What changed in this filing

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Item 1. Business

2023-02-21 compared with 2022-02-17 · 40 added, 45 removed, 282 unchanged (23% of the section changed)

7 unchanged sentences

Musculoskeletal Solutions and Enabling Technologies.

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.

As such, given the dynamic nature of this situation, the Company cannot reasonably estimate the impacts of COVID-19 on our financial condition, results of operations or cash flows in the future.

However, if a resurgence occurs and governments mandate restrictions, including restrictions on elective surgeries, we do expect that it could have a material adverse impact on our revenue growth, operating profit and cash flow, revised payment terms with certain of our customers, and a change in effective tax rate driven by changes in the mix of earnings across the Company’s jurisdictions.

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.

Overall Business

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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.

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

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

 Continue to expand into international markets .

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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 .

 Pursue strategic acquisitions .

In 2017, we acquired KB Medical SA, developer of a computer-assisted robotic guidance system, and in 2018 we acquired Nemaris Inc., a privately held company that markets and develops Surgimap ® , a leading surgical planning software platform, to further bolster our efforts to advance surgical procedures through Enabling Technologies.

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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.

During the fourth quarter of 2021, the Company acquired Capstone Surgical Technologies, LLC.

During the fourth quarter of 2021, the Company acquired Capstone Surgical

Technologies, LLC.

(“Capstone”), a privately held company that engages in the business of creating advanced drill and robotic surgery platforms.

During the fourth quarter of 2022, the Company acquired the membership interests of Harvest Biologics LLC (“Harvest”), which engages in the business of selling systems that produce autologous biologics.

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.

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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:

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.

Fracture plating includes proximal humerus, distal radius, proximal tibia, distal tibia, distal fibula, distal femur, 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.

Regenerative biologic products such as bone void fillers and allograft struts are 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.

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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.

The market for our Enabling Technologies in spine, cranial 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.

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

In 2022, we launched Excelsius3D™, which when combined with the ExcelsiusGPS® robotic navigation system, provides a superior intraoperative, image-guided robotic navigation solution that is designed to improve implant placement accuracy, lower radiation exposure, and shorten operative times.

This highly maneuverable and intuitive imaging platform offers 3 imaging modalities, position memory, and a large field of view.

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.

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As of December 31, 2022, we had a direct or distributor sales presence in the United States and in 53 other countries.

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

We have dedicated spinal implant, orthopedic trauma and enabling technologies 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 areas, both in the U.S.

and internationally, to

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

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

We believe the expansion of our U.S.

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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.

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.

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Most of our regenerative biologics products are processed in our facilities in San Antonio, Texas, and in Audubon, Pennsylvania.

The ExcelsiusGPS ® robotic guidance and navigation system is assembled in our facility in Methuen, Massachusetts.

The ExcelsiusGPS ® robotic guidance and navigation system and Excelsius3D™ imaging system are assembled in our facility in Methuen, Massachusetts.

Of our implant and instrument products that are not manufactured in-house, a majority are generally manufactured through a network of third-party suppliers.

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To date, we have experienced slight delays in locating and obtaining the materials necessary to fulfill our production requirements, but it has not caused a meaningful backlog of sales orders.

Despite the current delays, which we believe are temporary and are primarily driven by the dynamic nature of the COVID-19 impact on the global supply chain, we believe our supplier relationships and facilities will support our capacity needs for the foreseeable future.

Despite such delays, we believe our supplier relationships and facilities will support our capacity needs for the foreseeable future.

However, it is possible that a prolonged COVID-19 disruption could cause a backlog of sales orders.

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2 design patents), and we owned 967 issued foreign patents and had applications pending for 517 foreign patents.

Our issued patents expired or will expire between March 2015 and February 2041.

Our issued patents expired or will expire between March 2015 and December 2042.

Our trademark portfolio contains 304 registered trademarks and 122 pending trademarks.

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The Centers for Medicare and Medicaid Services (“CMS”) and the National Center for Health Statistics are jointly responsible for overseeing changes and modifications to International Classification of Diseases, Clinical Modification/Procedure Coding System (“ICD-10-CM/PCS”) procedure codes used by all providers including physicians and facilities for reporting patient diagnosis(es) (ICD-10-CM codes) and hospitals for reporting inpatient procedures (ICD-10-PCS codes).

ICD-10-CM/PCS was implemented in the U.S.

on October 1, 2015.

This represented the first major coding change for ICD coding in over 30 years.

The granularity and specificity of the new ICD-10-CM/PCS coding system may impact reimbursement in the future, particularly hospital inpatient reimbursement.

The granularity and specificity of the ICD-10-CM/PCS coding system may impact reimbursement in the future, particularly hospital inpatient reimbursement.

Physician and hospital coding is subject to change, which could impact coverage and reimbursement and thus potentially impact physician practice behavior.

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National and local coverage policy decisions are subject to unforeseeable change and have the potential to impact physician behavior.

We will continue to provide the appropriate resources to patients, physicians, hospitals, and insurers in order to promote the best patient care, provide clarity regarding coverage and reimbursement policies, and work to reverse any non-coverage policies.

We will continue to provide the appropriate and compliant resources to patients, physicians, hospitals, and insurers in order to promote the best patient care, provide clarity regarding coverage and reimbursement policies, and work to reverse any non-coverage policies.

For federal/state programs, such as Medicaid, coverage and reimbursement differ from state to state.

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

There can be no assurance that our products will be accepted by third-party

payors, that coverage and reimbursement will be available or, if available, that the third-party payors’ coverage and reimbursement policies will not adversely affect our ability to sell our products profitably.

There can be no assurance that our products will be accepted by third-party payors, that coverage and reimbursement will be available or, if available, that the third-party payors’ coverage and reimbursement policies will not adversely affect our ability to sell our products profitably.

We believe that the overall escalating cost of medical products and services has led to, and will continue to lead to, increased pressures on the healthcare industry to reduce the costs of products and services.

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 post-market approval studies;

 controls for electronic and other radiation emitting products;

 product advertising, marketing and promotion.

FDA’s Pre-Market Clearance and Approval Requirements

FDA’s Pre-Market Clearance and Approval Requirements for Medical Devices

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.

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The procurement and transplantation of allograft bone tissue is subject to U.S.

federal law pursuant to the National Organ Transplant Act (“NOTA”), a criminal statute which prohibits the purchase and sale of human organs used in human transplantation, including bone and related tissue, for “valuable consideration.” NOTA permits reasonable payments associated with the removal, transportation, processing, preservation, quality control, implantation and storage of human bone tissue.

federal law pursuant to the National Organ Transplant Act (“NOTA”), a criminal statute which prohibits the purchase and sale of human organs used in human transplantation,

including bone and related tissue, for “valuable consideration.” NOTA permits reasonable payments associated with the removal, transportation, processing, preservation, quality control, implantation and storage of human bone tissue.

With the exception of removal and implantation, we provide services in all of these areas.

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On October 31, 2018, we received a warning letter from the FDA resulting from an inspection of the facilities of our subsidiary Human Biologics of Texas, located in San Antonio, Texas, in April 2018.

The letter described observed non-conformities to regulations for human cells, tissues, and cellular and tissue-based products relating to one allograft tissue product processed by Human Biologics of Texas and sold to end users by us.

We take the matters identified in the warning letter seriously and are working diligently to address the FDA’s observations.

We responded to the FDA’s warning letter on November 20, 2018, and subsequently have provided periodic updates regarding our progress towards addressing the FDA’s observations.

We responded to the FDA’s warning letter on November 20, 2018, provided periodic updates to FDA on our progress, and notified FDA of actions completed to resolve the observations.

As of December 31, 2022, this warning letter remains open.

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Other countries, such as Brazil, Canada and Japan, require separate regulatory filings.

In the EEA, our devices are required to comply with the essential requirements of the EU Medical Device Directive (Council Directive 93/42/EEC).

In the EEA, our devices are required to comply with the essential requirements of the EU Medical Device Directive (Council Directive 93/42/EEC) (“MDD”).

Compliance with these requirements entitles us to affix the CE conformity mark to our medical devices, without which they cannot be commercialized in the EEA.

To demonstrate compliance with the essential requirements and obtain the right to affix the CE conformity mark we must undergo a conformity assessment procedure, which varies according to the type of medical device

and its classification.

Following the expiration of the existing Directive 93/42 CE mark (May 2024), all medical device companies manufacturing and/or marketing products in the EEA, including Globus, will be required to comply with requirements of the Medical Devices Regulation EU 2017/745, which are generally stricter and include increasing technical documentation requirements and altering the classification of some products.

Most devices that are CE marked under Directive 93/42 may continue to be marketed in the EU under certain conditions until May 2024, at which point these products must comply with the new regulation.

Products placed on the market under the Medical Device Directive may continue to be sold for one year after May 2024.

Following the expiration of the transitional provisions of the MDD relating to the CE mark (extended to May 2027), all medical device companies manufacturing and/or marketing products in the EEA, including Globus, will be required to comply with requirements of the Medical Devices Regulation EU 2017/745 (“MDR”), which are generally stricter and include increasing technical documentation requirements and altering the classification of some products.

Most devices that are CE marked under the MDD may continue to be marketed in the EU under certain conditions until May 2027, at which point these products

must comply with the new regulation.

Products placed on the market under the MDD prior to May 2027 may continue to be sold for one year after May 2027.

Additionally, in the EEA the procurement, testing, processing, preservation, storage and distribution of human tissues and cells is subject to the requirements of the laws of individual EEA Member States implementing Directive 2004/23/EC, Directive 2006/17/EC and Directive 2006/86/EC.

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These laws and codes may limit or restrict the advertising and promotion of our products to the general public and may impose limitations on our promotional activities with healthcare professionals.

With the departure of the UK from the EU in January 2021, while CE marking will continue to be accepted by the UK until July 2023, a separate UKCA mark will be thereafter required to market a device in the UK.

With the departure of the UK from the EU in January 2021, while CE marking will continue to be accepted by the UK until June 30, 2024 (extended from July 2023), a separate UKCA mark will be thereafter required to market a device in the UK.

We are subject to unannounced device inspections by the Notified Body (an organization accredited by a Member State of the EEA to conduct conformity assessments), as well as other regulatory agencies overseeing the implementation and adherence of applicable regulations.

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State anti-kickback laws have similar prohibitions.

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.

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

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 civil False Claims Act (“FCA”).

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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.

A bill pending before the Senate of the United States, the False Claims Amendments Act of 2021 (SB 2428), which was reported favorably out of the Committee on the Judiciary, would broaden the applicability of the FCA and implement other changes that would not be favorable to defendants in FCA cases.

If enacted, the False Claims Amendment Act would apply to any case filed under the FCA on or after the date of enactment.

Legislation periodically is introduced in the United States Congress that would broaden the applicability of the FCA and implement other changes that would not be favorable to defendants in FCA cases.

If enacted, such legislation could apply to any case filed under the FCA on or after the date of enactment.

Additionally, the majority of states in which we market our products have similar anti-kickback, false claims, anti-fee splitting and physician 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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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 with respect to ownership and investment interests by physicians and members of their immediate family as well as certain payments or other “transfers of value” made to physicians and other healthcare providers licensed in the U.S.

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 with respect to ownership and investment interests by physicians and members of their immediate family as well as certain payments or other “transfers of value” made to physicians and other healthcare providers licensed in the U.S.

and to teaching hospitals.

Several states in which we market our products also have imposed healthcare provider payment reporting, gift ban and compliance program requirements on device manufacturers.

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.

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.

Environmental Matters

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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