Research and development
From the date of our inception through March 31, 2007, we have incurred approximately $25.5
million on research and development of our LVAD technologies. For the quarter ended March 31, 2007
and each of the years ended December 31, 2006 and 2005, we incurred research and development
expenses of $3.1 million, $11.7 million and $10.7 million, respectively. Research and development
costs include activities related to the research, development, design, testing, and manufacturing
of prototypes of our products. It also includes clinical activities and regulatory costs.
Research and development costs also include cost associated with certain HeartWare employees
engaged in research and development activities, as well as external consultants and contractors
that we may engage from time to time. We expect our research and development expenses to increase
significantly as we continue the development of our HVAD pump, initiate commercialization
activities, research the application of, and develop our miniaturized heart pump technology,
conduct additional clinical trials and hire additional employees.
Our products are currently being utilized only in connection with clinical trials. Our
manufacturing activities to date, and for the foreseeable future, will continue to consist
primarily of process development, component assembly, quality control testing and research and
A number of critical components of our HVAD, including the center post, pump housing and
impeller, are provided by outside suppliers and then assembled and tested by us in-house. We do
not presently have supply agreements in place with our suppliers, other than a production services
agreement with Minnextronix, Inc., which is described elsewhere herein. We have identified second
source suppliers for all of our critical components, except for Minnetronix, Inc.
As of May 31, 2007, we had 70 employees, 13 of whom hold masters or doctorate degrees.
Approximately 54 employees are engaged in research and development including manufacturing and
operations, 4 in clinical and 12 in finance, legal and other administrative functions. None of our
employees are represented by a labor union or covered by a collective bargaining agreement. We
consider our relations with our employees to be good.
Medical Advisory Board
HeartWare maintains a six-person Medical Advisory Board (Advisory Board) which guides the
Company in both clinical and product development strategies. Our Advisory Board is comprised of a
group of cardiac surgeons and cardiologists. Their compensation is on a per diem basis to the
extent their services are requested by the Company. The following are biographical summaries of
the members of our Medical Advisory Board.
O. Howard Bud Frazier, MD, Chairman & Chief Transplant Services, Director Cardiovascular
Research, Texas Heart Institute. Dr. Frazier has been a pioneer in the surgical treatment of
severe heart failure. He has been director of cardiopulmonary