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<TYPE>424B1
<SEQUENCE>1
<DESCRIPTION>FINAL PROSPECTUS DATED 08/12/1999
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Results of Operations
Six Months Ended June 30, 1999 and 1998
Net sales for the six-month period ended June 30, 1999 totaled $4.4 million,
an increase of $4.1 million from $264,000 for the six-month period ended June
30, 1998. The increase in net sales primarily reflected the initial shipment of
instrument kits to surgeons subsequent to their completion of training in the
Intacs placement procedure during the second quarter of 1999. Each kit includes
two sets of proprietary instruments to perform the Intacs placement procedure
and a supply of 18 Intacs corneal ring segments. The predominant portion of the
revenues received from the sale of the kits was attributable to the proprietary
instruments. Significant growth of our net sales will be dependent upon our
ability to sell Intacs corneal ring segments in increasing volumes.
Cost of sales and manufacturing expenses totaled $4.6 million in the 1999
period as compared to $1.9 million in the 1998 period. The increase in cost of
sales and manufacturing expenses reflected higher fixed costs associated with
the establishment of our manufacturing operations and higher variable costs as
a result of higher net sales.
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Research and development expenses, which include clinical and regulatory
expenses, for the 1999 period were $4.2 million, which represented a decrease
of $1.8 million from the 1998 period. The decrease was primarily due to reduced
clinical trial costs as a result of the completion of various studies, in
addition to reduced legal expenses related to patents.
Selling, general and administrative expenses were $8.2 million in the 1999
period, which represented an increase of $4.5 million from the 1998 period,
primarily due to increased marketing efforts related to market development in
the U.S. and Canada.
Interest income (expense) and other, net was $(315,000) in the 1999 period,
as compared to $179,000 in the 1998 period. The 1999 amount reflected a lower
level of interest income due to lower cash balances and a higher level of
interest expense reflecting a higher level of borrowings.
The net loss applicable to common stockholders for the 1999 period was $13.7
million versus $13.8 million for the 1998 period. Net loss applicable to common
stockholders included the effect of dividends, including deemed dividends, of
$776,000 and $2.6 million to preferred stockholders for the 1999 and 1998
periods, respectively.
Years Ended December 31, 1998 and 1997
Net sales for 1998 increased to $835,000 from $355,000 in 1997, primarily as
a result of increased unit shipments associated with KeraVision's limited
product launch into the Canadian market.
Cost of sales and manufacturing expenses exceeded revenues in both years
reflecting low production volumes and fixed costs associated with our higher
volume manufacturing capabilities.
Research and development expenses for 1998 were $11.4 million compared to
$10.8 million in 1997. Research and development expenses in both periods
consisted primarily of clinical trial expenses, product development expenses
and patent expenses.
Selling, general and administrative expenses in 1998 were $9.7 million, an
increase of $3.3 million from 1997. The increase in spending reflects increased
staffing and associated expenses, in addition to increased marketing efforts
related to our launch in Canada and in anticipation of our U.S. launch
following FDA regulatory approval.
Interest income (expense) and other, net was $563,000 in 1998 as compared to
$1.1 million for 1997, reflecting lower average cash and investment balances
from period to period.
The net loss in 1998 was $24.0 million, an increase of $4.6 million from the
net loss of $19.4 million in 1997. In 1998, the net loss applicable to common
stockholders was $27.4 million, including the effect of dividends, including
deemed dividends, of $3.4 million to preferred stockholders.
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