Report: Common Shares, us 10 par value per Share




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SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 20-F
------------------------
|_| Registration statement pursuant to Section 12(b) or Section 12(g) of the

Securities Exchange Act of 1934

or

|X| Annual report pursuant to Section 13 or 15(d) of the Securities Exchange

Act of 1934 For the fiscal year ended December 31, 1999

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 0-19961
ORTHOFIX INTERNATIONAL N.V.
(Exact name of Registrant as specified in its charter)
Netherlands Antilles

(Jurisdiction of incorporation or organization)
7 Abraham de Veerstraat

Curacao

Netherlands Antilles

(Address of principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:

None
Securities registered pursuant to Section 12(g) of the Act:

Common Shares, US$0.10 par value per Share

(Title of Class)
Securities for which there is a reporting obligation

pursuant to Section 15(d) of the Act:

None
Indicate the number of outstanding shares of each of the issuer's classes

of capital or common stock as of the close of the period covered by the annual

report:
Common Shares, US$0.10 par value per Share.......................13,029,834
-----------------------
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 which financial statement item the Registrant has

elected to follow:
Item 17 Item 18 X

--- ---
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TABLE OF CONTENTS
PART I
Item 1. DESCRIPTION OF BUSINESS............................................1

General ...................................................................1

Recent Developments..........................................................1

Products ...................................................................3

Fixation Products............................................................3

PEMF Products................................................................5

Other Products...............................................................6

Distribution Products........................................................8

Sales and Distribution.......................................................8

Marketing ...................................................................9

Production..................................................................10

Product Development.........................................................10

Patents, Trade Secrets and Licenses.........................................10

Competition.................................................................11

Government Regulation.......................................................11

Product Liability and Insurance.............................................12

Third Party Payors..........................................................12

Employees ..................................................................13

Year 2000 ..................................................................13

Economic and Monetary Union in the European Union...........................13

Item 2. DESCRIPTION OF PROPERTY...........................................13

Item 3. LEGAL PROCEEDINGS.................................................14

Item 4. CONTROL OF REGISTRANT.............................................16

Item 5. NATURE OF TRADING MARKET..........................................16

Item 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS

AFFECTING SECURITY HOLDERS...................................17

Item 7. TAXATION..........................................................18

Item 8. SELECTED FINANCIAL DATA...........................................18

Item 9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS..........................19

Item 10. DIRECTORS AND OFFICERS OF REGISTRANT..............................24

Item 11. COMPENSATION OF DIRECTORS AND OFFICERS............................25

Item 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR

SUBSIDIARIES.................................................26

Item 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS....................27
PART II

Item 14. DESCRIPTION OF SECURITIES TO BE REGISTERED........................28
PART III
Item 15. DEFAULT UPON SENIOR SECURITIES.....................................28

Item 16. CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR

REGISTERED SECURITIES........................................28
PART IV

Item 17. FINANCIAL STATEMENTS...............................................28

Item 18. FINANCIAL STATEMENTS...............................................28

Item 19. FINANCIAL STATEMENTS AND EXHIBITS..................................28


INTRODUCTION
Orthofix International N.V. ("Orthofix International") was incorporated

under the laws of the Netherlands Antilles in 1987. In this Annual Report on

Form 20-F for the fiscal year ended December 31, 1999 (the "Annual Report"), all

references to the "Company" and "Orthofix" include Orthofix International and

its subsidiaries and affiliates, unless the context otherwise requires. The

principal executive offices of Orthofix International are located at 7 Abraham

de Veerstraat, Curacao, Netherlands Antilles.
The Company publishes its consolidated financial statements in United

States dollars. In this Annual Report, references to "United States dollars",

"dollars", "US$", or "$" are to United States currency, and references to

"lira", "lire" or "Lit." are to the Italian lira (singular) or to Italian lire

(plural).


--------------


PART I
Item 1. DESCRIPTION OF BUSINESS.
General
The business of Orthofix is the design, development, manufacture,

marketing and distribution of medical equipment, principally for the orthopedic

market. The Company's main products are external and internal fixation devices

used in fracture treatment, limb lengthening and bone reconstruction, and pulsed

electromagnetic frequency products used for the non-invasive healing enhancement

of spinal fusions and recalcitrant bone fractures. Other orthopedic products

produced by the Company include devices for the removal of cement in hip

revision procedures, the ultrasonic treatment of musculo-skeletal pain and an

oral- maxillofacial bone substitution compound. The Company also produces a

device for enhancing venous circulation.
Orthofix, which is registered in the Netherlands Antilles, has

manufacturing facilities in the United States, the United Kingdom, Italy and the

Seychelles. Products are distributed through subsidiary companies in the United

States, the United Kingdom and Italy, and affiliates in Mexico, Brazil and

France. Elsewhere, distribution is through independent distributors.
Orthofix has 100% equity ownership of Orthofix Inc., which is primarily

engaged in the development, manufacture and marketing of advanced products using

pulsed electromagnetic frequency technology for bone healing, including

Spinal-Stim for non-invasive healing enhancement of spinal fusions and

Physio-Stim for recalcitrant bone fractures. Osteogenics Inc. ("Osteogenics"), a

wholly owned subsidiary of Orthofix Inc., is engaged in the development of bone

substitution compounds with a wide variety of potential surgical and orthopedic

applications including facial reconstruction, fracture repair and periodontal

repair. See "-- Recent Developments" and "-- Products". The Company also has

100% equity ownership of Orthofix S.r.l., which designs, manufactures and

distributes external and internal fixation devices. The Company has 70% equity

ownership of DMO S.r.l. ("DMO"), the subsidiary that distributes the Company's

products in Italy, 100% equity ownership in Novamedix Limited ("Novamedix"), the

subsidiary that developed the A-V Impulse System and 100% equity ownership of

Novamedix Services Limited ("NSL"), a service company which manages the

manufacture of the A-V Image System. Orthofix also has 70% equity ownership of

Orthosonics Limited ("Orthosonics"), which markets and distributes bone cement

removal systems for use in connection with hip revision surgery, and 52% equity

ownership of Intavent Orthofix Limited ("Intavent Orthofix"), which distributes

Orthofix products in the United Kingdom. Orthofix also has 100% equity ownership

of each of Orthofix Ltd and Novamedix Distribution Limited ("NDL"), which

distribute Orthofix products in certain markets.
Recent Developments
On January 10, 2000, following a ruling of the United States Supreme

Court, an award of $64 million was confirmed in favor of Orthofix in its suit

against Biomet, Inc. After deducting contingent legal fees and reserving for

expenses relating to the case, Orthofix received a net gain of approximately $38

million before income taxes on January 21, 2000. -- See "Item 3. LEGAL

PROCEEDINGS."
On December 10, 1999, Orthofix acquired a further 10% equity interest

in NDL for a cash consideration of $2 million, taking its equity interest in NDL

to 100%. Orthofix had previously acquired a further 10% equity interest in NDL

on 16 April, 1999 for a cash consideration of $1.9 million.
In December 1999 and in September 1999, Orthofix Inc. announced that it

had entered into agreements to complete the development, and for the

distribution of, two new products. The first, an Intramedullary Skeletal Kenetic

Distractor (ISKD), is a patented internal lengthening system used on arms and

legs of unequal length. The ISKD system for external bone lengthening will

supplement Orthofix's external bone lengthening product line. The second product

is a fluidjet-based traumatic wound debridement system being developed in

conjunction with HydroCision, Inc.
1


On November 29, 1999 the National Osteoporosis Institute ("NOI") and

Orthofix announced that NOI had received clearance from the United States Food

and Drug Administration ("FDA") to begin a clinical trail with Orthofix's Bone

Growth Stimulator for the treatment of osteoporosis. The trial will evaluate the

safety and efficacy of the Orthofix Bone Growth Stimulator in osteoporotic

patients, measuring improvements in bone mineral density.
On September 24, 1999 Orthofix announced that it had received

Investigational Device Exemption (IDE) approval from the FDA for the clinical

investigation of the Orthofix Cervical-Stim (R), a non-invasive cervical bone

growth stimulator. The approval allows Orthofix to initiate a clinical

evaluation of Cervical-Stim in thirteen centers across the U.S.
On September 9, 1999, Orthofix announced that its subsidiary, Novamedix

had been successful in its motion to open its suit against Kinetic Concepts,

Inc. ("KCI"). The suit, first filed in 1992, alleges KCI's patent infringement,

breach of contract and unfair competition relating to Novamedix's proprietary

medical device, the A-V Impulse System(R). The case has been delayed by KCI's

successive requests to the US Patent and Trademark Office for re-examinations of

the original patents. See "Item 3. LEGAL PROCEEDINGS."
On May 27, 1999 Orthofix announced that it had acquired the remaining

outstanding shares (having previously held 30%) of Neomedics Inc., an

early-stage medical technology company focused on the development of implantable

tissue growth stimulation devices, in an all cash transaction.
On March 5, 1999 Orthofix announced that a Review Committee had

unanimously determined that an Earnout or Bonus of $500,000 plus interest from

August 21, 1995 was payable to the holders of record of American Medical

Electronics, Inc. ("AME") common stock and the options and warrants to such

stock as of August 21, 1995 pursuant to an Agreement and Plan of Merger. The

Earnout is the result of Orthofix Inc.'s sales of bone growth stimulators after

the merger. In addition, the Review Committee determined that Orthofix will pay

the AME Record Holders 12% of the net recovery as and when received from its

judgement against EBI Medical Systems, Inc. ("EBI MS"), Electro-Biology, Inc.,

and Biomet, Inc (collectively, EBI), up to a maximum of $5,500,000.
On December 14, 1998 Tom Hay joined the Company as President,

International Division, responsible for the operations of the Company and its

affiliate companies outside North America. Before joining Orthofix, Mr. Hay was

with C R Bard Inc. for eleven years, ultimately as Managing Director of C R Bard

Ltd. and Vice President, C R Bard, Northern Europe. Prior to this, he spent

fourteen years with Baxter Healthcare.
On July 7, 1998, Orthofix Inc. announced that it had entered into an

agreement with the Sofamor Danek Group for the non-exclusive distribution rights

in the U.S. for the Spinal Stim Lite, a stimulation device used by patients

having undergone a spinal fusion surgery. Sofamor Danek is a market leader in

devices for spinal fusions.
On April 22, 1998, Orthofix Inc. entered into an agreement with

Howmedica, Inc. ("Howmedica"), a wholly-owned subsidiary of Stryker Howmedica,

Inc. ("Stryker"), to license BoneSource, a calcium-based phosphate-based bone

cement for use in the repair of cranial defects. Under the terms of the
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