Arthur
Andersen LLP, independent auditors to Thoratec Corporation (formerly Thermo
Cardiosystems, Inc., a Massachusetts corporation and 60% owned subsidiary of
Thermo Electron Corporation), for the incorporation by reference of its
report for the year ended December 30, 2000 dated February 5, 2001 included
in our Annual Report on Form 10-K for the year ended December 29, 2001, as
filed on March 15, 2002. We have dispensed with the requirement to file
Arthur Andersen LLP's consent in reliance on Rule 437(a) promulgated under
the Securities Act. Because Arthur Andersen LLP has not consented to the
incorporation by reference of their report in this registration statement,
you will not be able to recover against Arthur Andersen LLP under Section
11 of the Securities Act for any untrue statements of a material fact
contained in the financial statements audited by Arthur Andersen LLP
incorporated by reference herein or any omissions to state a material fact
required to be stated therein.
II-2
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement;
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement;
(iii) 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;
Provided, however, that paragraphs (i) and (ii) shall not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
section 13 or section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) 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.
(3) 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.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 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.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, 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 the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, 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 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.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under
II-3
the Securities Act shall be deemed to be part of this registration statement as
of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus 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-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has grounds to believe that it meets all of the requirements
for filing on Form 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 Pleasanton, State of California, on August 7, 2002.
Thoratec Corporation
By: /s/ D. Keith Grossman
-----------------------------------
D. Keith Grossman
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints D. Keith Grossman and M. Wayne Boylston, and each
of them, his true and lawful attorney-in-fact, with full power of substitution
and resubstitution, to act for him and in his name, place and stead, in any and
all capacities to sign any and all pre- or post-effective amendments to this
registration statement, any subsequent registration statement for the same
offering which may be filed under Rule 462(b) under the Securities Act (a "Rule
462(b) registration statement") and any and all pre- or post-effective
amendments thereto, and to file the same, with all exhibits thereto, and all
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing which they, or any
of them, may deem necessary or advisable to be done in connection with this
registration statement or any Rule 462(b) registration statement, as fully to
all intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or any
substitute or substitutes for any or all of them, may lawfully 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/ D. Keith Grossman Chief Executive Officer, August 7, 2002
---------------------------------- President and Director
D. Keith Grossman
/s/ Howard E. Chase Director August 7, 2002
----------------------------------
Howard E. Chase
II-5
/s/ J. Daniel Cole Director August 7, 2002
----------------------------------
J. Daniel Cole
/s/ J. Donald Hill Director and Chairman of August 7, 2002
---------------------------------- the Board of Directors
J. Donald Hill
/s/ William M. Hitchcock Director August 7, 2002
----------------------------------
William M. Hitchcock
/s/ George W. Holbrook, Jr. Director August 7, 2002
----------------------------------
George W. Holbrook, Jr.
/s/ Theo Melas-Kyriazi Director August 7, 2002
----------------------------------
Theo Melas-Kyriazi
/s/ Daniel M. Mulvena Director August 7, 2002
----------------------------------
Daniel M. Mulvena
/s/ M. Wayne Boylston Senior Vice President, Chief August 7, 2002
---------------------------------- Financial Officer and Secretary
M. Wayne Boylston (Principal Financial and
Accounting Officer)
II-6