SPECTRANETICS CORP - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

FOR THE YEAR ENDED DECEMBER 31, 2001

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 0-19711
THE SPECTRANETICS CORPORATION
(Exact name of Registrant as specified in its charter)

DELAWARE 84-0997049
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

96 TALAMINE COURT
COLORADO SPRINGS, COLORADO 80907
(Address of principal executive offices and zip code)

Registrant's Telephone Number, including Area Code: (719) 633-8333

Securities registered pursuant to Section 12(b) of the Act: NONE

Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.001 PAR VALUE
(TITLE OF CLASS)

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

The aggregate market value of the voting stock of the Registrant, as of
March 13, 2002, computed by reference to the closing sale price of the voting
stock held by non-affiliates on such date, was approximately $93,070,868.

As of March 13, 2002, there were outstanding 23,718,101 shares of Common
Stock.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's definitive Proxy Statement for its 2002 Annual
Meeting of Shareholders, to be filed with the Securities and Exchange Commission
not later than April 30, 2002, are incorporated by reference into Part III as
specified herein. Portions of the Registrant's 2001 Annual Report to Security
Holders are incorporated by reference into Parts II and IV as specified herein.

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TABLE OF CONTENTS

PART I...................................................... 1
Item 1. Business........................................... 1
General................................................... 1
Strategy............................................... 1
Technology................................................ 2
CVX-300(R) Excimer Technology.......................... 2
Product Applications...................................... 3
Excimer Laser Atherectomy.............................. 3
Cardiac Lead Removal Systems........................... 5
Peripheral Vascular Disease Therapy.................... 6
Restenosed Stents...................................... 7
Sales and Marketing....................................... 7
Domestic Operations.................................... 7
International Operations............................... 8
Government Regulation..................................... 8
Section 510(K) Devices................................. 9
PMA Devices............................................ 9
Competition............................................... 11
Patents and Proprietary Rights............................ 12
Research and Development.................................. 13
Manufacturing............................................. 13
Third-Party Reimbursement................................. 13
Product Liability and Insurance........................... 14
Employees................................................. 14
Item 2. Properties......................................... 14
Item 3. Legal Proceedings.................................. 14
Item 4. Submission of Matters to a Vote of Security
Holders............................................ 14

PART II..................................................... 15
Item 5. Market for the Registrant's Common Stock and
Related Shareholder Matters........................ 15
Item 6. Selected Financial Data............................ 15
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations................
Item 7A. Quantitative and Qualitative Disclosure About
Market Risk........................................ 15
Item 8. Financial Statements and Supplementary Data........ 16
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure................ 16

PART III.................................................... 16
Item 10. Directors and Executive Officers of the
Registrant......................................... 16
Item 11. Executive Compensation............................. 16
Item 12. Security Ownership of Certain Beneficial Owners and
Management......................................... 16
Item 13. Certain Relationships and Related Transactions..... 16

PART IV..................................................... 17
Item 14. Exhibits and Reports on Form 8-K................... 17

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PART I

The information set forth below includes "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995, and
is subject to the safe harbor created by that section. You are cautioned not to
place undue reliance on these forward-looking statements and to note that they
speak only as of the date hereof. Factors that could cause actual results to
differ materially from those set forth in the forward-looking statements are set
forth below and include, but are not limited to, the following:

- Market acceptance of excimer laser atherectomy technology;

- Market acceptance of excimer laser removal of pacemaker and defibrillator
leads;

- Technological changes resulting in product obsolescence;

- The inability to obtain patents with respect to new products;

- Adverse state or federal legislation and regulation;

- Availability of vendor-sourced component products at reasonable prices;
and

- The risk factors listed from time to time in our filings with the
Securities and Exchange Commission as well as those set forth in Item
7 -- "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Risk Factors."

ITEM 1. BUSINESS

GENERAL

We develop, manufacture, market and distribute a proprietary excimer laser
system and related accessory products for the treatment of certain coronary and
vascular conditions. Excimer laser technology delivers comparatively cool
ultraviolet light in short, controlled energy pulses to ablate or remove tissue.
Our excimer laser system includes the CVX-300(R) laser unit and various fiber
optic delivery devices, including disposable catheters and sheaths. Our excimer
laser system is the only excimer laser system approved in the United States and
Europe for use in multiple, minimally invasive cardiovascular applications. Our
excimer laser system is used in atherectomy procedures to open clogged or
obstructed arteries. It is also used to remove lead wires from patients with
implanted pacemakers or cardioverter defibrillators, which are electronic
devices that regulate the heartbeat.

We also have regulatory approval to market our products in two key
international markets. In conjunction with our distributor Heiwa Bussan Co.,
Ltd., we recently received approval to market some of our coronary atherectomy
products in Japan, and are seeking additional approvals there for our newer
coronary products and our lead removal product line. In Europe, in addition to
our coronary atherectomy and lead removal product lines, we also have approval
to market our products to treat artery blockages in the upper and lower leg. We
are currently sponsoring clinical trials in order to obtain regulatory approval
in the United States to market our products domestically for use in the leg.

Spectranetics is a Delaware corporation formed in 1984. Our principal
executive offices are located at 96 Talamine Court, Colorado Springs, Colorado
80907. Our telephone number is (719) 633-8333.

Strategy

Our strategy includes the following key points:

- Leverage technical expertise in generation and delivery of excimer
energy. We have designed our excimer laser platform to support multiple
existing and potential therapeutic applications for the treatment of
cardiovascular disease. We are exploring additional applications of our
core excimer laser technology for novel treatments of coronary and
vascular conditions. We currently have two major clinical trials under
way testing additional applications for the excimer laser in the United
States.

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- Expand disposable device revenues from existing customer base. By
training additional cardiologists, surgeons and other specialists at
existing customer hospitals and introducing physicians already familiar
with our products to new products and applications, we intend to increase
our revenue stream from sales of current and future disposable devices to
existing customers. In 2001, we trained 166 physicians in the general use
of our equipment and trained 321 physicians in the use of our product as
a pretreatment within restenosed (clogged) stents prior to brachytherapy
(radiation therapy).

- Expand installed customer base. We intend to expand our customer base by
continuing to focus our sales efforts on cardiac centers that perform the
majority of interventional procedures. To help accomplish this goal, we
are running a special price promotion on our lasers at the beginning of
2002, offering them for $90,000 compared with our list price of $249,000.

TECHNOLOGY

Excimer laser ablation removes plaque or tissue by delivering relatively
cool excimer laser energy to a blockage or lesion. This laser beam breaks down
the molecular bonds of plaque or tissue in a process known as photoablation,
without significant thermal damage to surrounding tissue.

Laser ablation involves the insertion of a laser catheter or sheath into an
artery or vein through a small incision. When the tip of the catheter or sheath
has been placed at the site of the blockage or lesion, the physician activates
the laser beam to ablate the plaque or tissue.

CVX-300(R) Excimer Technology

Our proprietary CVX-300 excimer laser unit is designed for use in a variety
of cardiovascular applications. When coupled with our fiber optic laser devices,
the system generates and delivers 308 nanometer wavelength ultraviolet light
pulses to a lesion to remove plaque or tissue. The current list price of the
CVX-300 is $249,000, but we began a special price promotion at the beginning of
2002 in which lasers are being offered for $90,000. We offer various financing
options, including leasing options through a third-party leasing company
specializing in medical devices.

On February 19, 1993, the Food and Drug Administration (FDA) approved the
Spectranetics CVX-300 excimer laser unit and 1.4 and 1.7 millimeter diameter
fiber optic catheters for the following six indications for use in the treatment
of coronary artery disease:

- saphenous vein grafts;

- total occlusions crossable by a guidewire;

- ostial lesions (blockages at the beginning of arteries);

- lesions with moderate calcification;

- long lesions; and

- lesions where angioplasty balloon failures have occurred.

Additional catheter sizes and improved models to treat the six original
indications have been approved by the FDA over the ensuing years (see chart on
page 10). On October 15, 2001, we received FDA approval for the use of the
Spectranetics excimer laser and related catheters for an additional coronary
indication -- for use within restenosed stents prior to brachytherapy (radiation
therapy). In all of these coronary atherectomy indications, we offer an
alternative or adjunct to traditional balloon angioplasty and atherectomy
(rotational cutters and burrs). Unlike conventional balloons that merely
compress arterial plaque against the stent or vessel wall, laser atherectomy
dissolves the material, resulting in a larger diameter opening.

The CVX-300 excimer laser unit was also initially approved for lead removal
procedures on December 9, 1997.

In November 1994, we received ISO 9001 certification from the TUV Product
Service GmbH (TUV) in Munich, Germany, which allows us to market our products in
the European Community within compliance of
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the manufacturing quality regulations. We hold EC Cert G1990821401007,
G7011221401012 and G7990821401008; QA Cert Q1Z990821401011 with EN 550
Supplement with inclusion of ISO 13485:1996. In addition the CMDCAS (Canadian)
certification was recommended by TUV during our last audit in January 2002. We
have received CE (Communaute Europeene) mark registration for all of our current
products, with the exception of the POINT9 X-80(TM) catheter, which we expect to
receive CE mark registration in 2002. The CE mark indicates that a product is
certified for sale throughout the European Union and that the manufacturer of
the product complies with applicable safety and quality standards.

On September 28, 2001, in conjunction with our distributor Heiwa Bussan
Co., Ltd., we received regulatory approval from the Japanese Ministry of Health
and Welfare (MHW) to market our laser and various sizes of our Extreme(R),
Vitesse(R) E and Vitesse(R) C coronary catheters in Japan. We have submitted our
application for reimbursement approval for these products in Japan, which may
take up to two years to obtain. We do not expect our sales in Japan to be
significant until reimbursement approval is attained. In addition, we are in
various stages of the submission process to obtain regulatory approval in Japan
for some of our newer products.

Since receiving FDA approval in 1993, more than 50,000 patients have been
safely treated with excimer laser coronary atherectomy. Initial FDA approval for
use of the excimer laser for coronary applications was based on the results of
the Percutaneous Excimer Laser Coronary Angioplasty (PELCA) Study, which
evaluated a registry of laser usage in blocked coronary arteries in 2,432
patients with a mean age of 63 years. Clinical success (i.e., reduction in the
size of the lesion to less than 50 percent of the diameter of the artery without
heart attack, death, or the need for emergency bypass surgery during
hospitalization) was achieved in 89% of these patients. Of note, there was no
difference in success rate or complications for long lesions, total occlusions
crossable with a guidewire, saphenous vein grafts and aorto-ostial lesions,
suggesting that complex lesions could be safely and effectively treated with
excimer laser coronary atherectomy. More recent studies utilizing current
catheter technology in complex lesion subsets report significantly higher
success rates of more than 95 percent.

We believe that the CVX-300 system provides the following benefits:

- Reduced procedure time. Patient outcome audits, which compare excimer
laser procedures to balloon angioplasty and rotational atherectomy,
reveal the excimer laser method shortens procedure times and reduces
radiation exposure to the patient from fluoroscopic imaging used during
the procedure, thereby improving lab efficiency.

- Ease of use. During a laser procedure, it may be necessary to adjust
laser energy output. The CVX-300 laser unit is computer-controlled, which
allows the physician to change energy levels without interrupting the
treatment to remove the catheter from the patient for recalibration. This
feature also enables the physician to begin the procedure with the
minimum level of energy that might be required and, if necessary, to
easily adjust the energy level upward during the procedure.

- Small size and easy set-up. Space in cardiac catheterization labs is
usually limited. In addition, many hospitals have multiple
catheterization labs. As a result of a number of proprietary and patented
laser and catheter design features, the CVX-300 laser unit is portable
and typically requires five minutes to set up. This combination of
features allows the CVX-300 laser unit to be transported easily between
laboratories within the hospital.

PRODUCT APPLICATIONS

Excimer Laser Atherectomy

Background. Percutaneous coronary intervention, or PCI, is a minimally
invasive medical procedure used to treat coronary artery disease, or
atherosclerosis, and is performed by interventional cardiologists and
radiologists. We estimate there are approximately 1.35 million PCI procedures
performed worldwide. We estimate that approximately 10 to 15 percent of these
patients could benefit from the use of our products, including patients with
total occlusions crossable by a guidewire, occluded saphenous vein grafts, long
lesions,

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and lesions where a balloon failure has occurred.* In these indications, we
offer an alternative or adjunct to traditional balloon angioplasty or the need
for coronary bypass surgery. Unlike conventional balloons that merely compress
arterial plaque against the stent or vessel wall, laser atherectomy actually
dissolves the material. We focus our marketing efforts on seven approved
coronary indications:

- saphenous vein grafts;

- total occlusions crossable by a guidewire;

- ostial lesions (blockages at the beginning of arteries);

- lesions with moderate calcification;

- long lesions;

- lesions where angioplasty balloon failures have occurred; and

- pretreatment of restenosed stents prior to brachytherapy.

In Europe, we focus our marketing efforts on the approved coronary
indications shown above as well as laser treatment of all in-stent restenoses
and blockages in the arteries of the upper and lower legs.

Disposable Laser Catheters. We have developed a broad selection of
proprietary laser devices designed to meet physician needs and multiple
indications for use, including excimer laser coronary atherectomy and peripheral
excimer laser atherectomy in the upper and lower leg. Early laser catheters
contained only a few large optical fibers to transmit the laser energy. These
early devices were stiff, had difficulty accessing arterial anatomy and suffered
from poor ablation characteristics. Current innovative laser catheter designs
contain hundreds of very small diameter, flexible glass fibers that can access
more difficult-to-reach coronary anatomy. The smaller fibers also produce better
laser energy distribution at the tip of the catheter for more uniform ablation.

Laser catheters are designed to provide several advantages over other
atherectomy devices. These catheters, which we produce in sizes ranging from .9
to 2.5 millimeters in diameter, consist of concentric or eccentric bundles of
optical fibers mounted within a thin plastic tubing. Fibers are coupled to the
laser using a patented intelligent connector, which requires no adjustments by
the physician. This connector provides information about the device being used
to the CVX-300 laser unit computer, which controls the calibration cycle and
energy output. The catheter's combination of trackability, flexibility and
ablation characteristics enables the physician to access difficult-to-treat
lesions. Our line of disposable catheters includes the following:

- Extreme(R) Laser Catheter. In October 1993, the FDA approved the
Extreme(R) laser concentric catheter, which was our first
high-performance coronary laser catheter. It is an over-the-wire (OTW)
catheter with good flexibility and an active ablation area covering a
high percentage of the catheter tip. Other catheter features include the
patented metal rim tip designed for visualization and alignment and a
proprietary lubricious coating for easy access. The Extreme(R) laser
catheter is available in 0.9, 1.4, 1.7 and 2.0 millimeter tip diameters.
Spectranetics has received the CE Mark of approval for use of its Extreme
atherectomy line of catheters in Europe, and has received approval from
the MHW to market the 1.4, 1.7 and 2.0 millimeter size Extreme catheters
in Japan (but have not yet received reimbursement approval in Japan).

- Vitesse(R) Cos Catheter. The Vitesse(R) Cos concentric laser catheter,
which succeeded the Vitesse(R) C catheter, was approved by the FDA in
January 2000. Like its predecessor (which received regulatory approval in
the United States in October 1994 and in Japan in September 2001, with
reimbursement

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* Amounts were estimated by Spectranetics based on extrapolation from available
industry data. Patient population estimates are subject to inherent
uncertainties. We are unable to determine with any degree of certainty the
number of procedures for any indication or the number of patients who are
suitable for treatment using these procedures.
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approval in Japan still pending), this is a rapid-exchange (Rx) catheter,
which incorporates a "monorail design" that can be threaded onto and exchanged
over a guidewire more conveniently than over-the-wire models. It is also
compatible with a wide range of guidewires. The fibers in the Vitesse(R) Cos
are "optimally spaced" and laboratory tests have demonstrated that it produces
greater debulking, or plaque removal, compared with its predecessor catheter.
The Vitesse(R) Cos laser catheter is available in 1.4, 1.7 and 2.0 millimeter
tip diameters. In Europe, we received the CE Mark of approval for this laser
catheter in November 1998.

- Vitesse(R) E Laser Catheter. The Vitesse(R) E eccentric rapid-exchange
(Rx) laser catheter is our first directional coronary laser catheter. The
1.7 millimeter diameter catheter was approved by the FDA in July 1995,
and the 2.0 millimeter catheter was approved by the FDA in September
1997. Spectranetics received the CE Mark of approval for use of these
atherectomy catheters in Europe in February 1997 and MHW approval for use
in Japan in September 2001, but we are still awaiting Japanese
reimbursement approval. This catheter utilizes an eccentric (or
one-sided) fiber array at the tip that can be rotated by the operator to
create a larger channel through the blockage.

- POINT 9(TM) Millimeter Catheter. The POINT 9(TM) concentric catheter
comes in both the Extreme (OTW) and Vitesse (Rx) models. The Vitesse
model received CE Mark and FDA approvals in July and August 2000,
respectively. The Extreme model received CE Mark approval in Europe in
August 1999 and FDA approval in the United States in July 2000. The POINT
9 millimeter catheters are our smallest diameter atherectomy catheters
and are designed for use in vessels as small as 1.5 millimeters in
diameter, as well as larger vessels with total occlusions passable by a
guidewire or where angioplasty balloon failures have occurred. On June
13, 2001, Spectranetics received FDA approval to market the POINT 9 X-80
catheter, which has the ability to use higher laser parameters to
penetrate lesions where balloon failures have occurred and other
difficult-to-treat lesions.

- Spectranetics Support Catheter(TM). In November 1999 we received
clearance from the FDA to market the Spectranetics Support Catheter in
the .014 and .018 inch models. This is a non-laser-based accessory
product designed for use in the cardiovascular system to assist in
accessing and/or crossing lesions. The primary function is to support an
angioplasty guidewire. We also received the CE Mark of approval in April
1999 to market this product in Europe.

Cardiac Lead Removal Systems

Background. Approximately one million patients worldwide are implanted
with pacemakers and implantable cardioverter defibrillators, or ICDs, annually.*
Pacemakers and ICDs are electronic devices that regulate the heartbeat. We
believe that approximately 5% to 10% of these patients will eventually require
pacemaker or ICD lead removal. Competitive methods available to remove implanted
leads include open-chest surgery and transvenous removal with plastic sheaths,
each of which has significant drawbacks. For example, open-chest surgery is
costly and traumatic to the patient. The plastic sheath method sometimes results
in damage to the cardiovascular system, thereby necessitating surgery, and may
cause the lead to disassemble during the removal procedure.

Spectranetics Laser Sheath (SLS(TM)). We have designed a laser-assisted
lead removal device, the Spectranetics Laser Sheath (SLS(TM)), to be used with
our CVX-300 excimer laser unit to remove implanted leads with minimal force. The
SLS uses excimer laser energy focused through the tip of the SLS to facilitate
lead removal by removing scar tissue surrounding the lead. In addition to
resulting in less trauma and a lower complication rate, procedure time is
reduced significantly.

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*Amounts were estimated by Spectranetics based on extrapolation from available
industry data. Patient population estimates are subject to inherent
uncertainties. We are unable to determine with any degree of certainty the
number of procedures for any indication or the number of patients who are
suitable for treatment using these procedures.
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The SLS consists of optical fibers arranged in a circle between inner and
outer polymer tubing. The inner opening of the device is designed to allow a
lead wire to pass through it as the device slides over the lead wire and toward
the tip in the heart. Following the removal of scar tissue with the SLS, the
lead wire is removed from the heart with counter-traction. We have been
marketing our 12 French (Fr) SLS since December 1997. In September 1998, we
received FDA market approval for our 14 Fr and 16 Fr Spectranetics Laser
Sheaths, which are designed to free larger diameter implanted pacemaker and ICD
leads. On February 1, 2002, Spectranetics received FDA approval to market an
improved model of its 16 Fr Laser Sheath. Spectranetics received the CE Mark of
approval for use of its laser sheath devices in Europe in February and July
1997, and October 2001.

Lead Locking Device (LLD(TM)). In October 1999, we received clearance from
the FDA to market the LLD under a 510(k) application. This product was the first
Spectranetics' product to go through the 510(k) regulatory process, which
typically takes less time than other regulatory approval processes, such as pre-
market approval or a pre-market approval supplement. We also received the CE
Mark of approval for this product in Europe in March 1999. The LLD product
complements our current SLS product line and, since it is not laser-based, can
also be used in connection with the mechanical removal of pacemaker or
defibrillator leads. The LLD is a novel mechanical device that assists in the
removal of faulty leads by providing traction to the leads, which are typically
wire spirals. The LLD is inserted into the center opening (i.e., lumen) of the
lead and then a braid surrounding the LLD expands to fill and grip the entire
length of the lead's inner circumference, in effect converting a spiral into a
solid "pipe," which can more easily be extracted. Other devices on the market,
which merely grip the lead at the far end, provide less stability and frequently
release their grip on the lead.

In a randomized clinical trial completed in October 1996, the Spectranetics
Laser Sheath (SLS(TM)) increased the complete lead removal success rate to 94%
from 65% with other techniques. A more recent study completed in 1999 and
published in December 2000 reported that using both the SLS and LLD increased
the success rate to 98 percent.

Peripheral Vascular Disease Therapy

Background. The prevalent treatment options for total blockages in the
upper leg are medical management to minimize symptoms and bypass surgery.
Amputation below the knee may be required for critical limb ischemia. We
estimate that approximately 300,000 upper bypass surgeries and 170,000
amputations are performed annually worldwide as a result of peripheral vascular
blockages. In addition, we estimate that about 700,000 people are treated for
leg pain through conventional medical management.* Laser therapy is being
evaluated as an alternative treatment to bypass surgery, amputation and
conventional medical management. Our catheters for these applications are
approved in Europe for use in treating peripheral vascular disease.

Clinical Trials. On November 30, 2001, the last patient was enrolled in
the PELA (Peripheral Excimer Laser Angioplasty) trial, a 250-patient randomized
clinical trial, coordinated in the United States and Europe, to evaluate the use
of laser technology in patients with total occlusions at least 10 centimeters in
length in the upper leg. The primary endpoint for the PELA trial is clinical
patency, which is a measurement of the degree to which the artery is open,
twelve months following the procedure. On December 21, 2001, Spectranetics
received approval from the FDA to begin the PELA Phase 3 trial at 21 sites. PELA
Phase 3 is a registry of up to 120 patients with total occlusions at least 10
centimeters in length in the upper leg.

On January 26, 2001, Spectranetics received FDA approval to begin Phase 2
of the LACI (Laser Angioplasty for Critical Limb Ischemia) trial, which deals
with multi-vessel peripheral vascular disease in patients presenting with
critical limb ischemia (CLI). Patients with CLI have severe circulatory disease

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*Amounts were estimated by Spectranetics based on extrapolation from available
industry data. Patient population estimates are subject to inherent
uncertainties. We are unable to determine with any degree of certainty the
number of procedures for any indication or the number of patients who are
suitable for treatment using these procedures.
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resulting in resting leg pain, non-healing ulcers of the foot or lower leg, or
gangrenous areas that are likely candidates for amputation (Rutherford
Categories 4, 5, and 6). Frequently these patients also suffer from coronary
artery disease, hypertension and diabetes. The Phase 2 trial will involve 137
registry patients and up to 30 training patients at 20 domestic and several
European sites. The primary endpoint of Phase 2 is limb salvage (i.e., freedom
from major amputation) for a 6-month follow-up period. As of March 13, 2002 110
patients at 14 sites have been treated in the LACI Phase 2 registry.

We cannot assure that the clinical trials using excimer laser catheters to
unblock peripheral arteries will demonstrate our technology is safe, will result
in favorable success rates or, if the trials are successful, that we will
receive FDA approval for these devices. We have received CE Mark of approval for
our line of peripheral catheters in Europe.

Restenosed Stents

Background. Stents are thin, steel, slotted tubes or coils that are
implanted through a percutaneous procedure to support the walls of coronary
arteries. We estimate that approximately 1.4 million stents are implanted in
patients annually. Twenty to 25 percent of stents may develop blockages due to
restenosis, or tissue ingrowth, which can lead to partial or total occlusion of
the arteries, and 15 percent of them may be candidates for brachytherapy
(radiation therapy)*

Clinical Trials. On October 10, 2001, Spectranetics received approval from
the FDA to market our coronary atherectomy products to pretreat instent
restenosis prior to brachytherapy. As a result, we concluded enrollment in our
Laser Angioplasty in Restenosed Stents (LARS) trial, which had been conducted to
study the use of our laser catheters in debulking stents which have restenosed.
We no longer intend to pursue the broader instent restenosis label (with or
without brachytherapy) in the United States. Spectranetics has received CE Mark
approval to allow us to market our excimer laser atherectomy catheters
throughout Europe for the treatment of restenosed stainless steel coronary
stents, with or without brachytherapy.

SALES AND MARKETING

Our sales goals are to increase the use of laser catheters and other
disposable devices and to increase the installed base of excimer laser systems.
We plan to introduce new physicians and institutions to the efficacy, safety,
ease of use and growing indications of excimer laser technology through
published studies of clinical applications. By leveraging the success of
existing product applications, we hope to promote the use of our technology in
new applications.

Providing customers with answers about the cost of acquisition, use of the
laser and reimbursement codes is critical to the education process. Through the
following marketing and distribution strategy, both in the United States and
internationally, we believe that we will be positioned to capitalize not only on
the core competency of excimer laser technology in coronary atherectomy, but
also in lead extraction and in other new areas of development for excimer laser
technology in the cardiovascular system.

Domestic Operations

We estimate that there are about 1,500 interventional cardiac
catheterization laboratories in hospitals in the United States.* Our United
States sales efforts focus on the major cardiac catheterization labs, including
teaching institutions, which perform the majority of interventional procedures.
Our United States sales and marketing team consists of marketing managers,
district sales managers and clinical account managers.

We are focused on expanding our product line and developing an appropriate
infrastructure to support sales growth, and have increased our sales and
marketing capabilities over the last few years through the

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*Amounts were estimated by Spectranetics based on extrapolation from available
industry data. Patient population estimates are subject to inherent
uncertainties. We are unable to determine with any degree of certainty the
number of procedures for any indication or the number of patients who are
suitable for treatment using these procedures.
7

addition of personnel to our marketing and sales team. Since the use of excimer
laser technology is highly specialized, we believe that our marketing managers
and direct sales team must have extensive knowledge about the use of our
products and the various physician groups we serve. Our marketing activities are
designed to support our direct sales team and include advertising and product
publicity in trade journals, newsletters, continuing education programs, and
attendance at trade shows and professional association meetings. We have
marketing managers who are responsible for global marketing activities for a
given market segment, i.e., excimer laser atherectomy and cardiac lead removal
systems.

At December 31, 2001, we had 26 field sales employees consisting of
district sales managers and clinical account managers. The roles of each member
of the sales team are outlined below:

District Sales Managers are responsible for the overall management of a
district, including sales of lasers and disposable products. They are directly
responsible for the performance of the Clinical Account Managers in their
district.

Clinical Account Managers, who have experience working in hospital catheter
labs, support the district managers. Their primary function is to assist in
training our customers by standing in on cases, assisting in catheter and laser
parameter selection, and helping ensure proper protocol is used by clinicians.

Our field team also includes 10 service engineers who are responsible for
installation of each laser and participate in the training program at each site.
We provide a one-year warranty on laser sales, which includes parts, service and
replacement gas. We offer extended service to our customers under annual service
contracts or on a fee-for-service basis.

International Operations

In Europe, there are approximately 275,000 balloon angioplasty procedures
performed annually in approximately 450 interventional cardiac catheterization
laboratories.* In 1993, we began marketing and selling our products in Europe
and surrounding areas through Spectranetics International, B.V., a wholly owned
subsidiary, as well as through distributors.

In the fourth quarter of 2000, we made the decision to restructure our
European operations and utilize a distributor in Germany, our largest European
market. We now utilize distributors throughout Europe and the Middle East with
the exception of France, the Netherlands and Belgium, where we utilize a direct
sales force. In 2001, Spectranetics International, B.V., revenues totaled
$2,224,000, or 8 percent of our revenue.

In addition to the operations of Spectranetics International, B.V., we
conduct international business in the Pacific Rim, South America and Australia
through distributors. In 2001, revenues from these foreign operations totaled
$746,000, or 3 percent of our revenue.

Foreign sales may be subject to certain risks, including export/import
licenses, tariffs, other trade regulations and foreign medical regulations.
Tariff and trade policies, domestic and foreign tax and economic policies,
exchange rate fluctuations and international monetary conditions have not
significantly affected our business to date. For more information, see "Risk
Factors -- We Are Exposed to Problems That Come from Having International
Operations" set forth in Exhibit 13.1 herewith.

GOVERNMENT REGULATION

In the United States, all medical devices are subject to FDA regulation
under the Medical Device Amendments of the Federal Food, Drug and Cosmetics Act,
or FFDCA, and are classified into one of three categories: Class I, Class II,
and Class III. Products in Class I are the least invasive and pose the least
amount of risk, while products in Class II pose more potential risk to patients,
and Class III products provide the most

- ---------------

*Amounts were estimated by Spectranetics based on extrapolation from available
industry data. Patient population estimates are subject to inherent
uncertainties. We are unable to determine with any degree of certainty the
number of procedures for any indication or the number of patients who are
suitable for treatment using these procedures.
8

potential risk. The FDA approval process becomes more rigorous for products
classified as higher potential risk.

Section 510(k) Devices

Section 510(k) of the FFDCA is available in certain instances for Class I
and Class II products. It requires that before introducing most Class II and
some Class I devices into interstate commerce, the company introducing the
product must first submit information to the FDA demonstrating that the device
is substantially equivalent in terms of safety and effectiveness to a device
legally marketed prior to March 1976. When the FDA determines that the device is
substantially equivalent, the agency issues a "clearance" letter that authorizes
marketing of the product. The Support Catheter and the LLD have been precleared
by the FDA under the "510(k)" process.

Subsequent to its initial introduction, a manufacturer may make changes to
its previously cleared products. Under certain circumstances, a new 510(k) is
required when a manufacturer makes a change that could significantly affect the
device's safety or effectiveness or the manufacturer makes a major change to the
device's intended use. Before implementing the change, the manufacturer is
responsible for evaluating each change to determine whether to file a new
510(k). There is a risk that the FDA will not agree with the manufacturer's
decision and will require the filing of a new 510(k).

PMA Devices

The CVX-300 laser unit and related devices are designated as Class III
devices. Class III devices are devices that are represented to be
life-sustaining or life-supporting, or that present potential unreasonable risk
of illness or injury. Class III devices are subject to the most rigorous FDA
approval process, the pre-market approval, or PMA, process.

Pre-market approval of a Class III device generally requires the completion
of three major steps. The first step involves the granting of an investigational
device exemption, or IDE, by the FDA, which permits the proposed product to be
used in controlled human clinical trials. Upon completion of a sufficient number
of clinical cases to determine the safety and effectiveness of the proposed
product for specific indications, a pre-market approval application is then
prepared and submitted to the FDA for review. The pre-market approval
application must contain the results of the clinical trials, the results of all
relevant bench tests, laboratory and animal studies, a complete description of
the device and its components, and a detailed description of the methods,
facilities, and controls used to manufacture the device. In addition, the
submission must include the proposed labeling and promotional literature. If the
FDA determines that the pre-market approval application is sufficiently complete
to permit a substantive review, the FDA will accept the application for filing.

Once the submission is accepted for filing, the FDA begins an in-depth
review of the pre-market approval application, which represents the second major
step in pre-market approval of a Class III device. An FDA review of a pre-market
approval application generally takes one to two years from the date the
pre-market approval application is accepted for filing, but may take
significantly longer. The review time is often significantly extended by the FDA
asking for more information or clarification of information already provided in
the submission. During the review period, an advisory committee, typically a
panel of clinicians, will likely be convened to review and evaluate the
application and provide recommendations to the FDA at a public panel meeting as
to whether the device should be approved. Companies are typically requested to
make a presentation at the public panel meeting. The FDA is not bound by the
recommendations of the advisory panel.

Toward the end of the pre-market approval review process, the FDA will
generally conduct an inspection of the manufacturer's facilities to ensure that
the facilities are in compliance with applicable Good Manufacturing Practice
requirements, which are outlined under FDA's Quality System Regulation. If the
FDA's evaluations of both the pre-market approval application and the
manufacturing facilities are favorable, the FDA will either issue an approval
letter or an approvable letter, which usually contains a number of conditions
that must be met in order to secure final approval of the pre-market approval
application. When and if those conditions have been fulfilled to the
satisfaction of the FDA, the agency will complete the third
9

major step by issuing a pre-market approval letter, authorizing commercial
marketing of the device for certain indications. If the FDA's evaluations of the
pre-market approval application or manufacturing facilities are not favorable,
the FDA will deny approval of the pre-market approval application or issue a
"not approvable" letter. The FDA may also determine that additional clinical
trials are necessary, in which case pre-market approval may be delayed for
several years while additional clinical trials are conducted and submitted in an
amendment to the pre-market approval application. The pre-market approval
process can be expensive, uncertain and lengthy and a number of devices for
which FDA approval has been sought by other companies have never been approved
for marketing.

Modifications to a device that is the subject of a pre-market approval, its
labeling, or manufacturing process may require approval by the FDA of pre-market
approval supplements or new pre-market approval applications. Supplements to a
pre-market approval application often require the submission of the same type of
information required for an initial pre-market approval application, except that
the supplement is generally limited to that information needed to support the
proposed change from the product covered in the original pre-market approval
application.

The chart below summarizes the United States and major world market
regulatory approval status of each of our products and procedures for their
particular indications. The CE Mark designates regulatory approval throughout
Europe, and the Ministry of Health and Welfare (MHW) grants regulatory approval
in Japan. We have yet to receive reimbursement approval in Japan.

- ---------------

* Includes pretreatment prior to brachytherapy

We received our initial investigational device exemption to perform excimer
laser percutaneous coronary atherectomy in May 1989. In February 1991, we
submitted our pre-market approval application, which was accepted for filing by
the FDA in June 1991. On November 26, 1991, our pre-market approval application
was reviewed by a public advisory panel, and we received a recommendation for
approval of the CVX-300 laser unit and two sizes of our soft-rim catheters. As
part of the approval process, we were inspected in October 1991 by the FDA to
verify our compliance with Good Manufacturing Practices requirements. The final
step in the approval process, the issuance of a letter by the FDA approving the
application, occurred on February 19,

10

1993. In September 1993, we received pre-market approval for the Gen4-CVX300
laser. In March and December 1999, we received pre-market approval of
modifications to the operating software for the CVX-300.

We cannot assure that the FDA will approve our current or future pre-market
approval applications or supplements on a timely basis or at all. The absence of
such approvals could have a material adverse impact on our ability to generate
future revenues. For more information, see "Risk Factors -- Failures in Clinical
Trials May Hurt Our Business" set forth in Exhibit 13.1 filed herewith.

Any products we manufacture or distribute pursuant to FDA approvals are
subject to pervasive and continuing regulation by the FDA. Device manufacturers
are required to register their establishments and list their devices with the
FDA, and are subject to periodic inspections by the FDA and certain state
agencies. The FFDCA requires devices to be manufactured in accordance with
Quality System Regulation requirements, which impose certain process, procedure
and documentation requirements upon us with respect to product development,
manufacturing and quality assurance activities. We have developed systems and
controls that we believe will enable us to comply with Quality System Regulation
requirements; however, we cannot assure that we will be able to maintain
compliance with these requirements.

In addition, the Medical Device Reporting, or MDR, regulation obligates us
to inform the FDA whenever there is reasonable evidence to suggest that one of
our devices may have caused or contributed to death or serious injury, or when
one of our devices malfunctions and, if the malfunction were to recur, the
device would be likely to cause or contribute to death or serious injury. There
can be no assurance that the FDA will agree with our determinations as to
whether particular incidents meet the threshold for MDR reporting.

Labeling and promotional activities are also subject to scrutiny by the FDA
and, in certain instances, by the Federal Trade Commission. The FDA actively
enforces regulations prohibiting marketing of products for unapproved uses.

Noncompliance with requirements under the FFDCA or accompanying regulations
can result in, among other things, fines, injunctions, civil penalties, recall
or seizure of products, total or partial suspension of production, failure of
the government to grant pre-market approval, withdrawal of marketing approvals,
and criminal prosecution. The FDA also has authority to request repair,
replacement or refund of the cost of any device manufactured or distributed by
us.

International sales of our products are subject to foreign regulations,
including health and medical safety regulations. The regulatory review process
varies from country to country. Many countries also impose product standards,
packaging and labeling requirements, and import restrictions on devices. Exports
of products that have been approved by the FDA do not require FDA authorization
for export. However, foreign countries often require a FDA Certificate to
Foreign Government verifying that the product complies with FFDCA requirements.
To obtain a Certificate to Foreign Government, the device manufacturer must
certify to the FDA that the product has been granted approval in the United
States and that the manufacturer and the exported products are in substantial
compliance with the FFDCA and all applicable or pertinent regulations. The FDA
may refuse to issue a Certificate to Foreign Government if significant
outstanding Quality System Regulation violations exist.

We are subject to certain federal, state and local regulations regarding
environmental protection and hazardous substance controls, among others. To
date, compliance with such environmental regulations has not had a material
effect on our capital expenditures or competitive position. See "Risk
Factors -- Regulatory Compliance Is Very Expensive and Can Often Be Denied or
Significantly Delayed" set forth in Exhibit 13.1 filed herewith.

COMPETITION

Methods for the treatment of cardiovascular disease are numerous and we
expect them to increase in number. Almost all of our competitors have
substantially greater financial, manufacturing, marketing and technical
resources than we do. Consequently, we expect intense competition to continue in
the marketplace. Although our excimer laser technology competes against stents
and balloon angioplasty catheters, direct competition comes from manufacturers
of atherectomy and thrombectomy devices. In the lead removal
11

market, we compete worldwide with lead removal devices manufactured by Cook
Vascular Inc. and we compete in Europe with devices manufactured by VascoMed.

We estimate that approximately 80% of coronary interventions involve the
placement of a stent. The leading stent providers in the United States are
SCIMED Life Systems, Inc. (a subsidiary of Boston Scientific Corporation),
Cordis Corporation (a subsidiary of Johnson & Johnson Interventional Systems),
Guidant Corporation, Medtronic, Inc. and JOMED N.V. The leading balloon
angioplasty manufacturers are SCIMED, Cordis, Guidant and Medtronic.
Manufacturers of atherectomy or thrombectomy devices include SCIMED, Guidant and
Possis Medical, Inc.

We believe that the primary competitive factors in the interventional
cardiovascular market are:

- the ability to treat a variety of lesions safely and effectively;

- the impact of managed care practices and procedure costs;

- ease of use;

- size and effectiveness of sales forces; and

- research and development capabilities.

For more information, see "Risk Factors -- We May Be Unable to Compete
Successfully in Our Highly Competitive Industry in Which Many Other Competitors
Are Bigger Companies" set forth in Exhibit 13.1 filed herewith.

PATENTS AND PROPRIETARY RIGHTS

We hold 33 issued United States patents, four issued patents in each of
France, Germany, Italy and the Netherlands and one issued patent in Japan. Also,
we have three United States patent applications pending and eight foreign patent
applications pending. Any patents for which we have applied may not be granted.
In addition, our patents may not be sufficiently broad to protect our technology
or to provide us with any competitive advantage. Our patents could be challenged
as invalid or circumvented by competitors. In addition, the laws of certain
foreign countries do not protect our intellectual property rights to the same
extent as do the laws of the United States. We could be adversely affected if
any of our licensors terminates our licenses to use patented technology. We do
not have patents in any foreign countries other than those listed above.

It is our policy to require our employees and consultants to execute
confidentiality agreements upon the commencement of an employment or consulting
relationship with us. Each agreement provides that all confidential information
developed or made known to the individual during the course of the relationship
will be kept confidential and not disclosed to third parties except in specified
circumstances. In the case of employees, the agreements provide that all
inventions developed by the individual shall be our exclusive property, other
than inventions unrelated to our business and developed entirely on the
employee's own time. There can be no assurance that these agreements will
provide meaningful protection for our trade secrets in the event of unauthorized
use or disclosure of such information.

We also rely on trade secrets and unpatented know-how to protect our
proprietary technology and may be vulnerable to competitors who attempt to copy
our products or gain access to our trade secrets and know-how.

Litigation concerning patents and proprietary rights is time-consuming,
expensive, unpredictable and could divert the efforts of our management. An
adverse ruling could subject us to significant liability, require us to seek
licenses and restrict our ability to manufacture and sell our products.

We hold several non-exclusive, royalty-bearing license agreements for
patents covering basic areas of laser technology. In addition, we acquired an
exclusive, royalty-bearing license for a proprietary catheter coating.
Additional licenses held by us include an exclusive license to patents covering
laser-assisted lead removal and an exclusive license relating to certain aspects
of excimer laser technology in our products.

12

RESEARCH AND DEVELOPMENT

From inception through 1988, our primary emphasis in research and
development was on the CVX-300 laser unit. Since 1988, our research and
development efforts have focused on refinement of the CVX-300 laser unit and
laser device technology. We are also exploring additional applications for the
CVX-300 laser unit and are developing advanced laser devices designed to
facilitate greater use in existing applications.

Our team of research scientists, engineers and technicians substantially
performs all of our research and development activities. Our research and
development expense totaled $3,496,000 in 2001, $3,911,000 in 2000, and
$3,578,000 in 1999.

MANUFACTURING

We assemble and test substantially all of our product line and have
vertically integrated a number of processes in an effort to provide increased
quality and reliability of the components used in the production process. Many
of the processes are proprietary and were developed by us. We believe that our
level of manufacturing integration allows us to control costs, quality and
process advancements, to accelerate new product development cycle time and to
provide greater design flexibility. Raw materials, components and subassemblies
used in our products are purchased from outside suppliers and are generally
readily available from multiple sources.

Our manufacturing facilities are subject to periodic inspections by
regulatory authorities, including Quality System Regulations compliance
inspections by the FDA and TUV, which is the European governing body equivalent
to the FDA. We have undergone eight inspections by the FDA for Quality System
Regulations compliance since 1990, and the TUV has conducted an inspection each
year since 1993. Each inspection resulted in a limited number of noted
observations, to which we believe we have provided adequate responses.

We purchase certain components of our CVX-300 laser unit from several sole
source suppliers. We do not have guaranteed commitments from these suppliers, as
we order products through purchase orders placed with these suppliers from time
to time. While we believe we could obtain replacement components from
alternative suppliers, we may be unable to do so. In addition, we may encounter
difficulties in scaling up production of laser units and disposable devices and
hiring and training additional qualified manufacturing personnel. Any of these
difficulties could lead to quarterly fluctuations in operating results and
adversely affect us.

THIRD-PARTY REIMBURSEMENT

Our CVX-300 laser unit and related fiber-optic laser devices are generally
purchased by hospitals, which then bill various third party payers for the
health care services provided to their patients. These payers include Medicare,
Medicaid and private insurance payers. Most public and private insurance payers
base their payment systems upon the Medicare Program. The Medicare Program
reimburses hospitals based on predetermined amounts per diagnosis code for
inpatient hospital services (those lasting 24 hours or more) and predetermined
amounts per procedure performed for outpatient hospital services (those lasting
less than 24 hours), and it reimburses physicians based on a fee schedule per
procedure performed.

At present, many of our customers using the CVX-300 for laser atherectomy
are obtaining reimbursement for inpatient hospital services under the same code
as for balloon angioplasty, or for balloon angioplasty with stent. Lead removal
procedures using the SLS are reimbursed using the same inpatient hospital codes
for non-laser lead removal or lead removal and replacement. We expect that our
customers will continue to do so. Hospital outpatient codes and physician
services codes differentiate atherectomy procedures from PCI procedures
utilizing only balloons or only balloons and stents.

Reimbursement amounts are generally adequate to cover the cost of laser
ablation procedures. Procedure costs and payment rates vary depending on the
complexity of the procedure, various patient factors and geographical location.

13

While we believe that a laser atherectomy procedure offers a less costly
alternative for the treatment of certain types of heart disease, we cannot
assure that the procedure will be viewed as cost-effective under changing
reimbursement guidelines or other health care payment systems. For more
information, see "Risk Factors -- Failure of Third Parties to Reimburse Medical
Providers for Our Products May Reduce Our Sales" set forth in Exhibit 13.1 filed
herewith.

PRODUCT LIABILITY AND INSURANCE

Our business entails the risk of product liability claims. We maintain
product liability insurance in the amount of $5,000,000 per occurrence with an
annual aggregate maximum of $5,000,000. We cannot assure, however, that product
liability claims will not exceed such insurance coverage limits or that such
insurance coverage limits will continue to be available on acceptable terms, or
at all. See "Risk Factors -- Potential Product Liability Claims and Insufficient
Insurance Coverage May Hurt Our Business and Stock Price" set forth in Exhibit
13.1 filed herewith.

EMPLOYEES

As of February 28, 2002, we had 141 employees, including ten in research
and development and clinical affairs, 57 in manufacturing and 66 in marketing,
sales and administration in the United States and eight in marketing, sales and
administration in Europe. None of our employees is covered by collective
bargaining agreements. We believe that the success of our business will depend,
in part, on our ability to attract and retain qualified personnel. We believe
that our relationship with our employees is good.

ITEM 2. PROPERTIES

We lease a total of approximately 50,000 square feet in three buildings in
Colorado Springs, Colorado. These facilities contain approximately 35,000 square
feet of manufacturing space and approximately 15,000 square feet devoted to
marketing, research and administrative activities. The leases for two of these
facilities expire December 31, 2002 and June 30, 2004. The lease for the third
facility expires December 31, 2003, but we have the option to renew it for an
additional year.

Spectranetics International B.V. leases 4,394 square feet in Leusden, The
Netherlands. The facility houses our operations for the marketing and
distribution of products in Europe, and the lease expires June 30, 2003.

We believe these facilities are adequate to meet our requirements for the
foreseeable future.

ITEM 3. LEGAL PROCEEDINGS

The Company is involved in legal proceedings in the normal course of
business and does not expect them to have a material adverse effect on our
business.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

14

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS

Our Common Stock is traded on The Nasdaq National Market under the symbol
"SPNC." The table below sets forth the high and low sales prices for the
Company's Common Stock as reported on The Nasdaq National Market for each
calendar quarter in 2001 and 2000. These quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commissions, and may not necessarily
represent the sales prices in actual transactions.

We have not paid cash dividends on our Common Stock in the past and do not
expect to do so in the foreseeable future. The payment of dividends in the
future will be at the discretion of the Board of Directors and will be dependent
upon our financial condition, results of operations, capital requirements and
such other factors as the Board of Directors deems relevant.

The closing sales price of our Common Stock on March 13, 2002, was $4.000.
On March 13, 2002, we had 732 shareholders of record.

ITEM 6. SELECTED FINANCIAL DATA

Information appearing under the caption "Selected Six-Year Financial Data"
in the Company's 2001 Annual Report to security holders included in Exhibit 13.1
to this report is incorporated herein by reference. The Selected Six-Year
Financial Data should be read in conjunction with the Company's consolidated
financial statements and accompanying notes incorporated by reference in Item 8
hereof.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Information appearing under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the Company's 2001
Annual Report to security holders included in Exhibit 13.1 to this report is
incorporated herein by reference.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Our primary market risks include changes in foreign currency exchange rates
and interest rates. Market risk is the risk of potential loss arising from
adverse changes in market rates and prices, such as foreign currency exchange
and interest rates. We do not use financial instruments to any degree to manage
these risks. The Company does not use financial instruments to manage changes in
commodity prices and does not hold or issue financial instruments for trading or
other speculative purposes. Our debt consists of obligations with fixed interest
rates ranging from 5.75 percent to 8 percent. The Company does not consider the
potential losses in future earnings, cash flows and fair values from reasonable
near-term changes in exchange rates or interest rates to be material.

15

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Pages five through 32 of the Company's 2001 Annual Report to security
holders, which include the consolidated financial statements and the Independent
Auditors' Report as listed in Item 14 (a), are incorporated herein by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information appearing under the captions "Proposal 1 -- Election of
Directors," "Executive Officers" and "Section 16(a) Beneficial Ownership
Reporting Compliance" of the registrant's definitive Proxy Statement to be used
in connection with its 2002 Annual Meeting of Shareholders is incorporated
herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

Information appearing under the captions "Executive Compensation," "Grants
of Stock Options," "Stock Option Exercises and Fiscal Year-End Stock Option
Value," "Director Compensation" and "Compensation Committee Interlocks and
Insider Participations" of the Company's 2002 Proxy Statement is incorporated
herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information appearing under the caption "Security Ownership of Certain
Beneficial Owners and Management" of the Company's 2002 Proxy Statement is
incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Not applicable.

16

PART IV

ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K

(a) Documents Filed as a Part of The Report

(1) Financial Statements

The following information contained at pages five through 32 of the
Company's Annual Report to security holders is incorporated by reference
in Part II, Item 8 hereof:

Independent Auditors' Report

Consolidated Balance Sheets as of December 31, 2001 and 2000

Consolidated Statements of Operations and Other Comprehensive Income
for the years ended December 31, 2001, 2000 and 1999

Consolidated Statements of Shareholders' Equity for the years ended
December 31, 2001, 2000 and 1999

Consolidated Statements of Cash Flows for the years ended December
31, 2001, 2000 and 1999

Notes to Consolidated Financial Statements

(2) Financial Statement Schedule

Not applicable.

(b) Reports on Form 8-K

Not applicable.

(c) Exhibit Index to The Spectranetics Corporation Annual Report on Form
10-K for Fiscal Year Ended December 31, 2001:

- ---------------

(1) Incorporated by reference to the Company's 1993 Annual Report on Form 10-K
filed on March 31, 1994.

(2) Incorporated by reference to exhibits previously filed by the Company with
its Registration Statement on Form S-4 filed May 18, 1994 (File No.
33-79106).

(3) Incorporated by reference to exhibits previously filed by the Company with
its Registration Statement on Form S-1, filed December 5, 1991 (File No.
33-44367).

(4) Incorporated by reference to exhibits previously filed by the Company with
its Amendment No. 2 to the Registration Statement, filed January 24, 1992
(File No. 33-44367).

(5) Incorporated by reference to exhibits previously filed by LAIS with its
Registration Statement on Form S-1 filed August 30, 1991 (File No.
33-42457).

(6) Incorporated by reference to exhibits previously filed by the Company with
its Amendment No. 1 to the Registration Statement on Form S-1, filed
January 10, 1992 (File No. 33-44367).

19

(7) Incorporated by reference to exhibits previously filed by the Company with
its Annual Report for 1992 on Form 10-K filed March 31, 1993.

(8) Incorporated by reference to exhibits previously filed by the Company with
its Registration Statement on Form S-8 filed April 1, 1992 (File No.
33-46725).

(9) Incorporated by reference to exhibits previously filed by the Company with
its Registration Statement on Form S-8 filed December 30, 1994 (File No.
33-88088).

(10) Incorporated by reference to exhibits previously filed by the Company with
its Registration Statement on Form S-8 filed November 16, 1995 (File No.
33-99406).

(11) Incorporated by reference to exhibits previously filed by the Company with
its Registration Statement on Form S-8 filed October 6, 1994 (File No.
33-85198).

(12) Incorporated by reference to exhibits previously filed by the Company with
its 1994 Annual Report on Form 10-K filed on March 31, 1995.

(13) Incorporated by reference to the Company's 1995 Annual Report on Form 10-K
filed on April 29, 1996.

(14) Incorporated by reference to exhibits previously filed by the Company with
its Current Report on Form 8-K filed on May 6, 1996.

(15) Incorporated by reference to exhibits previously filed by the Company with
its Form 10-Q for the quarter ended on March 31, 1997.

(16) Incorporated by reference to exhibits previously filed by the Company with
its Form 10-Q for the quarter ended on September 30, 1997.

(17) Incorporated by reference to exhibits previously filed by the Company with
its Registration Statement on Form S-8 filed July 19, 1996.

(18) Incorporated by reference to exhibits previously filed by the Company with
its Form 10-Q for the quarter ended on June 30, 1998.

(19) Incorporated by reference to exhibits previously filed by the Company with
its 1997 Annual Report on Form 10-K filed on March 30, 1998.

(20) Incorporated by reference to exhibits previously filed by the Company with
its Current Report on Form 8-K filed on June 8, 1999.

(21) Incorporated by reference to exhibits previously filed by the Company with
its Registration Statement on Form S-8 filed June 17, 1998 (File No.
333-57015).

(22) Incorporated by reference to exhibits previously filed by the Company with
its Form 10-Q for the quarter ended March 31, 1999.

(23) Incorporated by reference to exhibit previously filed by the Company with
its Registration Statement on Form S-8 filed on November 22, 2000.

(24) Incorporated by reference to exhibit previously filed by the Company with
its 2000 Annual Report on Form 10-K filed on March 30, 2001.

(25) Incorporated by reference to exhibit previously filed by the Company with
its 2000 Annual Report on Form 10-K filed on March 30, 2001.

20

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Colorado Springs, State of Colorado, on this 29th day of March, 2002.

THE SPECTRANETICS CORPORATION

By: /s/ JOSEPH A. LARGEY

----------------------------------
Joseph A. Largey
President and Chief Executive
Officer

Pursuant to the requirements of the Securities Act of 1934, this report has
been signed below by the following persons on behalf of the Registrant in the
capacities and on the date indicated.

21

EXHIBIT INDEX

List of Exhibits filed with Form 10-K for the year ended December 31, 2001