RISK FACTORS DESCRIBED IN THE REGISTRATION
STATEMENT ON FORM S-4 FILED BY HW GLOBAL, INC. (HOLDCO)
Risks Relating to the Transactions
The number of shares of Holdco common stock that Valtech and Mitraltech shareholders will receive as a result of the Transactions is
fixed, subject to certain adjustments. The value of the shares of Holdco common stock that Valtech shareholders receive is different than at the date the Business Combination Agreement was signed and could be different than at the time Valtech
shareholders vote to approve the ISR Merger.
Upon the effective time of the ISR Merger, the Recipient Parties will receive, as set
forth in a Valtech notice delivered to its shareholders prior to Closing regarding its special meeting, a pro rata portion of: (a) 4,400,000 shares of Holdco common stock to be issued at closing, less escrowed shares of Holdco common stock and less
adjustments, including with respect to certain Valtech indebtedness and transaction expenses; (b) an additional 800,000 shares of Holdco common stock to be issued at closing, less escrowed shares of Holdco common stock, because Valtech successfully
obtained CE Mark approval for Valtechs Cardioband
product; (c) the right to receive escrowed shares of Holdco common stock, if any are ultimately distributed; (d) the right to receive 700,000 shares of Holdco common stock contingent upon a
first-in-man implant of Valtechs Cardioband Tricuspid Product or Valtechs Cardiovalve Product; (e) warrants to purchase 850,000 shares of Holdco common stock at an exercise price of $83.73 per share which become exercisable upon
achieving $75 million in net sales (trailing 12 months) of Valtech products; and (f) the right to receive a payment of $375 million (payable in cash or Holdco common stock, at the discretion of Holdco) upon achieving $450 million in net sales
(trailing 12 months) of Valtech products. The number of shares of Holdco common stock that Valtech shareholders will be entitled to receive will not be adjusted in the event of any increase or decrease in the share price of HeartWare common stock.
Each share of Holdco common stock will be issued in accordance with, and subject to the rights and obligations of, the Holdco Certificate
of Incorporation and Bylaws substantially in the forms attached hereto as Annex B. For a comparison of the rights and privileges of a holder of shares of Holdco common stock as compared to a holder of Valtech shares, please see Comparison
of the Rights of Holders of Valtech Shares and Holdco Common Stock beginning on page 146 of this proxy statement/prospectus.
The market value of the shares of Holdco common stock that Valtech shareholders and HeartWare stockholders will be entitled to receive at
Closing could vary significantly from the market value of HeartWare common stock on the date of this proxy statement/prospectus. Because the number of shares of Holdco common stock issued to the Recipient Parties will not be adjusted to reflect any
changes in the market value of HeartWare common stock, such market price fluctuations may affect the value that Valtech shareholders will receive at Closing. Share price changes may result from a variety of factors, including changes in the
business, operations or prospects of HeartWare or Valtech, market assessments of the likelihood that the Transactions will be completed, the timing of the Transactions, regulatory considerations, general market and economic conditions and other
factors. Shareholders are urged to obtain current market quotations for HeartWare common stock. See Comparative Per Share Data beginning on page 132 for additional information on the market value of HeartWare common stock.
HeartWare and Valtech must obtain required approvals and governmental and regulatory
consents to consummate the Transactions, which, if delayed, not granted or granted with unacceptable conditions, may jeopardize or delay the consummation of the Transactions, result in additional expenditures of money and resources and/or reduce the
anticipated benefits of the Transactions.
The Transactions are subject to customary closing conditions. These closing conditions
include, among others, the receipt of required approvals of HeartWare stockholders and Valtech shareholders, the effectiveness of the registration statement, the expiration or termination of applicable waiting periods under the HSR Act and certain
The governmental agencies from which the parties will seek certain of these approvals and consents have broad discretion
in administering the governing regulations. HeartWare and Valtech can provide no assurance that all required approvals and consents will be obtained. Moreover, as a condition to their approval of the Transactions, agencies may impose requirements,
limitations or costs or require divestitures or place restrictions on the conduct of Holdcos business after Closing. These requirements, limitations, costs, divestitures or restrictions could jeopardize or delay the consummation of the
Transactions or reduce the anticipated benefits of the Transactions. Further, no assurance can be given that the required shareholder approvals will be obtained or that the required closing conditions will be satisfied, and, if all required consents
and approvals are obtained and the closing conditions are satisfied, no assurance can be given as to the terms, conditions and timing of the approvals. If HeartWare and Valtech agree to any material requirements, limitations, costs, divestitures or
restrictions in order to obtain any approvals required to consummate the Transactions, these requirements, limitations, costs, divestitures or restrictions could adversely affect Holdcos ability to integrate HeartWare andValtechs
operations and/or reduce the anticipated benefits of the Transactions. This could result in a failure to consummate the Transactions or have a material adverse effect on Holdcos business and results of operations.
The Business Combination Agreement contains provisions that require HeartWare to pay to Valtech a termination fee in the form of a loan
if the Business Combination Agreement is terminated.
If the Business Combination Agreement is terminated in accordance with the
Business Combination Agreement, HeartWare will be required to make a loan to Valtech in the amount of $30 million. Neither party is entitled to terminate the Business Combination Agreement if the Closing has not occurred by the specified termination
date if the failure of the Closing to occur by such date principally arises out of or is related to such partys failure to fulfill any obligation under the Business Combination Agreement.
Failure to consummate the Transactions could negatively impact the value and the future business and financial results of HeartWare
If the Transactions are not consummated, the ongoing businesses of HeartWare and/or Valtech may be adversely
affected and, without realizing any of the benefits of having consummated the Transactions, HeartWare and/or Valtech will be subject to a number of risks, including the following:
||HeartWare and/or Valtech will be required to pay costs and expenses relating to the proposed Transactions; |
||if the Business Combination Agreement is terminated for any reason, HeartWare will be required to make a loan to Valtech in the amount of $30 million; |
||matters relating to the Transactions (including integration planning) may require substantial commitments of time and resources by HeartWare management and Valtech management, which could otherwise have been devoted to
other opportunities that may have been beneficial to HeartWare or Valtech, as the case may be; |
the Business Combination Agreement restricts HeartWare and Valtech, without the other partys consent and subject to certain exceptions, from
making certain acquisitions and taking other specified
actions until the Transactions occur or the Business Combination Agreement is terminated. These restrictions may prevent or increase the costs to, as applicable, HeartWare and Valtech from
pursuing otherwise attractive business opportunities and making other changes to their businesses that may arise prior to completion of the Transactions or termination of the Business Combination Agreement; and
||HeartWare and/or Valtech also could be subject to litigation related to any failure to consummate the Transactions or related to any enforcement proceeding commenced against HeartWare and/or Valtech to perform their
respective obligations under the Business Combination Agreement. |
If the Transactions are not consummated, these risks may
materialize and may adversely affect HeartWare and/or Valtechs business, financial results and share price.
Transactions are pending, HeartWare and Valtech will be subject to business uncertainties that could adversely affect their businesses.
Uncertainty about the effect of the Transactions on employees, customers and suppliers may have an adverse effect on HeartWare and Valtech and,
consequently, on Holdco. These uncertainties may impair HeartWares and Valtechs ability to attract, retain and motivate key personnel until the Transactions are consummated and for a period of time thereafter. Employee retention may be
particularly challenging during the pendency of the Transactions because employees may experience uncertainty about their future roles with Holdco. If, despite HeartWares and Valtechs retention efforts, key employees depart because of
issues relating to the uncertainty and difficulty of integration or a desire not to remain with Holdco, Holdcos business could be seriously harmed.
The Opinion of HeartWares financial advisor does not reflect changes in circumstances that may occur between the execution of the
Business Combination Agreement and the consummation of the Transactions.
The HeartWare Board has not obtained an updated opinion
from Canaccord Genuity as of the date of this proxy statement/prospectus and does not expect to receive an updated, revised or reaffirmed opinion prior to the consummation of the Transactions. Changes in the operations and prospects of HeartWare,
Valtech or Holdco, general market and economic conditions and other factors that may be beyond the control of HeartWare, Valtech or Holdco, and on which Canaccord Genuitys Opinion was based, may significantly alter the value of Valtech or the
price of HeartWare common stock or shares of Holdco common stock by the time the Transactions are completed. The Opinion does not speak as of the time the Transactions will be consummated or as of any date other than the date of such Opinion.
Because Canaccord will not be updating its Opinion, the Opinion will not address the fairness to HeartWare of the Valtech Merger Consideration from a financial point of view at the time the Transactions are consummated. The HeartWare Boards
recommendation that HeartWare stockholders vote FOR the proposal described herein is made as of the date of this proxy statement/prospectus. For a description of the Opinion the HeartWare Board received from Canaccord Genuity,
please refer to the section entitled The Transactions Opinion of Canaccord Genuity beginning on page 53 of this proxy statement/prospectus.
Risks Relating to the Businesses of the Combined Company
Mitral and tricuspid valve repair and replacement represent a significant, unmet clinical need, which requires technological and market
development that may (i) not be achieved at all or (ii) take longer to realize than expected.
Currently, mitral and tricuspid
valve repair and replacement represent an underpenetrated market, which may be accessed through the introduction of new technologies, including transcatheter medical devices. Physician confidence in and market acceptance of new technologies is
speculative and may not be realized, or take longer or cost more to realize than anticipated.
Uncertainties associated with the Transactions may cause a loss of employees and may
otherwise materially adversely affect the future business and operations of the combined company.
The combined companys
success after the Transactions will depend in part upon the ability of the combined company to retain executive officers and key employees of HeartWare and Valtech. In some of the fields in which HeartWare and Valtech operate, the competition for
qualified personnel is particularly intense and there are only a limited number of people in the job market who possess the requisite skills and it may be difficult for the combined company to hire personnel over time. The combined company will
operate in several geographic locations, including parts of Israel and Massachusetts, where the labor markets are particularly competitive. The combined company may experience difficulty in hiring and retaining sufficient numbers of qualified
management, manufacturing, technical, application engineering, marketing, sales and support personnel for parts or all of its business.
Current and prospective employees of HeartWare and Valtech may experience uncertainty about their roles with the combined company following
the Transactions. In addition, key employees may depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with the combined company following the Transactions. The loss of services of any key
personnel or the inability to hire new personnel with the requisite skills could restrict the ability of the combined company to develop new products or enhance existing products in a timely matter, to sell products to customers or to manage the
business of the combined company effectively. Also, the business, financial condition and results of operations of the combined company could be materially adversely affected by the loss of any of its key employees, by the failure of any key
employee to perform in his or her current position, or by the combined companys inability to attract and retain skilled employees, particularly engineers.
Third parties may claim that Holdco is infringing their intellectual property, and the combined company could suffer significant
litigation or licensing expenses or be prevented from selling its products or services.
The medical device industry is
characterized by uncertain and conflicting intellectual property claims and vigorous protection and pursuit of these rights. Each of HeartWare and Valtech may be involved in disputes regarding patent and other intellectual property rights. Each of
HeartWare and Valtech may receive communications from third parties asserting that certain of its products, processes or technologies infringe upon third party patent rights, copyrights, trademark rights or other intellectual property rights. Third
parties may claim that Holdco is infringing their intellectual property rights, and the combined company may be unaware of intellectual property rights of others that may cover some of its technology, products and services. Defending these claims
may be costly and time consuming, and may divert the attention of management and key personnel from other business issues. The complexity of the technology involved and the uncertainty of intellectual property litigation increase these risks. Claims
of intellectual property infringement also might require the combined company to enter into costly royalty or license agreements. Holdco may be unable to obtain royalty or license agreements on acceptable terms, or at all. Similarly, changing its
products or processes to avoid infringing the rights of others may be costly or impractical and may be subject to regulatory approvals. The combined company may also be subject to significant damages or injunctions against development and sale of
certain of its products and services. Resolution of whether any of the products or intellectual property of the combined company has infringed on valid rights held by others could have a material adverse effect on results of operations or financial
condition and may require material changes in production processes and products.
The combined company will be subject to risks
associated with doing business internationally.
The conduct of the combined business internationally is subject to certain risks
inherent in international business, many of which are beyond the combined companys control. These risks include, among other things:
||adverse changes in tariff and trade protection measures; |
||changes in foreign regulatory requirements; |
||potentially negative consequences from changes in or interpretations of tax laws; |
||differing labor regulations; |
||differing product liability regimes; |
||changing economic conditions in countries where the combined companys products are sold or manufactured or in other countries; |
||differing local product preferences and product requirements, including regulatory requirements; |
||restrictions on the repatriation of funds; |
||political unrest and hostilities; |
||differing degrees of protection for intellectual property; and |
||difficulties in coordinating and managing foreign operations. |
In addition, foreign sales
subject the combined business to numerous stringent United States and foreign laws, including the Foreign Corrupt Practices Act (FCPA), and comparable foreign laws and regulations which prohibit improper payments or offers of payments to
foreign governments and their officials and political parties by United States and other business entities for the purpose of obtaining or retaining business. As the combined company expands its international operations, there is some risk of
unauthorized payments or offers of payments by one of the combined companys employees, consultants, sales agents or distributors, which could constitute a violation by the combined company of various laws including the FCPA, even though such
parties are not always subject to the combined companys control. Safeguards that the combined company implements to discourage these practices may prove to be less than effective and violations of the FCPA and other laws may result in severe
criminal or civil sanctions, or other liabilities or proceedings against the combined company, including class action lawsuits and enforcement actions from the SEC, Department of Justice and overseas regulators, which could adversely affect the
combined companys reputation, business, financial condition and results of operations.
Any of these factors, or any other
international factors, could have a material adverse effect on the combined company, financial condition and results of operations. There can be no assurance that the combined company can successfully manage these risks or avoid their effects.
We may not realize all of the anticipated benefits of the Transactions or those benefits may take longer to realize than expected. We
may also encounter significant unexpected difficulties in integrating the two businesses.
Our ability to realize the anticipated
benefits of the Transactions will depend, to a large extent, on our ability to integrate the HeartWare and Valtech businesses. The combination of two independent businesses has the potential to be a complex, costly and time-consuming process. As a
result, we will be required to devote significant management attention and resources to integrating the business practices and operations of HeartWare and Valtech. The integration process may disrupt the businesses and, if implemented ineffectively,
would preclude realization of the full benefits expected of the Transactions. Our failure to meet the challenges involved in integrating the two businesses and to realize the anticipated benefits of the Transactions could cause an interruption of,
or a loss of momentum in, the activities of HeartWare and Valtech and could adversely affect Holdcos operational results.
addition, the overall integration of the businesses may result in material unanticipated problems, expenses, liabilities, competitive responses, loss of customer relationships, and diversion of managements attention. The difficulties of
combining the operations of the companies include, among others:
||the diversion of managements attention to integration matters; |
||difficulties in achieving anticipated synergies, business opportunities and growth prospects from combining the business of HeartWare with that of Valtech; |
||difficulties in the integration of operations and systems; |
||difficulties in the assimilation of employees; |
||difficulties in managing the expanded operations of a larger and more complex company; |
||challenges in keeping existing customers and obtaining new customers; and |
||challenges in attracting and retaining key personnel. |
Many of these factors will be outside
of our control and any one of them could result in increased costs, decreases in the amount of expected revenues and diversion of managements time and energy, which could materially impact the business, financial condition and results of
operations of Holdco. In addition, the risks relating to the businesses of Valtech and the combined company are similar to the risks relating to HeartWares business, including but not limited to, risks relating to intellectual property,
competition, regulatory matters, future growth and the medical device industry. Even if the operations of the businesses of HeartWare and Valtech are integrated successfully, we may not realize the full benefits of the Transactions, including the
synergies or sales or growth opportunities that we expect. These benefits may not be achieved within the anticipated time frame, or at all. Or, additional unanticipated costs may be incurred in the integration of the businesses of HeartWare and
Valtech. All of these factors could cause dilution to the earnings per share of Holdco, decrease or delay the expected accretive effect of the Transactions, and negatively impact the price of Holdcos ordinary shares. As a result, we cannot
assure you that the combination of the HeartWare and Valtech businesses will result in the realization of the full benefits anticipated from the Transactions.
Holdco will incur direct and indirect costs as a result of the Transactions.
Holdco will incur costs and expenses in connection with and as a result of the Transactions. These costs and expenses include costs related to
expanded research and development expenditure, market development activities, creation of a field sales force, and greater scaling of manufacturing capacity, as well as any additional costs Holdco may incur going forward as a result of its new
corporate structure. These costs may exceed the costs historically borne by HeartWare and Valtech.
Valtechs actual financial positions and results of operations may differ materially from the unaudited pro forma financial data included in this proxy statement/prospectus.
The pro forma financial information contained in this proxy statement/prospectus is presented for illustrative purposes only and may not be an
indication of what Holdcos financial position or results of operations would have been had the Transactions been completed on the dates indicated. The pro forma financial information has been derived from the audited and unaudited historical
financial statements of HeartWare and Valtech and certain adjustments and assumptions have been made regarding the combined company after giving effect to the Transactions. The assets and liabilities of Valtech have been measured at fair value based
on various preliminary estimates using assumptions that HeartWare management believes are reasonable utilizing currently available information. The process for estimating the fair value of acquired assets and assumed liabilities requires the use of
judgment in determining the appropriate assumptions and estimates. These estimates may be revised as additional information becomes available and as additional analyses are performed. Differences between preliminary estimates in the pro forma
financial information and the final acquisition accounting will occur and could have a material impact on the pro forma financial information and the combined companys financial position and future results of operations.
In addition, the assumptions used in preparing the pro forma financial information may not prove to be accurate, and other factors may affect
Holdcos financial condition or results of operations following Closing. Any potential decline in Holdcos financial condition or results of operations may cause significant variations in the share price of Holdco. Please see
Unaudited Pro Forma Condensed Combined Financial Statements beginning on page 79.
The shares of Holdco common stock to be received by HeartWare stockholders and Valtech
shareholders in connection with the Transactions will have different rights from the HeartWare common stock and the Valtech shares.
Upon completion of the Transactions, HeartWare stockholders and Valtech shareholders will become Holdco stockholders and their rights as
stockholders will be governed by Holdcos Certificate of Incorporation and Bylaws and Delaware law. The rights associated with each of the HeartWare common stock and Valtech ordinary shares are different than the rights associated with shares
of Holdco common stock. Material differences between the rights of stockholders of HeartWare and the rights of shareholders of Holdco include differences with respect to among other things, exclusive forum provisions, stockholder actions,
stockholder proposals and nominations, and Australian exchange listing rules (which no longer applies). Material differences between the rights of Holdco shareholders following the Transactions and the rights of Valtech shareholders before the
Transactions include, among other things, differences with respect to the board of directors and the special rights of preferred shareholders. See Comparison of the Rights of Holders of HeartWare Common Stock and Holdco Common
Stock beginning on page 144 and Comparison of the Rights of Holders of Valtech Shares and Holdco Common Stock beginning on page 146.
Risks Relating to Valtechs Business
If Valtech fails to successfully introduce its products to the market, Valtechs growth prospects may suffer.
If Valtech is slow in bringing its products to market or otherwise fails to successfully develop, manufacture, design clinical trials for,
obtain regulatory approvals of, introduce or commercialize its product pipeline on a timely basis, or if products are not well accepted by the market, Valtechs growth prospects may suffer.
Valtech has never generated any revenue from product sales and may never be profitable.
To date, Valtech has no commercial sales and has never generated any revenue from commercial product sales. Valtechs ability to generate
revenue and achieve profitability depends on Valtechs ability, alone or with strategic collaboration partners, to successfully complete the development of, and obtain the regulatory and marketing approvals necessary to commercialize, one or
more of its product candidates. Neither Valtech nor the combined company can predict when it will begin generating revenue from product sales, as this depends heavily on Valtechs success in many areas, including but not limited to:
||attracting, hiring and retaining qualified personnel; |
||completing nonclinical and clinical development of Valtechs product candidates; |
||developing and testing of Valtechs product designs; |
||obtaining regulatory and marketing approvals for product candidates for which Valtech has completed clinical studies; |
||developing a sustainable and scalable manufacturing process for any approved product candidates and establishing and maintaining supply and manufacturing relationships with third parties that can process and provide
adequate (in amount and quality) products to support clinical development and the market demand for Valtechs product candidates, if approved; |
||launching and commercializing product candidates for which Valtech obtains regulatory and marketing approval, either directly or with collaboration partners or distributors; |
||obtaining adequate third-party coverage and reimbursements for Valtechs products; |
||obtaining market acceptance of Valtechs product candidates as viable treatment options; |
||addressing any competing technological and market developments; |
||identifying, assessing and developing (or acquiring/in-licensing) new product candidates; |
||negotiating favorable terms in any collaboration, licensing or other arrangements into which we may enter; and |
||maintaining, protecting and expanding Valtechs portfolio of intellectual property rights, including patents, trade secrets and know-how. |
Even if the product candidates that Valtech develops is approved for commercial sale, it anticipates incurring significant costs to
commercialize Valtechs products. Valtechs expenses could increase beyond expectations if Valtech is required by the U.S. Food and Drug Administration, the European Medicines Agency, other regulatory agencies, domestic or foreign, or by
any unfavorable outcomes in intellectual property litigation filed against Valtech, to change Valtechs manufacturing processes or to perform clinical, nonclinical or other types of studies in addition to those that Valtech currently
anticipates. If the market for Valtechs product candidates (or Valtechs share of that market) is not as significant as expected, the indication approved by regulatory authorities is narrower than expected or the reasonably accepted
population for treatment is narrowed by competition, physician choice or treatment guidelines, Valtech may not generate significant revenue from sales of such products, even if approved. If Valtech is unable to successfully complete development and
obtain regulatory approval for Valtechs product candidates, particularly Cardioband and Cardiovalve, Valtechs future business and the business of the combined company may suffer. Additionally, if Valtech is not able to generate revenue
from the sale of any approved products, Valtech and the combined company may never become profitable.
Claims that Valtechs
current or future products infringe or misappropriate the proprietary rights of others could adversely affect Valtech or the combined companys ability to sell those products and cause Valtech or the combined company
to incur additional costs.
Substantial litigation over intellectual property rights exists in the medical device industry.
HeartWare and Valtech expect that Valtech could be increasingly subject to third-party infringement claims as its revenue increases, the number of technology holders grows and the functionality of products and technology in different industry
segments overlaps. Third parties may currently have, or may eventually be issued, patents on which Valtechs current or future products or technologies may allegedly infringe.
There can be no certainty that litigation will not arise in relation to third party intellectual property or, if it does arise, whether or not
it will be determined in a manner which is favorable to Valtech. Any litigation, regardless of its outcome, would likely result in the expenditure of significant financial resources and the diversion of managements time and resources. In
addition, litigation in which Valtech is accused of infringement may cause negative publicity, adversely impact prospective customers, cause product shipment delays, prohibit Valtech and the combined company from manufacturing, marketing or selling
Valtechs current or future products, require Valtech to develop non-infringing technology, make substantial payments to third parties or enter into royalty or license agreements, which may not be available on acceptable terms or at all. If a
successful claim of infringement were made against Valtech and Valtech could not develop non-infringing technology or license the infringed or similar technology on a timely and cost-effective basis, the expected future revenue of Valtech or the
combined company may decrease substantially and Valtech or the combined company could be exposed to significant liability. A court could enter orders that temporarily, preliminarily or permanently enjoin Valtech or Valtechs customers from
making, using, selling, offering to sell or importing Valtechs current or future products, or could enter an order mandating that we undertake certain remedial activities. Claims that Valtech has misappropriated the confidential information or
trade secrets of third parties could have a similar negative impact on Valtechs reputation, business, financial condition or results of operations.
If Valtech is unable to commence or complete successfully its clinical trials, or if it
experiences significant delays in the successful commencement or completion of its clinical trials, Valtechs ability to obtain regulatory approval to commercialize its products, and its ability to generate revenue, will be materially
Regulatory approvals to sell Valtechs existing and future products typically require clinical trials,
which can be time consuming, unpredictable and expensive. Significant technical, bench and preclinical testing may be required prior to submitting for regulatory authorization to commence a clinical trial. The cost, timing and outcome of any of
these trials or testing may be unfavorable or may be insufficient to obtain the required approvals.
Completion of any of Valtechs
clinical trials could be delayed or adverse events during a trial could cause Valtech to amend, repeat or terminate the trial. If this were to happen, Valtechs costs associated with the trial will increase, and it will take Valtech longer to
obtain regulatory approvals and to commercialize the product, or Valtech may never obtain regulatory approvals. Valtechs clinical trials may also be suspended or terminated at any time by regulatory authorities, the data safety and monitoring
board, site investigational review boards, or by Valtech including during the closing stages of enrollment of the trial and the subsequent patient data follow-up period in the event that, for example, there should be an unacceptable level of adverse
clinical events. Any failure or significant delay in completing clinical trials for Valtechs products may materially harm Valtechs or the combined companys financial results and the commercial prospects for Valtechs products.
The completion of any of Valtechs clinical trials could be substantially delayed or prevented by several factors, including: slower
than expected rates of patient recruitment and enrollment, including as a result of study inclusion and exclusion criteria; Valtechs competitors undertaking similar clinical trials at the same time as Valtech, or having functionally comparable
products that have received approval for sale; physicians or patients preferring to use approved devices or other experimental treatments or devices rather than Valtechs devices; prevalence and severity of adverse events, such as thrombus or
stroke rates, and other unforeseen safety issues; and governmental and regulatory delays or changes in regulatory requirements, policies or guidelines.
If Valtech fails to protect its intellectual
property rights, its competitors may take advantage of its ideas and compete directly against Valtech or the combined company.
Valtechs success will depend to a significant degree on Valtechs ability to secure and protect intellectual property rights and to
enforce patent and trademark protections relating to Valtechs technology. From time to time, litigation may be advisable to protect Valtechs intellectual property position. However, these legal means afford only limited protection and
may not adequately protect Valtechs rights or permit it to gain or keep any competitive advantage. Any litigation in this regard could be costly, and it is possible that Valtech will not have sufficient resources to fully pursue litigation or
to protect Valtechs other intellectual property rights. Litigation could result in the rejection or invalidation of Valtechs existing and future patents. Any adverse outcome in litigation relating to the validity of Valtechs
patents, or any failure to pursue litigation or otherwise to protect Valtechs patent position, could have a material adverse effect on the future business, financial condition, results of operations and cash flows of Valtech or the combined
company. Also, even if Valtech prevails in litigation, the litigation would be costly in terms of management distraction as well as in terms of cash resources.
Consolidation in the health care industry could have an adverse effect on Valtechs expected revenues and results of operations.
Many health care industry companies, including health care systems, are consolidating to create new companies with greater market
power. As the health care industry consolidates, competition to provide goods and services to industry participants will become more intense. These industry participants may try to use their market power to negotiate price concessions or reductions
for medical devices that Valtech plans to produce and sell.
The continuing development of many of Valtechs products depends upon Valtech maintaining
strong relationships with health care professionals. Notably, consolidation has occurred recently in the structural heart space as strategic players have acquired new technologies. Most of these players have greater financial resources and larger
employee pools than Holdco and Valtech.
The research, development, marketing and sales of many of Valtechs proposed products is
dependent upon Valtech maintaining working relationships with health care professionals. Valtech relies on these professionals to provide Valtech with knowledge and experience regarding the development, marketing and planned sale of Valtechs
products. Health care professionals assist Valtech as researchers, marketing and product consultants, inventors and public speakers. If Valtech is unable to maintain Valtechs strong relationships with these professionals and continue to
receive their advice and input, the development and marketing of Valtechs planned products could suffer, which could have a material adverse effect on Valtechs future earnings and financial condition.
Valtechs products are the subject of clinical trials, the results of which may be unfavorable, or perceived as unfavorable, and
could have a material adverse effect on Valtechs future business, financial condition, and results of operations.
As a part
of the regulatory process of obtaining marketing clearance or approval for new products and modifications to or new indications for existing products, Valtech conducts and participates in numerous clinical trials with a variety of study designs,
patient populations and trial endpoints. Unfavorable or inconsistent clinical data from existing or future clinical trials, or the markets or a regulatory bodys perception of this clinical data, may adversely impact Valtechs
ability to obtain product clearances or approvals in some or all geographies. Success in pre-clinical testing and early clinical trials does not always ensure that later clinical trials will be successful, and Valtech cannot be sure that later
trials will replicate the results of prior trials and studies. Any delay or termination of Valtechs clinical trials will delay the filing of product submissions and, ultimately, Valtechs ability to commercialize new products or product
modifications. It is also possible that patients enrolled in clinical trials will experience adverse side effects that are not currently part of the products profile, which could inhibit further marketing and development of such products.
Valtechs success is related to managements performance.
To a large extent, Valtechs success is predicated on the ability of its management team to effectively manage Valtech and the individual
businesses that it operates. The loss of the services of a senior manager or other key employee without an adequate replacement or the inability to attract and retain new and qualified resources could have a negative impact on Valtechs
business outlook, activities and operating and financial results.
Valtechs business is dependent on its relationship with
Valtech currently manufactures its products at its own facilities or through subcontractors located in various
countries, purchasing the components and materials used to manufacture these products from various suppliers. However, specific components and raw materials are purchased from primary or main suppliers (or in some cases, a single supplier) for
reasons related to quality assurance, cost-effectiveness and availability. While Valtech works closely with its suppliers to expand capacity and ensure supply continuity, it cannot guarantee that its efforts will always be successful. Moreover, due
to the strict standards and regulations governing the manufacture and marketing of its products, Valtech may not be able to quickly locate new supply sources in response to a supply reduction or interruption, with negative effects on its ability to
manufacture its products effectively and in a timely fashion.
Natural disasters, war, acts of terrorism and other events could adversely affect
Valtechs future revenues and operating income.
Natural disasters (including pandemics), war, terrorism, labor disruptions
and international conflicts, and actions taken by governmental entities or by Valtechs potential customers or suppliers in response to such events, could cause significant economic disruption and political and social instability in the areas
in which Valtech operates.
Valtech needs to attract and retain key employees to be competitive.
Valtechs ability to compete effectively depends upon its ability to attract and retain executives and other key employees, including
people in technical, marketing, sales and research positions. Competition for experienced employees, particularly for persons with specialized skills, can be intense. Valtechs ability to recruit such talent will depend on a number of factors,
including compensation and benefits, work location and work environment. If Valtech cannot effectively recruit and retain qualified executives and employees, its business could be adversely affected.
Valtech is incorporated under the laws of, and its principal offices are located in, the State of Israel and therefore its business
operations may be harmed by adverse political, economic and military conditions affecting Israel.
Valtech is incorporated under
the laws of, and its principal executive offices and research and development facilities are located in, the State of Israel. In addition, some of its subcontractors and suppliers are located in Israel. Accordingly, political, economic and military
conditions in Israel may directly affect its business.
In addition, a change in the security and political situation in Israel could have
a material adverse effect on Valtechs business. Since the establishment of the State of Israel in 1948, a number of armed conflicts have occurred between Israel and its Arab neighbors. In recent years, these have included hostilities between
Israel and Hezbollah in Lebanon, and Israel and Hamas in the Gaza Strip, both of which resulted in rockets being fired into Israel causing casualties and disruption of economic activities. In addition, Israel faces internal uprisings resulting in
organized and individual violent behavior and external threats. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its present trading partners could affect adversely Valtechs operations. Ongoing
and increased hostilities, the interruption or curtailment of trade between Israel and its trading partners or other Israeli political or economic factors could harm Valtechs operations and product development and cause its sales to decrease.
Civil unrest in various countries in the Middle East and North Africa are affecting the political stability of those countries. Such
instability may lead to deterioration in the political and trade relationships that exist between the State of Israel and these countries. Furthermore, several countries, principally in the Middle East, restrict doing business with Israel and
Israeli companies, and additional countries may impose restrictions on doing business with Israel and Israeli companies whether as a result of hostilities in the region or otherwise. In addition, any hostilities involving Israel could have a
material adverse effect on Valtechs facilities. Similarly, Israeli corporations are limited in conducting business with entities from some countries in the region. These restrictive laws and policies may seriously limit Valtechs ability,
and that of the combined company, to sell its products in these countries.
Valtechs property insurance does not cover losses that
may occur as a result of an event associated with the security situation in the Middle East. However, the Israeli government is currently committed to covering the actual value of physical damages (but not business interruption costs) that are
caused by terrorist attacks or acts of war, Valtech cannot assure you that this government coverage will be maintained, or if maintained, will be sufficient to compensate Valtech fully for damages incurred. Any losses or damages incurred by Valtech
could have a material adverse effect on its business. Any armed conflicts or political instability in the region would likely negatively affect business conditions generally and could harm Valtechs results of operations.
In the past, Valtech received Israeli government grants for certain of its research and
development activities. The terms of those grants may require Valtech to satisfy specified conditions in order to manufacture products and transfer technologies outside of Israel. Valtech may be required to pay penalties in addition to repayment of
Valtechs research and development efforts were financed in part, through grants that Valtech received from the
OCS. Notwithstanding the full repayment of these OCS grants, Valtech nevertheless must continue to comply with the requirements of the Israeli Law for the Encouragement of Industrial Research and Development, 1984, and related regulations. When a
company develops know-how, technology or products using OCS grants, the transfer of such know-how, and the transfer of manufacturing or manufacturing rights of such products, technologies or know-how outside of Israel is restricted without the prior
approval of the OCS. Therefore, if aspects of Valtechs technologies are deemed to have been developed with OCS funding, the discretionary approval of an OCS committee would be required for any transfer to third parties outside of Israel of
know-how or manufacturing rights related to those aspects of such technologies. Furthermore, the OCS may impose certain conditions on any arrangement under which it permits Valtech to transfer technology or development out of Israel. Valtech may not
receive those approvals or Valtech may find these conditions unfavorable.
Valtech is subject to risks arising from currency
exchange rates, which could increase its costs and may have a negative effect on its results of operations.
Inflation in Israel or
Europe or a weakening of the U.S. dollar against other currencies may have the effect of increasing the U.S. dollar cost of Valtechs operations in that jurisdiction, which may have a material adverse impact on its results of
operations. If the U.S. dollar declines in value in relation to one or more currencies, it may become more expensive to fund Valtechs operations in the jurisdictions that use those other currencies.
In the future, Valtech expects that a substantial portion of its revenues will be generated in U.S. Dollars and Euros. Valtechs
financial records are maintained in New Israel Shekels (NIS), which is the functional currency of Valtech. As a result, Valtechs financial results might be affected by fluctuations in the exchange rates of currencies in the
countries in which Valtechs products may be sold.
Currency exchange controls may restrict Valtechs ability to utilize
our cash flows.
Valtech intends to receive proceeds from sales of any prospective product Valtech may develop and also to pay its
operational costs and expenses in U.S. Dollars, Euros and other foreign currencies. However, Valtech may be subject to existing or future rules and regulations on currency conversion. In 1998, the Israeli currency control regulations were
liberalized significantly, and there are currently no currency controls in place. Legislation remains in effect, however, pursuant to which such currency controls could be imposed in Israel by administrative action at any time. Valtech cannot assure
you that such controls will not be reinstated, and if reinstated, would not have an adverse effect on Valtechs operations.
may be difficult to enforce a U.S. judgment against Valtech, Valtech executive officers and directors and some of the experts named in this proxy statement/prospectus, or assert U.S. securities law claims in Israel.
It may be difficult to effect service of process on some or all of Valtechs executive officers, directors and the experts named in this
proxy statement/prospectus. Furthermore, much of Valtechs assets and some of the assets of Valtechs executive officers and directors and some of the experts named in this proxy statement/prospectus are located outside the United States.
Therefore, a judgment obtained against Valtech or any of Valtechs executive officers or directors in the United States, including one based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the
United States and may not be enforced by an Israeli court. It also may be difficult to assert U.S. securities law claims in original actions instituted in Israel.
Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws
reasoning that Israel is not the most appropriate forum in which to bring such a claim. Even if an Israeli court agrees to hear such a claim, it may determine that Israeli, and not U.S., law is applicable to the claim. Under Israeli law, if U.S. law
is found to be applicable to such a claim, the content of applicable U.S. law must be proved as a fact by expert witness, which can be a time-consuming and costly process, and certain matters of procedure would be governed by Israeli law. There is
little binding case law in Israel addressing these matters.
Furthermore, Israeli courts might not enforce judgments rendered outside
Israel, which may make it difficult to collect on judgments rendered against Valtech.
It is recommended that each stockholder or
shareholder consult his or her own tax advisor as to the tax consequences of holding shares in, and receiving dividends from, Holdco. Holdco does not presently anticipate distributing dividends.