CSI IS
LEADING
THE
WAY...
AN ORBITAL EVOLUTION
2015 Annual Report
... WITH ORBITAL
ATHERECTOMY
Cardiovascular Systems, Inc. (CSI)
is leading the way in developing and
commercializing innovative
solutions for treating peripheral and
coronary vascular disease. Our
primary focus is helping physicians
conquer even the most difficult
disease states, including calcium,
given the complications it presents
for the millions who suffer from
peripheral artery disease (PAD) and
coronary artery disease (CAD).
AN ORBITAL EVOLUTION
ABOUT CSI
We offer evidence-based treatment
for calcified lesions. Even more
important, we’re committed to
clinical rigor, constant innovation
and a defining drive to set the
standard for safe, effective and
economical medical devices
that improve patient outcomes.
30+%
revenue growth
revenue growth
for fiscal 2014
for fiscal 2014
and 2015
and 2015
Based in St. Paul, Minn., CSI develops
and manufactures Orbital Atherectomy
Systems (OAS) that, in a few minutes of
time, treat calcified and fibrotic plaque in
arterial vessels throughout the leg and
heart. Our products address many of the
limitations associated with existing
surgical, catheter and pharmacological
treatment alternatives. CSI’s technology
restores blood flow from hearts-to-heels
and is always striving to help improve
patient lives. The U.S. FDA granted
510(k) clearance for the Diamondback®
Peripheral Orbital Atherectomy System
in August 2007. In October 2013, the
company received FDA approval for
the Diamondback Coronary Orbital
Atherectomy System. Through fiscal
2015, nearly 210,000 of CSI’s orbital
atherectomy devices have been sold to
leading institutions across the United States.
And we’re just getting started.
A FIERCE COMMITMENT TO
IMPROVING PATIENT OUTCOMES
As many as 18 million Americans, most over age 65, suffer from PAD, which is caused by the
accumulation of plaque in peripheral arteries (commonly the pelvis or leg) reducing blood flow.
Symptoms include leg pain when walking or at rest. If PAD progresses to critical limb ischemia
(CLI), the most severe form of PAD, the blood vessels become dangerously narrow and can
result in extreme pain, loss of a pulse in feet or legs, wounds that will not heal and possibly
limb amputation. CAD is a life-threatening condition
afflicting 16.3 million Americans, and a leading cause
of death in men and women in the United States. CAD
occurs when plaque builds up on the walls of arteries
that supply blood to the heart. Significant arterial
calcium in plaque on artery walls contributes to
poor patient outcomes, higher treatment costs
and suboptimal results. CSI is fiercely committed
Turn the page to read how our Diamondback
Coronary Orbital Atherectomy System helped
to changing that and improving patient outcomes.
Jim Collis get his life back.
Orbital atherectomy, along with the
stent placement, gave Jim Collis
back his marriage and his life.
TREATMENT WITH PURPOSE: A Patient Story
JIM COLLIS AND DR. MERRILL KROLICK
A wife knows when something is wrong. Pam Collis
at Largo in Florida, decided to try orbital atherectomy, a
certainly did.
She and her husband, Jim Collis, had been together through
Jim’s long military contracting career. Once a manager of
shipbuilding and repair for the U.S. Navy, Jim was a vibrant
man even after he retired. But he had a heart problem that
procedure that reduces coronary plaque on the artery wall.
The procedure took under an hour and was done without general
anesthesia, through a small incision in the groin. Once the doctor
had treated the calcium, he placed a stent to keep the circumflex
artery open and restore blood flow to the heart.
required bypass and, after recovering from surgery, Jim felt
Jim was under local anesthesia during the procedure, feeling
better—for a while.
However, over time, different, very troubling symptoms
began. Jim grew short of breath. He was acting “weirdly,”
according to his wife, complaining of mild chest pain any
time he was active. For the first time ever, he tired easily.
Pam was concerned.
the effect as his circumflex artery was modified from a closed-up
tunnel with calcified blockage to a clear passage with healthy
blood flow. After the procedure was done, Jim looked up at his
surgeon and said, ‘‘What did you do to me, doc? I feel like I got
a heart transplant.”
Over the next days and weeks, his condition only improved. Jim
So she urged her husband to seek further treatment. His
was able to walk, then participate in more strenuous physical
doctors tried medications and then angioplasty. But the
activities. Gone was the shortness of breath and chest pain. He
drugs didn’t help and surgeons were unable to treat the
had more energy than he’d had in a decade. He felt like his life
severely calcified plaque that had built up in Jim’s arteries.
had been restored.
That calcium was preventing healthy oxygenated blood
from reaching his heart.
Later, Pam called Dr. Krolick to thank him. Her husband was
healthy and strong again. They could travel and go on long walks
That was when Jim’s physician, Dr. Merrill Krolick, a board-
together. Orbital atherectomy, along with the stent placement,
certified interventional cardiologist at The Heart Institute
she said, had given them back their marriage and their life.
*Individual patient results may vary
OPENING UP POSSIBILITY:
A Sales Representative’s Perspective JESSICA BINNIE, CSI
Jessica Binnie has always been drawn to the healthcare
With Jessica’s counsel, the coronary atherectomy
industry. In college, she considered pre-med before
procedure was fast and successful. Jim experienced
deciding to study education and communication. When
immediate relief and was so pleased with the results
she learned about an opportunity to be a CSI sales
that, at his follow-up appointment, he asked to talk with
representative, a position that would require her to teach
Jessica directly to thank her.
physicians about CSI’s orbital atherectomy technology,
she jumped at the chance to combine her passion for
healthcare with her background in education.
“He spoke to me on the phone for 20 minutes, telling
me how much of an impact this procedure had on him
and how it helped him get his life back,” Binnie said.
Jessica began working as a sales representative for CSI
*Individual patient results may vary
in 2009, selling CSI’s peripheral atherectomy devices
and teaching physicians to use it in Clearwater and
Largo, Fla. That’s how she first met Dr. Merrill Krolick
five and a half years ago. Dr. Krolick embraced CSI’s
technology and its ability to sand away calcified plaque
in the peripheral arteries of his most challenging
patient cases.
Beginning in 2014, CSI began transitioning its sales
team from selling either coronary or peripheral products
to a dual franchise model, where representatives sell
both types of devices. Jessica was excited by the
educational opportunities it opened up for her
physician clients.
When she told Dr. Krolick about the Diamondback
Coronary Orbital Atherectomy System (OAS), he
immediately worked to become certified and
incorporate it into his practice. He became one of
the first physicians in the Tampa Bay area to adopt
the new technology. He knew several of his patients
would be ideal candidates for the coronary procedure.
Jim Collis was one of those patients. Once active, Jim
had suffered for years from angina and exhaustion due
to coronary artery disease, and traditional interventions
had failed him. Dr. Krolick felt that the Coronary OAS
could be Jim’s last chance at regaining his quality of life.
“He told me how much of an
impact this procedure had on
him and how it helped him get
his life back.” — Jessica Binnie
TO OUR STOCKHOLDERS,
In fiscal 2015, CSI continued to build on the success from
the prior year. On the top line, we delivered a 33 percent
gain over fiscal 2014, our second year in a row exceeding
30-plus percent growth. Moreover, we’ve positioned CSI
as the leader in peripheral and coronary atherectomy—
with effective systems backed by strong clinical data.
The patient populations we treat are large and underserved.
In the United States, there are four million patients with
critical limb ischemia, or CLI, largely caused by calcified
plaque. In addition, heart disease claims more than
600,000 lives in the United States each year. According
to estimates, significant arterial calcium is present in
nearly 40 percent of patients undergoing a percutaneous
coronary intervention (PCI). Calcium is an often
overlooked enemy of physicians, and the importance
of reducing it continues to gain mindshare in the
medical community.
The simple and powerful fact is that the Diamondback
360® devices deliver consistent, durable outcomes for
LETTER TO
STOCKHOLDERS
David L. Martin
President and
Chief Executive Officer
Scott Ward
Chairman of the Board
FINANCIAL HIGHLIGHTS For the fiscal year ended June 30
$181.5
$136.6
$103.9
78.2%
77.3%
76.5%
44,191
37,873
28,948
7,289
2013
2014
2015
2013
2014
2015
2013
2014
2015
2013
2014
2015
Revenue
(in millions)
Gross
Margin
Peripheral
Units Sold
Coronary
Units Sold
1,385
0
patients with calcified plaque. Our revenue gains in
sites in the groin or to treat the upper leg from access
fiscal 2014 and 2015 are evidence of this and
sites below the knee.
demonstrate our expansion of the vascular
Additionally, in July, we secured another FDA
interventional market by providing physicians with
clearance for our new ViperWire Advance® Peripheral
unique tools to treat patients who were previously
Guide Wire with Flex Tip for use with our Peripheral
difficult to treat.
CORONARY MOMENTUM BUILDS
OAS. The new guide wire provides physicians with
improved flexibility, navigation and ease of use—
particularly in hard-to-reach, tortuous vessels—when
According to the American Heart Association,
treating arterial calcium associated with PAD.
We believe the current CLI PAD market in the United
States represents a $12 billion opportunity.
Introducing new, innovative devices strengthens our
position and broadens our potential in this large,
underserved market.
“ CSI is committed
to helping physicians
successfully address
the most difficult
vascular disease states. ”
— David L. Martin, CEO
16.3 million people in the United States have been
diagnosed with CAD. According to estimates, significant
arterial calcium is present in nearly 40 percent of
patients undergoing a PCI. This translates into an
estimated $1.5 billion market opportunity. CSI’s
Coronary OAS is the only device approved to treat severe
coronary calcium.
Sales of Diamondback 360 Coronary OAS continued
to ramp in fiscal 2015, reaching $28.5 million. To
date, we’ve sold nearly 9,000 coronary devices, and
those numbers are building as physicians adopt our
technology. We expect strong coronary growth in fiscal
2016 with the completion of our sales force expansion
and dual franchise representative training.
On the coronary clinical science front, we made ongoing
progress during the year with our COAST study, and we
also released noteworthy two-year ORBIT II clinical data.
Both studies are detailed in the “Clinical Research”
section following this letter—which also contains
information on our peripheral studies.
FDA CLEARS NEW PERIPHERAL DEVICES
An estimated 18 million people in the United States have
PAD and nearly 4 million have CLI—the most severe form
of PAD. To help those critically ill patients, we continue
to develop enhancements to our product line to further
advance our leadership in treating calcified lesions. In
April, we received FDA clearance for a new, 145 cm 4
French 1.25 Solid Diamondback 360 Peripheral OAS,
an extension of our 60 cm 4 French product portfolio
that we began rolling out in calendar 2014. This new
clearance expands our minimally invasive product
portfolio with enhanced devices. Physicians now have the
ability to treat PAD below the knee through small access
ADOPTION DRIVES FINANCIAL RESULTS
Physicians’ rapid adoption of our Coronary OAS and
unique peripheral products backed by mounting clinical
data have been catalysts for revenue growth. Fiscal year
2015 revenues rose to $181.5 million, up strongly from
$136.6 million last year. And gross margin remained
strong at 78 percent.
Operating expenses rose 26 percent, reflecting planned
investments, including sales force expansion and
training, and coronary product commercialization.
Adjusted EBITDA* loss improved to $(15.6) million, while
the net loss totaled $(32.8) million, or $(1.04) per
common share, compared to $(35.3) million, or $(1.25)
per common share, in fiscal 2014.
“Fiscal year 2015
revenues rose to $181.5
million, up 33 percent
from $136.6 million last
year. And gross margin
A SALES FORCE EVOLUTION
remained strong at
78 percent. ”
CSI is in the final stages of an 18-month plan to transform
our sales force. One year ago, our team was divided into
two separate groups, representatives who sold our
coronary system and those who sold the peripheral
system—there was no synergy in the sales process.
Today, we are expanding our sales force and simultaneously
training our clinically focused sales organization to sell
both systems in small span of control territories.
During fiscal 2015, CSI’s dual franchise representatives
met our productivity goals and significantly outperformed
the company’s peripheral-only representatives. The
process of expanding and training our sales force is
challenging, but successful completion of this evolution
will set the foundation for high growth and profit for years
to come. This model allows us to be service intensive and
relationship strong in every major domestic market,
positioning us to help expand vascular interventions for
the large underserved patient population with calcified
artery disease.
LEADING THE ORBITAL EVOLUTION
We enter 2016 as the market leader in atherectomy. CSI is committed to helping physicians
successfully address the most difficult vascular disease states. We do this through clinical rigor,
constant innovation and a defining drive to improve patient outcomes.
We will expand this commitment by working with leading physicians to reduce the burden of PAD and
CLI, which, left untreated, can lead to amputation. Our commitment is not only to the patient, but also
to the healthcare system. Our mission is to raise PAD awareness with a specific focus on increasing
the treatment of CLI with a goal of reducing the number of PAD and CLI related amputations from
160,000 to under 100,000 within three years.
Our unique, low-profile Diamondback 360 is the device physicians rely on to reduce calcified plaque
and improve patient outcomes. As more physicians and their patients join our orbital evolution and
experience firsthand the performance of our product line—and our entirely unique mechanism of
action—we are confident that we will be able to capitalize on the enormous opportunity before us.
We look forward to completing the optimization and expansion of our sales organization to drive
further OAS adoption and help treat the millions of patients suffering from PAD and CAD.
Sincerely,
David L. Martin
Scott Ward
President and Chief Executive Officer
Chairman of the Board
October 9, 2015
*For a reconciliation of the non-GAAP financial measure referred to as adjusted EBITDA, please refer to the table on page 34 of Form 10-K.
CLINICAL RESEARCH
ORBIT II TWO-YEAR RESULTS
In February 2015, the company released two-year data from
its ORBIT II study of CSI’s Diamondback 360 Coronary OAS
in treating severely calcified lesions. Results demonstrated
high rates of freedom from major adverse coronary events
(MACE) of 80.6 percent and freedom from target lesion
revascularization of 93.8 percent. Moreover, patients treated
with the Diamondback 360 Coronary OAS demonstrated
shorter lengths of hospital stay and lower mortality than
standard of care, providing an estimated cost savings of up
to $4,913 per patient for the treating institutions at one year.
LIBERTY 360°
CSI continued enrolling patients in its post-market study,
LIBERTY 360°, during fiscal 2015 and is on track to complete
enrollment in early 2016. The study is evaluating the acute and
long-term clinical and economic outcomes of the company’s
orbital atherectomy system in treating PAD. As a prospective,
observational, multi-center post-market study, LIBERTY 360°
will enroll up to 1,200 patients at up to 100 sites across the
United States, including patients with claudication (painful
circulatory problems), critical limb ischemia (a severe form
of PAD) and those scheduled for amputation.
COAST
In July 2015, CSI completed patient enrollment in the Coronary
Orbital Atherectomy System Trial (COAST). The study will
assess the safety and efficacy, as well as economic outcomes,
of CSI’s investigational micro crown OAS in treating severely
calcified coronary lesions in patients suffering from coronary
disease. In total, 100 patients were enrolled in the COAST
study at 12 American and 5 Japanese sites. The COAST study
will provide data to help secure commercial approval for the
second generation Coronary OAS device in the world’s two
largest atherectomy markets, Japan and the United States.
10-K
CARDIOVASCULAR SYSTEMS, INC
For the fiscal year ended June 30, 2015
EXECUTIVE OFFICERS
BOARD OF DIRECTORS
David L. Martin
President and Chief Executive Officer
Laurence L. Betterley
Chief Financial Officer
Kevin J. Kenny
Chief Operating Officer
Paul A. Koehn
Senior Vice President,
Quality and Operations
Robert J. Thatcher
Chief Healthcare Policy Officer
HEADQUARTERS
Cardiovascular Systems, Inc.
1225 Old Highway 8 NW
St. Paul, Minnesota 55112
Scott R. Ward
Chairman
Managing Director
SightLine Partners;
President
Raymond Holdings
Scott Bartos
Chairman, President and
Chief Executive Officer
Rural/Metro Corporation
Brent Blackey
President and Chief Operating Officer
Holiday Companies
Edward Brown
Partner
Health Evolution Partners
William E. Cohn, M.D.
Director of Technology and
Innovation, Texas Heart Institute;
Director, Department of Surgery
Incubator, and Professor of Surgery,
Baylor College of Medicine
Augustine Lawlor
Managing Partner
HealthCare Ventures LLC
David L. Martin
President and Chief Executive Officer
Cardiovascular Systems, Inc.
Leslie L. Trigg
Chief Executive Officer
Outset Medical
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
INDEPENDENT
ACCOUNTANTS
PricewaterhouseCoopers LLP
Minneapolis, Minnesota
CORPORATE COUNSEL
Fredrikson & Byron, P.A.
Minneapolis, Minnesota
INVESTOR RELATIONS
Jack Nielsen
651.202.4919
j.nielsen@csi360.com
ANNUAL MEETING
The annual meeting
of the stockholders of
Cardiovascular Systems, Inc.
will be held November 18, 2015,
at 10:00 a.m. CT at:
Cardiovascular Systems, Inc.
1225 Old Highway 8 NW
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 report regarding
(i) estimates of numbers of patients, diagnoses and procedures; (ii) our expansion of the vascular interventional market; (iii) growth and dual-franchise training of
our sales organization; (iv) successful completion of our sales evolution setting the foundation for high growth and profit for years to come; (v) the expansions of
vascular interventions for the large, underserved patient populations with calcified artery disease; (vi) the $1.5 billion market opportunity to treat severe coronary
calcium; (vii) future growth, including our expectation of strong coronary growth in fiscal 2016; (viii) the $12-plus billion market opportunity of the U.S. PAD
market; (ix) new products; (x) our goal to aid in the reduction of the number of PAD and CLI related amputations from 160,000 to under 100,000 within three
years; (xi) our ability to capitalize on the enormous opportunity before us; (xii) the LIBERTY 360° trial, including the number of patients expected to be enrolled
and the timing of such enrollment; and (xiii) the COAST trial, including the potential to secure commercial approval in Japan, are forward-looking statements.
These statements involve risks and uncertainties that could cause results to differ materially from those projected, including, but not limited to, regulatory
developments in the U.S. and foreign countries; FDA and similar foreign clearances and approvals; approval of our products for distribution in foreign countries;
approval of products for reimbursement and the level of reimbursement; dependence on market growth; agreements with third parties to sell their products; the
experience of physicians regarding the effectiveness and reliability of our products; the reluctance of physicians, hospitals and other organizations to accept new
products; the potential for unanticipated delays in enrolling medical centers and patients for clinical trials; our ability to identify and work with hospitals on
amputation prevention programs; the use of our products in connection with the treatment of CLI; actual clinical trial and study results; the impact of competitive
products and pricing; unanticipated developments affecting our estimates regarding expenses, future revenues and capital requirements; the difficulty of
successfully managing operating costs; our inability to expand our sales and marketing organization; our ability to manage employee turnover, growth and training;
actual research and development efforts and needs; our ability to obtain and maintain intellectual property protection for product candidates; our actual financial
resources and our ability to obtain additional financing; fluctuations in results and expenses based on new product introductions, sales mix, unanticipated
warranty claims and the timing of project expenditures; 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 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
report. The forward-looking statements made in this 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.
1225 Old Highway 8 NW
St. Paul, Minnesota 55112
www.csi360.com
T: 651.259.1600
877.CS I.0360
F: 612.677.3355
Product Disclosures:
Peripheral Products
The Stealth 360® PAD System and Diamondback 360® PAD System are percutaneous orbital
atherectomy systems indicated for use as therapy in patients with occlusive atherosclerotic
disease in peripheral arteries and stenotic material from artificial arteriovenous dialysis
fistulae. The systems are 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.
Coronary Product
Indications: The Diamondback 360® Coronary Orbital Atherectomy System (OAS) is a
percutaneous orbital atherectomy system indicated to facilitate stent delivery in patients with
coronary artery disease (CAD) who are acceptable candidates for PTCA or stenting due to de
novo, severely calcified coronary artery lesions.
Contraindications: The OAS is contraindicated when the ViperWire guide wire cannot pass
across the coronary lesion or the target lesion is within a bypass graft or stent. The OAS
is contraindicated when the patient is not an appropriate candidate for bypass surgery,
angioplasty, or atherectomy therapy, or has angiographic evidence of thrombus, or has only
one open vessel, or has angiographic evidence of significant dissection at the treatment site
and for women who are pregnant or children.
Warnings/Precautions: Performing treatment in excessively tortuous vessels or bifurcations
may result in vessel damage; The OAS was only evaluated in severely calcified lesions; A
temporary pacing lead may be necessary when treating lesions in the right coronary and
circumflex arteries; On-site surgical back-up should be included as a clinical consideration;
Use in patients with an ejection fraction (EF) of less than 25 percent has not been evaluated.
See the instructions for use before performing Diamondback 360 Coronary OAS procedures
for detailed information regarding the procedure, indications, contraindications, warnings,
precautions, and potential adverse events. For further information, call CSI at 1-877-274-0901
and/or consult CSI’s website at www.csi360.com.
Caution: Federal law (USA) restricts this device to sale by or on the order of a physician.
Micro Crown OAS
CSI has commenced its COAST Investigational Device Exemption clinical trial to evaluate the
safety and efficacy of its new micro crown orbital technology in treating severely calcified
lesions within the coronary arteries.
Caution – Investigational Device. Limited by Federal (or United States) law to investigational
use. This new system is limited by federal law to investigational use and is currently not
commercially available in the United States or Japan.