What changed in this filing

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Item 1. Business

2021-02-17 compared with 2020-02-20 · 87 added, 176 removed, 229 unchanged (53% of the section changed)

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Since inception, Globus has listened to the voice of the surgeon to develop practical solutions and products to help surgeons effectively treat patients and improve lives.

We have expanded our sales operations across the globe and now serve customers in 51 countries worldwide.

Globus is an engineering-driven company with a history of rapidly developing and commercializing advanced products and procedures to address treatment challenges.

With over 200 products on the market, we offer a comprehensive portfolio of innovative and differentiated technologies that are used to treat a variety of musculoskeletal conditions of the spine, extremities and pelvis.

With 220 product launches across 51 countries worldwide, we offer a comprehensive portfolio of innovative and differentiated technologies that are used to treat a variety of musculoskeletal conditions.

Although we manage our business globally within one operating segment, we separate our products into two major categories:

Musculoskeletal Solutions and Enabling Technologies.

Musculoskeletal Solutions

Musculoskeletal Solutions consist primarily of implantable devices, biologics, accessories, and unique surgical instruments used in an expansive range of spinal, orthopedic and neurosurgical procedures.

Our broad spectrum of spine products addresses the vast majority of conditions affecting the spine including degenerative conditions, deformity, tumors, and trauma.

With over 16 years in this competitive market, we provide comprehensive solutions that facilitate both open and minimally invasive surgery (“MIS”) techniques.

This includes traditional fusion implants such as pedicle screw and rod systems, plating systems, intervertebral spacers and corpectomy devices.

We believe we pioneered innovative expandable implant solutions for interbody fusion, corpectomy and interspinous fixation that allow intraoperative customization of our devices to the patient’s anatomy and may help save surgical time by eliminating sequential trialing.

We have also developed treatment options for motion preservation technologies, such as dynamic stabilization, total disc replacement and interspinous distraction devices, and interventional pain management solutions to treat vertebral compression fractures.

Regenerative biologic products such as allografts and synthetic alternatives are adjunctive treatments typically used in combination with stabilizing implant hardware.

Our orthopedic trauma solutions are designed to treat a wide variety of orthopedic fracture patterns and patient anatomies in the upper and lower extremities as well as the hip and other bony anatomy.

To date, Globus has received 510(k) clearance from the U.S.

Food and Drug Administration (the “FDA”) for numerous orthopedic trauma and extremity products, covering four major segments of the orthopedic trauma market - fracture plates, compression screws, intramedullary nails, and external fixation.

We began marketing the first of these products in 2018 and we intend to significantly grow our presence in this field.

Fracture plating includes proximal humerus, distal radius, proximal tibia, distal fibula, small fragment, mini-fragment and clavicle plates.

Intramedullary nailing includes tibial, trochanteric, and femoral nail systems.

Regenerative biologic products such as bone void fillers and allograft struts are also used in orthopedic procedures where applicable.

Our hip and knee joint solutions for the treatment of degenerative conditions or failed previous reconstruction have a long history of clinical use with StelKast, Inc.

Over 17 different implant families have been marketed to date, including modular hip stems and acetabular cups for total hip arthroplasty as well as posterior stabilizing and cruciate retaining knee arthroplasty implants.

Enabling Technologies

Enabling Technologies are advanced computer-assisted intelligent systems designed to enhance a surgeon’s capabilities and streamline surgical procedures to be safer, less invasive, more accurate, and more reproducible, to ultimately improve patient care and reduce radiation exposure for all involved.

Our current enabling technologies are comprised of imaging, navigation and robotic (“INR”) assisted surgery solutions.

This includes the ExcelsiusGPS ® platform, a robotic guidance and navigation system that supports minimally invasive and open procedures by improving visualization of patient anatomy using patient images and by guiding instruments and implants to the specified trajectory using a robotic arm, to ultimately enhance the surgeon’s decision making process.

The ExcelsiusGPS ® platform has a modular design that can be used for a variety of screw placement applications, and we expect that it will serve as a foundation for future clinical applications using artificial intelligence and augmented reality.

Surgimap ® pre-planning software is used for effortless and convenient surgical planning at any time.

Globus’ innovative Enabling Technologies offer surgeons more information about patient anatomy and surgical options to help them to make well-informed surgical decisions.

We believe the advantages of pre-planning implant position and viewing instruments and implants with respect to patient anatomy during surgery are self-evident, with significant secondary gains such as eliminating radiation exposure altogether.

COVID-19 Update

We continue to monitor the rapidly evolving situation and guidance from domestic and international authorities, including federal, state and local public health authorities, regarding the COVID-19 pandemic, and we may need to make changes to our business based on their recommendations.

In these circumstances, there may be developments outside our control requiring us to adjust our operating plan.

Although the Company cannot reasonably estimate the length or severity of the impact that the pandemic will have on its financial results, the Company has experienced, and may continue to experience, a material adverse impact on its sales, results of operations, and cash flows in fiscal 2021.

To date, COVID-19 has not materially affected our supply chain or production schedule, although delays may be possible in the future due to the dynamic nature of the situation.

We are focused on navigating the challenges presented by COVID-19 and believe we are in a strong position to continue to sustain and grow our business once the restrictions are lifted and elective surgeries fully resume.

Overall Business

While we group our products into two categories, they are not limited to a particular technology, platform or surgical approach.

Instead, our goal is to offer a comprehensive product suite that can be used to effectively treat patients based on their specific anatomy and condition, and is customized to the surgeon’s training and surgical preference.

To date, the primary market for our products has been the United States, where we sell our products through a combination of direct sales representatives employed by us and distributor sales representatives employed by our exclusive independent distributors, who distribute our products on our behalf for a commission that is generally based on a percentage of sales.

The primary market for our products is the United States (“U.S.”), where we sell our products through a combination of direct sales representatives employed by us and sales representatives employed by our exclusive independent distributors, who distribute our products on our behalf for a commission that is generally based on a percentage of sales.

We believe there is significant opportunity to strengthen our position in the U.S.

market by increasing the size of our U.S.

sales force and we intend to add additional direct and distributor sales representatives in the future.

During the year ended December 31, 2019, our international sales accounted for approximately 17.5% of our total sales.

We currently sell our products through a combination of direct sales representatives employed by us and exclusive international distributors.

We believe there are significant opportunities for us to increase our presence in both existing and new international markets through the continued expansion of our direct and distributor sales forces and the commercialization of additional products.

Our goal is to become the market leader in providing innovative Musculoskeletal Solutions and Enabling Technologies to promote healing in patients with musculoskeletal disorders.

market by increasing the size of our sales force and continuing to add direct and distributor sales representatives in the future.

During the year ended December 31, 2020, international sales accounted for approximately 15.8% of our total sales.

Internationally, we sell our products through a combination of direct sales representatives employed by us and exclusive international distributors.

Our goal is to become the market leader in providing innovative solutions to promote healing in patients with musculoskeletal disorders.

To achieve this goal, we employ the following business strategies:

 Leverage our integrated product development engine .

We plan to continue developing new Musculoskeletal Solutions products and Enabling Technologies products, using our product development engine.

We believe our team-oriented approach, active surgeon input, and demonstrated capabilities position us to maintain a rapid rate of new product launches.

We launched seventeen new products in 2019, have potential new products in various stages of development, and expect to regularly launch new products.

We plan to continue developing new products, using the capabilities of our product development engine.

We believe our team-oriented and highly integrated development approach, active surgeon input, and demonstrated performance position us to maintain a rapid rate of new product launches.

We launched 10 new products in 2020, have a range of new products in various stages of development, and expect to continue to regularly launch new products.

 Increase the size, scope and productivity of our exclusive U.S.

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We believe there is significant opportunity for us to further penetrate existing markets, and to enter new markets, by increasing the size and geographic scope of our exclusive U.S.

sales force in the spine, trauma, and INR areas.

We expect to increase the number of our direct and distributor sales representatives in the United States to expand into new geographic territories and to deepen our penetration in existing territories.

sales force for musculoskeletal solutions.

We expect to increase the number of our direct and distributor sales representatives in the U.S., to expand into new geographic territories and to deepen our penetration in existing territories.

We will also continue to provide our sales representatives with specialized development programs designed to improve their productivity.

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As of December 31, 2020, we had an existing direct or distributor sales presence in 50 countries outside the United States.

We expect to continue to increase our international presence through the commercialization of additional Musculoskeletal Solutions and Enabling Technologies products and through the expansion of our international sales force.

We expect to continue to increase our international presence through the commercialization of additional musculoskeletal solutions products in current markets and through the expansion of our international sales force in current and new markets.

 Pursue strategic acquisitions and alliances .

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In 2019, we acquired substantially all of the assets of StelKast, Inc., a privately held company that designs, manufactures and distributes orthopedic implants for knee and hip replacement surgeries.

During the second quarter of 2020, the Company acquired Synoste Oy (“Synoste”), a Finnish engineering company that specializes in the research and development of a limb lengthening system.

We intend to selectively pursue acquisitions and alliances that complement our strategic plan and provide innovative technologies, personnel with significant relevant experience, or increased market penetration.

We are currently evaluating possible acquisitions and strategic relationships and believe that our resources and experience make us an attractive acquirer or partner.

The Musculoskeletal Market

We regularly evaluate possible acquisitions and strategic relationships and believe that our resources and experience make us an attractive acquirer or partner.

The Globus Solution

We believe that our focus on actively listening and responding to the needs of our customers with high quality solutions separates us from our industry peers.

Since 2003 we have introduced 220 products designed for the treatment of musculoskeletal disorders.

Given our robust product portfolio of unique and differentiated products, as well as the numerous disruptive products in various stages of development, we believe we are well positioned for growth in the musculoskeletal markets we operate in.

We believe that our innovative musculoskeletal solutions products, combined with our ability to provide world-class service through a highly trained and exclusive sales force and corporate account management, create significant value for our customers.

Product Categories

While we group our products into two categories, Musculoskeletal Solutions and Enabling Technologies, they are not limited to a particular technology, platform or surgical approach.

Instead, our goal is to offer a comprehensive product suite that can be used to safely and effectively treat patients based on their specific anatomy and condition, and is customized to the surgeon’s training and surgical preference.

Musculoskeletal Solutions

Our Musculoskeletal Solutions consist primarily of implantable devices, biologics, accessories, and unique surgical instruments used in an expansive range of spinal, orthopedic and neurosurgical procedures.

Musculoskeletal disorders are a leading driver of healthcare costs worldwide.

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Conservative therapies include bed rest, medication, casting, bracing, and physical therapy.

When conservative therapies are not indicated, or fail to provide adequate quality of life improvements, surgical interventions

Surgical treatments for musculoskeletal disorders can be instrumented, which include the use of implants, or non-instrumented, which forego the use of any such implants.

We believe the musculoskeletal market will continue to experience growth as a result of the following market influences:

 Favorable patient demographics.

The worldwide population is growing and aging, and improvements in healthcare have led to increasing life expectancies worldwide and the opportunity to lead more active lifestyles.

This population is more prone to musculoskeletal degeneration, traumatic fractures, and challenging complications.

These trends are expected to generate increased demand for surgical intervention.

 Improving technologies within Musculoskeletal Solutions leading to increased use in surgical procedures.

We expect the number of spinal and orthopedic surgery cases to grow as product innovation makes surgery a more attractive option for patients.

We also expect these innovations to differentiate Globus products from competitive products and make them more attractive to surgeons.

 Musculoskeletal Solutions driving earlier interventions and creating an expanded patient base.

Newer technological innovations have enabled novel surgical procedures, improvements to existing surgical procedures, the treatment of musculoskeletal disorders by new physician specialties, and surgical intervention earlier in the continuum of care, all of which may result in better patient outcomes.

As a result, we expect continued advancements within Musculoskeletal Solutions supported by surgical Enabling Technologies, including INR systems, to increase the size of the addressable patient population for spine surgery.

 Shift of MIS procedures performed using Enabling Technology in outpatient settings.

The effectiveness and shorter surgical times associated with MIS spine procedures is facilitating a larger number of treatments to be performed in ambulatory surgery centers, which increases availability and access to patients.

We believe Enabling Technologies provide more access to MIS surgery and facilitate best-in-class treatment modalities.

 Continued growth of musculoskeletal procedures worldwide.

We believe that improvements to the standard of care outside of the United States will increase the international demand for musculoskeletal products.

We believe innovative technologies are increasingly being used in previously underserved markets as the breadth of available innovative treatment options grow.

The Enabling Technologies Market

The market for Enabling Technologies in spine and orthopedic surgery is still in the infancy stage and consists primarily of imaging, navigation and robotic systems.

When conservative therapies are not indicated, or fail to provide adequate quality of life improvements, surgical interventions may be used.

Surgical treatments for musculoskeletal disorders can be instrumented, which include the use of implants, or non-instrumented, which forego the use of hardware but may include biologics.

Our broad spectrum of spine products addresses the vast majority of conditions affecting the spine including degenerative conditions, deformity, tumors, and trauma.

With more than fifteen years in this competitive market, we provide comprehensive solutions that facilitate both open and minimally invasive surgery (“MIS”) techniques.

This includes traditional fusion implants such as pedicle screw and rod systems, plating systems, intervertebral spacers and corpectomy devices.

We believe we pioneered innovative expandable solutions for interbody fusion, corpectomy and interspinous fixation that allow intraoperative customization of our devices to the patient’s anatomy, eliminating sequential trialing and potentially saving surgical time.

We have also developed treatment options for motion preservation technologies, such as dynamic stabilization, total disc replacement and interspinous distraction devices;

as well as interventional pain management solutions to treat vertebral compression fractures.

Our biologic solutions include regenerative biologic products such as allografts and synthetic alternatives that are adjunctive treatments typically used in combination with stabilizing implant hardware.

Our orthopedic trauma solutions are designed to treat a wide variety of orthopedic fracture patterns and patient anatomies in the upper and lower extremities as well as the hip.

Our orthopedic trauma and extremity products, covering four major segments of the orthopedic trauma market:

fracture plates, compression screws, intramedullary nails, and external fixation.

We began marketing these products in 2018 and intend to grow our presence in this field.

Fracture plating includes proximal humerus, distal radius, proximal tibia,

distal tibia, distal fibula, small fragment, mini-fragment and clavicle plates.

Intramedullary nailing includes tibial, trochanteric, and femoral nail systems.

Regenerative biologic products such as bone void fillers and allograft struts are also used in orthopedic procedures where applicable.

Our hip and knee joint solutions for the treatment of degenerative conditions or failed previous reconstruction have a long history of clinical use.

Over 13 different implants have been marketed to date, including modular hip stems and acetabular cups for total hip arthroplasty as well as posterior stabilizing and cruciate retaining knee arthroplasty implants.

Enabling Technologies

Our Enabling Technologies are comprised of imaging, navigation and robotics (“INR”) solutions for assisted surgery which are advanced computer-assisted intelligent systems designed to enhance a surgeon’s capabilities, and ultimately improve patient care and reduce radiation exposure for all involved, by streamlining surgical procedures to be safer, less invasive, and more accurate.

The market for our Enabling Technologies in spine and orthopedic surgery is still in the infancy stage and consists primarily of imaging, navigation and robotic systems.

In spine, a majority of these technologies are limited to surgical planning and assistance in implant placement for increased accuracy and time savings with less intraoperative radiation exposure to the patient and surgical staff.

As these Enabling Technologies become more fully integrated with various other Musculoskeletal Solutions, a continued rise in adoption is expected.

As our Enabling Technologies become more fully integrated with our Musculoskeletal Solutions, a continued rise in adoption is expected.

Furthermore, we believe as new technologies such as augmented reality and artificial intelligence are introduced, Enabling Technologies have the potential to transform the way surgery is performed and most importantly, continue to improve patient outcomes.

We believe that growth in Enabling Technologies will result from the following market influences:

 Demand for minimally invasive surgery.

Patients are more actively seeking the least invasive and safest surgical treatment options available.

As the benefits of robotic assisted surgery in enabling less invasive surgical techniques become known, we believe hospitals will equip themselves with these technologies to satisfy patient demand.

 Hospital cost reduction initiatives.

Enabling Technologies products may facilitate less invasive surgical procedures leading to shorter hospital stays with potentially fewer complications rates, which may lead to lower overall treatment costs per patient for the hospital.

As hospitals evaluate 30 day readmissions and surgical complication rates for possible cost savings, we expect that the use of Enabling Technologies across multiple surgical specialties will help facilitate less invasive and less costly procedures.

 Integration of robotic training into medical residency programs .

As more surgeon trainees, including fellows and residents, participate in programs incorporating imaging, navigation and robotics into their medical training, they are expected to drive widespread adoption of Enabling Technologies within each surgical specialty.

 Increased emphasis on physician and operating room staff safety .

Orthopedic surgery currently requires significant intraoperative radiation exposure to facilitate implant placement.

Repeated fluoroscopy exposure to patients, surgeons and their staff is hazardous and has been linked to cancer, cataracts, and other side effects.

We believe that Enabling Technologies have the potential to significantly reduce and potentially eliminate the need for intraoperative fluoroscopy which we believe will help drive demand for its implementation.

The Globus Solution

We believe that our focus on actively listening to the needs of our customers, and fostering a culture of urgency throughout the entire organization to quickly respond to these needs with high quality solutions, separates us from our industry peers.

Since 2003 we have introduced more than 200 products designed for the treatment of musculoskeletal disorders.

Musculoskeletal Solution

Our Spine product portfolio includes a wide range of implant and surgical approach options that can be used to treat degenerative, deformity, tumor and trauma conditions affecting the entire spine, from the occiput to the sacrum, while accommodating various surgical techniques preferred by surgeons.

We believe that we have the most comprehensive expandable spacer portfolio in today’s market, with over 16 implant options, designed for a wide variety of procedures including Posterior Lumbar Interbody Fusion, Transforaminal Lumbar Interbody Fusion, Lateral Lumbar Interbody Fusion, Anterior Lumbar Interbody Fusion, Endoscopic Lumbar Interbody Fusion and Corpectomy procedures.

Expandable product families, which include RISE ® , RISE-L ® , CALIBER ® , CALIBER ® -L, ALTERA ® , ELSA ® , ELSA ® -ATP, SABLE TM , MAGNIFY ® , MAGNIFY ® -S, FORTIFY ® , and XPand ® , among others, are designed to be inserted at a minimized height and then expanded during surgery for optimal fit between vertebral bodies.

The expansion features ease insertion into the disc space following disc removal to help reduce trauma to the vertebral endplates and surrounding tissue, while allowing for restoration of height and lordosis.

Our fixation portfolio, including pedicle screws, rods and plates, provides strength and stability for treating degenerative and more complex spinal deformity procedures.

The CREO ® thoracolumbar stabilization platform enhances efficiency and ease of use with intuitively designed instruments and a complete array of implant options for treating complex pathologies.

Within this platform, CREO ® MIS and CREO MCS ® provide percutaneous and mini-open midline approach options designed for less invasive surgery and minimal muscle disruption.

CREO ® Derotation and CREO ® Rod Link Reducer systems help to streamline various derotation maneuvers for deformity correction, such as segmental, rib hump correction, and translation of coronally displaced vertebrae.

For revision procedures, CREO ® Addition provides a comprehensive range of connectors, including modular and top-loading styles, which makes extending fixation more streamlined and efficient.

In 2018, we launched our first cement augmented pedicle screw system in the United States, CREO ® Fenestrated, which is designed to enhance fixation using bone cement for patients with advanced stage tumors and limited life expectancy.

QUARTEX ® , our most advanced Occipito-Cervico-Thoracic (“OCT”) stabilization system, is designed to address a number of challenges associated with posterior OCT fusion to aid in easier construct assembly with convenient implant options.

The system features a threading locking cap to enable quick and efficient low-torque single step locking and high angle screw heads that accommodate two different diameter rods.

Regenerative biologics products, including bioactive glass-based KINEX ® and SIGNIFY™ bone void fillers and CONDUCT ® ceramic-collagen, are well suited for pelvic/extremity and posterolateral spinal fusion procedures.

Interventional spine products, such as the AFFIRM ® bone tamp and the SHIELD ® barrier implant, allow physicians to customize the treatment plan for vertebral compression fractures and control cement delivery in minimally invasive procedures.

Our Orthopedic Trauma product portfolio features anatomic plating systems, compression screws, nailing systems, and external fixation.

ANTHEM ® Fracture Systems are anatomically contoured plates designed for a wide variety of ankle, shoulder, and wrist fractures as well as long and short bony anatomy.

Combined with extensive screw options and unique instruments, the plates are designed to match patient anatomy, reduce operative time and minimize soft tissue irritation from implant prominence, a major contributor to revision surgery.

They are available in numerous anatomic configurations for adult and pediatric indications.

CAPTIVATE ® Compression screws have an innovative feature for easy intraoperative compression and reduction of the fracture site.

These screws may be used independently for fracture fixation, or used to complement fracture plate fixation in complex trauma cases.

The AUTOBAHN™ nailing platform is comprised of the Trochanteric Nail designed for trochanteric and femoral neck fractures, Antegrade/Retrograde Femoral Nail that offers either greater trochanter or piriformis fossa entry points, and the Tibial Nail which includes instruments for infrapatellar and suprapatellar approaches.

Each system is designed to help streamline the procedure, increase versatility, reduce procedure time, and ultimately improve patient care.

The ARBOR ® External Fixation System provides a streamlined set of external fixation devices including clamps, pins, and bars for creation of customized external fixation frames for fracture treatment.

This system offers a one-clamp design for every procedure regardless of pin size.

Innovative instruments allow surgeons to quickly create the frame of their choice.

Our Total Joint Arthroplasty product portfolio features orthopedic hip and knee replacement implants.

The hip replacement systems offer a comprehensive portfolio of stems and acetabular components in various sizes and offsets based on clinically relevant designs with over 25 years of experience in the operating room.

These systems include tapered wedge, fit and fill, and cemented design stems to suit various femur types and surgeon preference.

The knee replacement systems offer solutions for partial and total reconstruction of the knee joint.

These implants were designed through virtual implantation and advanced simulation techniques for optimal fit.

Primary knee implants are offered in posterior stabilized and cruciate retaining designs and allow for seamless conversion from primary to revision implants for conservation of bone.

Enabling Technologies

ExcelsiusGPS ® , a robotic guidance and navigation system, is our first INR technology product to market.

FDA-cleared in 2017 and CE-marked in 2016, our first commercial sale of ExcelsiusGPS ® came in the fourth quarter of 2017.

The ExcelsiusGPS ® technology supports minimally invasive and open orthopedic and neurosurgical procedures, with applications ranging from the cervical spine to the sacroilium, long bones, and occiput.

ExcelsiusGPS ® seamlessly integrates with Globus implants and instruments and is compatible with pre-operative CT, intraoperative CT, and fluoroscopic imaging modalities.

The system is designed to reproducibly assist in implant placement, streamline workflows, and minimize radiation exposure.

In 2018, we acquired Nemaris Inc., a privately held company that markets and develops Surgimap ® , a leading surgical planning software platform.

Surgimap ® ’s intuitive, patient-specific surgical planning and cloud-based infrastructure with predictive algorithms and visual guides enable healthcare professionals to plan and simulate surgical treatment of complex deformities.

Our INR solutions include the ExcelsiusGPS® platform which is a robotic guidance and navigation system that supports minimally invasive and open procedures with screw and interbody spacer placement applications.

The ExcelsiusGPS® platform has a modular design that we expect will serve as a foundation for future clinical applications using artificial intelligence and augmented reality.

Also, in 2018, we acquired Nemaris Inc., a privately held company that developed and marketed Surgimap®, a leading surgical planning software platform.

Surgimap®’s intuitive, patient-specific surgical planning and cloud-based infrastructure includes predictive algorithms and visual guides that enable healthcare professionals to plan and simulate surgical treatment of complex deformities.

The software also enables medical professionals to share medical imaging technology globally to improve procedural workflow and patient care.

We believe that our innovative Musculoskeletal Solutions and Enabling Technologies products, combined with our ability to provide world-class service through a highly trained and exclusive sales force, reimbursement education and assistance, and corporate account management, create significant value for our customers.

Our innovative Enabling Technologies products offer surgeons more information about patient anatomy and surgical options to help them to make well-informed preoperative and intraoperative surgical decisions.

We believe the advantages of pre-planning implant position and viewing implants or instruments relative to patient anatomy during surgery are self-evident, and also create significant secondary gains such as eliminating radiation exposure altogether.

Product Development and Research

Globus believes in bringing products to market quickly by reducing the time from product conception to launch.

We believe in bringing products to market quickly by reducing the time from product conception to launch.

We believe our approach to product development is unique and highly efficient.

We employ an integrated team approach to product development involving collaboration among surgeons, our engineers, our dedicated researchers, our highly-skilled machinists, and our regulatory personnel.

We believe that this team approach, as well as our extensive in-house facilities, allows us to design, test and obtain regulatory clearance and approvals of our products more effectively.

We believe that this team approach, as well as our extensive in-house facilities, allows us to design, test and obtain regulatory clearance and approvals for our products more effectively.

We also believe that our product development engine provides us with a competitive advantage in developing solutions to challenging clinical problems for surgeons and improving outcome for patients.

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We market and sell our products primarily through our exclusive global sales force.

As of December 31, 2019, we had a direct or distributor sales presence in the United States and in 50 countries outside the United States.

As of December 31, 2020, we had a direct or distributor sales presence in the United States and in 50 other countries.

We have dedicated spinal implant, orthopedic trauma and INR sales teams in place.

We sell our hip and knee products primarily through independent sales agents.

We expect to continue to increase the number of our direct and distributor sales representatives in each of these three areas, both in the U.S.

We expect to continue to increase the number of our direct and distributor sales representatives in each of these areas, both in the U.S.

and internationally, to expand into new geographic territories and to deepen our penetration in existing territories.

We believe the expansion of our U.S.

and international sales forces provides us with significant opportunities for future growth as we continue to penetrate existing geographic markets and enter new ones.

international sales forces provides us with significant opportunities for future growth as we continue to penetrate existing geographic markets and enter new ones.

Our implant sales representatives are present in the operating room during most surgeries in the United States and in many, but not all, of the other countries in which our products are sold.

These representatives have the responsibility to confirm that all of the items

needed in the surgery are available and are provided sterile or are capable of being sterilized at the hospital.

Various sizes and quantities of implants are made available to be able to satisfy varying surgical requirements and patient anatomy, along with numerous surgical instruments and cases needed to safely perform the surgery and implantation.

These representatives have the responsibility to confirm that all of the items needed in the surgery are available and are provided sterile or are capable of being sterilized at the hospital.

An assortment of sizes and quantities of implants are made available to be able to satisfy varying surgical requirements and patient anatomy, along with numerous surgical instruments and cases needed to safely perform the surgery and implantation.

As products are used in surgeries, replacement items are shipped to our sales representatives and hospitals to replenish their supply.

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Our goal is for members of our direct sales force to move toward a compensation model based solely on commission as they become familiar with our products and drive higher sales.

Advancement of Musculoskeletal Care

We are committed to the advancement of musculoskeletal care through our support of numerous educational and research programs geared towards surgeons, such as:

 national and regional educational courses;

 intensive hands-on cadaveric training on new products and new techniques;

 research collaboration and support;

 educational support;

 fellowship support.

We devote significant resources to training and educating surgeons on the safe and effective use of our products and techniques.

To that end, we have made significant investments in the creation, staffing and program offerings of our Musculoskeletal Education and Research Center (“MERC”).

Through MERC, educational and training programs are offered at our modern bioskills laboratory and 100-person lecture facility, and through regionally-based didactic education and cadaveric bioskills training programs at off-site facilities.

We have a strong commitment to research performed in conjunction with surgeons from around the world as well as research opportunities in collaboration with leading academic institutions.

Supported by a dedicated research team, these efforts range from basic biomechanical testing conducted internally with our six-degrees-of-freedom machine to major clinical outcomes studies.

We are committed to providing the orthopedic surgeon community with high quality research to support new or improved surgical techniques and novel product designs that we develop.

We believe that our significant competitors are Medtronic, DePuy Synthes, Stryker, Zimmer Biomet, Smith and Nephew, and NuVasive.

Wright Medical Group, Orthofix International, Integra, and other smaller public and private companies are also competitors of ours.

Orthofix, Integra LifeSciences, and other smaller public and private companies are also competitors of ours.

At any time, these or other market participants may develop alternative treatments, products or procedures for the treatment of musculoskeletal disorders that compete directly or indirectly with our products.

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We compete in the marketplace to recruit and retain qualified scientific, management, and sales personnel, as well as in acquiring technologies and technology licenses complementary to our products or advantageous to our business.

Our currently marketed products are, and any future products we commercialize will be, subject to intense competition.

Many of our current and potential competitors are major medical device companies that have substantially greater financial, technical, and marketing resources than we do, and they may succeed in developing products that would render our products obsolete or noncompetitive.

In addition, many of these competitors have a significantly longer operating history and more established reputations than we do.

The markets we compete in are intensely competitive, subject to rapid change and highly sensitive to the introduction of new products or other market activities of industry participants.

Our ability to successfully compete is dependent on our ability to develop proprietary products that reach the market in a timely manner, receive adequate coverage and reimbursement, and are safer, less invasive and more effective than alternatives available for similar purposes.

Because of the size of the potential market, we anticipate that companies will dedicate significant resources to developing competing products.

Manufacturing and Supply

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Third-Party Coverage and Reimbursement

We expect that, in the future, sales volumes and prices of our Musculoskeletal Solutions products including spinal implant, orthopedic trauma, and hip and knee arthroplasty products may grow to be more dependent on the availability of coverage and reimbursement from third-party payors, such as state and federal programs including Medicare, Medicaid and Worker’s Compensation as well as private insurance plans including Blue Cross Blue Shield plans and commercial insurers.

We expect that sales volumes and prices of our Musculoskeletal Solutions products including spinal implant, orthopedic trauma, and hip and knee arthroplasty products may grow to be more dependent on the availability of coverage and reimbursement from third-party payors, such as state and federal programs including Medicare, Medicaid and Worker’s Compensation as well as private insurance plans including Blue Cross Blue Shield plans and commercial insurers.

Reimbursement is dynamic and is contingent on coding for given services or procedures, coverage by third-party payors, and adequate payment for the services or procedures.

Physicians, hospital outpatient departments, and Ambulatory Surgery Centers (ASCs) use Current Procedural Terminology (“CPT ® ”) codes to bill for services and procedures, which are established by the American Medical Association (“AMA”).

Specialty societies such as the North American Spine Society, the American Association of Neurological Surgeons, and the American Academy of Orthopaedic Surgeons provide advice to the AMA CPT ® Editorial Panel for developing codes.

Physicians, hospital outpatient departments, and Ambulatory Surgery Centers (“ASC”) use Current Procedural Terminology (“CPT ® ”) codes to bill for services and procedures, which are established by the American Medical Association (“AMA”).

Specialty societies such as the North American Spine Society, the American Association of Neurological Surgeons, and the American Academy of Orthopedic Surgeons provide advice to the AMA CPT ® Editorial Panel for developing codes.

The availability of existing codes to bill for services and procedures may impact the adoption of technology.

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Payment by Medicare and other third-party payors may not be adequate to cover the cost of medical devices used in musculoskeletal procedures.

Additionally, more musculoskeletal procedures are being performed in the hospital outpatient and ambulatory surgery center settings, in part due to innovation.

Reimbursement levels in these settings are typically lower than for the hospital inpatient setting and may not be adequate to cover the cost of innovative and novel medical devices.

Additionally, more musculoskeletal procedures are being performed in the hospital outpatient and ASC settings, in part due to innovation.

Further, beginning January 1, 2021 and over the course of a three-year period, CMS will eliminate the inpatient only list for Medicare which will result in all spine procedures being payable in the outpatient setting.

Reimbursement levels in the hospital outpatient and ASC settings are typically lower than for the hospital inpatient setting and may not be adequate to cover the cost of innovative and novel medical devices.

In international markets, reimbursement and healthcare payment systems vary significantly by country and some countries have instituted price ceilings on specific product lines.

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We believe that we have structured our business operations and relationships with our customers to comply with all applicable legal requirements.

However, it is possible that governmental entities or other third parties could interpret these laws differently and assert otherwise.

However, it is possible that governmental entities or other third parties, including Relators (whistleblowers) under the federal civil False Claims Act (“FCA”), could interpret these laws differently and assert otherwise.

We discuss below the statutes and regulations that are most relevant to our business.

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FDA’s Pre-Market Clearance and Approval Requirements

Unless an exemption applies, each medical device we wish to commercially distribute in the United States requires either 510(k) clearance, grant of a de novo classification request, or a pre-market approval (“PMA”) from the FDA.

Unless an exemption applies, each medical device we wish to commercially distribute in the United States requires either 510(k) clearance, pre-market approval (“PMA”), or grant of a de novo classification request from the FDA.

The FDA classifies medical devices into one of three classes.

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Some low risk devices are exempt from this requirement.

Devices deemed by the FDA to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices, and devices deemed not substantially equivalent to a previously cleared 510(k) device are placed in Class III, which typically requires approval of a PMA application.

Devices deemed by the FDA to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices, and devices deemed not substantially equivalent to a previously cleared 510(k) devices are placed in Class III, which typically requires approval of a PMA application.

For novel Class III devices that were not previously formally classified by the FDA and that present low to moderate risk, a risk-based classification determination can be requested in accordance with the de novo request process, under which the FDA may determine that the product can be appropriately regulated as a Class I or II device.

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Section 361 HCT/Ps do not require 510(k) clearance, PMA approval, or other premarket approvals from the FDA before marketing.

Tissue banks that handle HCT/Ps must register their establishments with the FDA, list their HCT/P products with the FDA, and comply with FDA donor eligibility and screening requirements, current Good Tissue Practice (“CGTP”), product labeling, and postmarket reporting requirements for HCT/Ps.

The FDA periodically inspects tissue processors to determine compliance with these requirements.

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In addition, federal false claims laws prohibit any person from knowingly presenting, or causing to be presented, a false claim for payment to the federal government, or knowingly making, or causing to be made, a false statement to get a false claim paid.

Off-label promotion has been pursued as a violation of the federal false claims laws.

Violations of the federal Anti-Kickback Statute and off-label promotion have been pursued by the Department of Justice (“DOJ”) and the Department of Health and Human Services (“HHS”) as violations of the FCA.

Lawsuits under the FCA often are initiated by Relators on behalf of the government.

Relators are incentivized to pursue claims against manufacturers by the potential to share in any monetary penalties recovered by the government, which can be significant.

Pursuant to FDA regulations, we can only market our products for cleared or approved uses.

Although surgeons are permitted to use medical devices for indications other than those cleared

or approved by the FDA based on their medical judgment, we are prohibited from promoting products for such off-label uses.

Although surgeons are permitted to use medical devices for indications other than those cleared or approved by the FDA based on their medical judgment, we are prohibited from promoting products for such off-label uses.

Additionally, the majority of states in which we market our products have similar anti-kickback, false claims, anti-fee splitting and self-referral laws, which may apply to items or services reimbursed by any third-party payor, including commercial insurers, and violations may result in substantial civil and criminal penalties.

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jurisdictions, such as the United Kingdom’s Bribery Act, generally prohibit companies and their intermediaries from making improper payments to non-U.S.

government officials for the purpose of obtaining or retaining business.

government officials and (in the case of the Bribery Act) private sector decision makers for the purpose of obtaining or retaining business.

Because of the predominance of government-administered healthcare systems in many jurisdictions around the world, many of our customer relationships outside of the U.S.

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Additionally, we must comply with a variety of other laws that protect the privacy of individually identifiable healthcare information and impose extensive tracking and reporting related to transfers of value provided to certain healthcare professionals.

The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act imposes reporting and disclosure requirements on device manufacturers for any “transfer of value” made or distributed to prescribers and other healthcare providers.

The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act, and various state laws impose reporting and disclosure requirements on device manufacturers for any “transfer of value” made or distributed to prescribers and other healthcare providers.

The shifting compliance environment and the need to build and maintain robust and expandable systems to comply in multiple jurisdictions with different compliance and/or reporting requirements increases the possibility that a healthcare company may run afoul of one or more of the requirements.

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However, it is possible that material environmental costs or liabilities may arise in the future.

Seasonality and Backlog

Our business is generally not seasonal in nature.

However, our sales of Musculoskeletal Solutions products may be influenced by summer vacation and winter holiday periods during which we have experienced fewer surgeries taking place, as well as more surgeries taking place later in the year when patients have met the deductibles under insurance plans.

Our sales of Enabling Technologies products may be influenced by longer capital purchase cycles and the timing of budget approvals for major capital purchases.

We work closely with our suppliers to ensure that our inventory needs are met while maintaining high quality and reliability.

To date, we have not experienced significant difficulty in locating and obtaining the materials necessary to fulfill our production requirements, and we have not experienced a meaningful backlog of sales orders.

Human Capital

We believe our employees are our most valuable asset and are critical to our success as an organization.

Our talent related initiatives, including employee recruitment and development, diversity and inclusion and compensation and benefit programs, are focused on building and retaining the world-class and talented staff that is needed to meet our goals.

As of December 31, 2020, we had over 2,200 employees, including sales and marketing, product development, general administrative and accounting, both domestically and internationally.

Our employees are not subject to a collective bargaining agreement except in a single market outside the U.S., and we consider our relationship with our employees to be good.

Our corporate headquarters are located in Audubon, Pennsylvania and owned by us.

We own research and manufacturing facilities in Massachusetts, Pennsylvania and Texas, lease additional research and manufacturing facilities in Texas and also own a

distribution center in Heerlen, Netherlands to support our international operations.

We maintain sales and administrative offices in fifteen additional countries, all of which are leased.

We were incorporated in Delaware in March 2003.

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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