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Defeating
Complex Calcium
2012 AnnuAl RepoRt
Using siMPLE PHYsiCs
Peripheral Arterial Disease (PAD) affects 8 million to 12 million
Americans. When treating it, physicians face a common, under-diagnosed
“WE SAVE MONEY FOR
condition and complicating factor — calcium. Cardiovascular Systems
PHYSICIANS AND PATIENTS
has developed a clinically proven, orbital atherectomy technology that
addresses this large and unmet need. Our electric-drive Stealth 360°, and
pneumatic-driven predecessor Diamondback 360°, Orbital Atherectomy
BY AVOIDING COMPLICATIONS,
REDUCING EXPENSIVE LAB TIME
Systems are FDA-cleared to treat calcified and fibrotic plaque in arterial
AND LOWERING ADDED COSTS
vessels throughout the leg — and they’re highly effective. We’re also
in the final phase of a clinical trial to approve our technology for use in
FOR ANCILLARY TECHNOLOGY
treating calcified coronary arteries. Coronary Artery Disease (CAD)
SUCH AS STENTS.”
affects 16 million Americans. Using simple physics, we’re defeating
complex calcium.
David L. Martin, CSI President
and Chief Executive Officer
$3.5 BILLION
100,000
225%
Combined PAD
and CAD
market opportunity.
Nearly 100,000 CSI
PAD devices have been
sold life to date.
Stealth 360° revenue
grew over 225% for the year,
35% quarterly average.
AboUt CArdiovAsCULAr sYstEMs, inC.
Cardiovascular Systems, Inc., based in St. Paul, Minn.,
in March 2011. The Stealth 360° has been rapidly adopted
is a medical device company focused on developing and
and is expected to accelerate the growth of orbital
commercializing innovative solutions for treating peripheral
atherectomy in the future. To date, nearly 100,000 PAD
and coronary vascular disease. The company’s electric-drive
orbital atherectomy devices have been sold to leading
Stealth 360°, and pneumatic-driven predecessor Diamondback
institutions across the United States. CSI is also in the final
360°, Orbital Atherectomy Systems treat calcified and fibrotic
phase of its ORBIT II Investigational Device Exemption clinical
plaque in arterial vessels throughout the leg in a few minutes of
trial to evaluate the safety and effectiveness of its orbital
treatment time*, and address many of the limitations associated
technology in treating coronary arteries. The coronary system
with existing surgical, catheter and pharmacological treatment
is limited by federal law to investigational use and is currently
alternatives. The U.S. FDA granted 510(k) clearance for the use
not commercially available in the United States.
of the Diamondback 360° in August 2007 and Stealth 360°
*Actual treatment times may vary; CSI studies show an average treatment time of less than 2 minutes.
TO OUR SHAREHOLDERS
We enter fiscal 2013 with momentum. With rising revenues, a large market opportunity and the potential to
expand into the coronary space, we’re backed by a wealth of clinical data that supports our ability to treat
arterial disease and, in particular, disease complicated by calcium.
The prevalence of arterial calcium is vastly underestimated in medicine today. Calcium, even if it isn’t visible
through angiography, is present in about 65 percent of the 2.5 million people diagnosed annually with
peripheral arterial disease (PAD).
The problem is profound. It leads to poor outcomes when traditional balloon and stent therapies are used —
including dissection, vessel wall trauma and stent fracture. Moreover, calcified lesions result in higher
treatment costs. Also, with obesity and diabetes on the rise, arterial calcium is increasing in prevalence.
Successful treatment of calcified lesions requires a different approach than standard balloon or stent therapies.
Our technology is different and effective. It utilizes a scientifically proven orbital mechanism of action that
protects healthy vessel tissue, while removing even the most difficult-to-treat calcified plaque throughout
the leg. Moreover, it’s cost effective. We save money for physicians and patients by avoiding complications,
reducing expensive lab time and lowering added costs for ancillary technology such as stents. In addition,
our studies indicate that CSI orbital atherectomy avoids early restenosis and thus the cost for reintervention.
Our technology’s safety, effectiveness and economic benefits
position it as the primary therapy for treating peripheral
REVENUE (in millions)
atherosclerotic arterial disease.
The rapid adoption of CSI’s next-generation Stealth 360° and the
company’s high growth in the rapidly emerging office-based lab
market helped drive success in fiscal 2012. In addition, we made
significant progress on a number of other fronts, including medical
education and clinical research — and we achieved important
milestones in preparing for a coronary market application.
2010
2011
2012
GROSS MARGIN
2010
2011
2012
$64.8
$78.8
$82.5
77%
79%
77%
David L. Martin
President and
Chief Executive Officer
Glen D. Nelson, MD
Chairman of the Board
STEALTH 360° REVENUE (by quarter)
Q4 11
Q1 12
Q2 12
Q3 12
Q4 12
$5.3M
$7.6M
$11.7
$14.4
$17.5
STEALTH 360° CUSTOMERS (by quarter)
106
219
Q4 11
Q1 12
Q2 12
Q3 12
Q4 12
396
532
675
Cardiovascular Systems, Inc. | 2012 Annual Report 01
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9/14/12 6:12 PM
PHySICIAnS EmbRACE STEALTH 360°
Increasingly, the medical community is becoming aware of the difficulty and high cost of treating
arterial calcium. With that comes recognition that our technology is successfully addressing this serious
problem. The next-generation Stealth 360° is easy for physicians to use, gives them complete control of
device operation and has a high degree of safety in both hospital and office settings.
The simplified and improved Stealth 360° has only six crown configurations versus 13 configurations for
its predecessor, the Diamondback 360°, which simplifies crown selection and reduces the amount of
inventory the customer needs to have on hand. Reduced inventories and cannibalization of our
Diamondback 360° sales limited revenue growth during fiscal 2012; however, as physicians continue to
adopt Stealth 360° and perform more procedures, we expect higher usage volumes to drive increased
revenue growth in fiscal 2013 and beyond.
Most CSI customers have now converted to the new system, which we launched just over one year ago.
During fiscal 2012, our Stealth 360° customer base grew from 106 accounts to nearly 700 accounts.
Stealth comprised 86 percent of total device revenues in our fourth quarter.
In the marketplace many physicians are moving their practices from hospitals to office-based labs.
As this trend continues, we expect it to broaden access to treatment for the almost 2.5 million people
diagnosed annually with PAD. As a result, CSI’s office-based lab revenue grew substantially in fiscal
2012. We believe that the strength of our technology — supported by compelling clinical data — will
lead to attractive long-term growth in both hospitals and office-based lab settings.
ORbIT II COROnARy TRIAL In FInAL PHASE
During fiscal 2012, CSI made substantial progress in the ORBIT II trial, evaluating the safety and
effectiveness of CSI’s orbital technology in treating severely calcified coronary arteries. We’re now in
the final phase of enrollment required to approve our technology for coronary use. CSI also received
approval from the FDA to include our next-generation electric orbital atherectomy system
in the ORBIT II trial. The system is a simpler design that gives physicians
complete control of device operation and is the preferred device for
commercialization. Including this system in the ORBIT II trial will
CSI’S orbItal teChnology
98%
Freedom from
flow-limiting
dissection1
94%
Freedom from
stenting1
99%
Freedom from
perforation1
93%
Freedom from
reintervention at
12 months1
1 CONFIRM II, CONFIRM III, CALCIUM 360 and COMPLIANCE 360 studies. CSI data on file.
02 Cardiovascular Systems, Inc. | 2012 Annual Report
192933_Guts.indd 2
9/14/12 6:12 PM
save millions of dollars of clinical trial expense and provide our next-
generation technology to patients and their physicians much sooner than
CSI’S mARkET OPPORTUnITy
with a separate trial.
At the end of August, ORBIT II had over 360 patients enrolled out of
a range of 429 to 479 allowed in the trial. We expect to complete
enrollment during the fourth quarter of calendar 2012, which may allow
commercialization by the end of calendar 2013, subject to approval
and timing of approval by the FDA.
CSI’s technology has an established track record of safety and
effectiveness in treating small calcified lesions. In addition, CSI’s
ORBIT I coronary feasibility study demonstrated safety, procedural
success and compelling long-term clinical outcomes in treating calcified
lesions in coronary arteries. Based on that success, we believe that our
orbital technology is well-suited for removing calcific and fibrocalcific
plaque in coronary lesions. A coronary application would open up
a large, underserved market opportunity for CSI, estimated to exceed
$1.5 billion annually.
DATA COnFIRmS ORbITAL TECHnOLOgy’S
SAFETy AnD EFFECTIvEnESS
With 13 peripheral clinical trials studying nearly 4,000 patients
completed, we are an industry leader in clinical data support for our
physician customers. During fiscal 2012, presentations of clinical data
at key conferences, including Transcatheter Cardiovascular Therapeutics
(TCT), American College of Cardiology (ACC), Society for Interventional
Radiology (SIR), New Cardiovascular Horizons (NCVH) and C3, among
others, continued to demonstrate the proven safety and effectiveness of
CSI’s orbital technology in treating patients with PAD. Of particular note:
Twelve-month data from CSI’s COMPLIANCE 360° study of calcified
above-the-knee lesions demonstrated that avoiding stents and reducing
restenosis lowers cost. The cost effectiveness of the CSI orbital
atherectomy system group versus the percutaneous transluminal
angioplasty (PTA) group at six months was substantial. The PTA arm
required bailout stenting in 84 percent of the procedures, compared to
8 percent for orbital atherectomy.
12 MIllIon
people in U.S. with
lower extremity PAD
700,000
PAD procedures annually,
65% with calcified lesions
$2 bIllIon
PAD market opportunity
and growing
16 MIllIon
people in U.S. with CAD
1.4 MIllIon
CAD procedures annually, nearly
40% with calcified lesions
$1.5 bIllIon+2
Potential coronary
market opportunity
2 CSI’s ORBIT II Investigational Device Exemption
clinical trial is evaluating the safety and effectiveness
of its orbital technology in treating coronary arteries.
The coronary system is limited by federal law to
investigational use and is currently not commercially
available in the United States.
Cardiovascular Systems, Inc. | 2012 Annual Report 03
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9/14/12 6:12 PM
Twelve-month data from our CALCIUM 360° study of calcified, below-the-knee lesions showed
significantly favorable outcomes of the orbital atherectomy system group versus PTA alone,
including freedom from death and freedom from major serious adverse events (major amputation,
death and target lesion revascularization/target vessel revascularization) of 93 percent versus
58 percent.
Our CONFIRM Registry Series, three studies of over 3,100 real-world patients, with no
exclusion criteria, showed predictable and reproducible results of orbital atherectomy in calcified
peripheral arterial disease. Results demonstrated excellent acute safety and procedural efficacy
(98 percent freedom from flow-limiting dissection, 94 percent freedom from stenting, 99 percent
freedom from perforation and 90 percent freedom from stenosis immediately post procedure).
Two studies of orbital atherectomy in the office-based lab setting showed similar favorable
results when used in the physician’s office compared to the hospital, including high procedure
success and low complication rates that were comparable to the CONFIRM series results.
FInAnCIAl ReSultS
The strength of our Stealth 360° and clinical data are
catalysts for revenue growth. For fiscal 2012, after a slow
FISCAl 2013: FoCuS on DRIvIng
ACCeleRAteD gRowth
With unique products and a wealth of market opportunity,
first quarter affected by our product transition to Stealth
this is a very exciting time for CSI’s employees and
360° and initial surge of physicians leaving hospitals to
establish office-based labs, revenues rebounded in the
following quarters and rose to $82.5 million for the fiscal
shareholders. In fiscal 2013, investments in science, our
commercial organization and medical education should
accelerate and drive our next stage of growth in the PAD
year, up 5 percent from the prior year. The percentage
market, and prepare us for a large potential coronary
of revenues from reorders increased to 96 percent —
market application.
reflecting a strong and loyal customer base.
While these strategies will increase operating expenses in
Fiscal 2012 gross margin remained strong at 77 percent,
even with higher initial costs associated with our product
the near term, we expect them to set the stage for
attractive revenue growth in 2013 and beyond and
transition and expansion of our manufacturing capacity to
profitability long term. We have a great future and look
meet future demand. Operating expenses rose 9 percent
forward to updating you on our progress.
as we continued to invest in our business to capitalize on
our large peripheral and coronary market opportunities
Sincerely,
and accelerate revenue growth in the future. Net loss
totaled $(16.8) million, or $(0.93) per common share,
versus $(11.1) million, or $(0.70) per common share, in
fiscal 2011. On an adjusted EBITDA basis, the loss was
$(8.4) million.3
In May, we raised approximately $15 million in a public
offering of common stock, resulting in a cash and cash
equivalent balance of $35.5 million at fiscal year end.
We will use the proceeds to accelerate growth in the
company’s existing PAD business and prepare for our
coronary application.
David L. Martin
President and Chief Executive Officer
G.D. Nelson, MD
Chairman of the Board
August 30, 2012
3For a reconciliation of the non-GAAP financial measure referred to as adjusted EBITDA, please refer to the table on page 41 of Form 10-K.
04 Cardiovascular Systems, Inc. | 2012 Annual Report
192933_Guts_B.indd 4
9/18/12 6:01 PM
exeCutive oFFiCers and
advisors
David L. Martin
President and Chief Executive Officer
Laurence L. Betterley
Chief Financial Officer
James E. Flaherty
Chief Administrative Officer
Kevin J. Kenny
Executive Vice President,
Sales and Marketing
Paul Koehn
Vice President, Manufacturing,
Quality and Operations
Robert J. Thatcher
Executive Vice President
Nabil Dib, MD, MSc, FACC
Medical Advisor
Headquarters
Cardiovascular Systems, Inc.
651 Campus Drive
St. Paul, Minnesota 55112
Board oF direCtors
Glen D. Nelson, MD
Chairman
Chairman, GDN Holdings
Vice Chairman (retired)
Medtronic, Inc.
Brent Blackey
President and Chief Operating Officer
Holiday Companies
Edward Brown
Senior Advisor
Health Evolution Partners
John Friedman
Managing Partner
Easton Capital Investment
Augustine Lawlor
Managing Partner
HealthCare Ventures
Leslie L. Trigg
Executive-in-Residence
Warburg Pincus
David L. Martin
President and Chief Executive Officer
Cardiovascular Systems, Inc.
transFer agent
and registrar
For change of name, address, or to
replace lost stock certificates, contact:
American Stock Transfer &
Trust Company, LLC
6201 15th Avenue
Brooklyn, New York 11219
info@amstock.com
www.amstock.com
800.937.5449
ind ependent
aCCountants
PricewaterhouseCoopers LLP
Minneapolis, Minnesota
Corporate Counsel
Fredrikson & Byron, P.A.
Minneapolis, Minnesota
investor relations
Padilla Speer Beardsley Inc.
Minneapolis, Minnesota
annual meeting
The annual meeting of the shareholders
of Cardiovascular Systems, Inc.,
will be held on October 31, 2012,
at 10:00 a.m. CT at:
Cardiovascular Systems, Inc.
651 Campus Drive
St. Paul, Minnesota 55112
Forward-looking statement
Certain statements in this annual report are forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 and are provided under the protection of the safe harbor for forward-looking statements
provided by that Act. For example, statements in this document regarding (i) CSI’s expectations regarding Stealth 360°
and acceleration of the growth of orbital atherectomy; (ii) the increasing prevalence of arterial calcium in the general
public; (iii) higher usage volumes for the Stealth 360° and increased revenue growth in fiscal 2013 and beyond;
(iv) long-term growth in both hospitals and office-based lab settings; (v) clinical trial expense and timing expectations;
(vi) commercialization timing expectations; (vii) the benefits of and market opportunity for a coronary application;
(viii) use of proceeds from CSI’s May 2012 public offering; and (ix) near-term increases in operating expenses and
long-term profitability expectations, are forward-looking statements. These statements involve risks and uncertainties
which could cause results to differ materially from those projected, including but not limited to the potential for
unanticipated delays in enrolling medical centers and patients for clinical trials; dependence on market growth; the
reluctance of physicians to accept new products; the effectiveness of the Stealth 360°; actual clinical trial results;
the impact of competitive products and pricing; the difficulty to successfully manage operating costs; fluctuations in
quarterly results; FDA clearances and approvals; approval of products for reimbursement and the level of reimbursement;
general economic conditions and other factors detailed from time to time in CSI’s SEC reports, including its most recent
annual report on Form 10-K and subsequent quarterly reports on Form 10-Q. CSI encourages you to consider all of these
risks, uncertainties and other factors carefully in evaluating the forward-looking statements contained in this annual
report. As a result of these matters, changes in facts, assumptions not being realized or other circumstances, CSI’s
actual results may differ materially from the expected results discussed in the forward-looking statements contained in
this annual report. The forward-looking statements made in this annual report are made only as of the date of this report
and CSI undertakes no obligation to update them to reflect subsequent events or circumstances.
Cardiovascular Systems, Inc.
651 Campus Drive
St. Paul, Minnesota 55112
csi360.com
t: 651.259.1600
877.CSI.0360
F: 651.259.1696
PRODUCT DISCLOSURE
The Diamondback® Orbital Atherectomy System is indicated for use as
therapy in patients with occlusive atherosclerotic disease in peripheral
arteries and stenotic material from artificial arteriovenous dialysis fistulae.
The system is contraindicated for use in coronary arteries, bypass grafts,
stents or where thrombus or dissections are present. Although the incidence
of adverse events is rare, potential events that can occur with atherectomy
include: pain, hypotension, CVA/TIA, death, dissection, perforation, distal
embolization, thrombus formation, hematuria, abrupt or acute vessel
closure or arterial spasm.
EN-1068.A 1012