What changed in this filing

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Item 1. Business

2021-02-26 compared with 2020-03-02 · 72 added, 41 removed, 243 unchanged (32% of the section changed)

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Company Background and Overview of Business

ICU is one of the world's leading pure-play infusion therapy companies with global operations and a wide-ranging product portfolio that includes IV solutions, IV smart pumps, dedicated and nondedicated IV sets and needlefree connectors, along with pain management and safety software technology designed to help meet clinical, safety and workflow goals.

In addition, ICU manufactures automated pharmacy IV compounding systems with workflow technology, closed system transfer devices for hazardous IV drugs and cardiac monitoring systems to optimize patient fluid levels.

ICU is one of the world's leading pure-play infusion therapy companies with global operations and a wide-ranging product portfolio that includes IV solutions, IV smart pumps with pain management and safety software technology, dedicated and nondedicated IV sets and needlefree connectors designed to help meet clinical, safety and workflow goals.

In addition, ICU manufactures automated pharmacy IV compounding systems with workflow technology, closed system transfer devices for preparing and administering hazardous IV drugs and cardiac monitoring systems for critically ill patients.

Headquartered in San Clemente, California, ICU was founded in 1984.

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Since our inception we have grown organically and through acquisition, and we currently serve customers in more than 90 countries around the world.

In October 2015, we acquired Excelsior Medical Corporation’s SwabCap® disinfecting cap for needlefree IV connectors to enhance our direct and OEM infusion therapy product offerings and to open new customer opportunities globally.

In February 2017, we acquired Pfizer Inc.'s ("Pfizer") Hospira Infusion Systems ("HIS") business.

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• SwabCap disinfecting cap, used to protect and disinfect any needlefree connector, including competitive brands of connectors;

Tego TM hemodialysis connector used to cap and protect hemodialysis central venous catheter hubs;

NovaCath ™ and SuperCath ™ peripheral IV catheters(PIV);

• ClearGuard HD antimicrobial barrier caps for hemodialysis catheters;

• Tego TM hemodialysis connector used to cap and protect hemodialysis central venous catheter hubs.

Closed System Transfer Devices ("CSTD") and hazardous drug compounding systems are used to prepare and deliver hazardous IV medications such as those used in chemotherapy, which, if released, can have harmful effects to the healthcare worker and environment.

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• ChemoLock TM CSTD which utilizes a proprietary needlefree connection method, is used for the preparation and administration of hazardous drugs.

ChemoLock is used to limit the escape of hazardous drug or vapor concentrations, block the transfer of environmental contaminants into the system, and eliminates the risk of needlestick injury;

ChemoLock is used to limit the escape of hazardous drug or vapor

concentrations, block the transfer of environmental contaminants into the system, and eliminates the risk of needlestick injury;

• ChemoClave TM , an ISO Connection standard and universally compatible CSTD used for the preparation and administration of hazardous drugs.

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Infusion Pump Hardware:

◦ Plum 360™ :

The Plum 360™ infusion pump is an ICU Medical MedNet™ ready large volume infusion pump with an extensive drug library and wireless capability.

Plum 360 was named the 2018, 2019 and 2020 Best in KLAS winner as top-performing IV smart pump and is the first medical device to be awarded UL Cybersecurity Assurance Program Certification;

Plum 360 was named the 2018, 2019 and 2020 Best in KLAS winner as top-performing IV smart pump and was the first medical device to be awarded UL Cybersecurity Assurance Program Certification.

Also, in 2021, the Plum 360 won the first ever award as the top-performing Smart Pump EMR-Integrated;

◦ LifeCare PCA™ :

The LifeCare PCA infusion pump is an ICU Medical MedNet™ ready patient-controlled analgesia pump ("PCA"), providing complete IV-EHR interoperability since 2016.

The LifeCare PCA infusion pump is an ICU Medical MedNet™ ready patient-controlled analgesia pump ("PCA").

IV Mediation Safety Software:

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IV Therapy and Diluents:

Including Sodium Chloride, Dextrose, Balanced Electrolyte Solutions, Lactated Ringer's, Ringer's, Mannitol, Sodium Chloride/Dextrose, Sterile Water.

• Including Sodium Chloride, Dextrose, Balanced Electrolyte Solutions, Lactated Ringer's, Ringer's, Mannitol, Sodium Chloride/Dextrose, and Sterile Water.

• Including Sodium Chloride Irrigation, Sterile Water Irrigation, Physiologic Solutions, Ringer's Irrigation, Acetic Acid Irrigation, Glycine Irrigation, Sorbitol-Mannitol Irrigation, Flexible Containers and Pour Bottle Options.

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Additionally, we leverage a long-term supply agreement with Pfizer (described below) to provide additional IV Solution products to us.

We also assemble compounders in our leased facility in Ludenscheid, Germany and Salt Lake City, Utah.

We have five main regional device service centers in San Jose, California;

Sligo, Ireland;

We have four main regional device service centers in Sligo, Ireland;

San Laurent, Quebec, Canada;

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Certain components and raw materials are available only from a sole supplier.

We work closely with our suppliers to ensure continuity of supply while maintaining high quality and reliability.

We work closely with our

suppliers to ensure continuity of supply while maintaining high quality and reliability.

We have generally been able to obtain adequate supplies of such raw materials and components.

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dollars, Euro and Canadian dollars.

We are not dependent on any single customer and no single customer accounted for 10% or more of our net sales in 2019.

We are not dependent on any single customer.

Our products are marketed to medical product manufacturers, independent distributors and directly to end users.

distribution of solutions, IV sets and accessories is supported by a network of three owned distribution centers acquired in the HIS business acquisition, which include King of Prussia, Pennsylvania;

distribution of solutions, IV sets and accessories is supported by a network of two owned and one leased distribution centers, which include King of Prussia, Pennsylvania;

Los Angeles, California;

and Dallas, Texas.

We also acquired the contracts to a number of public warehouses as part of the HIS acquisition.

We also utilize a number of public warehouses as part of our supply chain.

Internationally, we manage distribution by utilizing international regional hubs and through independent distributors.

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This approval process applies to most Class III devices, and generally requires clinical data to support the safety and effectiveness of the device, obtained in adherence with IDE requirements.

The FDA will approve the PMA application if it finds that there is a reasonable assurance that the device is safe and effective for its intended purpose, and

that the proposed manufacturing is in compliance with the Quality System Regulation ("QSR").

The FDA will approve the PMA application if it finds that there is a reasonable assurance that the device is safe and effective for its intended purpose, and that the proposed manufacturing is in compliance with the Quality System Regulation ("QSR").

For novel technologies, the FDA will generally seek input from an advisory panel of medical experts and seek their views on the safety, effectiveness and benefit-risk of the device.

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To market our products in the EC, we must conform to additional requirements of the EC and demonstrate conformance to established quality standards and applicable directives.

As a manufacturer that designs, manufactures and

markets its own devices, we must comply with the quality management standards of EN ISO 13485.

As a manufacturer that designs, manufactures and markets its own devices, we must comply with the quality management standards of EN ISO 13485.

Those quality standards are similar to the QSR regulations.

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state laws that require pharmaceutical and device companies to comply with the industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers and other potential referral sources;

state laws that require device manufacturers to track and report information related to payments and other “transfers of value” to physicians and other healthcare

providers or pricing, marketing expenditures and information;

state laws that require device manufacturers to track and report information related to payments and other “transfers of value” to physicians and other healthcare providers or pricing, marketing expenditures and information;

and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.

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Our profitability and operations are subject to changes in legislative, regulatory and reimbursement policies and decisions as well as changes in private payer reimbursement coverage and payment decisions and policies.

Our products are purchased by hospitals, physicians and other healthcare providers that typically bill various third-party payors, such as governmental programs, private insurance plans and managed care plans, for the healthcare services and products provided to their patients.

Our products are purchased by hospitals, physicians and other healthcare providers that typically bill various third-party payors, such as

governmental programs, private insurance plans and managed care plans, for the healthcare services and products provided to their patients.

The ability of our customers to obtain appropriate coverage and reimbursement for healthcare services and products from third-party payors is critical because it affects which products customer purchase and the prices they are willing to pay since our products are not separately reimbursed by any third-party payor.

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In the U.S., there have been, and we expect that there will continue to be, a number of federal and state proposals to limit payments by governmental payors for medical devices, and the procedures in which medical devices are used.

For example, in March 2010, comprehensive healthcare reform legislation was enacted through the passage of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education and Reconciliation Act (the “Affordable Care Act”), which, among other things, imposed, among other things, provided incentives to programs that increase the federal government’s comparative effectiveness research, and implemented payment system reforms including a national pilot program on payment bundling to encourage hospitals, physicians and other providers to improve the coordination, quality and efficiency of certain healthcare services through bundled payment models.

For example, in March 2010, comprehensive healthcare reform legislation was enacted through the passage of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education and Reconciliation Act (the “Affordable Care Act”), which, among other things, provided incentives to programs that increase the federal government’s comparative effectiveness research, and implemented payment system reforms including a national pilot program on payment bundling to encourage hospitals, physicians and other providers to improve the coordination, quality and efficiency of certain healthcare services through bundled payment models.

Since its enactment, there have been judicial and Congressional challenges to certain aspects of the Affordable Care Act, and we expect there will be additional challenges and amendments to the Affordable Care Act in the future.

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Court of Appeals for the 5th Circuit upheld the district court’s decision that the individual mandate was unconstitutional but remanded the case back to the District Court to determine whether the remaining provisions of the Affordable Care Act are invalid as well.

It is unclear how these decisions, subsequent appeals, if any, and other efforts to challenge, repeal or replace the Affordable Care Act will impact the Affordable Care Act.

Supreme Court is currently reviewing the case, although it remains unclear when or how the Supreme Court will rule.

It is also unclear how other efforts to challenge, repeal or replace the Affordable Care Act will impact the Affordable Care Act or our business.

In addition, other legislative changes have been proposed and adopted since the Affordable Care Act was enacted.

On August 2, 2011, the Budget Control Act of 2011 was signed into law, which, among other things, included reductions to Medicare payments to providers of 2% per fiscal year, which went into effect on April 1, 2013, and will stay in effect through 2029 unless additional Congressional action is taken.

On August 2, 2011, the Budget Control Act of 2011 was signed into law, which, among other things, included reductions to Medicare payments to providers of 2% per fiscal year, which went into effect on April 1, 2013, and will stay in effect through 2030, with the exception of a temporary suspension from May 1, 2020 through March 31, 2021 unless additional Congressional action is taken.

On January 2, 2013, the American Taxpayer Relief Act of 2012, was signed into law, which, among other things, further reduced Medicare payments to several providers, including hospitals.

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federal and state and foreign health information privacy, security and data breach notification laws, which may govern the collection, use, disclosure and protection of health-related and other personal information.

care providers), and their respective business associates, individuals or entities that create, received, maintain or transmit protected health information in connection with providing a service for or on behalf of a covered entity.

In the U.S., HIPAA imposes privacy, security and breach reporting obligations with respect to individually identifiable health information upon “covered entities” (health plans, health care clearinghouses and certain health care providers), and their respective business associates, individuals or entities that create, received, maintain or transmit protected health information in connection with providing a service for or on behalf of a covered entity.

HIPAA mandates the reporting of certain breaches of health information to HHS, affected individuals and if the breach is large enough, the media.

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The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities.

Individually identifiable health information is considered sensitive data that merits stronger safeguards.

Individually identifiable health information is considered sensitive data that

merits stronger safeguards.

The FTC’s guidance for appropriately securing consumers’ personal information is similar to what is required by the HIPAA Security Rule.

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For example, California recently enacted legislation, the California Consumer Privacy Act (the “CCPA”), which went into effect January 1, 2020.

The CCPA, among other things, creates new data privacy obligations for covered companies and provides new privacy rights to California residents, including the right to opt out of certain disclosures of their information.

The CCPA also creates a private right of action with statutory damages for certain data breaches, thereby potentially increasing risks associated with a data breach.

Although the law includes limited exceptions, including for “protected health information” maintained by a covered entity or business associate, it may regulate or impact our processing of personal information depending on the context.

The CCPA applies to certain businesses that collect personal information from California residents, whether directly or indirectly.

The CCPA gives California residents expanded rights to access and delete their personal information, opt out of certain personal information sharing and receive detailed information about how their personal information is used by requiring covered companies to provide new disclosures to California consumers (as that term is broadly defined) and provide such consumers new ways to opt-out of certain sales of personal information.

The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation.

Although there are limited exemptions for health-related information, including PHI maintained by covered entities and business associates, the CCPA may increase our compliance costs and potential liability.

Further, the California Privacy Rights Act (“CPRA”) recently passed in California.

The CPRA will impose additional data protection obligations on covered businesses, including additional consumer rights processes, limitations on data uses, new audit requirements for higher risk data, and opt outs for certain uses of sensitive data.

It will also create a new California data protection agency authorized to issue substantive regulations and could result in increased privacy and information security enforcement.

The majority of the provisions will go into effect on January 1, 2023, and additional compliance investment and potential business process changes may be required.

In addition, the CCPA has prompted a number of proposals for new federal and state privacy legislation that, if passed, could increase our potential liability, increase our compliance costs and adversely affect our business.

If we fail to comply with applicable laws and regulations we could be subject to penalties or sanctions, including criminal penalties if we knowingly obtain or disclose individually identifiable health information from a covered entity in a manner that is not authorized or permitted by HIPAA or applicable state laws.

In Europe, the General Data Protection Regulation, or GDPR, went into effect in May 2018 and imposes stringent data protection requirements for controllers and processors of personal data of persons within the EU.

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Companies that must comply with the GDPR face increased compliance obligations and risk, including more robust regulatory enforcement of data protection requirements and potential fines for noncompliance of up to €20 million or 4% of the annual global revenues of the noncompliant company, whichever is greater.

Data privacy laws in the EU and the EEA are developing rapidly and, in July 2020, the Court of Justice of the European Union limited how organizations could lawfully transfer personal data from the EEA to the United States by invalidating the Privacy Shield.

In addition, the United Kingdom leaving the EU could also lead to further legislative and regulatory changes.

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We believe our ability to effectively compete in this industry will be determined by our ability to provide a wide breadth of cost-effective, high quality products.

We believe the added breadth of our HIS business product portfolio has increased our competitiveness as we can now provide a one-stop shop for customers and offer more flexible competitive pricing.

We believe the infusion pump will also enable us to pull through a larger volume of higher margin infusion consumables.

In addition, we now have unified distribution channels after the HIS acquisition.

We believe the added breadth of our acquired product portfolios have increased our competitiveness as we can now provide a one-stop shop for customers and offer more flexible competitive pricing.

We also believe our acquired infusion pump product offering will enable us to pull through a larger volume of higher margin infusion consumables, and we believe we have a wider customer reach through our unified distribution channels.

Infusion Consumables

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Braun Medical, Inc.

There is no assurance that we will be able to compete successfully with these larger competitors.

Our CSTD used for the preparation and safe handling of oncology drugs, compete with similar products from BD, and B.

Our CSTD used for the preparation and safe handling of oncology drugs, compete with similar products from BD, and

We believe that our current CSTD product offering provides benefits over these competing systems in several areas related to safety, ease of use, quality, and cost;

however, ongoing innovation in this market space will be required, and there is no assurance that these innovations will be able to sustain continued growth.

however, ongoing innovation in this market space will be required.

Infusion Systems

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Our patents are important in preventing others from introducing competing products that are as effective as our products.

The loss of patent protection on the Clave/MicroClave, Neutron, Tego Connector, Swabcap, ChemoClave and ChemoLock technologies, could adversely affect our ability to exclude other manufacturers from producing effective competitive products and could have an adverse impact on our financial results.

The loss of patent protection on the Clave/MicroClave, Neutron, Tego Connector, Swabcap, Clearguard, ChemoClave and ChemoLock technologies, could adversely affect our ability to exclude other manufacturers from producing effective competitive products and could have an adverse impact on our financial results.

The fact that a patent is issued to us does not eliminate the possibility that patents owned by others may contain claims that are infringed by our products.

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Adverse determinations in such litigation could subject us to significant liabilities to third parties or could require us to seek licenses from third parties and could prevent us from manufacturing, selling or using our products, any of which could have a material adverse effect on our business.

In addition, we have initiated litigation, and may continue to initiate litigation in the future, to enforce our intellectual property rights against those we believe to be infringing on our patents.

In addition, we have initiated litigation, and may continue to initiate litigation in

the future, to enforce our intellectual property rights against those we believe to be infringing on our patents.

Such litigation could result in substantial cost and diversion of resources.

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Research and development costs were $42.9 million in 2020, $48.6 million in 2019 and $52.9 million in 2018.

At December 31, 2019 , we had approximately 8,000 employees.

Human Capital Management

We believe our employees are the foundation of our business and are key to executing our strategy globally.

The knowledge, skills and abilities of our diverse workforce is paramount in upholding our mission of connecting patients and caregivers through safe, life-saving, life enhancing IV therapy products, systems, and services.

We believe the health and well-being of our employees are cornerstones for our successful operations.

Whether you are a machine operator in one of our four manufacturing locations, a material handler in a distribution center, a service technician supporting our products in the field, or a clinician training the use of our products in a hospital, we strive to prioritize the safety of our team members.

This includes designing our work environments with a safety first mindset, providing personal protective equipment, and safety training beginning day one.

Our ability to attract and retain talented individuals globally begins with our commitment to offer a career that gives people a unique opportunity to work in an exhilarating, fast-paced, inspiring, and collaborative environment where what they do makes a difference.

We offer competitive salaries and participation to all employees in incentive plans based on individual and company performance.

We believe the development of our workforce is critical for personal growth and the success of our company as well.

We reinforce this with challenging, yet rewarding assignments, continued learning and training programs through our global iLearning platform, and support continued education globally through tuition reimbursement programs.

Our team believes in diversity, collaboration, and removing barriers to communication—all to create an environment where innovation and creativity can flourish.

This is principal for us in attracting, developing, retaining and rewarding talent on a global scale.

Finally, our leadership team, with its broad, and deep category knowledge and averaging approximately 17 years of experience in IV therapy has the necessary experience to effectively lead the execution of our strategy.

At December 31, 2020, we had approximately 7,900 employees located in over 20 countries.

Geographic Data

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"Financial Statements and Supplementary Data" of this Form 10-K in Note 4 and 13 to the Consolidated Financial Statements, and is incorporated herein by reference.

COVID-19 Pandemic

In late 2019, a novel strain of coronavirus ("COVID-19") was first reported in Wuhan, China and on March 11, 2020, the World Health Organization characterized COVID-19 as a global pandemic.

The COVID-19 pandemic has spread globally and has led governments and other authorities around the world to impose measures intended to control its spread, including restrictions on freedom of movement and business operations such as travel restrictions, border closings, business closures, quarantines and shelter-in-place orders.

Additionally, the COVID-19 pandemic and the measures taken to limit its spread have negatively impacted the economy across many industries.

As such, the COVID-19 pandemic may pose significant risks to our business.

We operate globally and the COVID-19 pandemic and its adverse effects have impacted most of the locations where we, our customers and our suppliers conduct business.

We expect COVID-19 will continue to have an impact on our financial

condition and results of operations in the near term and may have a material impact on our financial condition, liquidity, and results of operations in future periods.

See “Part II.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” for discussion regarding the impact of the COVID-19 pandemic on our financial results.

Also, see “Part I.

Risk Factors” for discussion of the risks and uncertainties associated with the COVID-19 pandemic.

Available Information

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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