VSI M DT00129936
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`Page 1
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`IPR2020-00126/-127/-128/-129/-130/-132/-134/-135/-136/-137/-138
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`Medtronic Ex.1777
`Medtronic v. Teleflex
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`

`

`Vascular Solutions is a medical device company that focuses on delivering unique clinical
`solutions within interventional cardiology and interventional radiology. As a vertically integrated
`medical device company, we generate ideas and create new interventional medical devices, and
`then we deliver those products directly to the physician through our direct domestic sales force
`and international distribution network.
`
`Our focus on underserved clinical opportunities and rapid development has resulted in an
`expanding product portfolio. More than 89 percent of Vascular Solutions' 2006 net sales came
`from new products introduced since 2003. Our product lines include:
`
`HEMOSTAT PRODUCTS
`
`D-Stat® Dry Hemostatic Bandage
`
`The D-Stat Dry is a powerful hemostatic bandage used following
`catheterization procedures to solve topical bleeding following the
`removal of catheters and tubes. D-Stat Dry provides the science and
`proven clotting power of thrombin. Clinical results show that compared
`to standard manual compression, D-Stat Dry can reduce the median
`time to hemostasis by as much as 50 percent.
`
`D-Stat® Flowable Hemostat
`
`The D-Stat Flowable hemostat utilizes the clinically proven procoagulant
`components of collagen, thrombin and a buffered diluent to provide a
`powerful stop to active bleeding. The thick, yet flowable procoagulant
`controls bleeding by initiating the body's own clotting mechanisms,
`particularly in prepectoral pockets created in pacemaker and
`defibrillator implants.
`
`ThrombiGel® Foam Hemostat
`
`The ThrombiGel is a unique gelatin/thrombin foam hemostat that
`combines a gelatin sponge and thrombin in a single composite pad. The
`ThrombiGel is available in multiple sizes to meet physician preferences.
`
`D-Stat® Radial Hemostat Band
`
`The D-Stat Radial hemostat band utilizes a compression band together
`with the active hemostatic material of our D-Stat Dry to control
`surface bleeding. The D-Stat Radial is designed to eliminate occlusive
`compression of the radial artery and to prevent compression of the
`ulnar artery following radial artery catheterization procedures.
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`VSI M DT00129937
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`EXTRACTION CATHETERS
`
`Pronto V3 Aspiration Catheter
`
`The Pronto V3 aspiration catheter is used to remove soft thrombus from
`coronary and peripheral arteries. Its large extraction lumen, fully braided
`shaft, protective tip and hydrophilic coating allow for ease of delivery
`and enhanced performance.
`
`SPECIALTY CATHETERS
`Langston® Dual Lumen Catheters
`
`The Langston dual lumen catheters are used for measurement of
`intra-arterial pressure gradients. The Langston catheters deliver
`simultaneous pressure measurements accurately and precisely through
`two independent lumens in a coaxial design. There are three Langston
`configurations—Pigtail, Multipurpose A2 and Straight Selective—for a
`variety of procedural needs.
`
`Twin-Pass® and Skyway® Specialty Catheters
`
`The Twin-Pass dual access catheters provide two lumens for delivering
`a second guidewire, medication or contrast without having to remove
`the original guidewire. The Skyway support catheters offer guidewire
`support and exchange for complex interventions.
`
`VEIN PRODUCTS
`Vari-Lase® Endovenous Laser Therapy
`
`The Vari-Lase endovenous laser products are designed as a complete
`vein care program for the treatment of varicose veins. Endovenous laser
`therapy is a patient-friendly alternative to surgical vein stripping that can
`be performed in a physician's office in less than an hour.
`
`ACCESS PRODUCTS
`Micro-Introducers and Guidewires
`
`Our extensive line of Micro-Introducer Kits offers superior design
`and convenient packaging in a full range of sizes and configurations.
`Features include smoothly tapered tips and easy-twist locking
`hubs. Available with nitinol or stainless steel mandrels and platinum
`or stainless steel tips, our Specialty Guidewires meet physician
`requirements for clinical niches.
`
`cr
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`Vascular
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`VSI M DT00129938
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`Last year on the day I wrote my letter to you our stock
`price closed at $6.59, a new 52-week low and a 32%
`decrease from where it was the year before. I wrote at
`the conclusion of last year's letter that I believed that
`if we simply continued with the progress we made
`in 2005 our stock price would correct itself in 2006.
`
`Today our stock price closed at $10.03, a 52%
`increase over last year. I'm pleased with that
`improvement, but I'm not satisfied that Vascular
`Solutions has reached its full potential. The
`substantial progress we made in 2006 and the
`plans we have for the next few years make it a very
`exciting time to be part of Vascular Solutions.
`
`In 2006 we increased our net sales by 32% to continue
`our string of 12 consecutive quarters of record sales.
`We also continued our string of eight consecutive
`quarters with a net profit before accounting for
`expenses incurred in our new thrombin qualification
`project and non-cash stock compensation. We
`received approvals for new products and approvals
`for new indications of existing products in 2006,
`and we continued to establish the foundation
`for substantial sales growth each quarter for the
`foreseeable future. On top of our progress in 2006,
`in just the first month of 2007 we've already received
`FDA clearance for two new products and entered
`into a substantial new strategic relationship with
`King Pharmaceuticals that provides security for our
`hemostat products, strengthens our balance sheet and
`provides substantial additional sales growth potential.
`
`As a review, Vascular Solutions' mission is to grow
`a profitable medical device business focused on
`delivering clinically unique solutions for vascular
`conditions. While the large companies in our
`vascular device market concentrate on billion-dollar
`opportunities like drug-eluding stents, Vascular
`Solutions focuses on the smaller opportunities
`that are often ignored. These opportunities are
`far more numerous and quicker to develop than
`the larger opportunities. Using our internal R&D
`team and our clinical-based direct sales force, we
`can rapidly bring these new devices to market
`and then deliver the sales and clinical results
`
`through our direct sales force in the United States
`and Germany, and through our independent
`distributor network in other international markets.
`
`In 2006 our hemostat products continued to be
`our top-selling product line, with $21,709,000 in
`net sales—a 9% increase over 2005. Our hemostat
`products include topical bandages such as the D-
`Stat Dry, trauma bandages such as the Thrombix,
`gel hemostats such as the D-Stat Flowable and foam
`pad hemostats such as the ThrombiGel. Our main
`product in this category is the D-Stat Dry bandage,
`which we launched in September 2003 as a simple
`solution to topical bleeding following catheterization
`procedures. In 2006 we documented the D-Stat
`Dry's ability to reduce the time to hemostasis
`following diagnostic catheterizations, with a 50%
`median reduction demonstrated in a multi-center
`randomized clinical study that is unmatched
`by our non-thrombin—based competition.
`
`Because of the importance of our hemostat products
`to our overall sales and the importance of thrombin
`as a component in our hemostat products, we spent
`considerable time and money in 2006 to obtain
`assurances of a cost-effective thrombin supply
`arrangement. In January 2007 we achieved our
`desired result through a new strategic relationship
`with King Pharmaceuticals. From a business
`standpoint, there are essentially three components
`to our new relationship with King. First, King will
`exclusively sell through its direct sales force (and we
`will continue to manufacture) our Thrombix trauma
`bandage, ThrombiGel hemostat and in-development
`ThrombiGel Paste hemostat products. Second, Vascular
`Solutions will work with King to develop additional
`hemostat products, with these future products sold
`outside of our direct sales force's call point of cardiac,
`peripheral and electrophysiology labs to be sold by
`King's direct sales force. And third, King will sell its
`Thrombin-JMI® to us for use as a component in the
`manufacture of our cath lab hemostat products under
`a 10-year, fixed-price arrangement that is 25% below
`our prior contract's price. In the long term, we project
`that our sales of these hemostat products to King
`could reach more than $15 million in sales in 2010.
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`VSI M DT00129939
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`Our second largest product line in 2006 was our
`extraction catheters—primarily the Pronto V3
`aspiration catheter, which is used to extract soft
`thrombus from within blood vessels. Net sales of
`extraction catheters totaled $9,058,000 in 2006, a 42%
`increase over 2005. During 2006 we continued our
`promotion of clinical case studies and publications on
`the use of the Pronto in removing soft thrombus. We
`also fully launched the third version of the catheter,
`Pronto V3, with excellent customer reaction. In 2007
`we expect to launch three new versions of aspiration
`catheters that address clinical needs for larger, smaller
`and less expensive aspiration catheters, respectively,
`with substantial additional sales growth expected.
`
`Our third major product line for 2006 was our vein
`products, primarily the Vari-Lase endovenous laser
`therapy products for treating varicose veins. Net
`sales of vein products in 2006 were $7,049,000, a
`62% increase over 2005. Our market data indicates
`that the endovenous laser procedure, a simple
`one-hour outpatient procedure, has become the
`most performed treatment for varicose veins in the
`United States. Vascular Solutions' clinical-based
`sales force has gained significant ground in the vein
`products market, which we believe we can advance
`even further in 2007. While two of our competitors
`have turned to intellectual property litigation in
`an attempt to block our growth, we are confident
`in our legal strategy and believe our Vari-Lase
`sales growth will continue unabated in 2007.
`
`Our specialty catheter product line includes the
`Langston, Twin-Pass and Skyway catheters, a category
`that we grew by 202% to $3,126,000 in net sales
`in 2006. Both the Twin-Pass and Skyway catheters
`were launched in 2006, with market feedback from
`the initial launch of the Twin-Pass resulting in a new
`023 version that was conceived, developed, tested
`and submitted in 2006, and then FDA-cleared in
`January 2007. Most of our ideas for products in
`the specialty catheter line come from physicians
`who request that the larger companies generally
`will not develop. Our growth in specialty catheters
`is a clear validation of our business strategy.
`
`Finally, net sales of our access products increased
`by 140% to $1,604,000 in 2006. While access
`products is a less prominent product line, it has the
`benefit of a nicely recurring revenue stream that is
`beginning to result in material sales. In January 2007
`we launched our most recent access product, the
`InnerChange micro-introducer catheter, and continued
`development of several additional proprietary
`access products that we expect to launch in 2007.
`
`Looking into 2007, we believe that we will continue
`to set new quarterly sales records each quarter
`throughout the year. For 2007 we expect to reach
`between $52 million and $54 million in net sales.
`New product launches should once again provide a
`substantial upside, with the Gopher and GuideLiner
`specialty catheters leading five new product launches
`planned for the year. Looking even farther out,
`we believe that we can continue to increase our
`sales each year until we reach our next long-term
`milestone—$100 million in annual sales in 2010.
`
`To conclude, and just as I said last year, I believe that
`if we simply continue with the progress we made
`in 2006, our stock price will continue to improve
`in 2007 and reflect the true potential of Vascular
`Solutions. 2006 was the completion of Vascular
`Solutions' first decade, and 2007 is looking like
`the start of a very promising second decade.
`
`As always, we thank you for your continued support of
`our business.
`
`Very truly yours,
`
`Howard Root
`Chief Executive Officer
`
`January 23, 2007
`
`Vascular
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`VSI M DT00129940
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`Page 5
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`Statements of Operations Data
`(in thousands)
`
`Year Ended December 31,
`
`Net sales
`
`Gross profit
`
`Gross profit %
`
`2006
`
`$43,310
`
`$29,079
`
`67.1%
`
`2005
`
`$32,786
`
`$23,400
`
`71.4%
`
`Total operating expenses
`
`$30,758
`
`$24,124
`
`Operating loss
`
`Net loss
`
`($1,679)
`
`($1,786)
`
`($724)
`
`($561)
`
`2004
`
`$22,414
`
`$15,657
`
`69.9%
`
`$19,233
`
`($3,576)
`
`2003
`
`2002
`
`$11,862
`
`$12,154
`
`$7,234
`
`61.0%
`
`$7,115
`
`58.5%
`
`$17,012
`
`$22,601
`
`($9,778)
`
`($15,486)
`
`($3,508)
`
`($9,628)
`
`($14,979)
`
`Balance Sheet Data
`(in thousands)
`
`Cash and cash equivalents
`
`Working capital
`
`Long-term debt
`
`Shareholder's equity
`
`Total shares outstanding
`
`Quarterly Net Sales
`(in thousands)
`
`December 31,
`
`2006
`
`$2,557
`
`$11,473
`
`$1,667
`
`$14,467
`
`15,141
`
`2005
`
`$4,282
`
`$10,887
`
`$0
`
`$14,107
`
`14,642
`
`$10,911 $
`
`< $9,
`
`$8,574 $8,8
`
` 9
`
`274
`
`$6,706
`
`$5 ~~
`
`$4,459 1111
`
`Q1
`
`Q2 Q3 Q4
`
`Q1
`
`$8 ,079 . lIPI I
`
`Q2 Q3 Q4
`
`Q1
`
`2004
`
`2005
`
`2006
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`VS I M DT00129941
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`UNITED STATES SECURITIES AND EXCHANGE COMMISSION
`WASHINGTON, D.C. 20549
`
`(Mark One)
`[ X I
`
`ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
`SECURITIES EXCHANGE ACT OF 1934
`
`FORM 10-K
`
`[
`
`]
`
`For the fiscal year ended December 31, 2006
`OR
`TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
`THE SECURITIES EXCHANGE ACT OF 1934
`For the transition period from
`to
`
`Commission file number: 0-27605
`
`VASCULAR SOLUTIONS, INC.
`(Exact name of registrant as specified in its charter)
`
`Minnesota
`(State or other jurisdiction of incorporation or organization)
`
`41-1859679
`(IRS Employer Identification No.)
`
`6464 Sycamore Court
`Minneapolis, Minnesota 55369
`(Address of principal executive offices, including zip code)
`
`(763) 656-4300
`(Registrant's telephone number, including area code)
`
`Securities registered pursuant to Section 12(b) of the Act:
`Title of each class:
`Name of each exchange on which registered:
`Common Stock, par value $.01 per share
`The NASDAQ Global Market
`Securities registered pursuant to Section 12(g) of the Act: None
`
`Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes I
`
`I No IXI
`
`Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]
`
`Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
`Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
`and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ]
`
`Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not
`be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III
`of this Form 10-K or any amendment to this Form 10-K. I X I
`
`Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition
`of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one):
`Large accelerated filer I
`I
`Accelerated filer IXI
`
`Non-accelerated filer I
`
`I
`
`Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes I
`
`I No IXI
`
`The aggregate market value of voting and non-voting common equity held by non-affiliates computed by reference to the price at
`which the common equity was last sold on June 30, 2006 was $115,374,594.
`
`As of January 26, 2007, the number of shares outstanding of the registrant's common stock was 15,170,931
`
`DOCUMENTS INCORPORATED BY REFERENCE
`
`Portions of the Registrant's Proxy Statement for its 2007 Annual Meeting of Shareholders to be held on April 24, 2007 are
`incorporated by reference in Part III of this Annual Report on Form 10-K.
`
`VSI M DT00129942
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`PART I
`
`ITEM 1. BUSINESS
`
`Overview
`
`Vascular Solutions, Inc. (we, us or Vascular) is a medical device company focused on bringing clinically
`advanced solutions to interventional cardiologists and interventional radiologists worldwide. We were
`incorporated in the state of Minnesota in December 1996, and we began operations in February 1997. Our
`main product lines consist of the following:
`
`• Hemostat (blood clotting) products, principally consisting of the D-Stat DryTM hemostat, a topical
`thrombin-based pad with a bandage used to control surface bleeding, and the D-Stat® Flowable, a
`thick yet flowable thrombin-based mixture for preventing bleeding in subcutaneous pockets,
`• Extraction catheters, principally consisting of the ProntoTM extraction catheter, a mechanical system
`for the removal of soft thrombus from arteries,
`• Vein products, principally consisting of the Vari-Lase® endovenous laser, a laser and procedure kit
`used for the treatment of varicose veins,
`• Specialty catheters, consisting of a variety of catheters for clinical niches including the Langston®
`dual lumen catheters, Twin-Pass® dual access catheter and Skyway® support catheters, and
`• Access products, principally consisting of micro-introducers and guidewires used to gain
`percutaneous access to the vasculature.
`
`In 2000 we received FDA clearance for our first product, the DuettTM sealing device, which is used to seal
`the puncture site following catheterization procedures. In 2001, due to competitive developments in the
`sealing device market, we made the strategic decision to develop additional products and de-emphasize the
`promotion of our Duett sealing device. We have grown from net sales of $6.2 million in 2000 solely from the
`Duett device to net sales of $43.3 million in 2006, with 95% of our 2006 net sales coming from products other
`than the Duett device. This increase in revenue represents a compound annual growth rate of 32% and was
`driven by our commitment to the research and development of multiple new devices to diagnose and treat
`existing and new vascular conditions.
`
`As a vertically-integrated medical device company, we generate ideas and create new interventional
`medical devices and then deliver these products directly to the physician through our direct domestic sales
`force and our international distribution network. We currently have in development several additional
`products that leverage our existing infrastructure to bring additional solutions to the interventional
`cardiologist and interventional radiologist. Additional products that we expect to gain regulatory clearance
`and market launch in the United States within the next 12 months include the following medical devices, each
`of which we believe addresses an annual market opportunity of between $1 million and $20 million:
`
`InnerChangeTM micro-introducer catheter, a series of catheters that combines both a diagnostic
`catheter and a micro-introducer into a single product kit,
`GopherTM catheter, a low profile metal catheter designed to be used principally in chronic total
`occlusion cases to provide improved passage through occlusions, and
`GuideLinerTM catheter, a specialty-purpose catheter designed to provide back-up support to the guide
`catheter in difficult coronary procedures.
`
`When we develop versions of our products that have application outside of the interventional cardiology
`and interventional radiology markets where our direct sales force focuses, we attempt to enter into a strategic
`relationship with a distribution partner. Our current products and products in development that fit into this
`category consist of the following:
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`VSI M DT00129943
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`• ThrombiGel® hemostat, a thrombin impregnated gelatin foam pad designed for use in controlling
`surgical bleeding,
`• ThrombiGel Paste hemostat (in development), a thick suspension of gelatin, thrombin and water
`designed for use in controlling surgical bleeding, and
`• Thrombix® 3x3 trauma bandage, a thrombin-based bandage designed for use in trauma indications.
`
`In January 2007 King Pharmaceuticals, Inc. (King) acquired the worldwide license to the ThrombiGel,
`ThrombiGel Paste and Thrombix devices for use outside of the catheterization markets for an initial cash
`payment of $6 million and an additional $1 million milestone payment due upon the first commercial sale of
`ThrombiGel or Thrombix, and a second $1 million milestone payment upon the first commercial sale of
`ThrombiGel Paste. We agreed to manufacture the ThrombiGel and Thrombix devices for King, and King
`agreed to sell us thrombin used in all of our hemostatic products under ten year device and thrombin supply
`agreements that expire in 2017.
`
`Interventional Cardiology and Interventional Radiology Industry Background
`
`Over 60 million Americans have one or more types of cardiovascular disease—diseases of the heart and
`blood vessels. Cardiovascular disease is the number one cause of death in the United States and is replacing
`infectious disease as the world's pre-eminent health risk. Advances in medicine have enabled physicians to
`perform an increasing number of diagnostic and therapeutic treatments of cardiovascular disease using
`minimally invasive methods, such as catheters placed inside the arteries, instead of highly invasive open
`surgery. Cardiologists and radiologists use diagnostic procedures, such as angiography, to confirm, and
`interventional procedures, such as angioplasty and stenting, to treat diseases of the coronary and peripheral
`arteries. Based on industry statistics, we estimate that cardiologists and radiologists performed over nine
`million diagnostic and interventional catheterization procedures worldwide in 2006. Often times, these
`procedures are performed to remove blood clots or plaque which have been generated and deposited inside
`the patient's artery and are an impediment to normal blood flow. The number of catheterization procedures
`performed is expected to grow by more than 5% each year for the next three years as the incidence of
`cardiovascular disease continues to increase. The overall interventional medical device market in 2006
`exceeded $5 billion worldwide.
`
`Each angiographic procedure using a catheter requires a puncture in an artery, usually the femoral artery
`in the groin area and sometimes the radial artery in the wrist of the patient to gain access for the catheter. The
`catheter then is deployed through an introducer sheath and into the vessel to be diagnosed or treated. Upon
`completion of the procedure and removal of the catheter, the physician must seal this puncture in the artery
`and the tissue tract that leads from the skin surface to the artery to stop bleeding. The traditional method for
`sealing the puncture site has been a manual process whereby a healthcare professional applies direct pressure
`to the puncture site, sometimes using a sand bag or a large C-clamp, for 20 minutes to an hour in order to
`form a blood clot. The healthcare professional then monitors the patient, who must remain immobile in order
`to prevent dislodging of the clot, for an additional four to 48 hours.
`
`Patients subjected to manual compression generally experience significant pain and discomfort during
`compression of the puncture site and during the period in which they are required to be immobile. Many
`patients report that this pain is the most uncomfortable aspect of the catheterization procedure. In addition,
`patients can develop a substantial coagulated mass of blood, or hemotoma, around the puncture site, limiting
`patient mobility for up to six weeks following the procedure. Finally, the need for healthcare personnel to
`provide compression and the use of hospital beds during the recovery period results in substantial costs to the
`institution, which, under virtually all current healthcare payment systems, are not separately reimbursed.
`
`Until 1996, manual compression was used following virtually all catheterization procedures. In late
`1995, the first vascular sealing device which did not rely on compression was introduced in the United States.
`In addition to invasive (below the skin surface) sealing devices, starting in 2000, non-invasive "patches"
`began to be used as an assist to manual compression following catheterizations. Non-invasive patches are
`
`VSI M DT00129944
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`Page 9
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`used by physicians who (principally due to cost, complexity or risk of complications) do not wish to use
`invasive sealing devices, and for those patients who are contra-indicated for an invasive sealing device.
`Based on the number of catheterization procedures performed annually by cardiologists and radiologists,
`industry sources report that the total market opportunity for vascular sealing devices (invasive and non-
`invasive) is more than $1 billion annually.
`
`Hemostat Products
`
`Our hemostat products utilize thrombin, a powerful bovine-derived blood clotting protein, to deliver a
`rapid seal of bleeding with a variety of shelf-stable product configurations. Through internal development we
`developed a proprietary manufacturing process to terminally sterilize our thrombin-based hemostats, which
`has resulted in our ability to create unique advantages in storage, shipping, preparation and application of our
`hemostat products.
`
`Our most popular hemostat product is the D-Stat Dry. In September 2003 we received regulatory
`clearance and commenced sales of our D-Stat Dry hemostat bandage in the United States and international
`markets. The D-Stat Dry hemostat bandage is a version of our proprietary blood clotting substance that is
`lyophilized (freeze-dried) into a gauze pad and combined with an adhesive bandage for application. The D-
`Stat Dry is used as an adjunct to manual compression for managing bleeding after diagnostic catheterization
`procedures. We completed a 376-patient, five center randomized clinical study that demonstrated a 50%
`reduction in the median time-to-hemostasis when using the D-Stat Dry bandage compared to simple manual
`compression. In the third quarter of 2006 we received Food and Drug Administration (FDA) clearance of our
`claim that the D-Stat Dry reduces the time-to-hemostasis in diagnostic catheterizations. We believe that the
`market for a hemostat pad in this indication has grown substantially since the first competitive patch was
`introduced in 2000, with a market size greater than $50 million in 2006.
`
`We have developed additional configurations of the D-Stat Dry technology for specialized medical
`procedures. Our D-Stat RadialTM hemostat band is a specially-sized version of the D-Stat Dry that includes a
`compression band that allows it to be applied over the radial artery in the wrist. In approximately 5% of all
`catheterizations, the radial artery is used to gain arterial access in the wrist instead of the femoral artery in the
`groin. In these cases using the radial artery, the health care professional must control bleeding from the artery
`after the procedure. A variety of compression splints and tapes have been used for this purpose. The D-Stat
`Radial is the first device that contains an active blood clotting agent together with the compression collar for
`this purpose. We received regulatory clearance for the D-Stat Radial hemostat band in September 2003, and
`made manufacturing improvements to the product before launching it in the United States in early 2004.
`
`Our D-Stat Flowable hemostat, which we began selling worldwide in February 2002, is a thick yet
`flowable mixture of collagen, thrombin and diluent that can be delivered topically and into voids and open
`spaces to control active bleeding. The D-Stat Flowable hemostat can be used in a wide variety of
`interventional procedures as an adjunct to hemostasis. In December 2006 we received FDA approval of our
`premarket approval (PMA) supplement for the use of D-Stat Flowable in the prepectoral pockets created in
`pacemaker and implantable cardioverter defibrillator (ICD) implants. Our PMA supplement was supported
`by the results of our 269-patient "Pocket Protector" clinical study that demonstrated a 48% reduction in the
`incidence of clinically relevant hematomas through the use of D-Stat Flowable compared to the standard of
`care. We estimate that the U.S. market opportunity for this prepectoral pocket indication is greater than
`100,000 procedures or $10 million annually. We also believe that the D-Stat Flowable has applications for
`use following breast biopsy and liver biopsy procedures which are not approved but we intend to explore.
`
`Our Duett sealing device is designed to provide a complete seal of the puncture site following
`catheterization procedures such as angiography, angioplasty and stenting. The Duett sealing device combines
`an easy-to-use balloon catheter delivery mechanism with a biological procoagulant mixture, which we believe
`offers advantages over both manual compression and competitive vascular sealing devices. We began selling
`our Duett sealing device in Europe in February 1998 and in the United States in June 2000. In the fourth
`quarter of 2001 we introduced the Diagnostic Duett version of the Duett sealing device, which utilizes a lower
`
`VSI M DT00129945
`
`Page 10
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`dose of procoagulant for the less-challenging diagnostic subset of catheterization procedures. Subsequently,
`we made the decision to reduce our focus on growing the Duett product line in order to focus on increasing
`sales of our new products.
`
`At the end of the first quarter of 2004 we received regulatory clearance in the United States for the
`Thrombix 3x3 trauma bandage. The Thrombix bandage is a larger sized version of our D-Stat Dry designed
`for use in trauma indications, does not require mixing or special storage requirements and can be quickly
`applied to even severely bleeding wounds.
`
`During the second quarter of 2005 we received regulatory clearance in the United States for the
`ThrombiGel hemostatic foam. The ThrombiGel hemostatic product contains a gelatin foam pad (instead of
`the non-resorbable gauze pad in the D-Stat Dry) to provide a unique, premixed, sterile, gelatin/thrombin
`hemostat. An additional version of the ThrombiGel in development is the ThrombiGel Paste, which adds
`diluent to make a thick, adherent thrombin-based gel. We expect to pursue surgical indications for the use of
`ThrombiGel and ThrombiGel Paste in 2007.
`
`Extraction Catheters
`
`Our Pronto product consists of an extraction catheter with a proprietary distal tip and large extraction
`lumen that can be delivered into arteries to mechanically remove blood clots using simple vacuum suction.
`The Pronto extraction catheter was initially developed by Dr. Pedro Silva of Milan, Italy, who exclusively
`licensed the design to us in 2002. We received CE mark approval and commenced international sales of the
`Pronto in August 2003, and received FDA clearance in December 2003 and commenced sales in the United
`States in early 2004. In the fourth quarter of 2005 we launched the third generation design of the Pronto,
`named the Pronto V3. This new version of the Pronto incorporates several improvements that physicians
`have requested, and resulted in a substantial increase in Pronto sales in 2006. We believe that the market size
`for the removal of soft thrombus is greater than $100 million per year worldwide.
`
`In October 2005 we announced the results of the DEAR-MI (Dethrombosis to Enhance Acute
`Reperfusion in Myocardial Infarction) clinical study by Dr. Pedro Silva. The DEAR-MI clinical study was a
`randomized evaluation of the use of the Pronto extraction for the removal of thrombus from patients
`presenting with ST elevated acute myocardial infarction admitted within 12 hours of symptom onset. The
`primary endpoints of the DEAR-MI study were a comparison of myocardial reperfusion according to ST-
`segment resolution and myocardial blush grade. The results showed thrombus aspiration with the Pronto was
`determined to be an independent predictor of myocardial reperfusion as measured by both ST resolution and
`mean blush grade. The FDA cleared the Pronto V3 catheter for specific use within the coronary system in
`December 2006.
`
`We believe that there is market potential