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The following is an excerpt from a S-1 SEC Filing, filed by ACCLARENT INC on 6/6/2008.
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ACCLARENT INC - S-1 - 20080606 - PROSPECTUS_SUMMARY

SUMMARY

The items in the following summary are described in more detail later in this prospectus. This summary provides an overview of selected information and does not contain all of the information you should consider. Therefore, you should also read the more detailed information set out in this prospectus, including the financial statements and related notes appearing elsewhere in this prospectus, before investing in our common stock. References in this prospectus to “we,” “us,” “Acclarent,” “Company” and “our” refer to Acclarent, Inc., a Delaware corporation, unless the context requires otherwise.

Our Business

We are a medical technology company dedicated to designing, developing and commercializing technologies that address conditions affecting the ear, nose and throat. We are currently focused on commercializing our Balloon Sinuplasty devices, which are flexible, minimally-invasive tools that aid physicians in treating patients suffering from chronic sinusitis. We believe that the use of our Balloon Sinuplasty devices in sinus surgery can provide meaningful benefits to patients with chronic sinusitis.

The primary surgical approach to treating chronic sinusitis is functional endoscopic sinus surgery, or FESS. FESS is traditionally performed using rigid steel instruments and powered cutting tools to remove bone and tissue, which can lead to significant post-operative pain and discomfort and has the potential for major complications. Our Balloon Sinuplasty devices enable physicians to perform FESS in a less invasive manner without the need to remove tissue and bone, resulting in significant symptom relief and reduced post-operative pain and discomfort for patients. We have conducted clinical studies providing evidence of safety, effectiveness and improved quality of life for patients undergoing FESS using our Balloon Sinuplasty devices.

We received U.S. Food and Drug Administration, or FDA, clearance of our first generation Balloon Sinuplasty devices in April 2005 and commenced full commercial launch in the United States in September 2005. We obtained CE Mark clearance of our first generation Balloon Sinuplasty devices in February 2006 and commenced international sales in January 2007. We market and sell our devices in the United States and United Kingdom through our over 100-person commercial organization and through third-party distributors covering more than 30 international markets. As of May 31, 2008, we had trained over 3,000 physicians worldwide. In 2007, we generated revenue of $22.2 million and had a net loss of $25.0 million. For the three months ended March 31, 2008, we generated revenue of $10.2 million and had a net loss of $8.6 million. As of March 31, 2008, we had an accumulated deficit of $62.5 million.

Industry Background

The primary physician group we serve is otolaryngologists, commonly referred to as Ear, Nose and Throat, or ENT, physicians. These physicians focus on diagnosing and treating a wide range of diseases and conditions affecting the ear, nose and throat, and often complete advanced training in subspecialties. According to the American Academy of Otolaryngology-Head & Neck Surgery, there are approximately 9,900 ENT physicians practicing in the United States, of which we believe approximately 6,000 perform sinus surgeries. The Millennium Research Group, or MRG, estimates that there will be approximately 2.9 million ENT surgical procedures performed in the United States in 2008, approximately 500,000 of which will be sinus surgeries.

Overview of Sinusitis

Sinuses are air-filled pockets within the bones of the face and skull. The four types of sinuses are frontal, ethmoid, sphenoid and maxillary sinuses. Sinusitis is inflammation of the sinus cavities that may be caused by infections, allergies or environmental factors, as well as structural issues such as blockage of a sinus ostium, or opening, through which mucous drains. If a sinus becomes blocked, normal mucus drainage is prevented and damage to sinus cilia may occur. Cilia are small, hair-like structures that assist in mucous drainage. Sinusitis can develop in one or more of the sinuses. The symptoms of sinusitis

 

 

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include facial pain, pressure and congestion, headache, fatigue and loss of smell. There are two main categories of sinusitis, acute and chronic. Acute sinusitis is transient in nature and lasts less than four weeks. Chronic sinusitis is more severe and lasts 12 weeks or longer.

According to the Centers for Disease Control, approximately 14% of the U.S. adult population is affected by sinusitis. In addition, one published study indicates that approximately 8% of children have sinusitis. Using U.S. census data, we estimate that approximately 31 million adults and six million children are affected by sinusitis, making it one of the more common chronic conditions in the United States. In addition, sinusitis is more prevalent than heart disease and asthma in adults and several times more common than chronic diseases of the tonsils or adenoids in children. A published study estimates that chronic sinusitis results in 18 to 22 million office visits per year, which we believe equates to approximately seven million patients visiting physicians for chronic sinusitis each year in the United States. According to a published study, chronic sinusitis can have a greater impact on quality of life in adults than either congestive heart failure or chronic back pain.

Current Treatments for Sinusitis and Their Limitations

Medical Therapy

Sinusitis is typically treated first with medication. Physicians commonly prescribe various antibiotics to treat the underlying infections and steroid-based agents to reduce the inflammation and to allow normal healing to occur. Although treatment with medications is often successful, an estimated 20% or more of chronic sinusitis patients who receive medication are unresponsive. Pharmaceuticals represent an ongoing expense to patients and payors, and long-term use may result in side effects typically associated with steroids and antibiotics, such as high blood pressure, weight gain and antibiotic resistance. In addition, pharmaceuticals do not address anatomical issues unique to each patient that may cause or contribute to sinusitis, and therefore pharmaceuticals may provide only temporary relief.

Sinus Surgery

In severe cases where patients are unresponsive to pharmaceutical treatments and sinusitis is a chronic problem, a physician may recommend a surgical approach. The primary surgical alternative is FESS. The goal of FESS is to open the affected sinus ostium to allow normal sinus drainage to occur while preserving as much bone and mucosal lining as possible. The ENT physician typically uses rigid steel instruments and powered cutting tools to remove tissue and bone in order to create a passage through the tortuous anatomy of the nasal passageway to the infected sinuses, where the physician then removes additional tissue and bone to open the sinus ostium. At the conclusion of the procedure, patients often need to have their nasal cavity packed with gauze in an attempt to control bleeding. In addition, patients typically require several debridement treatments in which the physician may remove more bone, tissue and scabs to promote proper healing.

While FESS performed with traditional instruments is often an effective means of treating chronic sinusitis, it has several limitations:

 

   

Post-operative pain, discomfort and recovery time.     The physical trauma associated with the use of traditional instruments can result in significant post-operative patient pain and discomfort, often requiring pain medication, and may require several follow-up office visits. During these visits, patients require removal of nasal packing and may also require debridement treatments, which can result in additional pain and discomfort. We believe most patients require approximately one to two weeks following surgery to return to normal activities.

 

   

Invasive treatment that affects normal sinus functions.     FESS performed with traditional instruments involves the cutting and removal of bone and mucosal tissue in the sinus cavities and nasal passageways, creating irreversible changes to the anatomy that may compromise normal functionality of the sinuses and limit future treatment options.

 

 

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Potential for significant complications.     FESS performed with rigid steel instruments and powered cutting tools has the potential for serious complications due to their use in close proximity to the brain, eyes and other critical structures. Major complications, such as cerebral spinal fluid leaks and blindness, occur in approximately 1% of FESS procedures.

 

   

Limited effectiveness.     The effectiveness of FESS performed with traditional instruments is measured by improvement in patient symptoms, patency, or openness, of the sinus ostia, and frequency of revision surgery. Published medical literature cites failure in symptom improvement in 5% to 25% of patients undergoing their first FESS procedure and up to 37% of patients undergoing revision procedures. Patency is determined on endoscopic examination, with approximately 20% to 30% of patients having non-patent sinus ostia within the first year following surgery. In addition, approximately 10% of patients require revision surgery within the first year.

 

   

Perceived severity limits usage.     We believe the perceived severity of FESS performed with traditional instruments results in physicians and patients electing not to prescribe or receive surgery and continuing to address symptoms with pharmaceuticals, even when those pharmaceuticals may provide less than optimal therapy or be associated with undesirable side effects.

 

   

Time-consuming procedure.     FESS performed with traditional instruments is a time-consuming procedure, lasting on average between 90 to 120 minutes. The complexity and time associated with FESS limits the number of procedures that physicians can complete and reduces the amount of operating room and physician availability.

As a result of the limitations of both pharmaceuticals and FESS performed with traditional instruments, we believe that chronic sinusitis patients remain undertreated. We believe that an opportunity exists to provide patients a more lasting and effective treatment than pharmaceuticals, while mitigating the severity of the surgical alternative and preserving future treatment options.

Our Solution

Our Balloon Sinuplasty devices represent a suite of flexible, minimally-invasive tools that aid physicians in treating patients suffering from chronic sinusitis. With our Balloon Sinuplasty devices, ENT physicians can create an opening in a patient’s blocked or significantly narrowed sinus ostia by inserting a high pressure balloon into the nasal cavity under endoscopic visualization. The balloon is gradually inflated to open the narrowed or blocked ostium. Inflation of the balloon causes microfractures and remodels the underlying bone, which we believe results in permanent changes to the sinus anatomy. The balloon is then deflated and removed, leaving the ostium open and allowing the return of sinus drainage without removing bone or tissue.

We believe the principal benefits of our Balloon Sinuplasty devices are:

 

   

Less post-operative pain and discomfort and improved recovery times.     We believe patients undergoing FESS with our Balloon Sinuplasty devices often experience significant symptom relief and less post-operative pain than patients who undergo FESS with traditional instruments, resulting in reduced dependence on pain medications. Because no tissue or bone is removed, the need for uncomfortable nasal packing and debridements may be reduced or eliminated. We estimate patients undergoing FESS with our Balloon Sinuplasty devices return to normal activity within four days on average.

 

   

Does not limit treatment options.     Our Balloon Sinuplasty devices may be used with other medical therapies or sinus surgery techniques. When using our Balloon Sinuplasty devices, physicians do not remove bone or tissue from the sinuses. Therefore, the use of our devices does not limit future treatment options for patients with progressive sinus disease.

 

   

Favorable safety profile.     While use of any surgical instrument involves some risk, published clinical studies, which represent 1,190 patients treated by 42 different physicians across 35 sites,

 

 

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have not resulted in any serious adverse events attributed to our Balloon Sinuplasty devices. We believe FESS using our Balloon Sinuplasty devices may be a more attractive option for physicians and patients for the treatment of chronic sinusitis because of the risk of complications when rigid steel instruments and powered cutting tools are used in the tortuous anatomy of the nasal cavity, particularly given that the sinuses lie in close proximity to the brain, eyes and other critical structures.

 

   

Effective technology.     Our clinical studies and other published studies indicate that our technology enables physicians to safely and effectively open blocked sinus ostia to allow for sinus drainage. In our CLEAR one year study, 86% of the sinus ostia could be observed endoscopically at one year. Of those that could be observed, 99% remained open at one year. Revision surgery procedures were required in 5.7% of the patients at one year. In addition, improvements in the sinus symptoms of study patients were statistically and clinically significant at each follow-up visit during the first year following surgery.

 

   

Ease of use.     We designed our Balloon Sinuplasty devices to be easy to use. In our experience, physicians quickly understand how to use our devices effectively after completing our physician training program. Physicians perform FESS with our Balloon Sinuplasty devices using straight-forward endoscopic surgical techniques and interventional skills. Due to the lack of complexity, the procedure is typically completed in less time than FESS with traditional instruments. FESS performed with our Balloon Sinuplasty devices last 73 minutes on average.

 

   

Available to broad patient population.     With Balloon Sinuplasty devices, physicians have the potential to offer patients a procedure that may be more attractive due to the less invasive nature of these devices and fast recovery times. Of the estimated seven million patients visiting physicians for chronic sinusitis, we believe approximately 20%, or 1.4 million patients, are unresponsive to medical therapy. MRG estimates that approximately 500,000 patients each year undergo FESS. We believe that many of the remaining estimated 900,000 annual U.S. chronic sinusitis patients could benefit from FESS using our Balloon Sinuplasty devices.

FESS is used to treat patients with a variable number of diseased sinuses. Our Balloon Sinuplasty devices are used in FESS to treat diseased frontal, sphenoid and maxillary sinuses and are not used to treat ethmoid sinuses. Diseased ethmoid sinuses require an ethmoidectomy, which is the removal of some or all of the ethmoid cells using traditional instruments. For a variety of reasons, physicians may choose to use our Balloon Sinuplasty devices together with traditional instruments to access or treat the frontal, sphenoid and maxillary sinuses. We refer to FESS procedures where our Balloon Sinuplasty devices are used to treat these sinuses in combination with traditional instruments as hybrid procedures. Approximately 68% of the procedures performed with our technology to date have been hybrid procedures. Although hybrid procedures use traditional instruments for a portion of the procedure, we believe the benefits of our technology are still realized because patients can experience significant benefits from having even a portion of the FESS procedure performed using our devices. In our clinical studies and 1,036 patient outcomes registry, clinical outcomes on safety, effectiveness and improvement in quality of life were comparable for balloon only and hybrid patient subgroups.

Our Strategy

Our goal is to be the leading provider of minimally-invasive medical technologies that aid physicians in treating patients with sinusitis and other ENT conditions. The key elements of our strategy include:

 

   

increase adoption and utilization of our Balloon Sinuplasty devices;

 

   

educate referring physicians and patients;

 

   

expand options for treating patients with chronic sinusitis;

 

   

commercialize additional ENT products; and

 

   

continue to expand our intellectual property portfolio and protect our competitive position.

 

 

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Risks Associated with Our Business

Our business is subject to numerous risks, as more fully described in the section entitled “Risk Factors” immediately following this summary, including:

 

   

our limited operating history, history of net losses and the uncertainty relating to our ability to achieve profitability;

 

   

our reliance on our Balloon Sinuplasty devices which have a limited commercial history and are currently our primary source of revenue;

 

   

changes in existing coverage and reimbursement of our Balloon Sinuplasty devices by governmental and third-party payors;

 

   

uncertainties surrounding regulatory approvals for our Balloon Sinuplasty devices as well as any future products we develop, and the expenses that will be incurred in seeking and maintaining such approvals;

 

   

the possibility that our patent applications may not issue as patents or, if issued, may not issue in a form that will be advantageous to us or provide meaningful protection;

 

   

the willingness of physicians to change current practices by adopting and recommending to patients the use of our devices;

 

   

the risk of adverse events associated with the use of our Balloon Sinuplasty devices and the effect such events could have on our reputation; and

 

   

the absence of long-term clinical data and head-to-head clinical studies comparing the use of our devices to traditional instruments used during FESS to demonstrate safety and efficacy.

Corporate Information

We were formed in the state of Delaware in June 2004, as ExploraMed NC1, Inc. We changed our name to Acclarent, Inc. in April 2005. Our principal executive offices are located at 1525 O’Brien Drive, Suite B, Menlo Park, California 94025. Our telephone number is (650) 687-5888. Our website is located at www.acclarent.com. The information found on, or accessible through, our website is not a part of this prospectus.

Acclarent ® and Relieva ® are registered trademarks of our company in the United States. We are allowed to use the trademarks Acella™, Optilink™ and Relient™ in the United States. We have pending applications in the United States to register trademarks for Balloon Sinuplasty™, Claryx™, Relieva Vortex™, Relieva Luma™, Relieva Vigor™, Relieva Solo™, Relieva Mini™, Relieva Sidekick™ and Relieva Stratus™.

All other trademarks, tradenames and service marks appearing in this prospectus are the property of their respective owners.

 

 

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