What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2021-02-26 compared with 2020-03-02 · 247 added, 225 removed, 363 unchanged (57% of the section changed)

1 unchanged sentence

Any of the following risks, as well as additional risks and uncertainties not currently known to us or that we currently deem immaterial, could materially and adversely affect our results of operations or financial condition.

Risks Related to our Strategic Transactions

We have may continue to acquire businesses, form strategic alliances or make investments in businesses or technologies that could adversely impact our business and our operating results and such transactions could result in unforeseen operating difficulties, expenditures and require significant management resources, charges or write-downs.

We have and may continue to seek to supplement our internal growth through acquisitions of complementary businesses, technologies, services, or products, as well as investments and strategic alliances.

We compete for those opportunities with others including our competitors, some of which have greater financial or operational resources than we do.

We may not be able to identify suitable acquisition candidates or strategic partners, we may have inadequate access to information or insufficient time to complete due diligence, and we may not be able to complete such transactions on favorable terms, if at all.

Such transactions are inherently risky, and the integration of any newly-acquired business requires significant effort and management attention that otherwise would be available for ongoing development of our other businesses.

The success of any acquisition, investment or alliance may be affected by a number of factors, including our ability to properly assess and value the potential business opportunity or to successfully integrate any business we may acquire into our existing business.

problems or legal liabilities and amortization of acquired intangible assets, some or all of which could materially and adversely affect our operations and financial performance.

Integration of an acquired business also may disrupt our ongoing operations and require management resources that we would otherwise focus on developing our existing business.

For example, we acquired the HIS business in February 2017, which includes IV pumps, solutions, and devices in order to create a leading pure-play infusion therapy company, but we continue to make significant integration efforts in order to achieve the anticipated benefits of the transaction.

In addition, in connection with the HIS business acquisition, we also entered into two manufacturing and supply agreements (the “MSAs”) with Pfizer under which, (i) Pfizer manufactures and supplies us with certain agreed upon products for an initial five-year term with a one-time two-year option to extend and (ii) we manufacture and supply Pfizer certain agreed upon products for a term of five or ten years depending on the product, with a one-time two-year option to extend.

Our facility in Austin, Texas manufactures and supplies these products to Pfizer under the MSAs, which, for certain products, could expire as early as 2022.

The expiration of these MSAs may adversely impact our production capacity utilization of our Austin facility, which could result in unforeseen operating difficulties and may impact our profitability.

In addition, any acquisition could result in the incurrence of debt, contingent liabilities or future write-offs of intangible assets or goodwill, any of which could have a material adverse effect on our financial condition, results of operations and cash flows.

We may also experience losses related to investments in other companies, which could have an adverse effect on our results of operations and financial condition.

As such, there can be no assurance that any past or future transactions will be successful.

If we are unable to effectively manage our internal growth or growth through acquisitions of companies, assets or products, our financial performance may be adversely affected.

We intend to continue to expand our marketing and distribution capability, which may include external expansion through acquisitions both in the U.S.

and foreign markets.

We may also consider expanding our product offerings through acquisitions of companies or product lines.

We can provide no assurance that we will be able to identify, acquire, develop or profitably manage additional companies or operations or successfully integrate such companies or operations into our existing operations without substantial costs, delays or other problems.

We have additional production facilities outside the U.S.

to reduce labor costs.

The expansion of our marketing, distribution and product offerings both internally and through acquisitions or by contract may place substantial burdens on our management resources and financial controls.

Decentralization of assembly and manufacturing could place further burdens on management to manage those operations and maintain efficiencies and quality control.

The increasing burdens on our management resources and financial controls resulting from internal growth and acquisitions could adversely affect our operating results.

Failure to manage this growth could adverse effect our operations through higher manufacturing costs, declining product quality, slower responses to competitive challenges, among other things.

A failure in any one of these areas could make it difficult for us to meet market expectations for our products, and could damage our reputation and our financial performance may be adversely affected.

Risk Factors Summary

Our business is subject to a number of risks and uncertainties, detail below.

These risks include, among others, the following:

• The COVID-19 pandemic has had a material impact on the global economy and has disrupted our operations and could continue to have an adverse impact on our employees, suppliers and customers, which could adversely and materially impact our business, financial condition and results of operations.

• We operate in a highly competitive industry, our ability to compete effectively to maintain or gain market share depends upon numerous factors, such as product innovation, the quality, convenience and reliability of our products, access to distribution channels and patent protection and pricing.

We can give no assurance that we will be successful in implementing any of our competitive strategies.

• We are dependent on certain key suppliers;

any supply interruptions could materially harm our business, financial condition and results of operations.

• Damage to our manufacturing facilities or any other supply chain restrictions could materially impact our business, financial condition and results of operations.

• Changes in or failure to comply with certain federal, state, foreign, legal and health regulations may harm our business and financial condition.

• We depend on the leadership of our executive management team and other key personnel;

the loss of one or more of our key employees could disrupt our business.

• Our stock price may be volatile and you may be unable to sell your shares at or above your purchase price.

Business and Operating Risks

The COVID-19 pandemic has disrupted how we, our suppliers and our customers operate and the duration and extent to which this will impact our business, future results of operations, liquidity and overall financial performance remains uncertain.

The COVID-19 pandemic has created significant volatility, uncertainty, and economic disruption.

The global spread of COVID-19 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.

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

As such, the COVID-19 pandemic may continue to 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 and, as a result, we have experienced some disruption to our operations, most notably due to reduced demand for our disposable product portfolio.

As a result of the COVID-19 pandemic, our non-essential offices and facilities, including our corporate headquarters remain closed to non-essential employees.

Similarly, many hospitals are restricting access to their facilities to essential personnel, which may negatively affect demand for our products by limiting the ability of our sales personnel to negotiate new and maintain existing contracts with customers.

We may also experience significant reductions in demand for certain products as our health care customers re-prioritize the treatment of patients, delay elective procedures and shift resources and operations to fight COVID-19 and the complications it causes.

For example, during 2020, we have experienced lower demand from hospital customers for our Infusion Consumables non-dedicated sets and lower demand for our Infusion Systems dedicated sets.

Additionally, the COVID-19 pandemic could potentially adversely affect our distributors if they are not able to maintain their historical levels of sales.

Our manufacturing, distribution and pump service facilities are operating under our business continuity plan due to the need for our critical healthcare products, however, we have taken certain precautionary measures including the following to maximize the safety of our employees and to mitigate disruption to our operations:

• implemented physical distancing measures;

• enhanced hygiene protocols and increased frequency of cleaning procedures;

• acquired additional personal protective equipment;

• developed contingency plans and protocols to assess employee illness;

• helped employees with childcare issues due to school and daycare closures;

• implemented COVID-19 temperature screening for employees entering our manufacturing and distribution facilities;

• initiated a visitor pre-entry questionnaire to limit potential exposure in our facilities.

While we anticipate that the foregoing measures are temporary, we cannot predict the specific duration for which these precautionary measures will stay in effect, and we may elect to take additional measures as the information available to us continues to develop.

These actions, and any future actions we may take in response to the COVID-19 pandemic, could negatively impact our business, financial condition and results of operations.

The duration and extent of the impact on our business from the COVID-19 pandemic depends on future developments that cannot be fully predicted at this time, as such, the impact of the COVID-19 pandemic on our future results of operations and overall financial performance remain uncertain and cannot as yet be quantified.

Additional factors that have contributed or may contribute to the adverse impact of the COVID-19 pandemic on our business, results of operations, financial condition and liquidity include, without limitation, the following:

• lost revenue or additional costs associated with either disruptions at our production and distribution facilities or interruptions in our supply chain, including shortages of raw materials or components for our products;

• fluctuations in demand from customers as a result of an increase in COVID-19 patient admissions in hospitals offset by the decline in non-COVID-19 patient admissions;

• healthcare customers that defer the more profitable elective procedures may experience financial difficulties and may be unable to pay within payment terms for the products they purchased;

• potential lower demand in future periods due to over-purchasing of our products due to the COVID-19 pandemic;

• reduced revenue due to delays in implementation of our infusion systems and oncology products at hospital locations due to restricted access;

• higher operating costs related to additional compensation paid to our manufacturing and distribution facility workers;

• volatility in cash flow, revenue and income due to foreign currency fluctuations and volatility;

• lower income due to a delay in cost savings projects as a result of the travel and social distancing requirements of COVID-19;

• lower interest income on cash balances due to reductions in interest rates along with higher interest expense from borrowing under our Credit Facility, if necessary, to maintain adequate liquidity.

To the extent the COVID-19 pandemic and related containment measures continue to adversely affect regional, national and global economic conditions and financial markets, as well as the business, results of operations, financial conditions and liquidity of us, our suppliers and our customers, it may also have the effect of heightening many of the risks

described in this ‘‘Risk Factors’’ section and elsewhere in this Annual Report on Form 10-K for the year ended December 31, 2020, including the risks resulting from our dependency on key personnel;

impairment of our supply chain or manufacturing facilities;

and the impact of negative economic conditions.

In addition, in light of the COVID-19 pandemic and the measures taken to limit its spread, our historical information regarding our business, results of operations, financial condition or liquidity may not be representative of the future results of operations, financial condition, liquidity or other financial or operating results of us or our business.

We are dependent on single and limited source third-party suppliers, which subjects our business and results of operations to risks of supplier business interruptions, and a loss or degradation in performance in our suppliers could have an adverse effect on our business and financial condition.

8 unchanged sentences

Due to the highly competitive nature of the healthcare industry and the cost controls of our customers and third party payors, we may be unable to pass along cost increases for any key components or raw materials increases through higher prices to our customers.

If the cost of key

components or raw materials increases and we are unable fully to recover those increased costs through price increases or offset these increases through other cost reductions, we could experience an adverse effect on our financial condition.

If the cost of key components or raw materials increases and we are unable to fully recover those increased costs through price increases or offset these increases through other cost reductions, we could experience an adverse effect on our financial condition.

Damage to any of our manufacturing facilities or supply chain network could impair our ability to produce our products.

A severe weather event, other natural or man-made disaster, or any other significant disruption, such as outbreak of disease (including the recent coronavirus outbreak), affecting our manufacturing facilities or our suppliers and logistics partners could materially and adversely impact our business, financial condition and results of operations.

Certain of our key product components are manufactured in China and the extent to which our ability to produce products is affected by the coronavirus will largely depend on future developments, which are highly uncertain and cannot be accurately predicted.

A severe weather event, other natural or man-made disaster, or any other significant disruption, such as outbreak of disease (including the COVID-19 pandemic), affecting our manufacturing facilities or our suppliers and logistics partners could materially and adversely impact our business, financial condition and results of operations.

The COVID-19 pandemic has caused us to temporarily shut down some of our facilities, to date these shut downs have not had a material impact on our business.

We have a single manufacturing facility for our Clave products located in Salt Lake City, Utah.

4 unchanged sentences

Damage to any of our facilities could render us unable to manufacture our products or require us to reduce the output of products at the damaged facility.

Two of our manufacturing facilities are located near known earthquake fault zones and are vulnerable to damage from earthquakes.

We carry insurance for damage to our property and disruption of our business, but this insurance may not cover all of the risks associated with damage or disruption to our facilities and business, may not provide coverage in amounts sufficient to cover our potential losses and may not continue to be available to us on acceptable terms, if at all.

3 unchanged sentences

An additional expansion of our Mexico facility was completed in January 2011.

Turnover among new employees was unusually high in Mexico, and the additional time spent in classroom training and on the job training could create production inefficiencies in Mexico in the future.

Turnover among new employees was unusually high in Mexico, and the additional time spent in classroom training and on the job training could create production inefficiencies in Mexico in the

The addition of new products will require additional molding in Salt Lake City and manual assembly work in Mexico.

5 unchanged sentences

In addition, the costs associated with implementing restructuring activities might exceed expectations, which could result in additional future charges.

We are subject to risks associated with debt financing.

The credit agreement governing our Credit Facility contains, among other things, certain customary restrictive covenants that limit our ability to incur additional indebtedness and liens, merge with other companies or consummate certain changes of control, acquire other companies, make certain investments, pay dividends, enter into certain transactions with affiliates, and transfer or dispose of assets as well as financial covenants requiring us to maintain a specified consolidated total leverage ratio and a specified consolidated fixed charge coverage ratio.

While we have not previously breached and are not currently in breach of these or any other covenants contained in our credit agreement, there can be no guarantee that we will not breach these covenants in the future.

Additionally, our ability to comply with these covenants may be affected by events beyond our control, including the COVID-19 pandemic.

These covenants could also limit our ability to seek capital through the incurrence of new indebtedness or, if we are unable to meet our obligations, require us to repay any outstanding amounts with sources of capital we may otherwise use to fund our business.

As such, these restrictive covenants contained in our Credit Facility may restrict our ability to pursue our business strategies.

Market and Other External Risks

4 unchanged sentences

We encounter significant competition in our markets both from large established medical device manufacturers and from smaller companies.

Many of these companies have introduced competitive products with features not

provided by the conventional products and methods they are intended to replace.

Many of these companies have introduced competitive products with features not provided by the conventional products and methods they are intended to replace.

Most of our current and prospective competitors have economic and other resources substantially greater than ours and are well established in the healthcare industry.

1 unchanged sentence

Due to the highly competitive nature of the group purchasing organizations (“GPOs”) or integrated delivery networks (“IDNs”) contracting processes, we may not be able to obtain or maintain contract positions with major GPOs and IDNs across our products portfolio.

Furthermore, the increasing leverage of organizing buy-in groups may reduce market prices for our products thereby affecting our profitability.

While having a contract with a GPO or IDN can facilitate sales to members of that GPO or IDN, it is no assurance that sales volume of those products will be maintained.

Furthermore, the increasing leverage of organized buying groups may reduce market prices for our products thereby affecting our profitability.

While having a contract with a GPO or IDN can facilitate sales to members of that GPO or IDN, it is no assurance that the sales volume of those products will be maintained.

The members of such groups may choose to purchase from our competitors due to the price or quality offered by such competitors, which could result in a decline in our sales and profitability.

2 unchanged sentences

In addition, if we fail to implement distribution arrangements successfully, it could cause us to lose market share to our competitors.

Moreover, there is no assurance that our competitors will not substantially increase resources devoted to the development, manufacture and marketing of products competitive with our products.

Moreover, there is no assurance that our competitors will not substantially increase resources devoted to the development, manufacture and

marketing of products competitive with our products.

The successful implementation of such a strategy by one or more of our competitors could materially and adversely affect us.

9 unchanged sentences

The success of new product offerings for device products depends on several factors, including our ability to anticipate and meet customers' or patients’ needs, obtain timely regulatory approvals or clearances, and manufacture quality products in an economic and timely manner.

Even if we are able to develop successfully new products or enhancements, we may not produce sales exceeding the costs of development, and we may not avoid infringing the proprietary rights of third parties.

Further, those new or enhanced products may be quickly rendered obsolete by changing customer preferences or the introduction by competitors of products embodying new technologies or features.

Even if we are able to develop successful new products or enhancements, we may not produce sales exceeding the costs of development, and we may not avoid infringing the proprietary rights of third parties.

Moreover, innovations may not be successful due to difficulties encountered in achieving positive clinical outcomes, meeting safety, efficacy or other regulatory requirements of government agencies, or obtaining favorable pricing on those products.

6 unchanged sentences

We expect to order semi-automated or fully automated assembly machines for other new Infusion Consumables products in 2021.

We also are adding additional IV Solutions capacity at our IV Solutions manufacturing facility.

If we do not achieve significant sales of these new

products, it might be necessary for us to recognize an impairment charge for the value of the production tooling because its costs may not be recovered through production of saleable product, which could adversely affect our financial condition.

Our operating results may be adversely affected by unfavorable economic conditions that affect our customers’ ability to buy our products and could affect our relationships with our suppliers.

Disruptions in financial markets worldwide and other worldwide macro-economic challenges may cause our customers and suppliers to experience cash flow concerns.

If job losses and the resulting loss of health insurance and personal savings cause individuals to forgo or postpone treatment, the resulting decreased hospital use could affect the demand for our products.

As a result, customers may modify, delay or cancel plans to purchase our products and suppliers may increase their prices, reduce their output or change terms of sales.

Additionally, if customers’ or suppliers’ operating and financial performance deteriorates, or if they are unable to make scheduled payments or obtain credit, customers may not be able to pay, or may delay payment of, accounts receivable owed to us and suppliers may impose different payment terms.

Any inability of current and/or potential customers to pay us for our products or any demands by suppliers for different payment terms may adversely affect our earnings and cash flow.

We also are adding additional IV Solutions capacity as we transition certain product lines to our Austin manufacturing facility from Rocky Mount.

If we do not achieve significant sales of these new/transitioned products, it might be necessary for us to recognize an impairment charge for the value of the production tooling because its costs may not be recovered through production of saleable product, which could adversely affect our financial condition.

Continuing pressures to reduce healthcare costs and inadequate coverage and reimbursement may adversely affect our prices.

If we cannot reduce manufacturing costs of existing and new products, our sales may not grow and our profitability may decline.

Increasing awareness of healthcare costs, public interest in healthcare reform and continuing pressure from Medicare, Medicaid, group purchasing organizations and other payers, both domestic and international, to reduce costs in the healthcare industry, as well as increasing competition from other protective products, could make it more difficult for us to sell our products at current prices.

Increasing awareness of healthcare costs, public interest in healthcare reform and continuing pressure from Medicare, Medicaid, group purchasing organizations and other payors, both domestic and international, to reduce costs in the healthcare industry, as well as increasing competition from other protective products, could make it more difficult for us to sell our products at current prices.

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 customers purchase and the prices they are willing to pay.

Because there is often no separate reimbursement for supplies used in surgical procedures, the additional cost associated with the use of our products can affect the profit margin of the hospital or surgery center where the procedure is performed.

procedure is performed.

Some of our target customers may be unwilling to adopt our products in light of the additional associated cost.

1 unchanged sentence

If we are forced to lower the price we charge for our products, our gross margins will decrease, which could have a material adverse effect on our business, financial condition and results of operations and impair our ability to grow our business.

Third-party payors, whether foreign or domestic, or governmental or commercial, are developing increasingly

sophisticated methods of controlling healthcare costs.

In addition, no uniform policy of coverage and reimbursement

for procedures using our products exists among third-party payors.

Third-party payors are developing increasingly sophisticated methods of controlling healthcare costs.

In addition, no uniform policy of coverage and reimbursement for procedures using our products exists among third-party payors.

Therefore, coverage and reimbursement for procedures using our products can differ significantly from payor to payor.

3 unchanged sentences

Further, we believe that future coverage and reimbursement may be subject to increased restrictions, such as

additional prior authorization requirements, both in the U.S.

and in international markets.

or international markets, which could have an adverse effect on our business, financial condition and results of operations and impair our ability to grow our business.

additional prior authorization requirements.

Third-party coverage and reimbursement for procedures using our products or any of our products in development for which we may receive regulatory approval may not be available or adequate, which could have an adverse effect on our business, financial condition and results of operations and impair our ability to grow our business.

Implementation of further legislative or administrative reforms in the reimbursement system in the U.S.

2 unchanged sentences

We believe that our ability to increase our market share and operate profitably in the long term may depend in part on our ability to reduce manufacturing costs on a per unit basis through high volume production using highly automated molding and assembly systems.

If we are unable to reduce unit manufacturing costs, we may be unable to increase our market share for Clave products or may lose market share to alternative products, including competitors’ products.

Similarly, if we cannot reduce unit manufacturing costs of new products as production volumes increase,

we may not be able to sell new products profitably or gain any meaningful market share.

If we are unable to reduce unit manufacturing costs, we may be unable to increase our market share for our products or may lose market share to alternative products, including competitors’ products.

Similarly, if we cannot reduce unit manufacturing costs of new products as production volumes increase, we may not be able to sell new products profitably or gain any meaningful market share.

Any of these results would adversely affect our future results of operations.

We are subject to foreign, federal, and state data privacy and security laws, and failure to protect our information systems against security breaches, service interruptions, or misappropriation of data could disrupt operations, compromise sensitive data, and expose us to liability, possibly causing our business and reputation to suffer.

Failure to protect our information systems against security breaches, service interruptions, or misappropriation of data could disrupt operations, compromise sensitive data, and expose us to liability, possibly causing our business and reputation to suffer.

We depend heavily on information technology infrastructure and systems to achieve our business objectives.

2 unchanged sentences

Further, as cyber security related incidents continue to evolve, and regulatory focus on these issues continues to expand, additional investment in protective measures, and vulnerability remediation, may be required.

We are also subject to various federal, state and foreign laws that protect the confidentiality of certain patient health information, including patient medical records, and restrict the use and disclosure of patient health information by healthcare providers, such as the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (“HITECH”), in the U.S.

HIPAA established uniform standards governing the conduct of certain electronic healthcare transactions and requires certain entities, called covered entities, to comply with standards that include the privacy and security of protected health information ("PHI").

HIPAA also requires business associates, such as independent contractors or agents of covered entities that have access to PHI in connection with providing a service to or on behalf of a covered entity, of covered entities to enter into business associate agreements with the covered entity and to safeguard the covered entity’s PHI against improper use and disclosure.

The HIPAA privacy regulations cover the use and disclosure of PHI by covered entities as well as business associates, which are defined to include subcontractors that create, receive, maintain, or transmit PHI on behalf of a business associate.

They also set forth certain rights that an individual has with respect to his or her PHI maintained by a covered entity, including the right to access or amend certain records containing PHI, or to request restrictions on the use or disclosure of PHI.

The security regulations establish requirements for safeguarding the confidentiality, integrity, and availability of PHI that is electronically transmitted or electronically stored.

HITECH, among other things, established certain health information security breach notification requirements.

A covered entity must notify any individual whose PHI is breached according to the specifications set forth in the breach notification rule.

The HIPAA privacy and security regulations establish a uniform federal “floor” and do not supersede state laws that are more stringent or provide individuals with greater rights with respect to the privacy or security of, and access to, their records containing PHI or insofar as such state laws apply to personal information that is broader in scope than PHI as defined under HIPAA.

Similarly, we may be subject to additional federal privacy laws such as Section 5 of the Federal Trade Commission Act.

HIPAA requires the notification of patients, and other compliance actions, in the event of a breach of unsecured PHI.

If notification to patients of a breach is required, such notification must be provided without unreasonable delay and in no event later than 60 calendar days after discovery of the breach.

In addition, if the PHI of 500 or more individuals is improperly used or disclosed, we would be required to report the improper use or disclosure to the U.S.

Department of Health and Human Services ("HHS") which would post the violation on its website, and to the media.

HIPAA authorizes state attorneys general to file suit on behalf of their residents for violations.

Courts are able to award damages, costs and attorneys’ fees related to violations of HIPAA in such cases.

While HIPAA does not create a private right of action allowing individuals to file suit against us in civil court for violations of HIPAA, its standards have been used as the basis for duty of care cases in state civil suits such as those for negligence or recklessness in the misuse or breach of PHI.

In addition, HIPAA mandates that the Secretary of HHS conduct periodic compliance audits of HIPAA covered entities, and their business associates for compliance with the HIPAA privacy and security standards.

It also tasks HHS with establishing a methodology whereby harmed individuals who were the victims of breaches of unsecured PHI may receive a percentage of the civil monetary penalty paid by the violator.

In Europe the General Data Protection Regulation ("GDPR") became applicable on May 25, 2018, replacing the prior data protection laws issued by each EU member state based on the Directive 95/46/EC.

Unlike the Directive (which needed to be transposed at national level), the GDPR text is directly applicable in each EU member state, resulting in a more uniform application of data privacy laws across the EU.

The GDPR imposes onerous accountability obligations requiring data controllers and processors to maintain a record of their data processing and policies.

It requires data controllers to be transparent and disclose to data subjects (in a concise, intelligible and easily accessible form) how their personal information is

to be used, imposes limitations on retention of information, increases requirements pertaining to pseudonymized (i.e., key-coded) data, introduces mandatory data breach notification requirements and sets higher standards for data controllers to demonstrate that they have obtained valid consent for certain data processing activities.

Fines for non-compliance with the GDPR are significant-the greater of EUR 20 million or 4% of global turnover.

The GDPR provides that EU member states may introduce further conditions, including limitations, to the processing of genetic, biometric or health data, which could limit our ability to collect, use and share personal data, or could cause our compliance costs to increase, ultimately having an adverse impact on our business.

We are subject to the supervision of local data protection authorities in those jurisdictions where we are established or otherwise subject to applicable law.

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

It remains unclear how the United Kingdom data protection laws or regulations will develop in the medium to longer term and how data transfer to the United Kingdom from the EU will be regulated, especially following the United Kingdom's departure from the EU on January 31, 2020 without a deal.

However, the United Kingdom has transposed the GDPR into domestic law with the Data Protection Act 2018, which remains in force following the United Kingdom's departure from the EU.

The California legislature passed the California Consumer Privacy Act of 2018 (the "CCPA") on June 28, 2018, which went into effect on January 1, 2020.

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

The CCPA establishes several consumer rights including a right to know what personal information is being collected about them and whether and to whom it is sold, a right to access their personal information and have it deleted, a right to opt out of the sale of their personal information, and a right to equal service and price regardless of exercise of these rights.

Violation of the CCPA can result in civil penalties through enforcement by the California Attorney General (effective July 1, 2020) or a private right of action by consumers following a data breach (effective January 1, 2020).

The law includes specific exemptions for entities and information covered by HIPAA or the Confidentiality of Medical Information Act (CMIA).

However, not all personal information maintained by entities covered by HIPAA or CMIA is exempt from the CCPA.

Congress may also pass a law to pre-empt all or part of the CCPA.

As passed, the effects of the CCPA potentially are significant, however, and may require us to modify our data collection or processing practices and policies and to incur substantial costs and expenses in an effort to comply.

Implementing regulations from the Attorney General that may clarify the CCPA are not due until July 1, 2020 and additional amendments to the CCPA may be signed into law before then.

Our ability to execute our business strategy depends, in part, on the continued and uninterrupted performance of our information technology systems, which support our operations.

5 unchanged sentences

Any such security breach may compromise information stored on our networks and may result in significant data losses or theft of personally identifiable information.

Any compromise of our security could result in a violation of applicable security, privacy or data protection, consumer and other laws, regulatory or other governmental investigations, enforcement actions, and legal and financial exposure, including potential contractual liability.

Any compromise of our security could result in a violation of applicable security, privacy

or data protection, consumer and other laws, regulatory or other governmental investigations, enforcement actions, and legal and financial exposure, including potential contractual liability.

A number of proposed and enacted federal, state and international laws and regulations obligate companies to notify individuals of security breaches involving particular personally identifiable information, which could result from breaches experienced by us or by third parties, including collaborators, vendors, contractors or other organizations with which we expect to form strategic relationships.

2 unchanged sentences

Any of these effects could materially and adversely affect our business, financial condition and results of operations.

Failure to comply with any of these laws or to protect our information systems against security breaches, service interruptions, or misappropriation of data could disrupt operations, compromise sensitive data, and expose us to fines, penalties, other liability, and reputational harm, any of which could adversely affect our ability to operate our business and our financial results.

Changes in and failures to comply with foreign, federal, and state data privacy and security laws, regulations and standards may adversely affect our business, operations and financial performance.

We are subject to various federal, state and foreign laws that govern the collection, use, disclosure, retention and security of personal information, including patient health information.

The global data protection landscape is rapidly evolving, and implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future.

This evolution may create uncertainty in our business, affect our or our collaborators’, service providers’ and contractors’ ability to operate in certain jurisdictions or to collect, store, transfer use and share personal information, necessitate the acceptance of more onerous obligations in our contracts, result in liability or impose additional costs on us.

In the United States, numerous federal and state laws and regulations could apply to our operations or the operations of our partners, including state data breach notification laws, state health information privacy laws, and federal and state consumer protection laws and regulations (e.g.

Section 5 of the FTC Act), that govern the collection, use, disclosure, and protection of health-related and other personal information.

For example, the privacy, security and breach notification rules promulgated under the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (“HITECH”) establish a set of national privacy and security standards for the protection of protected health information (“PHI”) by health plans, health care clearinghouses and certain health care providers, called covered entities, and the business associates with whom such covered entities contract for services that involve creating, receiving, maintaining or transmitting PHI.

HIPAA also requires covered entities to provide individuals with certain rights with respect to their PHI, and requires covered entities to enter into a written business associate contract or other arrangement with the business associate that establishes specifically what the business associate has been engaged to do and requires the business associate to comply with the requirements of HIPAA.

HIPAA requires the notification of patients, and other compliance actions, in the event of a breach of unsecured PHI.

If notification to patients of a breach is required, such notification must be provided without unreasonable delay and in no event later than 60 calendar days after discovery of the breach.

In addition, if the PHI of 500 or more individuals is improperly used or disclosed, we would be required to report the improper use or disclosure to the U.S.

Department of Health and Human Services ("HHS") which would post the violation on its website, and to the media.

Penalties for failure to comply with a requirement of HIPAA vary significantly depending on the nature of violation and could include civil monetary or criminal penalties.

HIPAA authorizes state attorneys general to file suit on behalf of their residents for violations.

Courts are able to award damages, costs and attorneys’ fees related to violations of HIPAA in such cases.

Certain states have also adopted privacy and security laws and regulations, some of which may be more stringent than HIPAA.

Such laws and regulations will be subject to interpretation by various courts and other governmental authorities, thus creating potentially complex compliance issues for us and our future customers and strategic partners.

For example, California enacted the California Consumer Privacy Act of 2018 (the "CCPA") went into effect on January 1, 2020.

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.

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.

Foreign data protection laws, including the EU General Data Protection Regulation (the “GDPR”), which became effective in May 2018, and EU and EEA member state data protection legislation, may also apply to health-related and other personal data obtained outside of the United States.

The GDPR imposes strict requirements for processing the personal data of individuals within the EEA.

The GDPR has and will continue to increase compliance burdens on us, including by mandating potentially burdensome documentation requirements and granting certain rights to individuals to control how we collect, use, disclose, retain and process data about them.

Fines for non-compliance with the GDPR are significant-the greater of €20 million or 4% of global turnover.

The GDPR provides that EU and EEA member states may impose further obligations relating to the processing of genetic, biometric or health data, which could limit our ability to collect, use and share personal data, or could cause our compliance costs to increase, ultimately having an adverse impact on our business.

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.

Further, following the United Kingdom’s withdrawal from the EEA and the EU, and the expiry of the transition period, companies have to comply with the GDPR and the GDPR as incorporated into United Kingdom national law, the latter regime having the ability to separately fine up to the greater of £17.5 million or 4% of global turnover.

The relationship between the United Kingdom and the European Union in relation to certain aspects of data protection law remains unclear, for example around how data can lawfully be transferred between each jurisdiction, which may expose us to further compliance risk.

If we cannot obtain additional custom tooling and equipment on a timely basis to enable us to meet demand for our products, we might be unable to increase our sales or might lose customers, in which case our sales could decline.

21 unchanged sentences

From January 2018 through December 2020, our trading price ranged from a high of $321.70 per share to a low of $148.89 per share.

We believe that factors such as quarter-to-quarter fluctuations in financial results, differences between stock analysts’ expectations and actual quarterly and annual results, new product introductions by us or our competitors, acquisitions or divestitures, changing regulatory environments, litigation, changes in healthcare reimbursement policies, sales or the perception in the market of possible sales of common stock by insiders, market rumors and substantial product orders could contribute to the volatility in the price of our common stock.

General economic trends unrelated to our performance such as recessionary cycles, changing interest and tax rates may also adversely affect the market price of our common stock;

the recent macroeconomic downturn could depress our stock price for some time.

We believe that factors such as quarter-to-quarter fluctuations in financial results, differences between stock analysts’ expectations and actual quarterly and annual results, new product introductions by us or our competitors, acquisitions or divestitures, changing regulatory environments, litigation, changes in healthcare reimbursement policies, sales or the perception in the market of possible sales of common stock by insiders, market rumors, general economic trends (including the COVID-19 pandemic) and substantial product orders could contribute to the volatility in the price of our common stock.

Most of our common stock is held by, or included in accounts managed by, institutional investors or managers.

1 unchanged sentence

If one or more of the institutions or if our other large stockholders should decide to reduce or eliminate their position in our common stock, it could cause a significant decrease in the price of our common stock.

Changes in funding for the FDA and other government agencies could hinder their ability to hire and retain key leadership and other personnel, or otherwise prevent new products and services from being developed or commercialized in a timely manner, which could negatively impact our business.

Disruptions at the FDA and other government agencies caused by funding shortages or global health concerns could hinder their ability to hire and retain key leadership and other personnel, or otherwise prevent new products and services from being developed or commercialized in a timely manner, which could negatively impact our business.

The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy changes.

1 unchanged sentence

In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.

Disruptions at the FDA and other agencies may also slow the time necessary for new products to be reviewed and/or approved by necessary government agencies, which would adversely affect our business.

Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would adversely affect our business.

For example, over the last several years, including for 35 days beginning on December 22, 2018, the U.S.

1 unchanged sentence

If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

Separately, in response to the COVID-19 pandemic, on March 10, 2020, the FDA announced its intention to postpone most foreign inspections of manufacturing facilities and products through April 2020, and subsequently, on March 18, 2020, the FDA temporarily postponed routine surveillance inspections of domestic manufacturing facilities.

Subsequently, on July 10, 2020 the FDA announced its intention to resume certain on-site inspections of domestic manufacturing facilities subject to a risk-based prioritization system.

The FDA intends to use this risk-based assessment system to identify the categories of regulatory activity that can occur within a given geographic area, ranging from mission critical inspections to resumption of all regulatory activities.

Regulatory authorities outside the United States may adopt similar restrictions or other policy measures in response to the COVID-19 pandemic.

If a prolonged government shutdown occurs, or if global health concerns continue to prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA or other regulatory authorities to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

Legal, Compliance, and Regulatory Risks

We are subject to certain federal, state and foreign fraud and abuse and transparency laws, which, if violated, could subject us to substantial penalties.

We are subject to certain fraud and abuse and transparency laws, which, if violated, could subject us to substantial penalties.

Additionally, any challenge to or investigation into our practices under these laws could cause adverse publicity and be costly to respond to, and thus could harm our business.

4 unchanged sentences

• the federal Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce either the referral of an individual or furnishing or arranging for a good or service, for which payment may be made, in whole or in part, under federal healthcare programs, such as Medicare and Medicaid.

A person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation.

A person or entity does not need

to have actual knowledge of the statute or specific intent to violate it to have committed a violation.

government has interpreted this law broadly to apply to the marketing and sales activities of manufacturers;

Moreover, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act.

Violations of the federal Anti-Kickback Statute may result in significant civil monetary penalties, plus up to three times the remuneration involved.

Civil penalties for such conduct can further be assessed under the federal False Claims Act.

Violations can also result in criminal penalties, including additional fines and/or imprisonment of up to 10 years.

Similarly, violations can result in exclusion from participation in government healthcare programs, including Medicare and Medicaid;

• the federal civil and criminal false claims laws, including the federal civil False Claims Act, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid or other federal healthcare programs that are false or fraudulent.

These laws can apply to manufacturers who provide information on coverage, coding, and reimbursement of their products to persons who bill third-party payers.

These laws can apply to manufacturers who provide information on coverage, coding, and reimbursement of their products to persons who bill third-party payors.

Private individuals can bring False Claims Act “qui tam” actions, on behalf of the government and such individuals, commonly known as “whistleblowers,” may share in amounts paid by the entity to the government in fines or settlement.

When an entity is determined to have violated the federal civil False Claims Act, the government may impose civil fines and penalties for each false claim, plus treble damages, and exclude the entity from participation in Medicare, Medicaid and other federal healthcare programs;

• the federal Civil Monetary Penalties Law, which prohibits, among other things, offering or transferring remuneration to a federal healthcare beneficiary that a person knows or should know is likely to influence the beneficiary’s decision to order or receive items or services reimbursable by the government from a particular provider or supplier;

the federal Physician Sunshine Act under the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, collectively referred to as the Affordable Care Act, which require certain applicable manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program ("CHIP") to report annually to the US Department of Health and Human Services Centers for Medicare and Medicaid Services ("CMS") information related to payments and other transfers of value to physicians, certain other healthcare providers beginning in 2022, and teaching hospitals, and applicable manufacturers and group purchasing organizations, to report annually ownership and investment interests held by physicians and their immediate family members.

• the federal Physician Sunshine Act, which require certain applicable manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program ("CHIP") to report annually to the US Department of Health and Human Services Centers for Medicare and Medicaid Services ("CMS") information related to payments and other transfers of value to physicians, certain other healthcare providers beginning in 2022, and teaching hospitals, and applicable manufacturers and group purchasing organizations, to report annually ownership and investment interests held by physicians and their immediate family members.

Applicable manufacturers are required to submit annual reports to CMS;

Failure to submit required information may result in significant civil monetary penalties for any payments, transfers of value or ownership or investment interests that are not timely, accurately, and completely reported in an annual submission, and may result in liability under other federal laws or regulations;

• HIPAA, which created additional federal criminal statutes that prohibit, among other things, executing a scheme to defraud any healthcare benefit program and making false statements relating to healthcare matters.

17 unchanged sentences

There have been, and we expect there will continue to be, a number of legislative and regulatory changes to the healthcare system that could affect our future revenues and profitability in the U.S.

Federal and state lawmakers regularly propose and, at times, enact legislation that results in significant changes to the healthcare system, some of which are intended to contain or reduce the costs of medical products and services.

Federal and state lawmakers regularly propose and, at times, enact legislation that

results in significant changes to the healthcare system, some of which are intended to contain or reduce the costs of medical products and services.

For example, in 2010, the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act (“Affordable Care Act”) were signed into law introducing comprehensive health insurance and healthcare reforms in the U.S.

Among the provisions of such legislation that may have an adverse impact on us was a 2.3% excise tax imposed on medical device manufacturers for the sale of certain medical devices to U.S.

customers, which, due to subsequent legislative amendments, was suspended, effective January 1, 2016, and subsequently repealed altogether, effective January 1, 2020.

The Affordable Care Act also 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.

The Affordable Care Act, 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.

Additionally, the Affordable Care Act has expanded eligibility criteria for Medicaid programs and created a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research.

5 unchanged sentences

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 and our business.

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 in the U.S.

since the Affordable Care Act was enacted that reduced payments to Medicare providers.

On August 2, 2011, the Budget Control Act of 2011 was signed into law, which, among other things, reduced Medicare payments to providers by 2% per fiscal year, effective on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain 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, reduced Medicare payments to providers by 2% per fiscal year, effective on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain 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, reduced Medicare payments to several providers, including hospitals, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

We anticipate there will continue to be proposals by legislators at both the federal and state levels, regulators and commercial payers to reduce costs while expanding individual healthcare benefits.

The ultimate implementation of any healthcare reform legislation and any new laws and regulations, and its impact on us, is impossible to predict.

We anticipate there will continue to be proposals by legislators at both the federal and state levels, regulators and commercial payors to reduce costs while expanding individual healthcare benefits.

The ultimate implementation of any healthcare reform legislation and any new laws and regulations, and its impact on us, is impossible to predict, particularly in light of the new presidential administration.

Any significant reforms made to the healthcare system in the U.S., or in other jurisdictions, may have an adverse effect on our financial condition and results of operations.

1 unchanged sentence

We rely on a combination of patents, trademarks, copyrights, trade secrets, business methods, software and nondisclosure agreements to protect our proprietary intellectual property.

Our efforts to protect our intellectual proprietary and proprietary rights may not be sufficient.

Our efforts to protect our intellectual and proprietary rights may not be sufficient.

Further, there is no assurance that patents pending will issue or that the protection from patents which have issued or may issue in the future will be broad enough to prevent competitors from introducing similar devices, that such patents, if challenged, will be upheld by the courts or that we will be able to prove infringement and damages in litigation.

1 unchanged sentence

The loss of patent protection on certain features of our products may make it possible for others to manufacture and sell products with features identical or similar to ours, which could adversely affect our business.

As a result of this possible increase in competition, we may need to reduce our prices to maintain sales of our products, which would make them less profitable.

If we fail to develop and successfully launch new products prior to the expiration of patents for our existing products, our sales and profits with respect to those products could decline significantly.

5 unchanged sentences

We may also face claims in the future.

Any adverse determination on these claims related to our products, if any, could have a material adverse effect on our business.

Additionally, there has been substantial litigation regarding patent and other intellectual property rights in the medical device industry.

Patent infringement litigation, which may be necessary to enforce patents issued to us or to defend ourselves against claimed infringement of the rights of others, can be expensive and may involve a substantial commitment of our resources which may divert resources from other uses.

Adverse determinations in litigation or settlements could subject us to significant liabilities to third parties, could require us to seek licenses from third parties, could prevent us from manufacturing and selling our products or could fail to prevent competitors from manufacturing products similar to ours.

Any of these results could materially and adversely affect our business.

From time to time we become aware of newly issued patents on medical devices, which we review to evaluate any infringement risk.

1 unchanged sentence

While we believe these patents will not affect our ability to market our products, there is no assurance that these or other issued or pending patents might not interfere with our right or ability to manufacture and sell our products.

There has been substantial litigation regarding patent and other intellectual property rights in the medical device industry.

Adverse determinations in litigation or settlements could subject us to significant

liabilities to third parties, could require us to seek licenses from third parties, could prevent us from manufacturing and selling our products or could fail to prevent competitors from manufacturing products similar to ours.

Any of these results could materially and adversely affect our business.

Our ability to market our products in the U.S.

and other countries may be adversely affected if our products fail to comply with the applicable standards of the FDA and regulatory agencies in other countries.

and other countries may be adversely affected if our products fail to comply with the applicable requirements of the FDA and regulatory agencies in other countries.

We and our products are subject to extensive regulation in the United States and elsewhere, including by the FDA and its foreign counterparts.

44 unchanged sentences

We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the U.S.

For example, certain policies of the Trump Administration may impact our business and industry.

For example, the results of the 2020 Presidential election may impact our business and industry.

Namely, the Trump Administration has taken several executive actions, including the issuance of a number of Executive Orders, that could impose significant burdens on, or otherwise materially delay, FDA’s ability to engage in routine regulatory and oversight activities such as implementing statutes through rulemaking, issuance of guidance, and review and approval of marketing applications.

It is difficult to predict how these requirement will be implemented, and the extent to which they will impact the FDA’s ability to exercise its regulatory authority.

If these executive actions impose constraints on FDA’s ability to engage in oversight and implementation activities in the normal course, our business may be negatively impacted.

It is difficult to predict whether or how these requirement will be implemented, or whether they will be rescinded or replaced under a Biden Administration.

The policies and priorities of an incoming administration are unknown and could materially impact the regulation governing our products.

In addition, the FDA may change its clearance and approval policies, adopt additional regulations or revise existing regulations, or take other actions which may prevent or delay approval or clearance of our future products under development.

For example, in November 2018, FDA officials announced forthcoming steps that the FDA intends to take to modernize the premarket notification pathway under Section 510(k) of the FDC Act.

Among other things, the FDA announced that it plans to develop proposals to drive manufacturers using the 510(k) pathway toward the use of newer predicates.

These proposals include plans to potentially sunset certain older devices that were used as predicates under the 510(k) clearance pathway, and to potentially publish a list of devices that have been cleared on the basis of demonstrated substantial equivalence to predicate devices that are more than 10 years old.

The FDA also announced that it intends to finalize guidance to establish a premarket review pathway for “manufacturers of certain well-understood device types” as an alternative to the 510(k) clearance pathway and that such premarket review pathway would allow manufacturers to rely on objective safety and performance criteria recognized by the FDA to demonstrate substantial equivalence, obviating the need for manufacturers to compare the safety and performance of their medical devices to specific predicate devices in the clearance process.

These proposals have not yet been finalized or adopted, and the FDA announced that it would seek public feedback prior to publication of any such proposals, and may work with Congress to implement such proposals through legislation.

For example, in May 2019, the FDA solicited public feedback on its plans to develop proposals to drive manufacturers utilizing the 510(k) pathway toward the use of newer predicates, including whether the FDA should publish a list of devices that have been cleared on the basis of demonstrated substantial equivalence to predicate devices that are more than 10 years old.

The FDA requested public feedback on whether it should consider certain actions that might require new authority, such as whether to sunset certain older devices that were used as predicates under the 510(k) clearance pathway.

These proposals have not yet been finalized or adopted, and the FDA may work with Congress to implement such proposals through legislation.

Accordingly, it is unclear the extent to which any proposals, if adopted, could impose additional regulatory requirements on us that could delay our ability to obtain new 510(k) clearances, increase the costs of compliance, or restrict our ability to maintain our current clearances, or otherwise create competition that may negatively affect our business.

Modifications to our products may require us to obtain new clearances or approvals, and if we market modified products without obtaining necessary clearances or approvals, we may be required to cease marketing or recall the modified products until required approvals are obtained.

Certain modifications to a cleared or approved device may require a new clearance or approval, or alternatively a notification or other submission to FDA.

The FDA may not agree with our decisions regarding whether a new regulatory submission is necessary.

We may make modifications to our approved devices in the future that we believe do not require a new clearance or approval.

If the FDA disagrees with our determination and requires us to submit a new submission for modifications to our previously approved products, we may be required to cease marketing or to recall the modified product until we obtain approval, and we may be subject to significant regulatory fines or penalties.

In addition, the FDA may not clear or approve our products for the indications that are necessary or desirable for successful commercialization, or could require clinical trials to support any modifications.

Any delay or failure in obtaining required approvals would adversely affect our ability to introduce new or enhanced products in a timely manner, which in turn would harm our future growth.

More recently, in September 2019, the FDA finalized the aforementioned guidance to describe an optional “safety and performance based” premarket review pathway for manufacturers of “certain, well-understood device types” to demonstrate substantial equivalence under the 510(k) clearance pathway, by demonstrating that such device meets objective safety and performance criteria established by the FDA, obviating the need for manufacturers to compare the safety and performance of their medical devices to specific predicate devices in the clearance process.

The FDA intends to maintain a list of device types appropriate for the “safety and performance based pathway” and develop product-specific guidance documents that identify the performance criteria for each such device type, as well as the testing methods recommended in the guidance, where feasible.

The FDA may establish performance criteria for classes of devices for which we or our competitors seek or currently have received clearance, and it is unclear the extent to which such performance standards, if established, could impact our ability to obtain new 510(k) clearances or otherwise create competition that may negatively affect our business.

In addition, FDA regulations and guidance are often revised or reinterpreted by the FDA in ways that may significantly affect our business and our products.

Any new statutes, regulations or revisions or reinterpretations of existing regulations may impose additional costs or lengthen review times of any future products or make it more difficult to obtain

clearance or approval for, manufacture, market or distribute our products.

We cannot determine what effect changes in regulations, statutes, legal interpretation or policies, when and if promulgated, enacted or adopted may have on our business in the future.

Such changes could, among other things, require:

additional testing prior to obtaining clearance or approval;

changes to manufacturing methods;

recall, replacement or discontinuance of our products;

or additional record keeping.

If we or our component manufacturers fail to comply with the FDA's Quality System Regulation or Good Manufacturing Practice regulations or other requirements, our manufacturing operations could be interrupted, and our product sales and operating results could suffer.

4 unchanged sentences

Although we believe our manufacturing facilities and those of our critical component suppliers are in compliance with the QSR requirements, and with applicable cGMPs for our products, we cannot provide assurance that any future inspection will not result in adverse findings.

If our manufacturing facilities or those of any of our component suppliers

are found to be in violation of applicable laws and regulations, or we or our suppliers have significant noncompliance issues or fail to timely and adequately respond to any adverse inspectional observations or product safety issues, or if any corrective action plan that we or our suppliers propose in response to observed deficiencies is not sufficient, the FDA could take enforcement action, including any of the following sanctions:

If our manufacturing facilities or those of any of our component suppliers are found to be in violation of applicable laws and regulations, or we or our suppliers have significant noncompliance issues or fail to timely and adequately respond to any adverse inspectional observations or product safety issues, or if any corrective action plan that we or our suppliers propose in response to observed deficiencies is not sufficient, the FDA could take enforcement action, including any of the following sanctions:

• untitled letters or warning letters;

17 unchanged sentences

Unlike directives, which must be implemented into the national laws of the European Economic Area member States (the “EEA member States”), the regulations would be directly applicable, i.e., without the need for adoption of EEA member State laws implementing them, in all EEA member States and are intended to eliminate current differences in the regulation of medical devices among EEA member States.

The Medical Devices Regulation will become applicable three years after publication (in May 2020).

The Medical Devices Regulation became effective May 26, 2020.

The Medical Devices Regulation among other things does the following.

The Medical Devices Regulation was meant to become applicable three years after publication (in May 2020).

However, on April 23, 2020, to take the pressure off EEA national authorities, notified bodies, manufacturers and other parties so they can focus fully on urgent priorities related to the COVID-19 pandemic, the European Council and Parliament adopted Regulation 2020/561, postponing the date of application of the Medical Devices Regulation by one year (to May 2021).

Once applicable, the Medical Devices Regulation will among other things:

9 unchanged sentences

We train our marketing personnel and direct sales force to not promote our products for uses outside of the FDA-cleared or approved indications for use, known as “off-label uses.” We cannot, however, prevent a physician from using our products off-label, when in the physician’s independent professional medical judgment he or she deems it appropriate.

There may be increased risk of injury to patients if

physicians attempt to use our products off-label.

There may be increased risk of injury to patients if physicians attempt to use our products off-label.

Furthermore, the use of our products for indications other than those cleared or approved by the FDA or approved by any foreign regulatory body may not effectively treat such conditions, which could harm our reputation in the marketplace among physicians and patients.

If the FDA or any foreign regulatory body determines that our promotional materials or training constitute promotion of an off-label use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcement actions, including the issuance or imposition of an untitled letter, which is used for violators that do not necessitate a warning letter, injunction, seizure, civil fine or criminal penalties.

It is also possible that other federal, state or foreign enforcement authorities might take action under other regulatory authority, such as false claims laws, if they consider our business activities to constitute promotion of an off-label use, which could result in significant penalties, including, but not limited to, criminal, civil and administrative penalties, damages, fines, disgorgement, exclusion from participation in government healthcare programs and the curtailment of our operations.

It is also possible that enforcement authorities might take action under other regulatory authority, such as false claims laws, if they consider our business activities to constitute promotion of an off-label use, which could result in significant penalties, including, but not limited to, criminal, civil and administrative penalties, damages, fines, disgorgement, exclusion from participation in government healthcare programs and the curtailment of our operations.

In addition, physicians may misuse our products or use improper techniques if they are not adequately trained, potentially leading to injury and an increased risk of product liability.

If our products are misused or used with improper technique, we may become subject to costly litigation by our customers or their patients.

As described above, product liability claims could divert management’s attention from our core business, be expensive to defend and result in sizeable damage awards against us that may not be covered by insurance.

Product liability claims could be costly to defend and could expose us to loss.

Litigation, product liability claims or product recalls could be costly and could expose us to loss.

The use of our products exposes us to an inherent risk of product liability.

The medical device industry has historically been subject to extensive litigation over product liability claims, and we cannot offer any assurance that we will not face product liability suits.

Further, the medical device industry has historically been subject to extensive litigation and we cannot offer any assurance that we will not face product liability or other suits in the future.

Patients, healthcare workers, healthcare providers or others who claim that our products have resulted in injury could initiate product liability litigation seeking large damage awards against us.

1 unchanged sentence

We maintain insurance against product liability and defense costs in the amount of $40,000,000 per occurrence.

There is no assurance that we will successfully defend claims, if any, arising with respect to products or that the insurance we carry will be sufficient.

A successful claim against us in excess of insurance coverage could materially and adversely affect us, and result in substantial liabilities and reputational harm.

Furthermore, there is no assurance that product liability insurance will continue to be available to us on acceptable terms.

In addition, regardless of merit or eventual outcome, product liability claims may result in:

costs of litigation;

distraction of management’s attention from our primary business;

the inability to commercialize our existing or new products;

decreased demand for our products or, if cleared or approved, products in development;

damage to our business reputation;

product recalls or withdrawals from the market;

withdrawal of clinical trial participants;

substantial monetary awards to patients or other claimants;

loss of revenue.

While we may attempt to manage our product liability exposure by proactively recalling or withdrawing from the market any defective products, any recall or market withdrawal of our products may delay the supply of those products to our customers and may impact our reputation.

However, legal proceedings are inherently unpredictable, and the outcome can result in judgments that affect how we operate our business, or we may enter into settlements of claims for monetary damages that exceed our insurance coverage, if any is available.

A successful claim against us in excess of insurance coverage could materially and adversely affect us, and result in substantial liabilities and reputational harm including product recalls or withdrawals from the market, withdrawal of clinical trial participants, the inability to commercialize our existing or new products, distraction of management’s attention from our primary business or decreased demand for our products or, if cleared or approved, products in development.

customers and may impact our reputation.

We can provide no assurance that we will be successful in initiating appropriate market recall or market withdrawal efforts that may be required in the future or that these efforts will have the intended effect of preventing product malfunctions and the accompanying product liability that may result.

Such recalls and withdrawals may also be used by our competitors to harm our reputation for safety or be perceived by patients as a safety risk when considering the use of our products, either of which could have a material adverse effect on our business, financial condition and results of operations.

We may incur costs or losses relating to other litigation.

We may from time to time be involved in litigation.

Legal proceedings are inherently unpredictable, and the outcome can result in judgments that affect how we operate our business, or we may enter into settlements of claims for monetary damages that exceed our insurance coverage, if any is available.

Any such proceedings, regardless of merits, may result in substantial costs, the diversion of management's attention from other business concerns and additional restrictions on our business, which could disrupt our business and have an adverse effect on our financial condition.

Additionally, we generally offer a limited warranty for product returns which are due to defects in quality and workmanship.

We attempt to estimate our potential liability for future product returns and establish reserves on our financial statements in amounts that we believe will be sufficient to address our warranty obligations;

however, our actual liability for product returns may significantly exceed the amount of our reserves.

If we underestimate our potential liability for future product returns, or if unanticipated events result in returns that exceed our historical experience, our financial condition and operating results could be materially and adversely affected.

Our products may cause or contribute to adverse medical events or be subject to failures or malfunctions that we are required to report to the FDA, and if we fail to do so, we would be subject to sanctions that could harm our reputation, business, financial condition and results of operations.

18 unchanged sentences

Any corrective action, whether voluntary or involuntary, as well as defending ourselves in a lawsuit, will require the dedication of our time and capital, distract management from operating our business and may harm our reputation and financial results.

We may be required to implement a costly product recall.

In the event that any of our products proves to be defective, we can voluntarily recall, or the FDA or other regulatory agencies could require us to redesign or implement a recall of, any of our products.

We believe that any recall could result in significant costs to us and significant adverse publicity, which could harm our ability to market our products in the future.

Though it may not be possible to quantify the economic impact of a recall, it could have a material adverse effect on our business, financial condition and results of operations.

We generally offer a limited warranty for product returns which are due to defects in quality and workmanship.

however, our actual liability for product returns may significantly exceed the amount of our reserves.

Geographic Risks

We are subject to risks associated with doing business outside of the U.S.

We operate in a global market and global operations are subject to a number of risks.

Sales to customers outside of the U.S.

made up approximately 27% of our revenue in 2019 and as our operations and sales located in Europe and other areas outside the U.S.

increase, we may face new challenges and uncertainties, although we can give no assurance that such operations and sales will increase.

Additionally, following a national referendum and enactment of legislation by the government of the United Kingdom, the United Kingdom formally withdrew from the EU on January 31, 2020 and entered into a transition period during which it will continue its ongoing and complex negotiations with the EU relating to the future trading relationship between the parties.

Significant political and economic uncertainty remains about whether the terms of the relationship will differ materially from the terms before withdrawal, as well as about the possibility that a so-called “no deal” separation will occur if negotiations are not completed by the end of the transition period.

These developments, or the perception that any of them could occur, have had and may continue to have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global market liquidity, restrict the ability of key market participants to operate in certain financial markets or restrict our access to capital.

In addition, the withdrawal could, among other things, affect the legal and regulatory environments to which our businesses are subject, impact trade between the United Kingdom and the EU and other parties and create economic and political uncertainty in the region.

The risks associated with our operations outside the U.S.

also include:

healthcare reform legislation;

changes in medical reimbursement policies and programs;

changes in non-U.S.

government programs;

multiple non-U.S.

regulatory requirements that are subject to change and that could restrict our ability to manufacture and sell our products;

possible failure to comply with anti-bribery laws such as the U.S.

Foreign Corrupt Practices Act and similar anti-bribery laws in other jurisdictions;

different local medical practices, product preferences and product requirements;

possible failure to comply with trade protection and restriction measures and import or export licensing requirements;

difficulty in establishing, staffing and managing non-U.S.

different labor regulations or work stoppages or strikes;

changes in environmental, health and safety laws;

potentially negative consequences from changes in or interpretations of tax laws, including changes regarding taxation of income earned outside the U.S.;

political instability and actual or anticipated military or political conflicts;

economic instability, including the European financial crisis or other economic instability in other parts of the world and the impact on interest rates, inflation and the credit worthiness of our customers;

uncertainties regarding judicial systems and procedures;

minimal or diminished protection of intellectual property in some countries;

natural disasters or outbreak of diseases;

imposition of government controls;

regulatory changes that may place our products at a disadvantage.

These risks, individually or in the aggregate, could have an adverse effect on our results of operations and financial condition.

The occurrence or allegation of these types of risks may adversely affect our business, performance, prospects, value, financial condition, and results of operations.

Any significant changes in U.S.

9 unchanged sentences

on a broader range of imports, or further retaliatory trade measures taken by other countries in response, could prevent or make it difficult for us to obtain the components needed for new products which would affect our sales.

Increased tariffs would require us to increase our prices which likely would decrease customer and consumer demand for our

Increased tariffs would require us to increase our prices which likely would decrease customer and consumer demand for our products.

Additionally, we are subject to income taxes in the United States and numerous foreign jurisdictions.

36 unchanged sentences

Changes in exchange rates may adversely affect our results of operations.

Our primary foreign currency exchange rate exposures are currently with the Euro, Mexican Peso, Costa Rican Colón, and the Canadian Dollar against the U.S.

Our primary foreign currency exchange rate exposures are currently with the Euro, Mexican Peso, Costa Rican

Colón, and the Canadian Dollar against the U.S.

Disruptions in the financial markets, including the impact of the United Kingdom’s withdrawal from the EU, could also, among other things, create volatility in currency exchange rates.

We currently do not hedge against our foreign currency exchange rate risks, other than the Mexican Peso and therefore believe our exposure to these risks may be higher than if we entered into hedging transactions, including forward exchange contracts or similar instruments.

We currently do not hedge against our foreign currency exchange rate risks, other than certain exposures related to the Mexican Peso and therefore believe our exposure to these risks may be higher than if we entered into hedging transactions, including forward exchange contracts or similar instruments.

If we decide in the future to enter into forward foreign exchange contracts to attempt to reduce the risk related to foreign currency exchange rates, these contracts may not mitigate the potential adverse impact on our financial results due to the limitations and difficulty forecasting future activity.

In addition, these types of contracts may themselves cause financial harm to us and have inherent levels of counter-party risk over which we would have no control.

During 2020, primarily during the first quarter, we recorded $7.2 million in foreign exchange losses due to the volatility of foreign exchange rates as a result of declining economic conditions caused by the COVID-19 pandemic.

We could be adversely affected by violations of the U.S.

5 unchanged sentences

Violations of these laws, or allegations of such violations, could have a material adverse effect on our business, financial position and results of operations.

Risks Related to our Strategic Transactions

We have and may continue to acquire businesses, form strategic alliances or make investments in businesses or technologies that could adversely impact our business and our operating results and such transactions could result in unforeseen operating difficulties, expenditures and require significant management resources, charges or write-downs.

We compete for those opportunities with others including our competitors, some of which have greater financial or operational resources than we do.

Difficulties in assimilating acquired businesses include a number of special risks in addition to the difficulty of integrating cultures and operations and the diversion of management’s attention, including adverse short-term effects on our reported operating results, dependence on retention, hiring and training of key personnel, risks associated with unanticipated problems or legal liabilities and amortization of acquired intangible assets, some or all of which could materially and adversely affect our operations and financial performance.

Integration of an acquired business also may disrupt our ongoing operations and require management resources that we would otherwise focus on developing our existing business.

For example, we acquired the HIS business in February 2017, which includes IV pumps, solutions, and devices in order to create a leading pure-play infusion therapy company.

We invested significant time and resources into the HIS integration in order to achieve the anticipated benefits of the transaction.

Our facility in Austin, Texas manufactures and supplies these products to Pfizer under the MSAs, which, for certain products, could expire as early as 2022.

The expiration of these MSAs may adversely impact our production capacity utilization of our Austin facility, which could result in unforeseen operating difficulties and may impact our profitability.

and cash flows.

We may also experience losses related to investments in other companies, which could have an adverse effect on our results of operations and financial condition.

As such, there can be no assurance that any past or future transactions will be successful.

If we are unable to effectively manage our internal growth or growth through acquisitions of companies, assets or products, our financial performance may be adversely affected.

We intend to continue to expand our marketing and distribution capability, which may include external expansion through acquisitions of companies or product lines both in the U.S.

and foreign markets.

We have additional production facilities outside the U.S.

to reduce labor costs.

Decentralization of assembly and manufacturing could place further burdens on management to manage those operations and maintain efficiencies and quality control.

The increasing burdens on our management resources and financial controls resulting from internal growth and acquisitions could adversely affect our operating results.

Failure to manage this growth could adversely effect our operations through higher manufacturing costs, declining product quality, slower responses to competitive challenges, among other things.

General Risk Factors

We are subject to risks associated with doing business outside of the U.S.

We operate in a global market and global operations are subject to a number of risks.

Sales to customers outside of the U.S.

made up approximately 28% of our revenue in 2020 and as our operations and sales located in Europe and other areas outside the U.S.

increase, we may face new challenges and uncertainties, although we can give no assurance that such operations and sales will increase.

The risks associated with our operations outside the U.S.

also include:

• economic and political uncertainty in the United Kingdom and the EU following the United Kingdom’s withdrawal from the EU on January 31, 2020;

• changes in non-U.S.

government programs;

• multiple non-U.S.

regulatory requirements that are subject to change and that could restrict our ability to manufacture and sell our products;

• different local medical practices, product preferences and product requirements;

• possible failure to comply with trade protection and restriction measures and import or export licensing requirements;

• difficulty in establishing, staffing and managing non-U.S.

• different labor regulations or work stoppages or strikes;

• political instability and actual or anticipated military or political conflicts;

• economic instability, including the European financial crisis or other economic instability in other parts of the world and the impact on interest rates, inflation and the credit worthiness of our customers;

• uncertainties regarding judicial systems and procedures;

• minimal or diminished protection of intellectual property in some countries;

• natural disasters or outbreak of diseases (including COVID-19);

• imposition of government controls.

These risks, individually or in the aggregate, could have an adverse effect on our results of operations and financial condition.

The occurrence or allegation of these types of risks may adversely affect our business, performance, prospects, value, financial condition, and results of operations.

Our operating results may be adversely affected by unfavorable economic conditions that affect our customers’ ability to buy our products and could affect our relationships with our suppliers.

Disruptions in financial markets worldwide and other worldwide macro-economic challenges may cause our customers and suppliers to experience cash flow concerns.

If job losses and the resulting loss of health insurance and personal savings cause individuals to forego or postpone treatment, the resulting decreased hospital use could affect the demand for our products.

As a result, customers may modify, delay or cancel plans to purchase our products and suppliers may increase their prices, reduce their output or change terms of sales.

Any inability of current and/or potential customers to pay us for our products or any demands by suppliers for different payment terms may adversely affect our earnings and cash flow.

UNRESOLVED STAFF COMMENTS

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 1A. Risk Factors