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Item 1. Business

2021-09-27 compared with 2020-09-25 · 165 added, 184 removed, 710 unchanged (33% of the section changed)

ITEM 1 – BUSINESS

(formerly known as Century Park Pictures Corporation) was incorporated in Minnesota in 1983 and on December 28, 2018, Isoray, Inc.

reincorporated to Delaware.

(formerly known as Century Park Pictures Corporation) was incorporated in Minnesota in 1983, and reincorporated to Delaware on December 28, 2018.

On July 28, 2005, Isoray Medical, Inc.

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Information on this website is not a part of this Form 10-K (this “Report”).

We make our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, Forms 3, 4, and 5 filed on behalf of directors and executive officers, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (Exchange Act) available free of charge on our website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (SEC).

Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, Forms 3, 4, and 5 filed on behalf of directors and executive officers, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (Exchange Act) are available free of charge on our website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (SEC).

You can also read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549.

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Information regarding our corporate governance, including the charters of our audit committee, our nominations and corporate governance committee and our compensation committee, and our Codes of Conduct and Ethics is available on our website (www.Isoray.com).

We will provide copies of any of the foregoing information without charge upon request to Mark Austin, Controller, 350 Hills Street, Suite 106, Richland, WA, 99354.

We will provide copies of any of the foregoing information without charge upon request to Mark Austin, Vice President of Finance and Corporate Controller, 350 Hills Street, Suite 106, Richland, WA, 99354.

Business Operations

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.

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.

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.

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Seeds can also be loaded into suture material, which can be sewn by Isoray into a piece of bio-absorbable mesh which can be sewn or stapled into tissue by the physician for use in lung, pelvic floor and other cancer locations.

Under a manufacturing agreement for GT Medical Technologies, Inc.

Under a manufacturing agreement with GT Medical Technologies, Inc.

(“GT Med Tech”), Isoray inserts Cesium-131 seeds into a collagen matrix which GT Med Tech’s customers place in the brain.

Brachytherapy seeds are small devices containing a therapeutic dose of radiation used in an interstitial radiation procedure.

Brachytherapy seeds are small devices that deliver a therapeutic dose of radiation used in an interstitial radiation procedure.

The procedure has become one of the primary treatments for prostate cancer.

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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.

Prostate cancer treatment represents about 75% of the business of Isoray today.

When brachytherapy is the only treatment (monotherapy) used in the prostate, approximately 70 to 120 seeds are permanently implanted in the prostate during an outpatient procedure.

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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.

J., et al., Long-term biochemical outcomes using Cesium-131 in prostate brachytherapy.

Brachytherapy 18 (6):800-805 (2019).

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 (2020)).

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.

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

From the same patient group as above, the University of Pittsburgh School of Medicine reported in 2020 an evaluation of the intermediate-risk group prostate cancer patients (Rodriguez-Lopez, J.

L., et al, Report of a Large Cohort of Intermediate-Risk Prostate Cancer Patients Treated with Cs-131 Brachytherapy.

International Journal of Radiation Oncology*Biology*Physics 108 (3):

e926 (2020)).

The authors reported excellent outcomes for the favorable intermediate-risk subgroup treated with Cesium-131 prostate brachytherapy alone and excellent outcomes for the unfavorable intermediate-risk subgroup with combined external beam radiation and Cesium-131 prostate brachytherapy.

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.

Glaser, et al.

(2017), Long-Term Quality of Life in Prostate Cancer Patients Treated With Cesium - 131 , Int J Radiat Oncol Biol Phys.

98 (5):1053-1058).

Glaser, et al., Long-Term Quality of Life in Prostate Cancer Patients Treated With Cesium - 131, International Journal of Radiation Oncology*Biology*Physics 98 (5):1053-1058 (2017)).

The Company continues to identify and support work that seeks to employ and study Cesium-131 brachytherapy seeds in combination with external beam radiation therapy (“EBRT”).

Compelling evidence is emerging supporting the use of such combination brachytherapy and EBRT in intermediate and high-risk prostate cancer cases.

(Sylvester J, Braccioforte M.H., Moran B.J.

(2019) Intensity modulated radiation therapy (IMRT) followed by cesium-131 brachytherapy for intermediate and high risk localized prostate cancer .

(Sylvester J, Braccioforte M.H., Moran B.J., Intensity modulated radiation therapy (IMRT) followed by cesium-131 brachytherapy for intermediate and high risk localized prostate cancer .

Brachytherapy 18 (3):S72 (2019)).

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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.

( 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.

An early results study of a series of men treated with Cesium-131 focal therapy was presented at the 2021 Annual Meeting of the American Brachytherapy Society, Moran, B.

J., et al., PO40:

A Pilot Study of Cs-131 Focal Brachytherapy in a Prospectively-Followed Group of Low Risk Localized Prostate Cancer Patients Staged by Stereotactic Transperineal Prostate Biopsy.

Brachytherapy.

S74-S75 (2021).

The author concludes the average serum PSAs in these men declined in the short term.

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

Brachytherapy 17 (Suppl):S89 (2018).

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E281 (2016)).

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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The application of Cesium-131 brachytherapy seeds loaded in braided strands to date has been primarily in salvage cases as a re-treatment for metastatic brain cancers where aggressive tumors had reoccurred following standard of care treatment.

From 2014 to present there have been numerous published abstracts and society presentations which have been presented and support the effectiveness of treating recurrent metastatic brain cancers with stranded Cesium-131.

Gabriella Wernicke and co-investigators at Weill Cornell Medical College at the NY Presbyterian Hospital have published multiple papers on the efficacy, favorable side-effect profile and cost-effectiveness of Cesium-131 brachytherapy seeds in the treatment of metastatic brain cancer.

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Wernicke, et al., Cesium-131 brachytherapy for recurrent brain metastases:

durable salvage treatment for previously irradiated metastatic disease, J Neurosurg DOI:

10.3171/2016.3.JNS152836 (Published online June 3, 2016);

durable salvage treatment for previously irradiated metastatic disease, Journal of Neurosurgery 10.3171/2016.3.JNS152836 (Published online June 3, 2016);

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 2021, 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.

following surgical removal) (Julie, DA, et al., A matched-pair analysis of clinical outcomes after intracavitary cesium-131 brachytherapy versus stereotactic radiosurgery for resected brain metastases.

Journal of Neurosurgery 134 (5):

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.

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

GammaTile™ Treatment for Brain Cancer

During fiscal 2013, the Company began providing technical assistance and selling Cesium-131 brachytherapy seeds for embedding in collagen tiles by physicians at Barrow Neurological Institute (Barrow) to treat malignant meningioma, primary brain cancers and metastases of cancers to the brain.

During fiscal 2013, the Company began providing technical assistance and supported selling Cesium-131 brachytherapy seeds for embedding in collagen tiles developed by physicians at Barrow Neurological Institute (Barrow) to treat malignant meningioma, primary brain cancers and metastases of cancers to the brain.

These physicians from Barrow formed a company, GammaTile LLC, now GT Medical Technologies, Inc.

(“GT Med Tech”), and further refined this technology which integrates Cesium-131 brachytherapy seeds and has resulted in the issuance of multiple patents to GT Med Tech for the treatment of brain cancers.

In fiscal 2019 a paper was published in the Journal of Neurosurgery describing outcomes of patients who had experienced multiple reoccurrences of a tumor type known as meningioma following previous surgeries in conjunction with external beam radiation.

In December 2018 a paper was published in the Journal of Neurosurgery describing outcomes of patients who had experienced multiple reoccurrences of a tumor type known as meningioma following previous surgeries in conjunction with external beam radiation.

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

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Journal of Neurosurgery 131 (6), 1819-1828 (December 2018)).

This same group has presented clinical studies of GammaTile™ in the treatment of other brain cancers.

This same group of physicians has presented clinical studies of GammaTile™ in the treatment of other brain cancers.

In June 2019, Dr.

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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.

Clinical studies continue to demonstrate the safety and effectiveness of GammaTile™ in concert with surgery for the treatment of brain metastases (Nakaji, P., et al., Resection and Surgically Targeted Radiation Therapy for the Treatment of Larger Recurrent or Newly Diagnosed Brain Metastasis:

Results From a Prospective Trial.

Cureus 12 (11):

e11570 (2020)).

The feasibility of this same approach using GammaTile™ has also been demonstrated for recurrent primary brain cancers (Patel, K., et al., Cs-131 Intracavitary Brachytherapy as an Adjunct to Maximal Safe Resection for Locally Recurrent High-Grade Glioma .

International Journal of Radiation Oncology*Biology*Physics 108(3):

e670-e671 (2020)).

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

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.

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

DRG 023 is the highest paying DRG for craniotomy procedures.

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

In addition to the traditional coding and reimbursement mechanisms, there is an additional mechanism under Medicare to help ensure that adequate payment is made for new medical services and technologies in the hospital inpatient setting.

This mechanism is called “New Technology Add-on Payment” or “NTAP.” CMS may grant NTAP status to technologies that meet a set of criteria, including requirements involving newness, cost, and whether the product results in a substantial clinical improvement in comparison to existing therapies.

Under NTAP, hospitals can receive additional reimbursement when treating Medicare beneficiaries with the new technology during the initial two or three years that the product is on the market.

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.

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™.

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.

In January 2020 GammaTile™ Therapy launched full market release.

Prior to fiscal 2021, 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 2022, but there is no assurance that this will occur.

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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.).

A pilot study, conducted in 2020, established the feasibility and safety of Cesium-131 brachytherapy in these patients (without Keytruda®) with no unexpected severe toxicities (Kharouta, M., et al., Permanent Interstitial Cesium-131 Brachytherapy in Treating High-Risk Recurrent Head and Neck Cancer:

A Prospective Pilot Study.

Front Oncol 11:

639480 (2021)).

Management believes that as immunotherapies (e.g.

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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.

The new codes took 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 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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Sharkey, et al., Brachytherapy versus radical prostatectomy in patients with clinically localized prostate cancer , Current Urology Reports , (2002)).

In addition to permanent, LDR brachytherapy, such as Cesium-131, localized prostate cancer can be treated with prostatectomy surgery (RP for radical prostatectomy), external beam radiation therapy (EBRT), three-dimensional conformal radiation therapy (3D-CRT), intensity modulated radiation therapy (IMRT), dual or combination therapy, permanent, high dose rate brachytherapy (HDR), cryosurgery, hormone therapy, proton therapy and active surveillance (watchful waiting).

In addition to permanent, LDR brachytherapy, such as Cesium-131, localized prostate cancer can be treated with prostatectomy surgery (RP for radical prostatectomy), external beam radiation therapy (EBRT), three-dimensional conformal radiation therapy (3D-CRT), intensity modulated radiation therapy (IMRT), dual or combination therapy, high dose rate brachytherapy (HDR), cryosurgery, hormone therapy, proton therapy and active surveillance (watchful waiting).

The success of any treatment is measured by the feasibility of the procedure for the patient, morbidities associated with the treatment, overall survival, and cost.

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Clinical Series for Prostate Low Dose Rate Brachytherapy

Other studies have demonstrated similar, durably high rates of control following brachytherapy for localized prostate cancer out to 15 years post-treatment (J.

Studies have demonstrated durably high rates of control following brachytherapy for localized prostate cancer out to 15 years post-treatment (J.

Sylvester, et al., 15-year biochemical relapse free survival in clinical stage T1-T3 prostate cancer following combined external beam radiotherapy and brachytherapy;

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Isotope Delivery Over Time

In June 2019, a study was published on long-term follow-up data collected on Cesium-131 as compared to I-125 (Agarwal M., Braccioforte M.H., Amin N., et al.

Long Term Results from a Prospective Randomized Trial of 131Cs vs 125I Permanent Prostate Brachytherapy , Brachytherapy:

An International Multidisciplinary Journal , May-June 2019).

This long-term data with nine-year median follow-up shows comparable long-term biochemical control (prostate-specific antigen recurrence) results between Cesium-131 and Iodine-125 in these patients.

In early 2021, the long-term follow-up data from a prospective randomized trial of Cesium-131 and Iodine-125 was published (Moran, B.

J., et al., Long-term outcomes of a prospective randomized trial of (131)Cs/(125)I permanent prostate brachytherapy.

Brachytherapy 20(1):

38-43 (2021)).

This long-term data with a nine-year median follow-up concluded that “short- and long- term urinary, sexual, and bowel quality of life, as well as long-term biochemical control were comparable” between the two isotopes.

The data supports Cesium-131 as an effective long-term solution for these patients and supports Cesium-131 as a viable choice for prostate cancer patients.

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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 of physicians 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 Long-Term Quality of Life in Prostate Cancer Patients Treated With Cesium-131.

International Journal of Radiation Oncology*Biology*Physics 2017 Aug 1;98(5):1053-1058.

10.1016/j.ijrobp.2017.03.046.

Epub 2017 Mar 31.

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

Under NTAP, hospitals can receive additional reimbursement when treating Medicare beneficiaries with the new technology during the initial two or three years that the product is on the market.

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.

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 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™.

In January 2020, GammaTile™ Therapy launched a full market release.

Prior to fiscal 2021, 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 2022, but there is no assurance that this will occur.

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Based upon the positive results seen in the Cesium-131 treatment of recurrent gynecological cancers, physicians at the University of Kentucky are currently moving Cesium-131 treatment into the primary treatment of these cancers.

In April 2017, the group from the University of Kentucky published a paper in the journal Brachytherapy that described the early experience with a template-based approach using Cesium-131 in the treatment of gynecologic cancers.

In April 2017, the group of physicians from the University of Kentucky published a paper in the journal Brachytherapy that described the early experience with a template-based approach using Cesium-131 in the treatment of gynecologic cancers.

Although reporting on only five patients, the University of Kentucky physicians demonstrated the feasibility and safety of replacing a high dose-rate isotope (Iridium-192) with Cesium-131.

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An estimated 131,880 deaths will result from lung cancer in 2021 (American Cancer Society, 2021).

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

Lung cancer has historically been treated utilizing surgery, radiation therapy, chemotherapy, immunotherapy and targeted therapy including LDR brachytherapy.

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.

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The key elements of Isoray’s strategy for fiscal year 2022 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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Because intermediate- to long-term follow-up data is required to convince clinicians and patients to consider any particular therapy for localized prostate cancer, the availability of long-term data with Cesium-131 in the treatment of prostate cancer represents a significant milestone.

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 a team of marketing professionals.

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.

Isoray hopes to capture more 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 2021, the Company hired a new Vice President of Sales and Marketing who brings twenty-five years industry experience to lead the initiatives in growing the core prostate business, as well as identifying new sites of care from the traditional HOPD setting, which will result in expanded patient access to care and treatment efficiencies.

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.

The Company continues to invest in digitally integrated, data-focused, and virtual learning platforms that align our products and services with our clinicians' needs.

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

Isoray recently added the Proximie virtual communication platform to our digital resources to enhance our physician training efforts.

This technology is specifically designed to assist clinicians by sharing all aspects of a medical procedure in real time as well as having the ability to review sessions that have been archived in a library.

We are working to achieve greater engagement with US leading teaching and research institutions in these efforts.

The Company believes this will help us get back to our pre-pandemic training levels.

In addition, the Company is partnering with the American Brachytherapy Society (ABS) to support ABS’ training initiative 300 in 10 which is designed to train 300 teams in brachytherapy in 10 years.

Blu Build ™ Loader.

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Further, the Company believes that customers are comfortable with their techniques, and want products to facilitate their preferred methods.

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.

Competitors to the Company 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 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.

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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 – 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 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.

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.

The Company continues to refine the design 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 and 2021.

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.

Management believes that the Blu Build™ loader will be able to gain greater market acceptance in fiscal 2022, but there is no assurance that this will occur.

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

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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.

The Company continued to provide assistance to GT Med Tech for various process improvement projects on a time and materials basis on a limited basis during fiscal year 2021.

To date revenues realized from the process improvement projects have been nominal.

GammaTile ™ Therapy has been assigned a new specific ICD-10_PCS code by the CMS for reimbursement purposes in the hospital setting.

GammaTile ™ Therapy was assigned a specific ICD-10 PCS code by the CMS for reimbursement purposes in the hospital setting.

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

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

The Company continues to sell product to physicians treating brain, gynecological, head and neck and lung cancer while continuing to support the compilation of treatment outcomes for publication.

The Company continues to sell Cesium-131 products to physicians treating brain, gynecological, head and neck and lung cancer while continuing to support the compilation of treatment outcomes for publication.

Isoray will continue to explore licenses or joint ventures with other companies to develop the appropriate technologies and therapeutic delivery systems for treatment of other solid tumors.

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

The new codes took 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 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.

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

However, 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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Further, many of the surgical applications the Company is exploring domestically may also have significant international opportunities.

Due to the pandemic most of these geographical regions have limited access, capacity or capability to introduce new products at this time.

The Company will continue to monitor world-wide progress to open access to care for patients who would benefit from our products.

Historically, the Company has placed limited resources towards realizing these international opportunities instead keeping the focus of expanding our domestic market share.

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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.

The agreement has continued to automatically renew, but there have been no sales in the past two fiscal years.

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.

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

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

Due to the ongoing COVID-19 global pandemic, there have been no sales to date under this agreement.

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.

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

COVID-19 / National Pandemic Impact and Response.

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

Still, there have been aspects of the COVID-19 pandemic that continue to impact 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 that reappeared with the escalation of the COVID-19 Delta variant.

As healthcare organizations continue to limit elective procedures based on COVID-19 hospitalization rates, we are supporting some customers shifting site of care from the traditional hospital outpatient (HOPD) to the ambulatory surgery center (ASC).

We cannot anticipate when patient treatment volume and referrals will return 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 has 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, as well as implementing a virtual learning platform for educating our treating physician customers.

The new Delta variant and other variants of COVID-19 could create disruptions to our business and particularly to our access to customers and potential customers.

The impact of the Delta variant and other variants cannot be predicted at this time, and could depend on numerous factors, including vaccination rates in the general public, how effective the COVID-19 vaccines and boosters are against the Delta variant and other variants, the response of governmental bodies and regulators, and the severity and duration of the outbreak among others.

Cesium-131 Manufacturing Process and Suppliers

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In fiscal year 2021, the Company delivered approximately 44% of its Cesium-131 seeds to customers configured in Mick ® cartridges, approximately 31% of its Cesium-131 seeds configured in stranded and pre-loaded in a needle form, 16% 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 7% configured in either a pre-loaded in a needle, Blu Build™, or stranded form.

In fiscal year 2012, Isoray obtained a CE mark which allows shipment of seeds loaded into flexible braided strands and flexible strands attached to bioabsorbable mesh into the European Union.

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 Compliance

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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.

There were zero non-conformances found by BSI.

The Company was recommended for continuing certifications.

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The Company was recommended for continued certifications.

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

In January 2021, BSI conducted a remote surveillance assessment audit of our quality management system.

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 microbiology assessment in February of 2022, and a surveillance audit in March-April 2022.

Isotope Suppliers

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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.

Pursuant to the New Agreement, 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.

On February 10, 2021, an addendum was signed updating delivery locations.

On March 18, 2021, the Company entered into a new supply contract with JSC Isotope pursuant to which the Company will purchase Cesium-131 for a term from March 18, 2021 through March 31, 2023.

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.

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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.

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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.

Beginning in the first fiscal quarter of 2019, the Company reduced the amount of Cesium-131 provided by the MURR reactor by approximately 35%.

After a thorough review of the capacity and quality of production at the MURR facility, the Company decided not to locate a hot cell there to ramp up domestic production.

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 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.

based supply alone would never prove capable of meeting current Company requirements and at current quality control and cost measures is no longer a viable supply source.

Additionally, expanding on-site chemical processing at the U.S.

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

Since the planned outage of RIAR ended, we are now able to obtain sufficient supplies of Cesium-131 from INM.

However, as the INM facility is reducing capacity and ultimately shutting down later in 2021, the Company intends to use the RIAR facility again.

On September 9, 2021, the Company entered into a Consignment Agreement with MedikorPharma-Ural LLC, a company incorporated in accordance with the laws of Russia.

Pursuant to the Consignment Agreement, the Company will purchase 6,000 mg of enriched barium carbonate for $720,000, which is needed for the manufacture of Cesium-131, and consign this inventory to Medikor.

It is expected that beginning in October 2021, Medikor will use the barium carbonate consigned by the Company and contract with a third-party manufacturer to produce Cesium-131.

Pursuant to the Consignment Agreement, Medikor will pay the Company varying US dollar amounts per curie of Cesium-131 the Company purchases.

It is further expected that a separate third-party contractor will receive the Cesium-131 produced by the third-party manufacturer and will sell the Cesium-131 exclusively to the Company.

The Company anticipates obtaining enough Cesium-131 under this arrangement to obtain over 5,000 curies of Cesium-131 through the end of the term, December 31, 2030, but there is no assurance as to whether the Consignment Agreement will be terminated before this full amount is obtained and other supply sources are used, nor is there assurance that the agreements with the third-parties will be executed.

The Company has not received any isotope from a domestic supplier since January 2019 and has no plans to use domestic suppliers unless supply of Cesium-131 is not available from Russia.

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.

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The Company was recommended for continued certification.

In January 2021, BSI conducted a remote surveillance assessment audit of our quality management system.

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 microbiology assessment in February of 2022, and a surveillance audit in March-April 2022.

The Federal Aviation Administration (FAA) also conducted an unannounced audit in May 2016.

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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.

During fiscal year 2021, the Company received FDA 510(k) clearance for use of C4 Imaging's Sirius® positive-signal MRI (Magnetic Resonance Imaging) markers with the Company's Cesium-131 brachytherapy seeds.

Sirius® is implanted during the treatment of prostate cancer with the Cesium-131 seeds and is used to facilitate seed localization within the prostate utilizing a single post-implant MRI procedure.

We are beginning a limited market release on this technology in our first quarter of fiscal year 2022 and expect it to be available for full market release later in fiscal year 2022 but there is no assurance this timing will occur.

Order Processing

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The Company has completed the design process for a new facility and has permit ready plans to build when the Company needs to move into a new facility.

The Company does not anticipate building a new facility until the Company either obtains financing to pay for the facility or can finance the facility through its own operations.

The new production facility is currently on hold as the Company has sufficient production capacity to meet future demands and while the Company focuses its resources on revenue growth.

It is anticipated that the Company will continue work on the new production facility process in the next four to five years.

Management believes that construction of a new facility will take 18 to 24 months to complete from the time that ground is broken.

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Marketing Strategy

In fiscal 2020, the Company continued to implement and execute on the established sales and marketing strategy.

This strategy involves a more direct focus on the prostate cancer market and existing and new Cesium-131 customers, with a secondary focus on developing opportunities in emerging applications, including brain tumors, gynecological cancers and head and neck tumors.

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

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.

The Company continues to implement and execute on the established sales and marketing strategy.

This strategy involves a direct focus on the prostate cancer market and existing and new Cesium-131 customers, expanding treatment sites of care from traditional hospital outpatient departments to ambulatory surgery centers and to freestanding clinics, with a secondary focus on developing opportunities in emerging applications, including brain tumors, gynecological cancers and head and neck tumors.

In fiscal 2022 the Company will undergo a website redesign as well as new collateral and educational materials.

Due to our inability to host in-person training programs as a result of the COVID-19 pandemic, we plan to utilize the Proximie virtual communication platform.

Proximie’s innovative technology is specifically designed to assist clinicians by sharing, in real time or streamed, all aspects of a medical procedure in tremendous detail.

This platform allows the leading brachytherapists we currently work with to share all aspects of a procedure with other clinicians regardless of their physical location.

We plan to install this learning platform in two leading centers.

This education effort will allow for interactive training of new domestic sites, as well as training our international partners.

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.

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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.

In 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.

These publications 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 Company has developed a customized brand message for each audience.

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.

The Company’s website 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.

Since April 2020, as a result of the national COVID-19 pandemic, many of the meetings continue to be 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.

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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.

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

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

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

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.

In 2020, an 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 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 an Executive 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, a Director of Sales, and a 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 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 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.

In addition, the Company’s decision to not renew its CE mark during fiscal year 2019 will limit its ability to sell to countries within the European Union.

As of September 2021, the Company had independent distributors in Russia, India, and Peru to focus on prostate and centers in the targeted markets.

Although it has international distribution agreements in place, due to the COVID-19 global pandemic, the Company continues to experience difficulties in generating sales of Cesium-131 products through its international distributors.

With the launch of the virtual learning platform, we look forward to re-engaging with our international distributors.

Reimbursement

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

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

The new codes took effect on October 1, 2020.

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

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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.

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 Radiation Oncology Alternative Payment Model (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.

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

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

however, CMS subsequently delayed the effective date to July 1, 2021.

The Consolidated Appropriations Act, 2021 enacted December 27, 2020 included a provision that delayed the effective date to January 1, 2022.

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.

In July 2021, CMS proposed changes to the RO APM which includes removing brachytherapy from the list of included modalities under the RO Model so that brachytherapy would still be paid under the current fee-for-service (FFS) model.

In the proposed rule, CMS explains the exclusion of brachytherapy from the RO APM is to ensure that providers would not be incentivized to forego brachytherapy in situations where a combination of brachytherapy and EBRT is clinically indicated.

Additionally, the proposed rule includes a five year performance period for select zip codes of January 1, 2022 through December 31, 2026.

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

Financial Information About Segments

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Other Information

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:

The following are the Company’s top customers, facilities or physician practices that utilize multiple surgical facilities shown as a percentage of total sales for the twelve months ended June 30, 2021:

El Camino, Los Gatos, and other facilities 1

GT Medical Technologies

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

As the medical director, this physician advises the Company Board of Directors and management, provides technical advice related to product development and research and development, and provides internal training to the Company sales staff and professional training to our sales staff and to other physicians.

Revenue from this practice increased by $975,000 in the year ended June 30, 2020 when compared to the year ended June 30, 2019.

This increase was due to the addition of new centers located by the regional manager and within the practice range of the medical director.

The loss of either the single largest physician practice or a combination of the other significant facilities and customers could have a material adverse effect on the Company’s revenues, which would continue until the Company located new customers to replace them.

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

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.

One other unrelated customer accounted for approximately 5.9% of total sales, so our top three customers accounted for approximately 42.5% of total sales.

Proprietary Rights

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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 has a patent application pending in the US and a single patent application filed for the Patent Cooperation Treaty.

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 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%.

The Royalty Agreement had an anti-shelving clause that required Isoray to return the patent if Isoray permanently abandoned sales of products using the invention.

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

Chief among R&D expenditures in fiscal year 2021 were the support of clinical research studies that are accumulating data on prostate, brain and head and neck cancers, consulting , and new product development (Blu Build™ loader and others).

Government Regulation

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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 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.

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Because a material portion of the Company’s business is dependent on three customers, physician practices or facilities, simultaneous or extended vacations by the physicians at these facilities or by our single largest physician whose total revenue alone represents a material portion of the Company’s business could cause significant drops in the Company’s productivity during those reporting periods.

As of September 21, 2020, Isoray employed 53 full-time individuals.

As of September 23, 2021, Isoray employed 67 individuals, of which 61 were full-time employees.

The Company’s future success will depend, in part, on its ability to attract, retain, and motivate highly qualified sales, technical and management personnel.

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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-seven 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-eight years later, have not produced any Cesium-131 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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Both other permanent brachytherapy isotopes, I-125 and Pd-103, were introduced to the market prior to Cesium-131, allowing many customers to become comfortable with the performance of both isotopes and requiring the Company to overcome these preferences to convert customers to Cesium-131.

Key competitors who provide permanent prostate brachytherapy products include:

Key competitors which provide permanent prostate brachytherapy products include:

Theragenics Corporation, Becton-Dickinson (formerly C.

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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 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 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.

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.

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

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