UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

(Mark One)

For fiscal year ended March 31, 2006

OR

For the transition period from                      to                     

Commission File Number: 0-20584

ABIOMED, Inc.

(Exact Name of Registrant as Specified in Its Charter)

(978) 777-5410

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.01 par value

Preferred Stock Purchase Rights

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x

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 Rule 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.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  ¨                    Accelerated filer  x                    Non-accelerated filer  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The aggregate market value of the registrant’s common stock as of September 30, 2005, held by non-affiliates of the registrant (without admitting that any person whose shares are not included in such calculation is an affiliate) computed by reference to the price at which the common stock was last sold as of such date was $237,213,633.

As of June 13, 2006, 26,532,524 shares of the registrant’s common stock, $.01 par value, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s Proxy Statement for its 2006 Annual Meeting of Stockholders, which is scheduled to be filed within 120 days after the end of the registrant’s fiscal year, are incorporated by reference in Part III (Items 10, 11, 12, 13 and 14) of this Report.

INTRODUCTORY NOTE

This report, including the documents incorporated by reference in this report, includes forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events. Our actual results could differ materially from those discussed in, or implied by, these forward-looking statements. Forward-looking statements are identified by words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “will,” “may” and other similar expressions. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. Forward-looking statements in these documents include, but are not necessarily limited to, those relating to:

Factors that could cause actual results or conditions to differ from those anticipated by these and other forward-looking statements include those more fully described in the “Risk Factors” section set forth in Part I, Item1A and elsewhere in this Report. We are not obligated to update or revise these forward-looking statements to reflect new events or circumstances.

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PART I

Overview

ABIOMED is a Delaware corporation, incorporated in 1981, with its principal executive offices located at 22 Cherry Hill Drive, Danvers, Massachusetts 01923. We commenced operations in 1981. Our telephone number is (978) 777-5410 and our web address is www.abiomed.com. We make available free of charge through the Investor section of our website, all reports filed with the Securities and Exchange Commission (“SEC”). We include our website address in this Annual Report on Form 10-K only as an inactive textual reference and do not intend it to be an active link to our website. The Company is a leading provider of medical products and services in the area of circulatory care. The Company’s strategy is centered around establishing “recovery” as the standard of care for acute patients. The two products of the Company designed for heart recovery, and approved by the FDA, following acute events are the AB5000 and BVS 5000. The Company’s Impella products are CE marked in Europe and are discussed in more detail in this Overview section. Our AB5000 Circulatory Support System is a heart assist product designed to provide enhanced patient mobility within and between medical centers, to facilitate patient ambulation and to provide enhanced features and ease of use for caregivers. The AB5000 console serves as a platform for ongoing and future blood pump product line enhancements expected to meet patient needs across a broader spectrum of temporary heart assist applications. Our AB5000 marketing efforts were initially focused on introducing the system in the largest cardiothoracic surgical centers through sales of consoles and blood pumps. It is our intention to seek expansion of the current approved indications for use of the AB5000 in order to allow support of expanded patient populations for longer periods of support.

The BVS and AB5000 systems each consist of single-use external blood pumps and cannulae and a reusable pneumatic drive and control console. Both are capable of assuming the full pumping function of a patient’s failing heart, and are designed to provide either univentricular or biventricular support. Both are currently approved by the FDA for temporary use while the patient’s heart is allowed to rest, heal and recover. The AB5000 console is capable of controlling both the BVS and the AB5000 blood pumps and ventricles and a patient can be switched from a BVS VAD to an AB 5000 VAD without surgery due to the compatible design of the cannulae used with the products.

Our AbioCor is a battery-powered totally implantable replacement heart system, designed to operate without wires or any other material penetrating the patient’s skin. The Company applied for initial FDA market approval for the AbioCor to treat a defined subset of irreversible end-stage heart failure patients under a Humanitarian Device Exemption (HDE). This would allow implantation of the AbioCor in up to 4,000 U.S. patients a year. As of June 13, 2006, the Company is awaiting an FDA decision on its HDE application.

In May 2005, we completed the acquisition of Impella CardioSystems AG (Impella), located in Aachen, Germany. Impella manufactures, sells and supports the world’s smallest, minimally invasive, high performance micro blood pumps with integrated motors and sensors for use in interventional cardiology and heart surgery. Impella’s Recover System pumps are designed to provide ventricle support for patients requiring hemodynamic stabilization, or suffering from reduced cardiac output and can potentially aid in recovering the hearts of patients suffering from acute myocardial infarction (AMI or Heart Attack). Impella has CE marks for four of its devices and currently markets them throughout Europe. We intend to seek FDA approval to sell the Impella Recover System blood pumps in the United States, as well as regulatory approval in other countries in order to address wider market opportunities for circulatory care. In May 2006, the FDA granted approval for the Company to commence its pilot clinical trial immediately in the United States for the Impella 2.5 minimally invasive ventricular assist device (VAD). The approval is conditioned on submitting additional information to the FDA by early July, 2006.

The indication for use is support during “high-risk” angioplasty for up to five days as a left ventricular assist device. Angioplasty, performed in the catheterization lab, is the insertion of a catheter-guided balloon and is used

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to open a narrowed coronary artery. A stent (a wire-mesh tube that expands to hold the artery open) is usually placed at the narrowed section. High-risk angioplasty is defined as patients undergoing angioplasty on an unprotected left main coronary artery lesion, or the last patent coronary conduit, and poor cardiac function.

As used herein, ABIOMED includes ABIOMED, Inc., together with our subsidiaries. ABIOMED and ABIOCOR are trademarks of ABIOMED, Inc., and are registered in the U.S.A. and certain foreign countries. BVS is a trademark of ABIOMED, Inc. and is registered in the U.S.A. AB5000 is a trademark of ABIOMED, Inc. IMPELLA and RECOVER are trademarks of Impella CardioSystems GmbH, a subsidiary of ABIOMED, Inc., and are registered in the U.S.A. and certain foreign countries. This Report may also include trademarks of companies other than ABIOMED.

Industry Overview

Heart Disease

Heart disease is the number one cause of death in the U.S., annually claiming more than 700,000 lives in the U.S. Internationally, heart disease accounts for nearly one third of all deaths, killing 16.7 million people annually (according to World Health Organization estimates), including more than 4 million in Europe alone. Illnesses and deaths from heart disease create an immense burden to many individuals and their families. Patients frequently experience extended suffering, and the economic cost can be substantial. While a number of therapies exist for the treatment of patients in early stages of heart disease, limited therapies exist today for most patients with severe end-stage heart failure.

The majority of deaths from heart disease can be attributed to coronary heart disease and congestive heart failure. Other types of heart disease include rhythm disorders and diseases of the valves.

Coronary heart disease is a disease of the coronary arteries causing reduced blood flow and insufficient oxygen delivery to the affected portion of the heart. Coronary heart disease can lead to a heart attack, also known as acute myocardial infarction (AMI), and may result in permanent damage to the heart muscle. In severe heart attacks, death can occur suddenly or gradually over days and weeks. Each year, approximately 865,000 people in the U.S. experience AMI. Of these cases, 7% to 10% suffer from cardiogenic shock, preventing blood flow from the heart. Cardiogenic shock is the leading cause of mortality for patients hospitalized with AMI, resulting in death in up to 50% of cases.

Congestive heart failure is a condition resulting from the progressive deterioration of the heart over extended periods of time. The patient’s heart cannot provide adequate blood flow and oxygen to meet the needs of the body. Congestive heart failure may be initiated and aggravated by a variety of factors, including high blood pressure, defective heart valves, coronary heart disease, infections of the heart muscle or the valves and problems resulting from heart defects. Due to the progressive nature of congestive heart failure, medical interventions often take place over periods of months or years.

In general, heart failure is progressive. While over 60% of all heart failure patients experience sudden death as a result of cardiac arrest, the remaining patients who die from heart failure typically do so in hospitals or long-term care facilities.

Prevalence, Incidence and Mortality

The American Heart Association reports in the 2005 update on Heart Disease and Stroke Statistics that a total of 70.1 million people in the United States live with some form of cardiovascular disease, including 65.0 million with high blood pressure. Of those, 13.0 million were diagnosed with coronary heart disease, 4.9 million with congestive heart failure. Thus, coronary heart disease patients outnumbered congestive heart failure patients by approximately 2.7:1. For patients newly diagnosed within 2002, however, the ratio of coronary

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heart disease to congestive heart failure patients was 2.2:1, indicating that congestive heart failure is becoming relatively more important as time goes on. We believe this trend is primarily attributable to the aging of the population. Congestive heart failure is primarily a condition of the elderly.

According to the National Center for Health Statistics, approximately 700,000 people died of heart disease in the U.S. in 2002. According to the same source, nearly 371,000 of these deaths were attributable to coronary (ischemic) heart disease, approximately 42,000 were attributable to congestive heart failure, and approximately 287,000 were attributable to other diagnoses. We believe that a close examination of the various categories included in those other diagnoses reveals that many of those deaths may have been attributable to congestive heart failure related conditions.

Therapies for Heart Disease

A broad spectrum of treatment is available for heart disease patients. Treatments include drug therapies, cardiac interventions, including closed chest procedures (angioplasty and stents) and rhythm management therapies, or surgical corrections, such as coronary bypass surgery and valve replacement. These therapies are sometimes successful in slowing the progression of heart disease, extending life, and/or improving the quality of life for some period of time. For patients with end-stage heart disease, however, these treatments are typically inadequate. Patients with the most severe heart disease, those at identifiable risk of death, frequently are in need of mechanical circulatory support or heart replacement. Because the supply of available donor hearts is limited, with fewer than 2,200 per year available in the U.S., heart assist and replacement treatments have been and continue to be developed with the goal of extending and improving the lives of these patients.

The Market for Circulatory Support Devices in the U.S.

At present, due to the stage of technological development, circulatory support devices are typically used only after other, less-invasive therapies have been found to be inadequate. The appropriate reference group from which to begin analysis of the potential market for these devices are the patients who die each year of heart disease: approximately 700,000 in the U.S. and the estimated 16.7 million around the globe. In the future, when devices have matured and become less invasive, more durable and reliable, and surgical and patient management techniques have improved, these devices may become appropriate choices for less emergently ill patients and the potential addressable market may be much larger.

Not all of the patients who die each year of heart disease are addressable by circulatory support devices. Many patients not classifiable as coronary heart disease or congestive heart failure patients are not suitable candidates for circulatory support. In addition, more than 60% of all cardiac deaths occur suddenly, outside of the hospital or in the Emergency Room, and therefore cannot be reached by this therapy. Some suffer significant comorbidities that might rule out device implantation, and many are simply too frail to withstand the rigors of device implantation and surgical recovery. As a result, we estimate that the total number of patients addressable today by mechanical circulatory support devices ranges from 60,000 to 100,000 patients per year in the U.S.

This and any other estimate of market size should be viewed as dynamic and subject to change on account of a variety of factors. For example, both the percentage of heart disease patients who are unreachable because they die suddenly and the percentage of patients who are untreatable because of frailty are important determinants of the total circulatory support device market. Both of those variables are susceptible to change over time as technology improves and patient management techniques mature. The total size of the market will also be affected by demographic trends, most particularly by the aging of the so-called “baby boom” generation. That generation is just approaching the age at which heart disease becomes a major medical problem, and it is reasonable to postulate that the pool of heart disease patients will increase as the baby boom generation ages.

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ABIOMED Products and Products Under Development

ABIOMED is building a global suite of cardiac assist solutions for physicians and clinicians. Our cardiac assist products support patients along the entire care pathway to heart recovery. Today, ABIOMED manufactures the smallest circulatory assist devices in the market. The Impella Recover 2.5 and 5.0 are minimally invasive, high-performance micro blood pumps designed for use by cardiologists in the cardiac catheterization lab. These pumps can be inserted percutaneously to provide ventricular support to patients suffering cardiogenic shock or undergoing a high risk procedure. Currently, the Impella Recover devices, the 5.0, 2.5 and RD each have the CE mark. The 5.0 and the RD are not yet approved by the FDA for sale in the U.S. The conditional approval of the 2.5 for initial clinical trials in the U.S. is conditioned on submitting additional information to the FDA by early July, 2006.

Patients presented to the surgery suite may be supported with the ABIOMED BVS 5000. The BVS 5000 was the first FDA approved heart assist device capable of assuming the pumping function of the heart, allowing the patient’s heart to rest, heal and recover. Since 1992, thousands of patients have been supported, and the BVS system was considered the standard of care for patients with acute shock, supporting either the right, left or both ventricles.

Acute shock of the heart can occur in many situations including immediately following heart surgery, a virus attacking the heart or a heart attack. Published data demonstrates that recovery from a heart attack complicated by shock requires on the average 30 days of cardiac support. This latest data supports the need for a recovery device, such as ABIOMED’s AB5000, which provides longer support durations, ambulation and ease of explant post recovery.

The AB5000 heart assist system was FDA approved for recovery and commercial distribution during fiscal 2004. Since its introduction, the AB5000 has supported more than 400 patients globally, increasing the recovery and survival rates for all potentially recoverable indications. There is growing acceptance of the AB5000 around the world. It is quickly being recognized as the device preference for surgical patients.

In May 2005, we completed the acquisition of Impella CardioSystems AG (Impella), located in Aachen, Germany. Impella manufactures, sells and supports the world’s smallest, minimally invasive, high performance micro blood pumps with integrated motors and sensors for use in interventional cardiology and heart surgery. Impella’s Recover System pumps are designed to provide ventricle support for patients requiring hemodynamic stabilization, or suffering from reduced cardiac output and can potentially aid in recovering the hearts of patients suffering from acute myocardial infarction (AMI or Heart Attack). Impella has CE marks for its devices and currently markets them throughout Europe. We intend to seek FDA approval to sell the Impella products in the United States as well as regulatory approval in other countries in order to address wider market opportunities for circulatory care.

The AbioCor and the Company’s next generation AbioCor II are battery-powered totally implantable replacement heart systems, designed to operate without wires or any other material penetrating the patient’s skin. As of June 13, 2006, we are awaiting an FDA decision on our HDE application for AbioCor. The AbioCor II is 30% smaller than the AbioCor, incorporates key design elements of the Penn State Heart technology acquired in 2000, and has a Company reliability goal of five years of operation.

Research and Product Development

As of May 31, 2006, our research and development staff, including those employees who joined us from Impella, consisted of 86 professional and technical personnel, including many engineers with advanced degrees, covering disciplines such as electronics, mechanical engineering, software, reliability engineering, fluid mechanics, physics, materials and physiology.

Our research and development efforts are focused on developing a broader portfolio of products across a clinical spectrum of care, primarily focused in the area of circulatory care.

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We expended $14.2 million, $13.4 million and $16.7 million on research and development in fiscal 2004, 2005 and 2006, respectively. We expect research and development expenditures of approximately $16 million to $20 million in fiscal year 2007, which includes certain estimated expenses for the U.S. FDA trials for certain Impella products, as well as costs associated with the development of new technologies and improvements to existing technologies.

Sales, Clinical Support, Marketing and Field Service

As of May 31, 2006, our worldwide sales, clinical support, marketing and field service teams included 73 full-time employees, 53 in the United States and 20 in Europe. In the fiscal year ahead, we plan to increase our sales and clinical support personnel by approximately two to four individuals per quarter to enhance our global distribution and generate recovery awareness to establish recovery as the standard of care for acute patients worldwide.

As of May 31, 2006, we have signed international sales and distribution agreements in Japan, China, Australia, Canada, and Latin America. We also utilize distributors throughout Europe and the Middle East in those countries in which we have not chosen to sell directly to medical centers. In fiscal 2006, fiscal 2005 and fiscal 2004, approximately 13%, 8% and 8%, respectively, of our product revenues were derived from international sales.

Manufacturing

We manufacture our products in Danvers, Massachusetts and Aachen, Germany. Our United States operations manufacture the BVS, AB5000, AbioCor and other products under development. Our Aachen, Germany facility manufactures all of our Impella products.

We believe our existing manufacturing facilities give us the physical capacity to produce sufficient quantities of products to meet market demand for the foreseeable future. However, we will continue to monitor market conditions and demand and evaluate capacity expansion requirements as deemed necessary in the future. Our U.S. manufacturing facility is ISO9001 certified and operates under the FDA’s good manufacturing practice requirements set forth in the current quality system regulations, known as QSR.

Proprietary Rights, Patents and Know-How

We have developed significant know-how and proprietary technology, upon which our business depends. To protect our know-how and proprietary technology, we rely on trade secret laws, patents, copyrights, trademarks, and confidentiality agreements and contracts. However, these methods afford only limited protection. Others may independently develop substantially equivalent proprietary information, gain access to our trade secrets or disclose such technology without our approval.

A substantial portion of our intellectual property rights relating to the AbioCor, the Penn State Heart, the BVS and the AB5000 is in the form of trade secrets, rather than patents. We protect our trade secrets and proprietary knowledge in part through confidentiality agreements with employees, consultants and other parties. We cannot assure that our trade secrets will not become known to or be independently developed by our competitors.

As of June 8, 2006, we own or have rights to 70 U.S. patents and at least 87 foreign patents. Our overall patent portfolio is comprised of 70 U.S. patents, of which 17 are related to the AbioCor Implantable Replacement Heart, two are related to the BVS 5000 Bi-Ventricular Support System, and 17 are related to Impella products. Our portfolio also includes ten patents related to the Penn State Heart to which we have an exclusive worldwide license. Our 70 U.S. patents have expiration dates ranging from July 11, 2006, to January 25, 2025. The remaining 87 patents are foreign patents issued in a variety of countries and related to 21 distinct patent families, of which one is related to the BVS 5000 Bi-Ventricular Support System and 84 are related to Impella

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products. Our 87 foreign patents have expiration dates ranging from April 4, 2016, to November 16, 2021. We also own or have rights to certain pending U.S. and foreign patent applications. We believe patents will issue pursuant to such applications. However, neither the timing of the issuance, the scope of protection, nor the actual issue date of these pending applications can be forecasted with precision at this point in time. In certain instances, we may be required to pay royalties to maintain certain patent rights.

Our patents may not provide us with competitive advantages. They may also be challenged by third parties. Our pending or future patent applications may not be approved. The patents of others may render our patents obsolete or otherwise have an adverse effect on our ability to conduct business. Because foreign patents may afford less protection than U.S. patents, they may not adequately protect our proprietary information.

The medical device industry is characterized by a large number of patents and by frequent and substantial intellectual property litigation. Our products and technologies could infringe on the proprietary rights of third parties. If third parties successfully assert infringement or other claims against us, we may not be able to sell our products. In addition, patent or intellectual property disputes or litigation may be costly, result in product development delays, or divert the efforts and attention of our management and technical personnel. If any such disputes or litigation arise, we may seek to enter into a royalty or licensing arrangement. However, such an arrangement may not be available on commercially acceptable terms, if at all. We may decide, in the alternative, to litigate the claims or to design around the patented or otherwise proprietary technology.

The government may obtain certain rights to use or disclose technical data developed under government contracts that supported the development of some of our products. We retain the right to obtain patents on any inventions developed under those contracts (subject to a non-exclusive, non-transferable, royalty-free license to the government), provided we follow prescribed procedures.

Competition

Competition among providers of treatments for the failing heart is intense and subject to rapid technological change and evolving industry requirements and standards. We compete with companies developing or marketing cardiovascular products that have substantially greater or broader financial, product development, sales and marketing resources and experience than ABIOMED. These competitors may develop superior products or products of similar quality at the same or lower prices. Moreover, improvements in current or new technologies may make them technically equivalent or superior to our products in addition to providing cost or other advantages. Other advances in medical technology, biotechnology and pharmaceuticals may reduce the size of the potential markets for our products or render those products obsolete.

Our customers frequently have limited budgets. As a result, our products compete against a broad range of medical devices and other therapies for these limited funds. Our success will depend in large part upon our ability to enhance our existing products, to develop new products to meet regulatory and customer requirements, and to achieve market acceptance. We believe that important competitive factors with respect to the development and commercialization of our products include the relative speed with which we can develop products, establish clinical utility, complete clinical trials and regulatory approval processes, obtain reimbursement, and supply commercial quantities of the product to the market.

The BVS and AB 5000 systems can assume the full pumping function of the heart. The FDA approved these systems as bridge-to-recovery devices for the treatment of all patients with potentially reversible heart failure. They compete with a temporary cardiac assist device from Thoratec Corporation, which is also capable of assuming the full pumping function of the heart and is today approved for post-cardiotomy support. The Thoratec device was originally approved for bridge-to-transplant and bridge-to-transplant continues to be the primary use of the device. In addition, the BVS and AB 5000 compete with other blood pumps, such as intra-aortic balloon pumps (Datascope, Arrow International) and centrifugal pumps, that are used in medical centers for a variety of applications but which are limited to either providing partial pumping support of failing hearts, or are

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non-pulsatile, or are not recommended for the duration of support generally required for bridge-to-recovery. We are aware of one other company, Levitronix, that is conducting clinical trials in the U.S. with a device that may compete with our current heart assist products in some applications. Approval by the FDA of products that compete directly with our products could increase competitive pricing and other pressures. We believe that we can compete with such products based on cost, clinical utility and customer relations.

No fully implantable replacement heart is commercially available today. We are aware of other heart replacement device research efforts in the U.S., Canada, Europe and Japan, but are not aware of any plans for any other totally implantable replacement heart to commence clinical trials in the U.S. or anywhere in the world. In March 2004, the FDA’s Circulatory Systems Devices Panel recommended approval of Syncardia Systems’ CardioWest total Artificial Heart for use as a bridge to transplantation in cardiac transplant-eligible candidates at risk of imminent death from non-reversible biventricular failure. The FDA approved the recommendation in October of 2004. Unlike our AbioCor, the CardioWest heart is not fully implantable. In addition, there are a number of companies—including Thoratec Corporation, World Heart Corporation, MicroMed Technology, and Ventracor—which are developing permanent heart assist products, including implantable LVADs and miniaturized rotary ventricular assist devices, that may address markets that overlap with certain segments of the markets targeted by our products. In addition to these devices, several companies and institutions have been for many years investigating xenotransplantation, the transplantation of a heart from another species, as a potential therapy. Research is also being conducted by others to develop gene and cell therapy potentially to reverse the disease process or to supplant diseased heart cells.

Third-Party Reimbursement

ABIOMED’s products and services are generally purchased by healthcare institutions that rely on third party reimbursement to cover the costs of related patient care. Third parties may include government healthcare plans such as the U.S. Medicare program (CMS), private insurers or managed care organizations. The type of coverage and amount of payment for patients supported by ABIOMED technology varies by country, medical procedure, hospital, outcome, cost and third party. Reimbursement for the AB5000 and BVS 5000 are well established in the U.S. market and most major global markets. Effective October 1, 2005 CMS increased reimbursement under DRG 103 for ABIOMED’s recovery VADs to an average of $140,000 per patient, up approximately 70% from historical CMS reimbursement levels. Commercial insurance carriers in the U.S. generally reimburse approximately $165,000 per patient and are not subject to CMS reimbursement regulations. New products and services such as certain Impella products and AbioCor are actively reviewed for coverage and payment amounts with major third party payers.

Government Regulation

U.S. Clinical Use Regulations. In the United States, our AB5000 and BVS 5000 heart assist systems are classified as Class III medical devices under FDA rules, as is the AbioCor. In the U.S., medical devices are classified into one of three classes (i.e., Class I, II or III) based on the controls deemed necessary by the FDA to reasonably ensure their safety and effectiveness. Class III devices, which are typically life-sustaining, life-supporting or implantable devices, or new devices that have been found not to be substantially equivalent to legally marketed devices, must generally receive pre-market approval (PMA) by the FDA to ensure their safety and effectiveness.

The FDA also provides that certain devices can be distributed under a Humanitarian Device Exemption (HDE) rather than a PMA. In order for a device to be eligible for an HDE, a qualifying target patient population of less than 4,000 patients per year for which there is currently no other available therapy must be approved by the FDA. The FDA’s approval of an HDE to treat that qualifying patient population then requires demonstration that the device is safe for its intended application, that it is potentially effective, and that the probable benefits outweigh the associated risks. If clinical trials of a device are required in order to obtain FDA approval, the sponsor of the trial is required to file an Investigational Device Exemption, known as an IDE, application prior to

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commencing clinical trials. The IDE application must be supported by data, which typically include the results of extensive device bench testing, animal testing performed in conformance with Good Laboratory Practices, and formal laboratory testing and documentation in accordance with appropriate design controls and scientific justification.

In November 1992, the FDA approved our PMA for the BVS. In 1996 and 1997, the FDA approved the use of the BVS for additional indications, expanding its use to the treatment of all patients with potentially reversible heart failure. In April 2003 the AB5000 Circulatory Support System Console was approved under a PMA Supplement, and in September 2003 a PMA supplement for the AB5000 blood pump was approved. The AbioCor is classified as a Class III device and therefore is subject to a stringent regulatory approval and monitoring process. In January 2001, the FDA granted an IDE providing us with regulatory permission to commence the initial clinical trial of the AbioCor.

In September, 2003, a Humanitarian Use Device (“HUD”) designation was approved by the Office of Orphan Product Development, paving the way for our HDE submission in September, 2004. In June, 2005, the Circulatory Support Panel considered our HDE application for the AbioCor and provided feedback to the FDA. We are currently awaiting an FDA decision on our HDE application.

U.S. Manufacturing and Sales Regulation. Any devices, including the AB5000, BVS 5000 and AB5000 circulatory assist systems, which we manufacture or distribute pursuant to FDA clearances or approvals, are subject to continuing regulation by the FDA and other regulatory authorities. Manufacturers of medical devices for marketing in the U.S. are required to adhere to QSR requirements and must also comply with Medical Devices Reporting, or MDR, which requires that a firm report to the FDA any incident in which its product may have caused or contributed to a death or serious injury, or in which its product malfunctioned and, if the malfunction were to recur, it would be likely to cause or contribute to a death or serious injury. Labeling and promotional activities are subject to scrutiny by the FDA and, in certain circumstances, by the Federal Trade Commission. Current FDA enforcement policy prohibits the marketing of approved medical devices for unapproved uses. We are subject to routine inspection by the FDA and other regulatory authorities for compliance with QSR and MDR requirements, as well as other applicable regulations.

International Regulation. We are also subject to regulation in each of the foreign countries in which we sell our products. Many of the regulations applicable to our products in these countries are similar to those of the FDA. The European Union requires that medical devices such as the BVS and AB5000 comply with the Medical Device Directive, which includes quality system and CE certification requirements. The BVS, AB5000 and certain Impella Recover temporary cardiac assist products comply with the Medical Devices Directive, are CE marked and available for sale in the European Union.

Employees

As of May 31, 2006 we had approximately 300 full-time employees, including:

We have entered into contractual agreements with all of our employees, which include confidentiality and non-competition commitments. Our employees are not represented by unions. While we consider our employee relations to be good, if we were unable to attract and retain qualified personnel in the future, our operations could be negatively impacted.

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An investment in our common stock involves a high degree of risk. Current and prospective investors should carefully consider each of the risks and uncertainties described in this section and all of the other information in this Report. Our business, financial condition and results of operations could be severely harmed by any of the following risks. The trading price of our common stock could decline if any of these risks and uncertainties develop into actual events.

We do not operate at a profit and cannot be assured of future profitability.

We have had net losses in each of the past three fiscal years. We are committed to making large expenditures in fiscal 2007 and subsequent fiscal years for our new products under development, including those acquired in connection with our recent acquisition of Impella CardioSystems, AG, (now Impella CardioSystems GmbH, a Division of ABIOMED) which may result in losses in future periods. These expenditures include costs associated with performing clinical trials, continuing our research and development relating to our new products under development, seeking regulatory approvals and, if we receive these approvals, commencing commercial manufacturing and marketing. The amount of these expenditures is difficult to forecast accurately, and cost overruns may occur. We plan to fund a portion of these expenditures from our existing financial resources and revenues from AB5000, BVS and Impella product sales. We cannot be sure that we will have the necessary funds to develop and commercialize our new products, or that additional funds will be available on commercially acceptable terms, if at all. In the event that we are unable to obtain the necessary funding to develop and commercialize our products, our business may be adversely affected.

Our operating results may fluctuate unpredictably.

Our annual and quarterly operating results have fluctuated historically and we expect these fluctuations to continue. Among the factors that may cause our operating results to fluctuate are:

We believe that period-to-period comparisons of our historical and future results will not necessarily be meaningful, and that investors should not rely on them as an indication of future performance. To the extent we experience the factors described above, our future operating results may not meet the expectations of securities analysts or investors from time to time, which may cause the market price of our common stock to decline.

Our principal products and current primary source of revenues, the AB5000, BVS 5000 and Impella circulatory assist products, are vulnerable to competitive pressures, disruptions in sales, continuing review and extensive regulatory requirements.

All of our product revenues to date have come from sales of the AB5000, BVS 5000 and Impella products. We believe that we will continue to rely heavily on these products for at least the next several years until we

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obtain regulatory approval for new products. In the event that a competitor were to introduce new treatments, products and technologies which compete with our products, add new features to their existing products or reduce their prices to make their products more financially attractive to customers, our revenue from our AB5000, BVS 5000 and Impella products could decline. For example, in the event of the expansion of technologies, which allow heart surgical procedures to be performed without stopping the heart, a reduction in the market for the AB5000 and BVS 5000 products could potentially result. Further, the AB5000 and BVS 5000 products are subject to stringent and continuing FDA and other regulatory requirements, including compliance with the QSR, adverse event reporting, prohibitions on promoting the products for unapproved uses, and continued inspection and market surveillance by the FDA. If our products are recalled or otherwise withdrawn from the market, our revenues would likely decline, which would hurt our business. In addition, variations in the quantity and timing of sales of our new AB5000 consoles have a disproportionate effect on our revenues, because the price of the console is substantially greater than the price of our disposable blood pumps. If we cannot maintain and increase our disposable blood pump revenues from our AB5000 and BVS 5000 product line, our overall business and financial condition could be adversely affected.

Our product revenues increased in fiscal 2006 by 14% in comparison to fiscal 2005 and in fiscal 2005 our product revenues increased by 51% in comparison to fiscal 2004. To maintain or increase revenues from sales of our current products, we may be required to adopt new sales and marketing strategies, some of which may require expending additional capital resources, or execute on existing strategies. The new strategies we may adopt or execute on include:

In the event that we are unsuccessful in carrying out these new strategies, our revenues may decline.

We may not be successful in expanding our sales activities into international markets.

We are seeking to expand our international sales of the AB5000, BVS and Impella circulatory assist systems by recruiting direct sales and support teams for selected countries in Europe. Our international operations will be subject to a number of risks, which may vary from the risks we experience in the U.S., including:

If we are unable to effectively expand our sales activities in international markets, our results of operations could be negatively impacted.

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We depend on third party reimbursement to our customers for market acceptance of our products. If third party payers fail to provide appropriate levels of reimbursement for purchase and use of our products, our profitability would be adversely affected.

Sales of medical products largely depend on the reimbursement of patients’ medical expenses by government health care programs and private health insurers. The cost of our AB5000 and BVS 5000 systems is substantial, and we anticipate that the cost of implanting the AbioCor in a patient will also be substantial. Without the financial support of the government reimbursement for CMS patient care or third party insurers’ payments for patient care, the market for our products will be limited. Medical products and devices incorporating new technologies are closely examined by governments and private insurers to determine whether the products and devices will be covered by reimbursement, and if so, the level of reimbursement which may apply. We cannot be sure that third party payors will reimburse sales of our products now under development, or enable us to sell them at profitable prices. We also cannot be sure that third party payors will continue the current level of reimbursement to physicians and medical centers for use of the AB5000 and BVS 5000 products. Any reduction in the amount of this reimbursement could harm our business.

The federal government and private insurers have considered ways to change, and have changed, the manner in which health care services are provided and paid for in the U.S. In the future, it is possible that the government may institute price controls and further limits on Medicare and Medicaid spending. These controls and limits could affect the payments we collect from sales of our products. Internationally, medical reimbursement systems vary significantly, with some medical centers having fixed budgets, regardless of levels of patient treatment, and other countries requiring application for, and approval of, government or third party reimbursement.

Even if we succeed in bringing our new products to market, uncertainties regarding future health care policy, legislation and regulation, as well as private market practices, could affect our ability to sell our products in commercially acceptable quantities at profitable prices.

Prior to approving coverage for new medical devices, most third party payors require evidence that the product has received FDA approval, is not experimental, and is medically necessary for the specific patient. Increasingly, third party payors require evidence that the devices being used are cost-effective. Our Impella, AbioCor and other products under development may not meet these or future criteria, which could hurt our ability to market and sell these products.

If we fail to achieve and maintain the high manufacturing standards that our products require or if we are unable to develop additional manufacturing capacity, we will not be successful.

Our products require precise, high quality manufacturing. Our failure to achieve and maintain these high manufacturing standards, including the incidence of manufacturing errors, design defects or component failures, could result in patient injury or death, product recalls or withdrawals, delays or failures in product testing or delivery, cost overruns or other problems that could seriously hurt our business. We have from time to time voluntarily recalled certain products. Despite our very high manufacturing standards, we cannot completely eliminate the risk of errors, defects or failures. If we are not able to manufacture the AB5000, BVS 5000 and Impella Recover products in accordance with necessary quality standards, our business and results of operations may be negatively affected.

The AbioCor involves even greater manufacturing complexities than our current commercial products. The AbioCor must be significantly more durable and meet different standards, which may be more difficult to achieve, than those that apply to our current product line. If we are unable to manufacture the AbioCor or other future products on a timely basis at acceptable quality and cost and in commercial quantities, or if we experience unanticipated technological problems or delays in production, our business will suffer.

The manufacture of our products is and will continue to be complex and costly, requiring a number of separate processes and components. Achieving precision and quality control requires skill and diligence by our

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personnel. Further, to be successful, we believe we will need to increase our manufacturing capacity. We may experience difficulties in scaling up manufacturing of our new products, including problems related to product yields, quality control and assurance, component and service availability, adequacy of control policies and procedures, and lack of skilled personnel. If we cannot hire, train and retain enough experienced and capable scientific and technical workers, we may not be able to manufacture sufficient quantities of our current or future products at an acceptable cost and on time, which could limit market acceptance of our products or otherwise damage our business.

If our suppliers cannot provide the components we require, our ability to manufacture our products could be harmed.

We rely on third party suppliers to provide us with certain components used in our existing and other products under development. Relying on third party suppliers makes us vulnerable to component part failures and to interruptions in supply, either of which could impair our ability to conduct clinical tests or to ship our products to our customers on a timely basis. Using third party vendors makes it difficult and sometimes impossible for us to test fully certain components, such as components on circuit boards, maintain quality control, manage inventory and production schedules and control production costs. Vendor lead times to supply us with ordered components vary significantly and can exceed six months or more. Both now and as we expand our manufacturing capacity, we cannot be sure that our suppliers will furnish us with required components when we need them. These factors could make it more difficult for us to effectively and efficiently manufacture our products, and could adversely impact our results of operations.

Some suppliers may be the only source for a particular component, which makes us vulnerable to cost increases and supply interruptions. Vendors may decide to limit or eliminate sales of certain products to the medical industry due to product liability or other concerns, and we might not be able to find a suitable replacement for those products. Manufacturers of our product components may be required to comply with the FDA or other regulatory manufacturing regulations and to satisfy regulatory inspections in connection with the manufacture of the components. If we cannot obtain a necessary component, we may need to find, test and obtain regulatory approval for a replacement component, produce the component ourselves or redesign the related product, which would cause significant delay and could increase our manufacturing costs. Any of these events could adversely impact our results of operations.

We own patents, trademarks, trade secrets, copyrights and other intellectual property and know-how that we believe gives us a competitive advantage. If we cannot protect our intellectual property, competition could force us to lower our prices, which could hurt our profitability.

Our intellectual property rights are and will continue to be a critical component of our success. A substantial portion of our intellectual property rights relating to the AB5000, BVS 5000, Impella products, AbioCor, AbioCor II and other products under development is in the form of trade secrets, rather than patents. In order to preserve certain proprietary information as trade secrets, we are required to restrict disclosure of information intended to constitute trade secrets to third parties. We protect our trade secrets and proprietary knowledge in part through confidentiality agreements with employees, consultants and other parties. Certain of our consultants and third parties with whom we have business relationships may also provide services to other parties in the medical device industry, including companies, universities and research organizations that are developing competing products. In addition, some of our former employees may seek employment with, and become employed by, our competitors. We cannot assure that confidentiality agreements with our employees, consultants and third parties will not be breached, that we will have adequate remedies for any such breach, or that our trade secrets will not become known to or be independently developed by our competitors. The loss of trade secret protection for technologies or know-how relating to the AB5000, BVS 5000, Impella products, AbioCor or AbioCor II could adversely affect our business prospects.

Our business position will also depend in part on our ability to defend our existing and future patents and rights and conduct our business activities free of infringement claims by third parties. We intend to seek

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additional patents, but our pending and future patent applications may not be approved, may not give us a competitive advantage, and could be challenged by others. Patent proceedings in the U.S. and in other countries may be expensive and time consuming. In addition, patents issued by foreign countries may afford less protection than is available under U.S. patent law, and may not adequately protect our proprietary information.

Our competitors may independently develop proprietary technologies and processes that are the same as or substantially equivalent to ours, or design around our patents.

Companies in the medical device industry typically obtain patents and frequently engage in substantial intellectual property litigation. Our products and technologies could infringe on the rights of others. If a third party successfully asserts a claim for infringement against us, we may be liable for substantial damages, be unable to sell products using that technology, or have to seek a license or redesign the related product. These alternatives may be uneconomical or impossible. Patent litigation could be costly, result in product development delays and divert the efforts and attention of management from our business.

If we cannot attract and retain the management, sales and other personnel we need, we will not be successful.

We depend heavily on the contributions of the principal members of our business, financial, technical, sales and support, regulatory and clinical, operating and administrative management and staff, many of whom would be difficult to replace. Competition for skilled and experienced business management, scientific personnel and sales personnel in the medical devices industry is intense. If we lose the services of any of the principal members of our management and staff, or if we are unable to attract and retain qualified personnel in the future, especially scientific and sales personnel, our business could be adversely affected.

We expect to grow rapidly if our products under development advance through the approval process. The expansion of personnel and facilities will strain our management and our financial and other resources. If we cannot manage this growth successfully, our business will likely suffer.

Product liability claims could damage our reputation and hurt our financial results.

The clinical use of medical products, even after regulatory approval, poses an inherent risk of product liability claims. We maintain limited product liability insurance coverage, subject to deductibles and exclusions. We cannot be sure that product liability insurance will be available in the future or will be available on acceptable terms or at reasonable costs, or that such insurance will provide us with adequate coverage against potential liabilities. Claims against us, regardless of their merit or potential outcome, may also hurt our ability to obtain physician endorsement of our products or expand our business.

Many patients supported by our products do not survive. There are many factors beyond our control that could result in patient death, including the condition of the patient prior to use of the product, the skill and reliability of physicians and hospital personnel using and monitoring the product, and product maintenance by customers. However, the failure of the life support products we distribute for clinical test or sale could give rise to product liability claims and negative publicity.

The risk of product liability claims will increase as we introduce new products that are intended to support a patient until the end of life. For example, the AbioCor will have a finite life and could cause unintended complications to other organs and may not be able to successfully support all patients. Its malfunction could give rise to product liability claims whether or not it has extended or improved the quality of the patient’s life. We cannot be sure that we can obtain liability insurance to cover the AB5000, BVS 5000, Impella products, AbioCor or other new products at a reasonable cost, if at all. If we have to pay product liability claims in excess of our insurance coverage, our financial condition will be adversely affected.

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Failure of our Impella acquisition to achieve its potential benefits could harm our business and operating results.

The acquisition of our Impella division may not achieve its anticipated benefits for a variety of reasons, including:

Further, we cannot assure you that we will realize any of the anticipated benefits and synergies of the acquisition. Any one or all of the factors identified above could cause increased operating costs, lower than anticipated financial performance, or the loss of customers, employees or business partners. The failure to integrate Impella successfully would have a material adverse effect on our business, financial condition and results of operations.

The substantial costs of our Impella acquisition could harm our financial results.

In connection with our acquisition of Impella, we incurred substantial costs. These include fees to legal counsel, independent accountants and consultants. We may also be required to make additional contingent payments under the terms of the acquisition, in an amount of up to approximately $28.2 million, based on our future stock price performance and milestones related to FDA approval and unit sales of Impella’s products. If the benefits of the acquisition do not exceed the associated costs, including any dilution to our stockholders resulting from the issuance of shares of our common stock in the transaction, our financial results, including earnings per share, could suffer, and the market price of our common stock could decline.

If we acquire other companies or businesses, we will be subject to risks that could hurt our business.

In the future, we may pursue new acquisitions to obtain complementary businesses, products or technologies. Any such acquisition may not produce the revenues, earnings or business synergies that we anticipated, and an acquired business, product or technology might not perform as we expected. If we pursue an additional acquisition, our management could spend a significant amount of time and effort in identifying and completing the acquisition. If we complete an additional acquisition, we may encounter significant difficulties and incur substantial expenses in integrating the operations and personnel of the acquired company into our operations while preserving the goodwill of the acquired company. In particular, we may lose the services of key employees of the acquired company and we may make changes in management that impair the acquired company’s relationships with employees and customers.

Any of these outcomes could prevent us from realizing the anticipated benefits of our additional acquisitions. To pay for an acquisition, we might use stock or cash. Alternatively, we might borrow money from a bank or other lender. If we use our stock, our stockholders would experience dilution of their ownership interests. If we use cash or debt financing, our financial liquidity would be reduced. We may be required to capitalize a significant amount of intangibles, including goodwill, which may lead to significant amortization charges. In addition, we may incur significant, one-time write offs and amortization charges. These amortization charges and write offs could decrease our future earnings or increase our future losses.

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Our rights distribution, certificate of incorporation and Delaware law could make it more difficult for a third party to acquire us and may prevent our stockholders from realizing a premium on our stock.

Our rights distribution and provisions of our certificate of incorporation and of the Delaware General Corporation Law may make it more difficult for a third party to acquire us, even if doing so would allow our stockholders to receive a premium over the prevailing market price of our stock. Our rights distribution and those provisions of our certificate of incorporation and Delaware law are intended to encourage potential acquirers to negotiate with us and allow our Board of Directors the opportunity to consider alternative proposals in the interest of maximizing stockholder value. However, such provisions may also discourage acquisition proposals or delay or prevent a change in control, which could negatively affect our stock price.

The market value of our common stock could vary significantly, based on market perceptions of the status of our development efforts.

The perception of securities analysts regarding our product development efforts could significantly affect our stock price. As a result, the market price of our common stock has and could in the future change substantially when we or our competitors make product announcements. Many factors affecting our stock price are industry related and beyond our control.

Our future success is strongly dependent on development of new assist products and implantable replacement heart devices. Our development efforts may not be successful.

We are currently devoting our major research and development and regulatory efforts, and significant financial resources, to the development of the AbioCor and AbioCor II, product extensions of existing commercial products and new products, such as the Impella Recover 2.5 and 5.0 micro blood pumps. The development of assist and replacement heart devices such as the AbioCor, AbioCor II, Impella blood pumps and other new products, presents enormous challenges in a variety of areas, many or all of which we may have difficulty in overcoming, including blood compatible surfaces, blood compatible flow, manufacturing techniques, pumping mechanisms, physiological control, energy transfer, anatomical fit and surgical techniques. Specifically, for many years, we and other parties have been attempting to develop a heart replacement device. We cannot be sure that we will be successful in our development efforts, and in the event that we are unable to commercialize the AbioCor and AbioCor II, our business and financial condition could be adversely affected.

The markets for our products under development are unproven.

Even if our products are successfully developed and approved by the FDA and corresponding foreign regulatory authorities, they may not enjoy commercial acceptance or success, which would adversely affect our business and results of operations. Several factors could limit our success, including:

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The commercial success of the AB5000, AbioCor, AbioCor II, Impella Recover 2.5 and 5.0 micro blood pumps and other heart assist products will require acceptance by cardiovascular surgeons and interventional and heart failure cardiologists, a limited number of whom significantly influence medical device selection and purchasing decisions. We may achieve our business objectives only if our other products are accepted and recommended by leading physicians, which is likely to be based on a determination by these physicians that our products are safe, cost-effective and represent acceptable methods of treatment. Although we have developed relationships with leading cardiac surgeons and cardiologists, we cannot assure that these existing relationships and arrangements can be maintained or that new relationships will be established in support of our products. If cardiovascular surgeons and cardiologists do not consider our products to be adequate for the treatment of our target cardiac patient population or if a sufficient number of physicians recommend and use competing products, it would seriously harm our business.

Testing of our new products will involve uncertainties and risks which could delay or prevent new product introductions, require us to incur substantial additional costs or result in our failure to bring our products to market.

Development and testing of design changes to the AbioCor, AbioCor II, Impella 2.5 and 5.0 micro blood pumps and other products under development is often extensive, expensive and time consuming. Some of the tests for our products may require months or years to perform, and we could be required to begin these tests again if we modify one of our products to correct a problem identified in testing. Even modest changes to certain components of our products can take months or years to complete and test. If results of pre-clinical or clinical testing of our products under development indicate that design changes are required, such changes could cause serious delays that would adversely affect our results of operations. A number of companies in the medical industry have suffered delays, cost overruns and project terminations despite achieving promising results in pre-clinical testing or early clinical testing. In the event that we suffer setbacks in the pre-clinical or clinical testing of our heart assist and replacement products, these products may be delayed, require further funding, and possibly may not be brought to market.

If we fail to obtain approval from the FDA and/or from foreign regulatory authorities, we cannot market and sell the affected products currently under development in the U.S. and/or other countries.

If we cannot demonstrate through clinical testing on humans or other means that the AbioCor or other new products under development and testing are safe and effective, we will not be able to obtain regulatory approvals in the U.S. or other countries for the commercial sale of these products. We cannot assure that the FDA or any other regulatory authority will act quickly or favorably on our requests for this product approval, or that the FDA or any other regulatory authority will not require us to provide additional data that we do not currently anticipate in order to obtain product approvals. If we are successful in obtaining FDA approval for an HDE for the AbioCor, the initial approval is likely to include conditions or limitations to particular indications that would limit the available market for these products. If we are not able to obtain regulatory approvals for use of the AbioCor or our other products under development, or if the patient populations for which they are approved are not sufficiently broad, the commercial success of these products could be limited.

We intend to market our new products in international markets, including the European Union and Japan. We must obtain separate regulatory approvals in order to market our products in other jurisdictions. The approval

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process may differ among those jurisdictions and approval in the U.S. or in any other jurisdiction does not ensure approval in other jurisdictions. Obtaining foreign approvals could result in significant delays, difficulties and costs for us, and require additional trials and additional expense.

If we obtain regulatory approval of our new products, the products will be subject to continuing review and extensive regulatory requirements, which could affect the manufacturing and marketing of our products.

The FDA continues to review products even after they have received initial approval. If and when the FDA approves the Impella and AbioCor devices, or our other products under development, the manufacture and marketing of these products will be subject to continuing regulation, including compliance with QSR, adverse event reporting requirements and prohibitions on promoting a product for unapproved uses.

We will also be required to obtain additional approvals in the event we significantly modify the design of an approved product or the product’s labeling or manufacturing process. Modifications of this type are common with new products, and we anticipate that the first generation of each of our products will undergo a number of changes, refinements and improvements over time. For example, the current configuration of the AbioCor’s thoracic unit, or “replacement heart,” is sized for patients with relatively large chest cavities, and we anticipate that we will need to obtain regulatory approval of thoracic units of other sizes. If we are not able to obtain regulatory approval of modifications to our current and future products, the commercial success of these products would be limited.

We and our third-party suppliers of product components are also subject to inspection and market surveillance by the FDA for QSR and other requirements. Enforcement actions resulting from failure to comply with government requirements could result in fines, suspensions of approvals, recalls of products, operating restrictions and criminal prosecutions, and affect the manufacture and marketing of our products. The FDA could withdraw a previously approved product from the market upon receipt of newly discovered information, including a failure to comply with regulatory requirements, the occurrence of unanticipated problems with products following approval, or other reasons, which could adversely affect our operating results.

The cost of developing and manufacturing the AbioCor, AbioCor II, Impella micro blood pumps and other planned new products is substantial for a company of our size and might exert a strain on our available resources.

Spending on our AbioCor, AbioCor II, Impella micro blood pumps and other products under development will remain significant for some time. We expect that we will also need to make significant expenditures to begin to manufacture and market the AbioCor and our other planned new products in commercial quantities for sale in the U.S. and other countries, if and when we obtain regulatory approval. We cannot be sure that our estimates of capital expenditures for the development of our new products will be accurate. We could have significant cost overruns, which could reduce our ability to commercialize our products. Any delay or inability to commercialize our products under development could adversely affect our business prospects and results of operations.

Not applicable.

Our headquarters are in an industrial office park located 22 miles north of Boston. This facility, located at 22 Cherry Hill Drive in Danvers, Massachusetts, consists of approximately 80,000 square feet of space under an operating lease that expires in 2010. This facility houses all of our U.S. operations, including research and development, manufacturing, sales and marketing and general and administrative departments. The lease contains options to extend twice in five-year increments beyond 2010 at market rates.

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Our European operations are located in Aachen Germany in a 30,000 square foot leased facility that expires in August 2008. The building houses all of the research and development and manufacturing operations for our Impella product line as well as the sales, marketing and general and administrative functions for all ABIOMED product lines sold in Europe and the Middle East.