What changed in this filing

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Item 1. Business

2020-09-25 compared with 2019-09-27 · 252 added, 214 removed, 642 unchanged (42% of the section changed)

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In 2003, Isoray obtained clearance from the Food and Drug Administration (FDA) for the use of Cesium-131 (Cesium-131) radioisotope in the treatment of all malignant tumors.

As of the date of this Report, such applications include prostate cancer, brain cancer, breast cancer, colorectal cancer, gynecological cancer, lung cancer, liver cancer, ocular melanoma and pancreatic cancer.

As of the date of this Report, such applications include prostate cancer, brain cancer, colorectal cancer, gynecological cancer, lung cancer, ocular melanoma and pancreatic cancer.

The brachytherapy seed form (a sealed source) of Cesium-131 may be used in surface, interstitial and intra-cavity applications for tumors with known radio-sensitivity.

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A primary advantage of seed brachytherapy is the ability of the seeds to deliver therapeutic radiation thereby killing the cancerous tumor cells while minimizing exposure (damage) to adjacent healthy tissue.

This procedure allows doctors to administer a higher dose of radiation directly to the tumor.

This procedure allows doctors to administer a high dose of radiation directly to the tumor.

A seed contains a radioisotope sealed within a titanium capsule.

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The number of seeds for treatment sites vary widely (as few as 8 seeds to more than 100 seeds) depending on the type of cancer, the tumor location, the prescribed activity level and any additional type of therapy being utilized.

In the cases of lung and brain tumors (and other solid tumors), a surgeon will remove the tumor if it is medically prudent and this offers the patient some benefit in terms of controlling the growth of the cancer or its symptoms.

In the cases of brain and lung tumors (and other solid tumors), a surgeon will remove the tumor if it is medically prudent and this offers the patient some benefit in terms of controlling the growth of the cancer or its symptoms.

In many cases, radiation therapy is added following the surgery;

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Prostate Cancer

Isoray began the production and sales of Cesium-131 brachytherapy seeds in October 2004 for the treatment of prostate cancer after receiving clearance of its premarket notification (510(k)) by the Food and Drug Administration.

Isoray began the production and sale of Cesium-131 brachytherapy seeds in October 2004 for the treatment of prostate cancer after receiving clearance of its premarket notification (510(k)) by the Food and Drug Administration.

Prostate cancer treatment represents over 85% of the business of Isoray today.

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Seeds may be combined with another treatment method (dual therapy) when treating prostate cancer.

In late 2017, the first report with long-term follow-up clinical outcomes for patients treated with Cesium-131 brachytherapy for low-risk patients was presented at the annual meeting of the American Society for Therapeutic Radiation Oncology.

Braccioforte (2017).

Long-term PSA outcomes in a single institution, prospective randomized 131-Cs/125-I permanent prostate brachytherapy trial.

Int J Radiat Oncol Biol Phys 99 (2 (Suppl)):

In this randomized study of 140 patients no statistically significant difference in biochemical failure was seen with long-term follow-up between the Cesium-131 group and the group implanted with I-125.

In late 2019, the first peer-reviewed report with long-term follow-up clinical outcomes for patients treated with Cesium-131 brachytherapy for prostate cancer patients was published in the journal “Brachytherapy”.

Long-term biochemical outcomes using Cesium-131 in prostate brachytherapy.

Brachytherapy 18 (6):800-805.

In this observational study of 571 prostate cancer patients long-term outcomes based on serum PSA were determined by the authors to be “…excellent and on par with…” other implantable brachytherapy seeds that had previously been the subject of long-term study.

Several months later, in the same journal, a second report was published that provided detailed, long-term PSA follow-up data for a group of Cesium-131 treated prostate cancer patients (Benoit, et al.

(2020) Cesium-131 prostate brachytherapy:

a single institutional long-term experience.

Brachytherapy 19 (3):298-304).

The authors, from the University of Pittsburgh School of Medicine, reported results from 669 men and likewise conclude “excellent long-term biochemical control” following treatment with Cesium-131 prostate brachytherapy.

In both studies the majority of patients (83% and 63% respectively) received Cesium-131 brachytherapy as their sole therapy (monotherapy), while the remainder of the patients’ treatments were enhanced with external beam radiation therapy and/or hormonal intervention as the putative risk of cancer spread outside the prostate increased.

In addition to the long-term cancer control data mentioned above, a report from 2017 describes favorable long-term quality of life outcomes following Cesium-131 brachytherapy in the treatment of prostate cancer (S.M.

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It is hypothesized that low-risk patients using focal brachytherapy may achieve rates of prostate cancer control comparable to that of full gland treatment while significantly reducing side effects.

Mendez, et al., Current trends and new frontiers in focal therapy for localized prostate cancer, Current Urology Report 16, 35 (June 2015)).

Early results from a series of men treated with Cesium-131 focal therapy were presented at the 2018 Annual Meeting of the American Brachytherapy Society, Kalash, R., et al., (2018), Focal brachytherapy using Cesium-131 in low-risk prostate cancer.

( Preliminary results of a study on focal low dose rate prostate brachytherapy using Cesium-131 , Journal of Clinical Oncology 36, 6 (Suppl.) Abstract 151 (February 2018)).

Early results from another series of men treated with Cesium-131 focal therapy were presented at the 2018 Annual Meeting of the American Brachytherapy Society, Kalash, R., et al., (2018), Focal brachytherapy using Cesium-131 in low-risk prostate cancer.

Brachytherapy 17 (Suppl):S89.

The authors conclude that, while too early to estimate disease specific outcomes, serum PSAs in these men had declined in the short term and there was no residual effect on urinary, bowel or erectile symptoms.

The Company will continue to monitor these series studying Cesium-131 based focal therapy of low risk prostate cancer.

Gynecologic Cancer

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The FDA clearance granted in August 2009 permits loading Cesium-131 seeds into bio-absorbable braided sutures or “braided strands” giving the Company the ability to treat brain, lung, head and neck, colorectal, and chest wall cancers.

The Company is currently pursuing the brain, head and neck, and lung cancer applications in addition to its primary focus on prostate cancer.

The Company is currently pursuing the brain, head and neck, and other cancer applications in addition to its primary focus on prostate cancer.

Stranded Cesium-131 Sources

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Wernicke, et al., The cost-effectiveness of surgical resection and cesium-131 intraoperative brachytherapy versus surgical resection and stereotactic radiosurgery in the treatment of metastatic brain tumors, J Neurooncol 127 (1):145-53 (2016)).

In May 2020, a group of physicians from Weill Cornell Medical College published a retrospective study comparing outcomes between patients with surgically removed brain metastases treated with Cesium-131 brachytherapy or by stereotactic radiosurgery (SRS) as adjuvant radiation therapy (i.e.

following surgical removal) (D.A.

Julie, et al.

A matched-pair analysis of clinical outcomes after intracavitary Cesium-131 brachytherapy versus stereotactic radiosurgery for resected brain metastases.

Journal of Neurosurgery.

Epub date May 16, 2020:

DOI 10.3171/2020.3.JNS193419).

While retrospective in nature, the authors of the study found a lower rate of local recurrence in the Cesium-131 treatment group (10% versus 28.3%).

Toxicity from the Cesium-131 implant was not significantly different from SRS treatment.

Such findings continue to support the notion that Cesium-131 brachytherapy can benefit the management of surgically addressable brain mestases.

GammaTile™ Treatment for Brain Cancer

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Following treatment with Cesium-131, 90% of the treated tumors had no evidence of regrowth at the operative site (local control).

The incidence of radiation necrosis, a side effect to the brain from Cesium-131 brachytherapy seeds (a common side effect) occurred in only 2 of the 20 treatments.

The incidence of radiation necrosis, a common side effect to the brain from Cesium-131 brachytherapy seeds occurred in only 2 of the 20 treatments.

Brachman, et al.

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Safety Profile of Collagen Tile Brachytherapy in 79 Recurrent, Previously Irradiated Intracranial Neoplasms on a Prospective Clinical Trial.

Brachytherapy 18(S3):S35 (2019.) Dr.

Brachytherapy 18 (S3):S35 (2019)).

Brachman, who was awarded the Judith Stittman Best Abstract Award for this work, described GammaTile™ therapy utilizing Cesium-131 as having an excellent safety profile that “could help expand treatment options for this difficult cohort of patients”.

This work is important because recurrence of these hard-to-treat brain cancers leaves patients with very limited options due to their prior radiation treatments.

Earlier, in November of 2016, Dr.

Emad Youssef of the Barrow Neurological Institute presented a study conducted on 13 patients with recurrent high grade gliomas (primary brain cancer) at the annual meeting of the Society for Neuro-Oncology meeting.

Youssef, et al;

Cs131 Implants For Salvage Therapy Of Recurrent High Grade Gliomas (Hgg) , Neuro-Oncology Volume 18, Issue suppl_6, 1 November 2016, Pages vi179).

These patients were reported to have achieved a 92% rate of local control of their cancers during the follow-up interval.

The Company collaborated with GT Med Tech to file an application with the U.S.

Food and Drug Administration (FDA) to clear GammaTile™ for clinical use and the FDA provided clearance on July 6, 2018.

FDA to clear GammaTile™ for clinical use and the FDA provided clearance on July 6, 2018.

In 2016, the Company, in support of GammaTile™, provided assistance throughout the application process to obtain an ICD-10-PCS code.

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The rules governing NTAP eligibility and processes are described in greater detail on the CMS website and in notices that are published from time-to-time in a government publication called the Federal Register.

GT Med Tech applied to CMS for NTAP status for GammaTile™.

In August 2019, CMS concluded that the Agency would not approve NTAP status for GammaTile™.

We cannot predict the likelihood of whether CMS may make a favorable decision in the future if GT Med Tech decides to continue pursuing NTAP status.

Based on the NTAP rules and the initial date of clearance for GammaTile™ by the U.S.

Food and Drug Administration, we anticipate that GammaTile™ would remain eligible to re-apply for NTAP status that would take effect during the 2021 federal fiscal year (October 1, 2020 through September 30, 2021).

We are not aware of anything in the CMS notice from August 2019 on NTAP status or otherwise that would suggest any changes are forthcoming for the mapping of the GammaTile™ procedure to DRG 023 for reimbursement purposes.

We cannot predict with certainty whether or how the Medicare program may revise its coding or reimbursement policies in the future.

In August 2019, CMS announced that it did not approve GT Med Tech’s initial NTAP application.

GT Med Tech re-applied to CMS for NTAP status for GammaTile™ that would take effect during the 2021 federal fiscal year (October 1, 2020 through September 30, 2021).

In September 2020, CMS concluded again that it would not approve NTAP status for GammaTile™ stating “we are unable to make a determination that GammaTile™ technology represents a substantial clinical improvement over existing therapies, and we are not approving new technology add-on payments for the GammaTile™ for FY 2021.” We cannot predict the likelihood of whether CMS may make a favorable decision in the future if GT Med Tech decides to continue pursuing NTAP status.

Despite the lack of an NTAP code, GT Med Tech has reimbursement for GammaTile™ under ICD-10PCS-00H004Z and MS-DRG 023 which reimburses hospitals in the inpatient setting and will continue to roll out its sales and marketing strategy for release of GammaTile™.

Since January 2019, GammaTile™ Therapy has been in a limited market release and total revenues from sales to GT Med Tech have been nominal.

In January 2020 GammaTile™ Therapy was launched in full market release.

To date, total revenues from sales to GT Med Tech have been less than ten percent (10%) of sales.

GT Med Tech has indicated it intends to increase sales and marketing efforts during the Company’s fiscal year 2021, but there is no assurance that this will occur.

Head and Neck Cancer

An emerging possible indication for Cesium-131 brachytherapy is the treatment of recurrent head and neck cancers.

Cesium-131 brachytherapy is also used in the treatment of recurrent head and neck cancers.

First reported by Bhupesh Parashar MD from Weill Cornell Medical College (A.

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The authors of this paper concluded that Cesium-131 brachytherapy is a feasible treatment option for these patients.

In June 2020 the Company announced that an agreement had been completed with a group of physicians based at the University of Cincinnati.

The agreement related to support for a Phase I/IIa clinical study of recurrent or metastatic head and neck cancers treated by a combination of surgical resection, Cesium-131 brachytherapy, and blockade of the programmed cell death protein 1 (PD-1) checkpoint using pembrolizumab therapy (Keytruda® from Merck & Co., Inc.).

Management believes that as immunotherapies (e.g.

immune checkpoint inhibition) become more prevalent in the treatment of human cancers, the optimal combination with more conventional cancericidal therapies will be a key area of research interest.

The Company has a collaboration agreement with MIM Software to deliver a treatment solution to more accurately target the placement of Cesium-131 for recurrent head and neck cancers.

Approval of Billing Codes for the Intraoperative Use of Cesium-131

In May 2020, the Centers for Medicare and Medicaid Services (CMS) approved 64 ICD-10-PCS billing codes used for reimbursement of Cesium-131 for the hospital in-patient DRG setting.

The codes allow hospitals to bill Medicare and other health insurers for specific surgical procedures that would benefit from the addition of Cesium-131.

DRG, or diagnostic related groups, are designed for Medicare and other health insurers to set payment levels for hospital in-patient services.

The 64 ICD-10-PCS codes are important for the growing surgical applications of Cesium-131 in treating a significant range of hard to treat cancers including brain, lung, head and neck, abdominal, breast, gynecological, pelvic, and colorectal cancers.

The new codes will take effect on October 1, 2020 and management believes they will provide greater impetus for usage as now CMS will be able to track the additional cost of the Cesium-131 seed itself and be able to reimburse the hospital through the DRG payment system for this additional costs when an in-patient brachytherapy procedure is performed.

Industry Information

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According to the American Cancer Society, one in seven men will be diagnosed with prostate cancer during his lifetime.

It is the most common form of cancer in men after skin cancer, and the second leading cause of cancer deaths in men following lung cancer.

It is the most common form of cancer in men, and the second leading cause of cancer deaths in men following lung cancer.

The American Cancer Society estimates there will be about 191,930 new cases of prostate cancer diagnosed and an estimated 33,330 deaths associated with the disease in the United States in 2020.

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Prostatectomy Surgery Options.

In the radical prostatectomy operation, a surgeon will remove the entire prostate gland plus some of the tissue around it, including the seminal vesicles.

New methods such as laparoscopic and robotic prostatectomy surgeries are currently being used more frequently in order to minimize the damage that leads to impotence and incontinence, but these techniques require a high degree of surgical skill.

(American Cancer Society, 2016) Surgical resection accounted for approximately 44% of treatments before the introduction of robotic prostatectomy in the early 2000s and then rose to 60% in 2010.

Martin, et al.

The rise and fall of prostate brachytherapy:

Use of brachytherapy for the treatment of localized prostate cancer in the National Cancer Data Base, Cancer 120:2114–2121 (2014);

Martin, et al., Use of brachytherapy for the treatment of localized prostate cancer in the National Cancer Data Base, Cancer 120:2114–2121 (2014), Duke University, International Focal Therapy Conference, (June 2016)).

To the knowledge of management, this is the latest most relevant information available.

Laparoscopic and robotic prostatectomy surgeries are currently primarily used to remove all or portions of the prostate gland and seminal vesicles and tissue around it in order to minimize the damage that leads to impotence and incontinence, but these techniques require a high degree of surgical skill.

To the knowledge of management, this is a common treatment choice.

External Radiation Therapy.

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While the treatments each last only a few minutes, getting the patient and equipment in place for each treatment takes longer.

The use of EBRT as a whole doubled from 11.6% in 2004 to 24% in 2009.

The increase in the number of cases being treated with EBRT during 2004 to 2008 were cases that historically would have been treated with brachytherapy.

During that period there was a nearly complete transition to IMRT as the predominant method with IMRT treatment increasing from 0.15% to 95.9% of EBRT treatments from 2000 to 2008.

Mahmood, et al., Declining use of brachytherapy for the treatment of prostate cancer, Brachytherapy 13:157–162 (2014).

Side effects of these treatments can include bowel problems, bladder problems, urinary incontinence, impotence, fatigue, lymphedema, and urethral stricture.

To the knowledge of management, this is the latest most relevant information available.

To the knowledge of management, this is the predominant treatment modality when using radiation therapy.

Proton beam radiation therapy.

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Although in theory proton beam therapy might be more effective than using x-rays, so far studies have not shown if this is true.

As of the filing of this Form 10-K, proton beam therapy is not widely available.

The machines needed to make protons are very expensive, and they are not available in many centers in the United States.

Management believes proton beam radiation is not covered by all insurance companies as of the filing of this Form 10-K.

Management believes proton beam radiation is not covered by all insurance companies.

Dual or Combination Therapy.

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When this initial treatment is completed, the patient must then wait for several more weeks to months to have the prostate seed implant.

The process could also involve the seed implant be performed first, followed by the course of external radiation.

Management estimates that at least 25% of all U.S.

The process could also involve the seed implant being performed first, followed by the course of external radiation.

As of the filing of this Form 10-K, management estimates that at least 25% of all U.S.

prostate implants are now dual therapy cases.

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Sexual impotence and urinary incontinence are two major concerns men face when choosing among various forms of treatment for prostate cancer.

Studies have shown that brachytherapy with existing sources results in lower rates of impotence and incontinence than surgery (C.

Studies have shown that brachytherapy with iodine and palladium resulted in lower rates of impotence and incontinence than surgery (C.

Buron, et al., Brachytherapy versus prostatectomy in localized prostate cancer:

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Int J Radiat Oncol Biol Phys 98 (5):

1053-1058 (2017).

The advantage of the Company’s Cesium-131 brachytherapy seed is the resolution of urinary side effects as pictured in the graphic below has been observed in a second study, presented at the 2013 Annual Meeting of the American Brachytherapy Society (A.B.

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All patients were treated at the same institution by the same physicians, and the difference in the time to resolution was considered significant.

Further evidence of the favorable side effect profile of Cesium-131 was published by a group from the University of Pittsburgh Medical Center (UPMC) in August 2017 (Glaser 2017).

Further evidence of the favorable side effect profile of Cesium-131 was published by a group of physicians from the University of Pittsburgh Medical Center (UPMC) in August 2017 (Glaser 2017).

This report concluded that only minimal long-term changes were noted to the urinary and bowel quality of life measures, and that men treated with Cesium-131 for their prostate cancers are able to return to baseline measure of quality of life after treatment.

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An estimated 23,890 new cases of malignant primary tumors of the brain or spinal cord are expected to be diagnosed in 2020.

About 17,760 people are expected to die from brain and spinal cord tumors in 2019.

(American Cancer Society, 2019).

About 18,020 people are expected to die from brain and spinal cord tumors in 2020 (American Cancer Society, 2020).

In addition to primary tumors, metastasis of brain tumors from other body sites are estimated at over 65,000 new cases per year.

The chance that a person will develop a malignant tumor of the brain or spinal cord is about 1 in 143 for a man and 1 in 185 for a woman.

These numbers would be much higher if benign tumors were also included.

(American Cancer Society, 2019).

On July 6, 2018, the Company and GT Med Tech received FDA 510(k) regulatory clearance for the brachytherapy technology, known as GammaTile™ Therapy that incorporates proprietary Cesium-131 seeds within customizable collagen-based carriers for the treatment of recurrent brain tumors.

Isoray Medical and GT Medical Technology had previously executed a collaborative development agreement and an exclusive ten-year supply agreement for GammaTile™ Therapy.

On January 27, 2020, GT Med Tech announced that it had received clearance from the FDA for an expanded indication that will allow patients of newly diagnosed malignant brain tumors to be treated by GammaTile™ Therapy.

Isoray Medical and GT Medical Technology executed a collaborative development agreement and an exclusive ten-year supply agreement for GammaTile™ Therapy in fiscal year 2018.

In fiscal year 2019, the Company and GT Med Tech amended and restated the manufacturing and supply agreement which now expires in April 2029.

The amended agreement requires GT Med Tech to provide on a monthly basis a twelve-month rolling forecast.

The amended agreement requires GT Med Tech to provide a twelve-month rolling forecast on a monthly basis.

The first calendar month of each rolling forecast becomes a binding purchase order and the remaining eleven months are a non-binding forecast.

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GammaTile™ leverages Cesium-131’s unique ability to deliver a highly targeted dose of intense radiation treatment while limiting radiation exposure to surrounding tissue.

In 2016, the Company, in support of GammaTile™, provided assistance throughout the application process to obtain an ICD-10-PCS code.

ICD-10-PCS is a code set designed for use in the hospital inpatient setting in the United States.

ICD-10-PCS codes can be used to identify and track differences in resource consumption, quality, and patient outcomes for different inpatient hospital procedures.

ICD-10-PCS codes are distinguishable from the MS-DRG (Medicare Severity-Diagnosis Related Group) codes that are commonly used to assign payment levels to inpatient hospital admissions for use by Medicare and other health care insurers.

The Centers for Medicare & Medicaid Services (CMS) established an ICD-10-PCS code for GammaTile™, 00H004Z (insertion of radioactive element, Cesium-131 implant into brain, open approach).

CMS established an ICD-10-PCS code for GammaTile™, 00H004Z (insertion of radioactive element, Cesium-131 implant into brain, open approach).

CMS also mapped GammaTile™’s ICD-10-PCS code to DRG 023.

DRG 023 is the highest paying DRG for craniotomy procedures.

ICD-10-PCS is a code set designed for use in the hospital in-patient setting in the United States.

ICD-10-PCS codes can be used to identify and track differences in resource consumption, quality, and patient outcomes for different inpatient hospital procedures.

Along with Medicare, commercial carriers and many Medicaid programs use the ICD-10-PCS and DRG code sets, including DRG 23.

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GT Med Tech applied to CMS for NTAP status for GammaTile™.

In August 2019, CMS concluded that the Agency would not approve NTAP status for GammaTile™.

We cannot predict the likelihood of whether CMS may make a favorable decision in the future if GT Med Tech decides to continue pursuing NTAP status.

Based on the NTAP rules and the initial date of clearance for GammaTile™ by the U.S.

We cannot predict with certainty whether or how the Medicare program may revise its coding or reimbursement policies in the future.

In August 2019, CMS announced that it did not approve GT Med Tech’s initial NTAP application.

GT Med Tech re-applied to CMS for NTAP status for GammaTile™ that would have taken effect during the 2021 federal fiscal year (October 1, 2020 through September 30, 2021).

In September 2020, CMS concluded again that it would not approve NTAP status for GammaTile™ stating “we are unable to make a determination that GammaTile™ technology represents a substantial clinical improvement over existing therapies, and we are not approving new technology add-on payments for the GammaTile™ for FY 2021." We cannot predict the likelihood of whether CMS may make a favorable decision in the future if GT Med Tech continues pursuing NTAP status.

Since January 2019, GammaTile™ Therapy has been in a limited market release and total revenues from sales to GT Med Tech have been nominal.

Beginning in January 2019, GammaTile™ Therapy was in a limited market release and in January 2020, GammaTile™ Therapy launched a full market release.

To date, total revenues from sales to GT Med Tech have been less than ten percent (10%) of revenues.

GT Med Tech has indicated it intends to increase sales and marketing efforts during the Company’s fiscal year 2021, but there is no assurance that this will occur.

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Head and Neck Cancer Treatment Options

An estimated 53,000 new cases of head and neck cancer are expected to be diagnosed in the United States in 2019.

(American Cancer Society, 2019).

An estimated 53,260 new cases of head and neck cancer are expected to be diagnosed in the United States in 2020 (American Cancer Society, 2020).

Surgery is the most common option to treat head and neck cancers.

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Approximately 22% of all cancer deaths are from lung cancer and it accounts for the most cancer related deaths in both men and women in the United States.

An estimated 142,670 deaths will result from lung cancer in 2019.

(American Cancer Society, 2019).

An estimated 135,720 deaths will result from lung cancer in 2020 (American Cancer Society, 2020).

Lung cancer has historically been treated utilizing surgery, radiofrequency ablation (RFA), radiation therapy, chemotherapy, immunotherapy and targeted therapy including LDR brachytherapy.

More than one kind of treatment may be used, depending on the stage of the patient’s cancer and other factors.

More than one kind of treatment may be used in combination with others, depending on the stage of the patient’s cancer and other factors.

(American Cancer Society, 2018).

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The key elements of Isoray’s strategy for fiscal year 2021 includes:

COVID-19 / National Pandemic Impact and Response.

Isoray continues to execute on the core strategic elements discussed below.

Still, there have been aspects of the COVID-19 pandemic that have impacted our commercial efforts.

Initially, customers and potential customers limited vendor access to their facilities.

This required the sales team to use other techniques to connect with our customers, including video conference and ongoing email and telephonic conversations.

Further, the onset of the pandemic impacted patient treatment schedules and physician wellness and screening visits.

This has resulted in inconsistent patient demand for treatment and referral patterns through the early months of the pandemic.

As healthcare organizations return to more normal operations, patient treatments and referrals are also returning to pre-pandemic conditions.

The pandemic has given us the opportunity to look at more efficiencies in our sales process, including customer communication techniques and strategies.

It also allowed the full incorporation and increased utilization of our customer relationship management (CRM) tools, which should create a stronger basis for on-going and future customer communications.

Continue to Invest in Sales and Marketing Development Activities .

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Isoray hopes to capture much of the incremental market growth if and when seed implant brachytherapy recovers market share from other treatments, take market share from existing competitors, and expand the use of Cesium-131 as a dual therapy option where it has experienced success.

In 2016, the Company started its aggressive sales and marketing approach by hiring industry sales and marketing veterans to assist in this market development effort, including the hire in March 2016 of a Vice-President of Sales and Marketing and Marketing support personnel, who have developed and continue to develop a comprehensive strategy to expand the presence of the Company’s Cesium-131 products in the prostate market.

In addition, the Company filled its regional sales positions with experienced sales staff from the prostate brachytherapy industry.

A redesigned website for Isoray.com was launched in September 2016 that focused its message to specific decision makers including the physician, patient, family and friends.

The new website supports management’s focus on the growth of sales from the treatment of prostate cancer and the Company’s efforts to expand into brain, head and neck, gynecological, and other cancers.

The Company has invested in direct to consumer marketing campaigns through social media to target potential patients and their family and friends.

These efforts have resulted in significant year over year growth in web traffic (50.1% increase in total visitors), new visitors (48.52% increase) and organic search results (71.5% increase in resulting site traffic).

The Company believes that an increased digital presence will result in increased awareness about brachytherapy overall, and specifically increased awareness about Cesium-131.

Management believes that this increased awareness will ultimately translate to more patients finding a physician with Cesium-131 experience.

In subsequent years, the team has identified and worked to implement and evolve a comprehensive strategy to expand the presence of the Company's Cesium-131 products in the prostate market.

The marketing team works in conjunction with the local sales team members to deliver value to customers through several channels.

The Company continues to invest in an increasingly digitally-integrated and data-focused strategy to align our products and services with our clinicians' needs.

The Company believes that this approach will result in increased awareness by potential patients and faster adoption of Cesium-131 by clinical teams.

Blu Build ™ Loader.

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All of the Company’s competitors provide a set of standard products (including loose seeds, seeds loaded in cartridges, and seeds pre-loaded in needles) to meet the customer needs.

Further Theragenics and BD have products that support intra-operative and real-time techniques that allow for stranding or linking seeds together in custom configurations in the operating room.

These products allow physicians to gain the benefits of stranded or linked seeds while still allowing for customization to the patient anatomy, as determined at the time of the procedure.

Further, Theragenics and Becton-Dickenson (BD), formerly Bard Brachytherapy, have products that support intra-operative and real-time techniques that allow for stranding or linking seeds together in custom configurations in the operating room.

These products allow physicians to gain the benefits of stranded or linked seeds while still allowing for customization to the patient's anatomy, as determined at the time of the procedure.

The Company believes that approximately 25% of procedures are performed with some level of customization in the operating room.

It is this segment of the market – customers looking to customize their procedures to the anatomy at the time of the procedure – that the Company expects to address with its new Blu Build™ loading device.

It is this segment of the market – customers looking to customize their procedures to the patient's anatomy at the time of the procedure – that the Company expects to address with its new Blu Build™ loading device.

The Blu Build™ loading device efficiently configures strands in the operating room, allowing the clinician to make determinations about the product configurations with the most recent picture of the patient’s anatomy.

The Company believes that this technique may provide advantages in some brachytherapy products and will provide a better solution for this market segment.

The Company also believe the efficiency and ease of use of the Blu Build™ loading device will offer an intriguing opportunity for the other 75% of the market.

The Company also believe the efficiency and ease of use of the Blu Build™ loading device will offer an intriguing opportunity for the other 75% of the market not currently utilizing intra-operative techniques.

During fiscal year 2019, the Company released the Blu Build™ loader in a limited market release.

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This is the first internally developed proprietary delivery device in the Company's history.

The Company expects to have a full market release of the Blu Build™ loader during its second quarter of fiscal year 2020, but there is no assurance that this will occur.

Commercialization of GammaTile™ Therapy for the treatment of recurrent brain metastases.

During fiscal year 2020 the Company continued to refine the design of the Blu Build™ loader.

During fiscal year 2020, the Company completed the full market release of the Blu Build™ loader;

however, the COVID-19 pandemic impacted the sourcing of parts and the ability to fully market the Blu Build™ loader to new accounts.

This led to a slower than expected release of Blu Build™ during fiscal 2020.

Management believes we have enough inventory to support our current customers and new customers in the pipeline and we have resolved our sourcing of parts.

Management believes that the Blu Build™ loader will be able to gain traction in fiscal 2021, but there is no assurance that this will occur.

Commercialization of GammaTile™ Therapy for the treatment of primary and recurrent brain metastases.

The utilization of the GammaTile™ system over the past five years has developed a product with consistent and repeatable results as evidenced by the June 2016 presentation at the Society of Neurologic Oncologists.

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Pursuant to the Manufacturing and Supply Agreement, the Company has agreed to exclusively supply Cesium-131 seeds to be incorporated into the GammaTile™ Therapy and manufacture the GammaTile™ Therapy product for end users designated by GT Med Tech.

In January 2019, GT Med Tech, which is the sole commercial agent of GammaTile™ Therapy, began a limited market release with plans for a full market release in 2020.

In January 2019, GT Med Tech, which is the sole commercial agent of GammaTile™ Therapy, began a limited market release and in January 2020 began a full market release.

The Company continues to provide assistance to GT Med Tech for various process improvement projects on a time and materials basis.

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Increase utilization of Cesium-131 in treatment of other solid tumor applications such as brain, gynecological, and other cancers.

The Company has clearance from the FDA for its premarket notification (510(k)) for Cesium-131 brachytherapy seeds that are preloaded into bioabsorbable braided sutures and bioabsorbable braided sutures attached to bio absorbable mesh.

This FDA clearance allows commercial distribution for treatment of brain, gynecological, head and neck and lung tumors as well as tumors in other organs.

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Local control – defined as success in preventing the re-growth of cancer in the immediate vicinity of the treatment area – has been excellent to date.

Obtaining More Favorable Reimbursement Codes .

In May 2020, CMS approved 64 ICD-10-PCS billing codes used for reimbursement of Cesium-131 for the hospital in-patient DRG setting.

The codes allow hospitals to bill Medicare and other health insurers for specific surgical procedures that would benefit from the addition of Cesium-131.

DRG, or diagnostic related groups, are designed for Medicare and other health insurers to set payment levels for hospital in-patient services.

The new codes will take effect on October 1, 2020.

Support C linical R esearch and sustained product development .

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The Company has deployed a secure, regulatory environment compliant, online information system capable of large usable databases to participating investigators.

During fiscal year 2019, four presentations were accepted at the annual meeting of the American Society for Radiation Oncology (ASTRO) in October 2018 covering topics related to Cesium-131 treatment of gynecologic cancers, prostate and brain cancers.

Four presentations were also made at the 2019 annual meeting of the American Brachytherapy Society in June 2019.

During fiscal year 2020, one presentation was accepted at the annual meeting of the American Society for Radiation Oncology (ASTRO) in September 2019 that reported multi-center outcomes following Cesium-131 treatment of recurrent head & neck cancers following surgery.

The annual meeting of the American Brachytherapy Society (ABS), where Cesium-131 studies are often reported, was canceled for the Spring of 2020 due to the COVID-19 pandemic.

The Company will continue to seek to increase the number of reports made to society meetings and the peer reviewed literature in order to seek to enhance the standing of its products in the scientific community.

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Targeted Expansion into International Markets.

The Company believes that in addition to a significant domestic market for their products, there exists a potential international demand for Cesium-131.

The Company believes that in addition to a significant domestic market for its products, there exists a potential international demand for Cesium-131.

The current global market for permanent prostate brachytherapy is larger than the domestic market.

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Assessing geographical clinical and capital expense factors – It will be key to understand the alternative therapies available in a given foreign market.

For example, in some regions large capital investments are difficult, making the use of permanent brachytherapy more attractive.

For example, in some regions large capital investments are difficult, making the use of permanent brachytherapy more attractive than other therapies.

Identifying potential partners / strategies – The Company will assess if there are strategic partners or other potential strategies for addressing a particular foreign market.

On July 14, 2017, the Company entered into an agreement with a distributor in Russia that provides for the ability to sell the entire product line in the Russian Federation.

The agreement had a one-year initial term with two additional one-year terms which automatically renew unless either party invoke their right to terminate earlier under the provisions of the agreement.

Although sales have been minimal under this agreement, the two parties elected to have the agreement automatically renew through July 2020 .

On September 22, 2020, the Company entered into an agreement with the same distributor.

The agreement has a one-year initial term with two additional one-year terms which automatically renew unless either party invoke their right to terminate earlier under the provisions of the agreement.

Although sales have been minimal under this agreement, the two parties elected to have the agreement automatically renew now through July 2020.

In fiscal year 2020, the Company entered into a three-year agreement with a distributor in India that provides for the ability to sell Cesium-131 brachytherapy seeds in different configurations within India.

There have been no sales to date under this agreement.

On August 1, 2016, the Company entered into an agreement with a distributor in Italy for the territory of Italy and Switzerland, as its prior Italian distribution agreement, with an affiliate of the new distributor, had expired without any sales.

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The agreement expired August 1, 2019 and was not renewed.

The Company believes that learning more about the different international opportunities will provide a better foundation for its international strategy and potential investments in specific markets.

In fiscal 2019, due to significant expense involved in renewal, the Company declined to renew the CE Mark on its Cesium-131 seed for distributing in European markets.

This will limit European market opportunities to sell / distribute the seed.

The Company will periodically re-evaluate the opportunity associated with having the CE Mark, and, if appropriate, reapply for the mark.

Cesium-131 Manufacturing Process and Suppliers

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Pre-loaded braided strands attached to bioabsorbable mesh (creates planar implants out of braided sutures and bioabsorbable mesh);

Intraoperative real-time loading device sold as Blu Build ™ (loader that allows custom spacer and seed loading).

Intraoperative real-time loading device sold as Blu Build ™ (loader that allows custom seed and spacer loading).

In fiscal year 2020, the Company delivered approximately 43% of its Cesium-131 seeds to customers configured in Mick ® cartridges, approximately 36% of its Cesium-131 seeds configured in stranded and pre-loaded in a needle form, 10% of its Cesium-131 seeds configured in a braided strand form, 2% of its Cesium-131 seeds sold in a loose configuration and the remaining 9% configured in either a pre-loaded in a needle, Blu Build™, or stranded form.

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During fiscal year 2019, the Company elected to not renew its CE Mark due to no sales activity in the European Union, limited interest in Cesium-131 due to the pricing and reimbursement environment, and changing European Union registration requirements that would have required significant investment into additional clinical trials.

Maintain ISO 13485:2016

In August 2008, the Company obtained its initial ISO 13485:2003 certification.

This permitted the Company to register its products in Europe in 2008 and in Canada and Russia during fiscal year 2009.

The ISO 13485:2003 certification demonstrates that the Company is in compliance with this internationally recognized quality standard and the initial certification was valid for a three-year period.

In June 2012, the Company received a recertification to ISO 13485:2003 for an additional three-year period, which was affirmed through a surveillance audit in June 2013.

The Company has subsequently maintained timely compliance with ISO 13485:2003.

In March 2017, BSI conducted its full system inspection and recertification and found no nonconformities to ISO 13485:2003 medical device standards.

In April 2018, BSI certified the Company’s successful transition to ISO 13485:2016.

Maintain ISO Compliance

In August 2008, the Company obtained its initial ISO 13485:2003 certification and has subsequently been ISO certified under various compliance standards since then.

In April 2018, the British Standards Institute (BSI) certified the Company’s successful transition to ISO 13485:2016.

This transition moved Isoray’s quality system into the current state of the art Quality Management System per the ISO standard.

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The Company was recommended for continued certification.

In January 2020, BSI conducted a microbiology assessment of the operations at our manufacturing facility in Richland, Washington to ISO 13485:2016 medical device standards.

The two minor nonconformances found by BSI were subsequently resolved.

The Company was recommended for continuing certifications.

In February-March 2020 BSI conducted a re-certification audit of the company to ISO 13486:2016 general requirements.

The company successfully passed the audit with three minor non-conformances.

The minor non-conformances were subsequently resolved.

The Company was recommended for continued certifications.

The Company is scheduled for a general assessment audit in March of 2021.

Isotope Suppliers

The Company has identified key reactor facilities in Russia, the U.S., Canada , Poland, Belgium, and South Africa, but is currently solely relying on and has a contract with the Russian suppliers.

On December 15, 2016, Medical entered into a new supply contract (the INM Agreement) with The Open Joint Stock Company, Isotope, a Russian company (JSC Isotope).

On July 30, 2019, Medical entered into a new supply agreement with JSC Isotope.

With this Agreement, Medical can purchase Cesium-131 from the Joint Stock Company, within the quality standards and within the time periods specified, through December 31, 2020.

Due to the planned outage at the INM reactor from November 2017 to July 2018, the Company negotiated an agreement in order to receive supply from the Research Institute of Atomic Reactors (RIAR) during the outage.

INM began returned from its planned outage in August 2018.

INM will again be the 100% supplier of Russian-sourced Cesium-131 beginning in August 2019 when RIAR begins a planned outage until approximately summer 2020 and management believes that INM will reach a supply on a 50/50 basis with RIAR beginning approximately in the summer 2020.

In order to maximize the efficiency of Cesium-131 production from the RIAR reactor, the Company has consigned its supply of “enriched” Barium to the RIAR facility.

The Company has identified key reactor facilities in Russia, the U.S., Canada , Poland, Belgium, and South Africa, but is currently solely relying on and has a contract with one Russian supplier with access to two reactors.

On July 30, 2019, Medical entered into a new supply agreement with JSC Isotope, its historical Russian supplier.

With this agreement, Medical agreed to purchase Cesium-131 from JSC Isotope within the quality standards and within the time periods specified, through December 31, 2020.

On August 26, 2020, the Company entered into a new supply contract (the “New Agreement”) with JSC Isotope.

Pursuant to the New Agreement, the Medical will purchase Cesium-131 from JSC Isotope, at the quality standards, volume, and pricing indicated in the New Agreement, from August 26, 2020 through December 31, 2021.

Although the previous agreement remains in effect until December 31, 2020, the Company has or will shortly have purchased the maximum amount of Cesium-131 permitted under the previous agreement.

Therefore, the Company will make all future purchases of Cesium-131 under the New Agreement.

From November 2017 to July 2018, the Company received supply under the JSC Agreement from the Research Institute of Atomic Reactors (RIAR) during the outage of INM.

On August 25, 2017, the Company executed a consignment inventory agreement with MedikorPharma-Ural LLC (“Medikor”) to process the Company’s enriched Barium at a specific nuclear reactor in Russia beginning in November 2017.

The term of the consignment agreement is 10 years.

As the Company no longer relies on the RIAR reactor for supply, it is uncertain whether the consignment agreement will ever be relied upon again to use the “enriched” Barium owned by the Company.

In order to maximize the efficiency of Cesium-131 production from the specific reactor using the “enriched” Barium, (the RIAR reactor) (when supply comes from this reactor), the Company has consigned its supply of “enriched” Barium to the RIAR facility.

“Enriched” in this context refers to a Barium Carbonate supply that contains a greater proportion of the non-radioactive isotope Barium-130 than is found in nature.

This higher proportion of Barium-130 leads to a greatly increased yield of Cesium-131 when it is placed in a high flux neutron environment such as that available at RIAR and a small number of other reactors worldwide.

The Company also received irradiated barium from the University of Missouri Research Reactor (MURR), located in the United States.

This higher proportion of Barium-130 leads to a greatly increased yield of Cesium-131 when it is placed in a high flux neutron environment as is available at RIAR and a small number of other reactors worldwide.

INM returned from its planned outage in August 2018.

INM was again the 100% supplier of Russian-sourced Cesium-131 beginning in August 2019 when RIAR began a planned outage that lasted until the summer of 2020.

The Company is no longer utilizing RIAR since its planned outage ended as we are now able to obtain sufficient supplies of Cesium-131 from INM.

The Company also has historically at times received irradiated barium from the University of Missouri Research Reactor (MURR), located in the United States.

For the fiscal year 2018, approximately eighty percent (80%) of our Cesium-131 was supplied by our Russian supplier and approximately twenty percent (20%) of Cesium-131 was generated by the irradiated barium from MURR.

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The Company also determined to terminate its supply agreement with MURR thereby eliminating all domestic suppliers of this critical component of its product and the last shipment of isotope from MURR was received in January 2019.

This decision means that the Company has no domestic supply capabilities for Cesium-131, however, with sufficient notice it may issue a purchase order as needed from time to time.

Even if Cesium-131 was supplied by MURR, MURR cannot manufacture enough supply to meet the Company’s increasing needs and requires additional cost in processing to meet the Company’s isotope specifications.

Management believes that failure to obtain deliveries of Cesium-131 from its Russian supplier, <<JSC Isotope>> (which provides supply from both the INM and RIAR reactors), would have a material adverse effect on seed production.

Over a two-year period of time, the Company has reviewed its isotope strategy and negotiated with both the U.S.

and Russian reactors.

This decision means that the Company has no domestic supply capabilities for Cesium-131, however, with sufficient notice it may issue a purchase order from MURR as needed from time to time.

But, even if Cesium-131 was supplied by MURR, MURR cannot manufacture enough supply to meet the Company’s increasing needs and requires additional cost in processing to meet the Company’s isotope specifications.

Management has determined that the U.S.

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reactor will not meet Company demand and is not cost effective.

As the Company has now determined to rely solely on its Russian suppliers, it is critical to rely on a strategy for outages.

Management has developed a three-step process to insulate the Company isotope supply from unplanned outages at the Russian supplier.

the Company has transferred its stock of enriched barium to the Russian RIAR reactor as a contingency in the case of an outage at one or both of its current isotope providers or at a new isotope supplier in Russia.

identifying close-proximity Russian reactors that could irradiate targets to transfer to INM or RIAR for further processing.

This provides the Company additional capacity to meet demand.

the Company is performing due diligence to identify other reactors that can supply isotope.

Quality Controls

In July 2008, Isoray had its baseline inspection by the FDA at its manufacturing and administrative offices in Richland, WA.

This inspection was carried out over a five day period during which the investigator performed a complete inspection following Quality Systems Inspection Techniques (QSIT).

At the end of the inspection, no report of deviations from Good Manufacturing Practices or list of observations (FDA Form 483) was issued to Isoray.

An additional inspection of Isoray was conducted by FDA in April 2013.

Again the FDA reported no deviations from Good Manufacturing Practices and did not list any observations (FDA Form 483).

Since July 2008, Isoray has met Quality Systems Inspection Techniques (QSIT) with no report of deviations from Good Manufacturing Practices or list of observations (FDA Form 483) issued.

In August 2017, the FDA conducted an announced QSIT inspection of the Richland facility and again, did not find any nonconformance to U.S.

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Therefore, as the Company looks at international opportunities to sell Cesium-131 seeds it will focus on those markets outside of the European Union.

In the beginning of the fiscal year 2021 the Company submitted a 510(k) to the FDA under the traditional pathway.

The proposed medical device is requested to be classified with the FDA as a Class II device and will assist physicians in visualizing the implanted seeds under different imaging.

Order Processing

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Many physicians order more seeds than necessary to assure themselves that they have a sufficient quantity.

Upon receipt of an order, the Company either delivers the seeds from its facility directly to the physician in either loose, preloaded, or Blu Build™ form and for a couple customers we send the order to an independent preloading service that delivers the seeds just prior to implant.

Upon receipt of an order, the Company either delivers the seeds from its facility directly to the physician in either loose, preloaded, or Blu Build™ form and for a couple of customers we send the order to an independent preloading service that delivers the seeds just prior to implant.

If the implant is postponed or rescheduled, the short half-life of the seeds makes them unsuitable for use and therefore they must be re-ordered.

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In 2015, the Company entered into a modification to the production facility lease that modified the requirement to return the facility to ground at the time of exit at Company discretion, exercised an extension in 2017 to increase the lease term to April 30, 2021, and reduced the required notice to terminate the lease early from twelve months to six months.

In July 2019, the Company entered into another modification of the production facility lease that extends the term to April 20, 2026, maintains the current rental rate through April 2020, and provides for an eighteen month termination notice with an early termination penalty of up to $40,000 which decreases each year.

In July 2019, the Company entered into another modification of the production facility lease that extends the term to April 20, 2026, and maintained the then current rental rate through April 2020, and provides for an eighteen month termination notice with an early termination penalty of up to $40,000 which decreases in the future beginning May 1, 2022.

These lease modifications provide the flexibility required for the Company to plan, design and construct its own production facility, which is expected to reduce operational cash flow requirements and provide for long-term security of production capabilities for the Company.

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This focus was supported by a complete redesign of the Company brand, website and collateral materials.

This effort was initiated in fall 2016.

This follows the changes to the sales and marketing team that occurred in 2016, when the Company hired a Vice President of Sales and Marketing, Michael Krachon.

Krachon brought more than twenty years of experience of progressive growth in sales and marketing with the past fifteen years in the brachytherapy market.

Further to support the new marketing strategy, the Company has started the process of reestablishing its medical advisory boards to provide professional input and insight regarding the Company’s current products and research and developments efforts.

The boards will vary by cancer type/site and the supporting specialties that treat that cancer.

They will include, but not be limited to, radiation oncologists, surgeons, urologists, and physicists.

The boards will be a mix of customers and non-customers, which the Company believes will provide increased insight regarding the perception of its products and opportunities to meet the needs of the market.

This effort was initiated in the fall of 2016, following changes to the sales and marketing team that occurred in early 2016, when the Company hired a Vice President of Sales and Marketing, Michael Krachon.

Krachon was recently promoted to Executive Vice President of Sales and Marketing in June 2020.

To support the new marketing strategy, the Company has continued to engage with its medical advisory boards to provide professional input and insight regarding the Company’s current products and research and developments efforts.

The Company held its first advisory meeting for prostate cancer in September 2016.

The Company held its most recent meeting in June 2019 and is planning on continuing this strategy.

The Company held its most recent meeting in May 2020 and is planning on continuing this strategy.

The Company is looking to continue to build additional advisory boards as the other applications grow in viability.

The additional boards will vary by cancer type/site and the supporting specialties that treat that cancer.

They will include, but not be limited to, radiation oncologists, surgeons, urologists, and physicists.

These additional boards will be a mix of customers and non-customers, which the Company believes will provide increased insight regarding the perception of its products and opportunities to meet the needs of the market.

The market for treatments of localized prostate cancer is very competitive and largely hinges upon two factors:

the demonstration of long-term follow-up data that has been presented to the prostate cancer treatment profession and the economic and strategic dynamics of the different therapeutic options.

Cesium-131 was introduced to the prostate cancer marketplace more than a decade after Iodine-125 and Palladium-103, and the resulting time for mature clinical data to be developed has proven an obstacle to widespread market acceptance.

The time to publish these results is lengthy and includes time to enroll patients in protocols which may take multiple years depending on the size of the enrollment population, time to aggregate the results at five years from the final patient treatment, time to analyze the data and author the article followed by the time for peer review, and publication in a medical journal.

The total time for this process may approach a decade from start to publication and these long-term results are just beginning to be published at the end of fiscal year 2019.

The first long term data are emerging for Cesium-131 prostate brachytherapy, primarily from The Chicago Prostate Cancer Center.

Cesium-131 was introduced to the prostate cancer marketplace more than a decade after Iodine-125 and Palladium-103, and the resulting lag time for mature clinical data to be developed has proven an obstacle to widespread market acceptance.

The total time for this process may approach a decade from start to publication and these long-term results were just beginning to be published at the end of fiscal year 2019.

The first long term data for Cesium-131 prostate brachytherapy have now been released from The Chicago Prostate Cancer Center.

A second long term study from University of Pittsburgh Medical Center, was published in 2020.

These publications should continue to support adoption of Cesium-131 as they place the isotope on a more level data field with the other isotopes.

The prostate brachytherapy market has been pressured by the economic differences and strategic dynamics of competing treatment options such as robotic surgical devices and external beam radiation facilities.

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The declining market has impacted the competitive landscape, reducing the number of competitors and their respective investments in sales, marketing and product development efforts.

Based upon Company market review and research, there appears to be an opportunity for Isoray to expand its current market opportunity with an investment in sales and marketing efforts.

The Company believes its hires of both sales and marketing veterans with regional sales support will lead to growth of their market share in the prostate cancer treatment business.

Based upon Company market review and research, there appears to be an opportunity for Isoray to expand its current market opportunity with continued investment in sales and marketing efforts.

The Company believes its hires of both sales and marketing veterans with regional sales support will continue to support its growth of market share in the prostate cancer treatment business.

The Company also believes that an increased share of the prostate brachytherapy market share will assist in facilitating Cesium-131 brachytherapy cancer treatment growth in other body sites.

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The Company has developed a customized brand message for each audience.

The Company’s new website was launched in the fall of 2016 and delivers the message that Cesium-131 is a treatment option for cancers throughout the body.

The Company’s website, which was relaunched in 2016 and regularly updated since, delivers personalized messaging that positions Cesium-131 as a treatment option for cancers throughout the body.

Isoray continues to develop and/or refresh print, visual and digital media (including physician brochures discussing the clinical advantages of Cesium-131, clinical information materials, and digital content for the website and social media awareness efforts).

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various local chapter meetings.

In 2020, as a result of the national COVID-19 pandemic, many of the meetings were cancelled, or transitioned to virtual formats.

The Company assesses each of these changing meeting formats individually and is working with the hosts and professional societies to maximize opportunities to raise awareness about Cesium-131 products and interact with our customers and potential customers.

As these meetings and conferences continue to evolve we will also adapt to find the most efficient methods to support our market position.

The Company will continue to invest resources in these conferences as they occur as management believes this is an effective way to educate others concerning Cesium-131.

In today’s U.S.

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Many physicians relate incidents of their patients coming for consultations armed with articles researched on the Internet and other sources describing new treatments and medications.

In many cases, these patients are demanding a certain therapy or drug and the physicians are complying when medically appropriate.

In many cases, these patients are demanding a certain therapy or drugs and the physicians are complying when medically appropriate.

Because of this consumer-driven market factor, we also promote our products directly to the general public.

We target the prostate cancer patient, his spouse, family, care givers and loved ones.

We emphasize to these segments the specific advantages of the Cesium-131 brachytherapy seed through our website (located at www.Isoray.com), patient advocacy efforts, informational patient materials and patient testimonials, other awareness efforts through social media channels, and advertisements in specific markets supporting brachytherapy.

None of our websites should be considered a part of this Report.

We emphasize to these segments the specific advantages of the Cesium-131 brachytherapy seed through our website, patient advocacy efforts, informational patient materials and patient testimonials, other awareness efforts through social media channels, and advertisements in specific markets supporting brachytherapy.

Over the past year, the Company has continued to increase its efforts to raise awareness about Cesium-131 and Isoray Medical.

One key method we have pursued for this is to increase our digital footprint, with consistent updates to our website and outreaches through social media, including Twitter, LinkedIn and Facebook.

The Company believes that an increased digital presence will result in increased awareness about brachytherapy overall, and specifically increased awareness about Cesium-131.

In early 2020, a new integrated patient community website, called Together (located at www.isoray.com/together/), was launched to help inform and educate potential patients and their families about brachytherapy.

None of our websites should be considered a part of this Report.This effort continues to build on our strength as a digital innovator in patient outreach and personalized messaging.

Management believes this increased awareness should ultimately translate to more patients finding a physician with Cesium-131 experience.

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The Company continues to work with its existing radiation oncology physician customers and to educate them as to additional or new Company products and expand utility of Cesium-131 within the facility and across different disease sites.

To facilitate this expanded position, the Company’s sales managers call on existing radiation oncology physicians and other key decision makers within an organization to discuss the available clinical results and experiences in coordination with key Company scientific personnel to educate the customer representatives about different Cesium-131 applications and comparisons to competing treatments.

To facilitate this expanded position, the Company’s sales managers call on in person or virtually, as applicable, existing radiation oncology physicians and other key decision makers within an organization to discuss the available clinical results and experiences in coordination with key Company scientific personnel to educate the customer representatives about different Cesium-131 applications and comparisons to competing treatments.

Sales and Distribution

In the prostate cancer market, the sales organization targets radiation oncologists and medical physicists as well as urologists and facility administrators as key clinical decision-makers in the type of radiation therapy offered to prostate cancer patients.

In the prostate cancer market, our sales team targets radiation oncologists and medical physicists as well as urologists and facility administrators as key clinical decision-makers in the type of radiation therapy offered to prostate cancer patients.

As the urologist plays a key role in influencing the ultimate treatment for each prostate cancer patient, our sales team is expanding efforts to raise interest in brachytherapy within the urology community, both in direct effort and through the urology referrals at existing facilities.

We will continue to work with our existing clinicians to raise awareness in their referral community about the benefits of Cesium-131 brachytherapy.

With respect to non-prostate applications, the Company targets neurosurgeons, thoracic surgeons, gynecologic oncologists and other surgeons in addition to radiation oncologists.

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The sales cycle for non-prostate applications has proved to be a longer process than for prostate applications and often takes nine months or longer before the Company is licensed in a new hospital and can make its first sale.

Isoray has a direct sales organization consisting of territory sales managers, and a Vice-President of Sales and Marketing responsible for the development of the team and the execution of the sales plan.

Isoray has a direct sales organization consisting of territory sales managers, and an Executive Vice-President of Sales and Marketing responsible for the development of the team and the execution of the sales plan.

The Company’s territory sales managers are responsible for all sales activities in their respective territories and solicit potential specialist physicians in all areas of the body.

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market through use of established distributors in target markets of other countries.

As of September 2019, the Company had independent distributors in Russia and Peru.

As of September 2020, the Company had independent distributors in Russia, India and Peru.

The Company’s initial focus on the international markets was for the sale of the GliaSite ® RTS, which was discontinued in March 2016.

This has shifted to targeted prostate and gynecological centers in the targeted markets.

This focus has now shifted to prostate and gynecological centers in the targeted markets.

Although it has international distribution agreements in place, the Company continues to experience difficulties in generating sales of Cesium-131 products through its international distributors.

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Reimbursement by third party payers is the primary means of payment for all Isoray products.

The Centers for Medicare and Medicaid Services (CMS) is the primary payer, providing coverage for approximately 65% of all prostate brachytherapy cases and a majority of non-prostate procedures.

CMS is the primary payer, providing coverage for approximately 65% of all prostate brachytherapy cases and a majority of non-prostate procedures.

Well established brachytherapy coverage and payment policies are currently in place by CMS and other non-governmental payers for out-patient procedures.

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The first, the out-patient setting, includes prostate brachytherapy, and a limited range of other procedures, including some gynecological implants, and as such, is covered by the CMS Outpatient Prospective Payment System, which since 2010 has provided a fixed reimbursement per seed for stranded and loose seeds.

Iodine, Palladium and Cesium each have their own reimbursement values for stranded and loose seeds.

Cesium, iodine, and palladium each have their own reimbursement values for stranded and loose seeds.

If reported correctly when seeds are submitted for payment to CMS, providers are reimbursed at a flat rate that is determined by median costs of the seeds.

CMS has generally continued its historical trend of declining year over year reimbursement with few exceptions.

CMS calculates future payments based on prior hospital billing data.

This has generally resulted in a historical trend of declining year over year reimbursement with few exceptions.

Private insurance companies have historically followed the CMS reimbursement policies.

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The brachytherapy seeds in these in-patient cases are not paid for separately by CMS, but rather included as part of the DRG payments from CMS.

Because the Company’s seeds may not be reimbursed by CMS, there can be difficulty in convincing hospitals to use the Company’s products.

The Company contracted with a reimbursement consultant in April of 2016 to review opportunities to establish incremental reimbursement from CMS for in-patient care for brachytherapy.

In September 2019, the Company submitted for an additional ICD-10-PCS code for other surgical procedures and is currently waiting on CMS’s response.

Historically, because the Company’s seeds may not be separately reimbursed by CMS for in-patient procedures, there can be difficulty in convincing hospitals to use the Company’s products.

In September 2019, the Company submitted for additional ICD-10-PCS code for other surgical procedures and in May 2020, CMS approved 64 ICD-10-PCS billing codes used for reimbursement of Cesium-131 for the hospital in-patient DRG setting.

The codes allow hospitals to bill Medicare and other health insurers for specific surgical procedures that would benefit from the addition of Cesium-131.

DRG, or diagnostic related groups, are designed for Medicare and other health insurers to set payment levels for hospital in-patient services.

The new codes will take effect on October 1, 2020.

The codes will map to DRG payments for the associated procedures.

The Company plans on considering additional applications for ICD-10-PCS codes for in-patient brachytherapy treatments in the future.

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In July 2019, CMS proposed a significant change to the way Medicare currently pays for radiation services in an out-patient setting.

If this change proposed by CMS is enacted, the Radiation Oncology Alternative Payment Method (RO APM) would provide for a single, bundled payment for a 90-day episode of radiation therapy including LDR brachytherapy, IMRT, SBRT, proton therapy, and HDR brachytherapy.

The RO APM proposal would apply the same payment levels to services provided in physician offices, free-standing centers, and hospital outpatients and would be mandatory for approximately forty percent of the facilities in the United States.

In addition, certain surgical codes are included in the bundled payment such as those for gynecological treatments.

This CMS proposal for a revised payment includes brachytherapy sources which contradicts the current Congressional mandate to provide separate payment for brachytherapy sources.

The Radiation Oncology Alternative Payment Method (RO APM) proposed a single, bundled payment for a 90-day episode of radiation therapy including LDR brachytherapy, IMRT, SBRT, proton therapy, and HDR brachytherapy.

The RO APM proposal applied the same payment levels to services provided in physician offices, free-standing centers, and hospital outpatients.

In addition, certain surgical codes were proposed to be included in the bundled payment such as those for gynecological treatments.

This CMS proposal for a revised payment included brachytherapy sources.

All comments regarding the RO APM were due to CMS by mid-September 2019 and the Company submitted its comments prior to the deadline.

The final rule could become effective for calendar year 2020 if CMS proceeds with little or no changes to the proposed RO APM.

Management is currently evaluating the impact that RO APM would have if implemented as currently written.

GT Med Tech filed an application for a New Technology Add-on Payment (NTAP) to the Center for Medicare and Medicaid Services (CMS) seeking reimbursement for the GammaTile™ treatment in the in-patient setting.

In August 2019, CMS issued a ruling that GammaTile™ Therapy was not approved for an NTAP.

The final rule was published on September 18, 2020 with an effective date of January 1, 2021.

As published, the rule is effective for randomly selected Core-Based Statistical Areas (CBSAs) and the participating zip codes are included in the final rule.

The selected zip codes include approximately thirty percent of all eligible Medicare fee-for-service (FFS) radiotherapy episodes nationally.

The RO APM could prove beneficial to the Company if clinics and physicians transition to brachytherapy options and away from more expensive IMRT and other non-brachytherapy options.

However, if clinics and physicians determine to use less costly iodine brachytherapy this would have a negative impact on the Company as the costs of our Cesium-131 seeds are higher than iodine seeds.

Management is currently evaluating the impact the final rule may have on our business, financial condition, or results of operations.

In August 2019, CMS announced that it did not approve GT Med Tech’s initial NTAP application.

GT Med Tech re-applied to CMS for NTAP status for GammaTile™ that would take effect during the 2021 federal fiscal year (October 1, 2020 through September 30, 2021).

In September 2020, CMS concluded again that it would not approve NTAP status for GammaTile™.

We cannot predict the likelihood of whether CMS may make a favorable decision in the future if GT Med Tech decides to continue pursuing NTAP status.

Financial Information About Segments

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Other Information

The following are the Company’s top three customers, facilities or physician practices that utilize multiple surgical facilities at which primarily prostate brachytherapy procedures are performed, which accounted for approximately 35.2% of the total Company sales for the twelve months ended June 30, 2019:

The following are the Company’s top customers, facilities or physician practices that utilize multiple surgical facilities at which primarily prostate brachytherapy procedures are performed, which accounted for approximately 26.8% of the total Company sales for the twelve months ended June 30, 2020:

El Camino, Los Gatos, and other facilities 1

Longview Regional Medical Center, and other facilities

University of Pittsburg Medical Center – Mercy

The head of the single largest physician practice also serves as the Company’s medical director.

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There can be no assurance this would occur in a timely manner or at all.

Advanced Radiation Centers of NY was a top three customer in fiscal year 2018.

While not a top three customer in fiscal year 2019, Advanced Radiation Centers of NY is still a substantial customer.

Two other unrelated customers together accounted for approximately 13.7% of total sales so our top three customers account for approximately 40.5% of total sales.

Proprietary Rights

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Our management believes that certain aspects of the Isoray seed design and construction techniques are patentable innovations.

These innovations resulted in a patent granted by the USPTO under Patent Number 7,410,458, in August 2008, with an expiration date of December 5, 2025.

These innovations resulted in a patent granted by the USPTO under Patent Number 7,410,458, in August 2008, with a currently expected expiration date in 2025.

Certain methodologies regarding isotope production, separation, and seed manufacture are retained as trade secrets and are embodied in Isoray’s procedures and documentation.

Four patents have been granted by the USPTO relating to methods of deriving Cesium-131 developed by Isoray employees:

Patent Number 7,479,261, with an expiration date of April 6, 2027;

Patent Number 7,531,150, with an expiration date of July 13, 2027;

Patent Number 7,316,644, with an expiration date of August 5, 2025;

and Patent Number 7,510,691, with an expiration date of July 19, 2027.

Patent Number 7,479,261, with a currently expected expiration date in 2027;

Patent Number 7,531,150, with a currently expected expiration date in 2027;

Patent Number 7,316,644, currently expected to expire in 2025;

and Patent Number 7,510,691, currently expected to expire in 2027.

One patent has been granted by the USPTO relating to a device for loading brachytherapy seeds:

Patent Number 10,328,278, with an expiration date in October 2038.

The Company has two patents that were issued on April 23, 2014 and are effective in Canada (Canada 2576907 and 2571349).

The Company has patents granted in the Russian Federation which expire at various times in 2024 and 2025.

The Company has a single patent granted in each of the Netherlands and India that both expire on June 22, 2025.

The Company has a single patent pending in the EU and Hong Kong.

Patent Number 10,328,278, currently expected to expire in 2038.

The Company has two patents that were issued on April 23, 2014 and are in force in Canada (Canada 2576907 and 2571349), both of which expire in 2025.

The Company has three patents granted in the Russian Federation which expire at various times in 2024 and 2025.

The Company has a single patent granted in each of the EU, Hong Kong, Netherlands and India which expire various times in 2024 and 2025.

The Company has a two patent applications pending in the US and a single patent application pending in the EU.

The Company is continuing its efforts to develop and patent additional methods of deriving Cesium-131 and other isotopes.

There were specific conditions attached to the assignment of the Cesium-131 Trust patent from the late Lane Bray.

In particular, the associated Royalty Agreement provided for 1% of gross profit payment from seed sales to Lane Bray and 1% of gross profit from any use of the Cesium-131 process patent for non-seed products.

There were specific conditions attached to the assignment of the patent from the late Lane Bray.

In particular, the associated Royalty Agreement provided for 1% of gross profit payment from seed sales to Lane Bray's trust and 1% of gross profit from any use of the Cesium-131 process patent for non-seed products.

If Isoray reassigned the Royalty Agreement to another company, these royalties increased to 2%.

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During fiscal years 2020 and 2019, the Company recorded royalty expense of $0 and $33,000, respectively, related to this patent.

The patent expired in April 2019 and no royalties were paid on sales after the expiration of the patent.

The assigned patent expired in April 2019 and no royalties were paid on sales after the expiration of the patent.

The Company has changed and improved its processes over time and was only using a small part of the methodology described in the patent at the time of its expiration.

While others can now use the methodologies described in the patent without infringing, management believes that its proprietary processes covered either by other valid patents or by know-how still provide some barriers to entry for anyone wanting to produce a Cesium-131 brachytherapy seed and also allow the Company to more efficiently manufacture Cesium-131 brachytherapy seeds than using the methods listed in the expired patent.

While others can now use the methodologies described in the assigned patent without infringing, management believes that its proprietary processes are covered either by other valid patents or by know-how and still provide some barriers to entry for anyone wanting to produce a Cesium-131 brachytherapy seed and also allow the Company to more efficiently manufacture Cesium-131 brachytherapy seeds than using the methods listed in the expired patent.

Research and Development

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The Company expects to continue ongoing research and development activities for the foreseeable future.

Chief among R&D expenditures in fiscal year 2019 were new product development (Blu Build™ loader, GammaTile™ and others) and the support of clinical research studies that are accumulating data on the subjects of prostate, brain and head and neck cancers.

Other clinical research, including the study of Cesium-131 in the treatment of gynecological and other cancers, are currently funded by sources other than the Company.

Chief among R&D expenditures in fiscal year 2020 were new product development (Blu Build™ loader and others) and the support of clinical research studies that are accumulating data on prostate, brain and head and neck cancers.

Government Regulation

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This transition moved Isoray’s quality system into the current state of the art Quality Management System per the ISO Medical Device Quality Management System standard.

It was imperative that the Company complied with ISO 13485:2016 by end of February 2019 in order to maintain its CE Marks.

It was imperative that the Company complied with ISO 13485:2016 by the end of February 2019 in order to maintain its CE Marks.

During the fiscal year 2014, the CE Mark was renewed for an additional five years.

However, during fiscal year 2019, the Company elected to not to renew its CE Mark due to no sales activity in the European Union, limited interest in Cesium-131 due to the pricing and reimbursement environment, and changing European Union registration requirements that would have required significant investment into additional clinical trials.

However, during fiscal year 2019, the Company elected to not renew its CE Mark due to no sales activity in the European Union, limited interest in Cesium-131 due to the pricing and reimbursement environment, and changing European Union registration requirements that would have required significant investment into additional clinical trials.

In the United States, as a manufacturer of medical devices and devices utilizing radioactive byproduct material, we are subject to extensive regulation by not only federal governmental authorities, such as the FDA and FAA, but also by state and local governmental authorities, such as the Washington State Department of Health, to ensure such devices are safe and effective.

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None of the Company’s employees are represented by any collective bargaining unit.

On September 19, 2019, the Company employed six direct sales people.

On September 21, 2020, the Company employed seven direct sales people.

The Company competes in a market characterized by technological innovation, extensive research efforts, and significant competition.

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In addition, a competitor would need to develop a method for isotope attachment and seed assembly, would need to conduct testing to meet NRC and FDA requirements, and would need to obtain regulatory clearances before marketing a competing device.

Best Medical received FDA 510(k) clearance to market a Cesium-131 seed on June 6, 1993 but to date, twenty-six years later, have not produced any products for sale.

Best Medical received FDA 510(k) clearance to market a Cesium-131 seed on June 6, 1993 but to date, twenty-seven years later, have not produced any products for sale.

The permanent brachytherapy seed market includes companies that manufacture and/or distribute Cesium-131, Iodine-125 (I-125) and Palladium-103 (Pd-103).

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While none of these companies publicly report specific information about their brachytherapy business, the Company believes the following about their product offerings and market positions:

Theragenics Corporation introduced Pd-103 into the market approximately 20 years ago.

They are the market leader in Pd-103 production.

In the 2000’s, Theragenics introduced their own I-125 product.

They deliver product in a variety of configurations, include products that allow for intra-operative needle preparation and stranding.

They also provide product (primarily I-125) for international distribution.

Theragenics Corporation introduced Pd-103 into the market more than 20 years ago.

It is the market leader in Pd-103 production.

In the 2000’s, Theragenics introduced its own I-125 product.

It delivers product in a variety of configurations, including products that allow for intra-operative needle preparation and stranding.

It also provides product (primarily I-125) for international distribution.

The majority of their brachytherapy sales are for prostate treatment.

They manufacture Pd-103 for Becton Dickinson.

It manufactures Pd-103 for Becton-Dickinson.

Becton-Dick i nson ( “BD”, Previously C.

Bard) manufactures their own I-125 and distribute Pd-103 from Theragenics.

They are a prior market leader, and historically focused on dedicated delivery devices to support different physician procedure techniques.

They continue to distribute I-125 internationally, with the majority of their brachytherapy sales for prostate treatment.

Bard) manufactures its own I-125 and distribute Pd-103 from Theragenics.

It is a prior market leader, and historically focused on dedicated delivery devices to support different physician procedure techniques.

It continues to distribute I-125 internationally, with the majority of its brachytherapy sales for prostate treatment.

IsoAid manufactures both I-125 and Pd-103, with a focus on domestic prostate brachytherapy customers.

They have focused on providing seeds to customers in standard configurations.

It has focused on providing seeds to customers in standard configurations.

The Company does not believe that IsoAid offers a product for intra-operative needle preparation and stranding.

Best Medical manufactures both I-125 and Pd-103, with a focus on domestic prostate brachytherapy customers.

They have focused on providing seeds to customers in standard configurations.

It has focused on providing seeds to customers in standard configurations.

The Company does not believe that Best Medical offers a product for intra-operative needle preparation and stranding.

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The Company believes that approximately 25% of procedures are performed with some level of customization in the operating room.

It is this segment of the market – customer looking to customize their procedures to the anatomy at the time of the procedure – that the Company expects to address with their new Blu Build™ loading device.

It is this segment of the market – customer looking to customize procedures to his anatomy at the time of the procedure – that the Company expects to address with its new Blu Build™ loading device.

The Blu Build™ loading device will efficiently configure strands in the operating room, allowing the clinician to make determinations about the product configurations with the most recent picture of the patient’s anatomy.

The Company believes that this technique may provide advantages in some brachytherapy products and will provide a better solution for this market segment.

The Company also believes the efficiency and ease of use of the Blu Build™ loading device will offer an intriguing opportunity for the other 75% of the market.

The Company also believes the efficiency and ease of use of the Blu Build™ loading device will offer an intriguing opportunity for the other 75% of the market not currently utilizing intra-operative techniques.

Blu Build™ was sold in a limited market release during fiscal year 2019 as the Company worked to refine the loader before wide-spread distribution.

The Company anticipates a full market release of Blu Build™ in the first half of fiscal year 2020, but there is no assurance this will occur.

During fiscal year 2020, the Company completed the full market release of the Blu Build™ loader;

however, the COVID-19 pandemic impacted the sourcing of parts and the ability to fully market the Blu Build™ loader to new accounts.

This led to a slower than expected release of Blu Build™ during fiscal 2020.

Management believes we have enough inventory to support our current customers and new customers in the pipeline and we have resolved our sourcing of parts.

Management believes that the Blu Build™ loader will be able to gain traction in fiscal 2021, but there is no assurance that this will occur.

The Company’s brachytherapy products used in non-prostate applications typically compete with temporary (high dose-rate, HDR) and external beam radiation therapy (EBRT), which can be provided as conventional or intensity modulated radiation therapy, or as stereotactic radiosurgery, a technique that delivers high doses of radiation to a target in a much lower number of sessions than other forms of EBRT.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business