Summary of SPECTRANETICS CORP

Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
Forward-Looking Statements
This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such statements are based on current assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially. For a description of such risks and uncertainties, which could cause the actual results, performance or achievements of the Company to be materially different from any anticipated results, performance or achievements, please see the risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2008. Readers are urged to carefully review and consider the various disclosures made in this report and in our other reports filed with the SEC that advise interested parties of certain risks and factors that may affect our business. This analysis should be read in conjunction with our consolidated financial statements and related notes and Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Form 10-K, filed on March 16, 2009. Spectranetics disclaims any intention or obligation to update or revise any financial projections or forward-looking statements due to new information or other events. Corporate Overview
We develop, manufacture, market and distribute single-use medical devices used in minimally invasive procedures within the cardiovascular system, many of which are used with our proprietary excimer laser system. More than 800 Spectranetics laser systems are used in hospitals worldwide. Excimer laser technology delivers relatively cool ultraviolet energy to ablate, or remove, multiple lesion morphology types which include plaque, calcium and thrombus. Our laser system includes the CVX-300® laser unit and various disposable fiber-optic laser catheters. Our laser catheters contain up to 250 small diameter, flexible optical fibers that can access difficult to reach peripheral and coronary anatomy and produce evenly distributed laser energy at the tip of the catheter for more uniform ablation. We believe that our excimer laser system is the only laser system approved in the United States, Europe, Japan and Canada for use in multiple, minimally invasive cardiovascular procedures. Our Vascular Intervention disposable products include a range of peripheral and cardiac laser catheters for ablation of occluded arteries above and below the knee and within coronary arteries. We also market non-laser aspiration catheters for the removal of thrombus and non-laser support catheters to facilitate crossing of coronary and peripheral arterial blockages. Our Lead Management disposable product line includes excimer laser sheaths and cardiac lead management accessories for the removal of pacemaker and defibrillator cardiac leads.
Although 86% of our revenue was derived in the United States for the quarter ended March 31, 2009, we also have regulatory approval to market our products in two key international markets. In Europe, we have the required approvals to market our products for the same indications that are approved in the United States. We have also received approval to market certain coronary atherectomy products and certain lead removal products in Japan, and are seeking additional approvals there for our other coronary, peripheral and lead removal products. Our distributor, DVx Japan, is assisting us in pursuing reimbursement approval in Japan. We do not expect significant revenue increases in Japan unless and until reimbursement approval is received from the Japanese Ministry of Health, Labor and Welfare.
In 1993, the Food and Drug Administration (FDA) approved for commercialization our CVX-300 laser system and the first generation of our fiber optic coronary atherectomy catheters. Several improvements and additions to our coronary atherectomy product line have been made since 1993 and have been approved for commercialization by the FDA. In 1997, we secured FDA approval to use our excimer laser system for removal of pacemaker and defibrillator leads, and we secured FDA approval in 2001 to market certain products for use in restenosed (clogged) stents (thin steel mesh tubes used to support the walls of coronary arteries) as a pretreatment prior to brachytherapy (radiation therapy). In April 2004, we received 510(k) marketing clearance from the FDA for our CLiRpath® excimer laser catheters which are indicated for use in the endovascular treatment of symptomatic infrainguinal lower extremity vascular disease when total obstructions are not crossable with a guidewire. The data submitted to the FDA showed that the limb salvage rate (no major amputations) among the 47 patients treated was 95% for those patients surviving six months following the procedure. There was no difference in serious adverse events as compared with the entire set of patients treated in the LACI (Laser Angioplasty for Critical Limb Ischemia) trial.

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Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition (Cont'd)
In October 2005, we received 510(k) clearance from the FDA to incorporate several new features (80-Hz capability, "continuous on" lasing and lubricous coating) into our entire CLiRpath product line. The launch of this CLiRpath Turbo product line, to replace the CLiRpath catheters, was completed in the third quarter of 2006. In October 2006, we received FDA clearance to market our Turbo Elite® product line, which added improved pushability, trackability and ablation capability as a result of an improved outer jacket and inner guidewire lumen, as well as additional laser fibers in most sizes, to our CLiRpath Turbo lines. Full transition to this product line was substantially completed in early 2007.
In July 2007, we received clearance from the FDA to market our Turbo-Booster®product for the treatment of arterial stenoses and occlusions in the leg. The Turbo-Booster functions as a guiding catheter facilitating directed ablation of blockages in the main arteries at or above the knee. The Turbo-Booster combined with Turbo Elite laser catheters allows for removal of large amounts of plaque material within the superficial femoral artery (SFA) and popliteal artery. This approval represented a broader indication for use as compared to previous labeling of the existing peripheral laser catheters. We began a limited market launch of the Turbo-Booster product in the third quarter of 2007, and a full launch was completed in the fourth quarter of 2007. In May 2008, we completed the acquisition of the endovascular business of Kensey Nash Corporation (KNC). Pursuant to an Asset Purchase Agreement among us and KNC, we purchased from KNC all of the assets related to KNC's QuickCat™, ThromCat® and SafeCross®product lines for $11.7 million in cash, including acquisition costs of $0.8 million and including a first milestone payment of $1.0 million paid to KNC in October 2008. The primary reason for the acquisition of these product lines was to leverage our existing sales organization while extending our product offering in the area of thrombus management. Under the terms of the Agreement, we will pay KNC an additional $6 million once cumulative sales of the acquired products reach $20 million, and up to $7 million is payable based on various product development and regulatory milestones associated with the next generation ThromCat devices.
We simultaneously entered into a Manufacturing and License Agreement pursuant to which KNC will manufacture for us the endovascular products acquired by us under the Asset Purchase Agreement, and we will purchase such products exclusively from KNC for specified time periods. Revenue from these products subsequent to the acquisition date are included in our reported Vascular Intervention disposable products revenue. Additionally, we and KNC also entered into a Development and Regulatory Services Agreement pursuant to which KNC will conduct work to develop, on our behalf, certain next-generation SafeCross and ThromCat products at KNC's expense. We will own all intellectual property resulting from this development work. If clinical studies are required to obtain regulatory approval from the FDA for those next-generation products, the costs will be shared equally by us and KNC. KNC additionally will be responsible, at its own expense, for regulatory filings with the FDA that are required to obtain regulatory approval from the FDA for the next-generation products.
On September 4, 2008, we were jointly served by the FDA and the Immigration and Customs Enforcement (ICE) with a search warrant issued by the United States District Court, District of Colorado. The search warrant requested information and correspondence relating to: (i) the promotion, use, testing, marketing and sales regarding certain of the company's products for the treatment of in-stent restenosis, payments made to medical personnel and an identified institution for this application, (ii) the promotion, use, testing, experimentation, delivery, marketing and sales of catheter guidewires and balloon catheters manufactured by certain third parties outside of the United States, (iii) two post-market studies completed during the period from 2002 to 2005 and payments to medical personnel in connection with those studies and (iv) compensation packages for certain of the company's personnel. We are cooperating with the appropriate authorities regarding this matter. See Part II, Item 1, "Legal Proceedings" and Note 11, "Commitments and Contingencies" for a discussion of this and other legal proceedings in which we are involved.

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Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition (Cont'd)
In December 2008, we received clearance from the FDA for the Quick-Cross® Extreme® product line, which represents an extension of our Quick-Cross support catheters. We launched this product line in December 2008. The FDA clearance followed the recent receipt of the CE Mark in Europe and approval to market these products in Canada. The Quick-Cross Extreme product line is intended for use to guide and support a guide wire during access of the vasculature, allow for wire exchanges and provide a conduit for the delivery of saline solutions or diagnostic contrast agents. The Quick-Cross Extreme is designed to facilitate the crossing of blockages in the legs and features a braided catheter and an angled tip. The braided catheter jacket improves strength and pushability while the angled tip allows for quicker access into branched anatomy. This was an upgrade to the previous Quick-Cross product line and is available for 0.035" guide wire compatibility in 65 cm, 90 cm, 135 cm, and 150 cm lengths. In December 2008, we also received clearance from the FDA to market our Cross-Pilot™ laser support catheter. We launched the product during the first quarter of 2009 within the United States, Europe and Canada. The Cross-Pilot is a laser support catheter for the 0.9 mm Turbo Elite laser ablation catheter. The Cross-Pilot was designed to provide additional support for reaching distal lesions. The braid reinforced catheter construction and hydrophilic coating allow for better pushability through distal vessels and the angled tip allows for quicker access to branched anatomy. The Cross-Pilot Laser Support Catheter is currently offered in 125 cm length and straight and angled tip configurations.
Results of Operations
Financial Results by Geographical Segment Our two reporting segments consist of United States Medical, which includes the United States and Canada, and International Medical, which includes Europe, the Middle East, Asia Pacific, Latin America and Puerto Rico.

                                     For the three months ended March 31,
              (in thousands)             2009                        2008
              Revenue
              United States    $    23,528            86 %    $ 21,258        89 %
              International          3,775            14         2,573        11

              Total revenue    $    27,303           100 %    $ 23,831       100 %




                                   For the three months ended March 31,
           (in thousands)              2009                      2008
           Net (loss) income
           United States       $             (3,231 )       $          (624 )
           International                        394                     219

           Total net loss      $             (2,837 )       $          (405 )

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