Company Profile

Company Overview

Kyphon, Inc. (“Kyphon”) was founded in 1994 and has grown to become a global market leader in the spine industry; designing, manufacturing and marketing state-of-the-art minimally invasive medical devices to diagnose the source of low back pain as well as to treat and restore spinal function.

Kyphon currently employs close to 1,200 people worldwide, with over half of those dedicated in the field as direct sales and professional educators (the Company ended the fourth quarter of 2006 with over 300 device sales representatives in the U.S. and over 150 international sales professionals). To date, approximately 10,500 spine specialists, including over 3,500 outside of the U.S. have been trained to perform kyphoplasty. The Company believes these physicians have used KyphX instruments to treat approximately 350,000 fractures in over 300,000 patients.
Kyphon has developed a unique and enviable culture centered on its employees’ collective commitment to the corporate Vision, Mission, Values and Operating Principles. The Company’s culture is probably best characterized as performance-driven and values-based. Employees at all levels work hard together as a team to produce superior results and concurrently meet challenging financial targets. They are empowered to make decisions at all levels, drive innovative thinking throughout their teams and to truly enjoy their work. In 2006, Kyphon was named as one of “The 50 Best Small and Medium Companies to Work For” by the Society of Human Resource Management. In this prestigious ranking, Kyphon was ninth in the best medium-sized company category.
Following the acquisition of InnoSpine, Inc. (“InnoSpine”) and St. Francis Medical Technologies, Inc. (“St. Francis”) and the proposed acquisitions of certain assets of Disc-O-Tech Medical Technologies, Ltd. (“Disc-O-Tech”) the company will have three product platforms: Spinal Fracture Management and Repair, Disc Disease Diagnosis and Therapies and Spinal Motion Preservation. All three product families will be sold and supported through existing sales organizations in North America and Europe, in addition to distributors in selected areas outside the United States.
Kyphon defines these three product platforms as follows:
• Spinal Fracture Management and Repair: These products include Kyphon’s core balloon kyphoplasty portfolio, which uses minimally invasive technology to treat spinal fractures, including vertebral compression fractures due to osteoporosis, cancer and trauma.
• Disc Disease Diagnosis and Therapies: Kyphon’s products in this area are intended to assist clinicians in diagnosis and treatment of degenerative disc disease. The company’s goal in this product area is two-fold: to develop improved diagnostic tools to assist the clinician in identifying the source of a patient's pain, and to develop minimally invasive devices for treatment of degenerative disc disease. Kyphon’s acquisition of InnoSpine provided a diagnostic platform in this area, and the company is committed to developing or acquiring additional technologies to provide minimally invasive approaches to treating the degenerated disc. The proposed acquisition of the non-vertebroplasty assets of Disc-O-Tech will provide Kyphon with an initial platform to treat spinal fusion through minimally invasive technology.
• Spinal Motion Preservation: Kyphon’s goal in this area is to provide physicians with minimally invasive approaches to treat lumbar spinal stenosis (LSS). The acquisition of St. Francis gives the company the first FDA-approved minimally invasive device for the treatment of neurogenic intermittent claudication in mild to moderate LSS patients. Additionally, in Europe, Kyphon is in the initial stages of launching the Aperius TM PercLID TM device; an internally developed product for the treatment of LSS.
In January 2006, Kyphon acquired InnoSpine, a company focused on developing and marketing its proprietary technology platform for the diagnosis and potential treatment of axial low back pain due to disc degeneration. InnoSpine's initial technology, which was cleared for marketing by the FDA in April 2005, was developed with the aim of improving the results available from existing discography techniques through a novel diagnostic method known as the Functional Anaesthetic Discography ™ (F.A.D.) procedure, which involves a single-use disposable device with no capital equipment requirements. In contrast to traditional provocative discography which relies on delivery of fluid under pressure to provoke pain in a disc while the patient is prone, the F.A.D. procedure is a unique, minimally invasive procedure that utilizes a catheter-based system anchored in the disc space to deliver mild anaesthetic to a candidate disc while the patient loads his or her spine in positions that cause pain. If the pain sensations from normal loading are relieved by anaesthetic delivery to the degenerated disc, then the disc can be identified for further treatment. We began a limited commercial launch in the U.S. of our Discyphor ™ system for practicing the F.A.D. procedure in the third quarter of 2006.
In January 2007, Kyphon acquired St. Francis, a company that manufactures the X-STOP Interspinous Process Decompression (IPD ®) System, the first FDA-approved interspinous process device for treating lumbar spinal stenosis (LSS). The X-STOP IPD System received a CE mark in Europe in 2001 and has been commercially available since December 2002. The X-STOP technology is complementary to Kyphon’s own extension limiting technology for the treatment of LSS, percutaneous Aperius PercLID device, which was commercially launched in a very limited manner in late 2006 in Europe, for the purpose of conducting physician preference testing.
In December 2006, Kyphon agreed to acquire the non-vertebroplasty, spine-related product assets and associated intellectual property rights of Disc-O-Tech, a privately held Israeli company and its U.S. subsidiary. Completion of the non-vertebroplasty transaction, if and when that occurs (subject to FTC approval), will enable the company to further broaden their focus in minimally invasive spine by adding the B-Twin ™ Expandable Spinal System technology for minimally invasive fusion in patients with degenerative disc disease in the lumbar and cervical spine. This technology is CE marked and available in Europe, but not presently available in the United States. Back pain affects four out of five persons in the United States at some point in their lives, with more than 150,000 lumbar and nearly 200,000 cervical spinal fusions performed each year to treat common spinal conditions such as degenerative disc disease and spondylolisthesis (misaligned vertebrae). The non-vertebroplasty assets also include Disc-O-Tech's SKy™ Bone Expander System, which is available only outside the U.S. for use in the treatment of vertebral compression fractures. The vertebroplasty assets include Disc-O-Tech's Confidence™ Cement System, which will be another treatment option complementary to Kyphon’s existing KyphX technology for vertebral compression fractures depending on a patient's individual needs and a clinician's goals for his or her patients. The Confidence System incorporates a delivery mechanism that is designed to provide controlled injection of putty-like cement, reduce clinician radiation exposure and streamline cement preparation. Kyphon’s ability to offer such additional minimally invasive diagnostic and therapeutic tools to customers is a natural next step in broadening the product portfolio.
Kyphon intends to pursue the research, development and commercialization of spine products arising from these acquisitions, as well as continue to bring new, innovative products to market from internal research and development. Kyphon may also choose to do so based on its licenses to various portfolios of patents the company has previously acquired, including from Bonutti Research in August 2002, Dr. J. Lee Berger in April 2005, and Dr. Harvinder Sandhu in November 2005, as well as other product initiatives, to complement the company’s existing KyphX and Discyphor instruments and to leverage their experienced sales force and expertise in spinal fracture treatments.
Kyphon has undertaken a very ambitious clinical trial agenda to support its growth objectives across the three product platforms. This includes both IDE/PMA studies as well as post market approval studies designed to provide the highest quality evidence based medicine information. A key element of Kyphon’s overall business strategy is to build a strong scientific foundation for its products and indications for use. Kyphon believes this assists clinicians in deciding which therapies are safe and effective for their patients. Additionally, the company believes third party payors, such as Medicare, will increasingly require more rigorous levels of clinical information to support adequate reimbursement amounts. As of March 2007, Kyphon has launched fifteen trials worldwide and several more, including IDE/PMA trials, are expected to be initiated by the end of 2007.

Kyphon is headquartered in Sunnyvale, California; its European operations are based in Brussels, Belgium and there is a small bio-materials focused research facility in Germany. Kyphon has recently opened a new manufacturing, distribution, and shared financial services site in Neuchatel, Switzeerland. In 2004, the company formed a Japanese subsidiary, Kyphon Nippon KK and subsequently began clinical and regulatory activities to augment future commercialization of KyphX products in Asia.

Kyphon is publicly traded on the NASDAQ exchange under the symbol, KYPH. The company has consistently exceeded expectations in growth and earnings. FY 2007 revenues are projected to exceed $565 million; a greater than 38% increase over FY 2006 sales. Further information can be found on the company’s website, www.kyphon.com .