What changed in this filing

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Item 1A. Risk Factors

2022-02-25 compared with 2021-02-26 · 261 added, 199 removed, 411 unchanged (53% of the section changed)

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These risks include, among others, the following:

• We may not realize the anticipated benefits of the Smiths Medical Transaction, which could adversely impact our business and our operating results.

• 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.

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

Risks Related to our Strategic Transactions

We may not realize the anticipated benefits of the Smiths Medical Transaction, which could adversely impact our business and our operating results.

The Smiths Medical acquisition that closed on January 6, 2022 was a significant transaction for us and the Smiths Medical business significantly expands our global presence.

The success of our business will depend, in part, on our ability to realize our anticipated benefits, opportunities and synergies from combining the businesses of our company and the Smiths Medical business.

We can provide no assurance that the anticipated benefits of the Smiths Medical transaction will be fully realized in the time frame anticipated or at all.

Integrating the operations of the Smiths Medical business with that of our own is a complex, costly and time-consuming process and the nature of a carve out acquisition makes it inherently more difficult to assume operations on closing day as well as to integrate activities, as certain systems, processes and people may not all have transferred with the acquired business to support such activities.

The integration process may disrupt the businesses and, if implemented ineffectively, would restrict the realization of the full expected benefits.

The failure to meet the challenges involved in integrating the two businesses could cause an interruption of, or a loss of momentum in, the activities of the combined businesses and could adversely affect the results of operations of the combined businesses.

Potential difficulties that may be encountered in the integration process include the following:

• challenges in preserving important strategic customer and other third-party relationships of both businesses;

• the diversion of management’s attention to integration matters;

• challenges in maintaining employee morale and retaining or attracting key employees;

• potential incompatibility of corporate cultures;

• costs, delays and other difficulties consolidating corporate and administrative infrastructures and information systems and implementing common systems and procedures including, in particular, our internal controls over financial reporting;

• coordinating and integrating a geographically dispersed organization, including operations in jurisdictions we did not operate in prior to the Smiths Medical transaction.

Any one or all of these factors may increase operating costs or lower anticipated financial performance.

Achieving the anticipated benefits and the potential benefits underlying our reasons for the Smiths Medical business acquisition will depend on successful integration of the businesses.

Because of the significance of the Smiths Medical business acquisition to us, our failure to successfully integrate the Smiths Medical business with that of our own could have a material adverse impact on our business, financial condition and results of operations.

The Smiths Medical business acquisition has resulted in organizational change and significant growth to our business.

If we fail to effectively manage this growth and change to our business in a manner that preserves our reputation with customers and the key aspects of our corporate culture, our business, financial condition and results of operations could be harmed.

The Smiths Medical business has resulted in significant growth in our personnel and operations.

We will continue to incur significant expenditures and the allocation of management time to assimilate the Smiths Medical business employees in a manner that preserves the key aspects of our corporate culture, including a focus on strong customer satisfaction, but there can be no assurance that we will be successful in our efforts.

If we do not effectively integrate, train and manage our combined employee base and maintain strong customer relationships, our corporate culture could be undermined, the quality of our products and customer service could suffer, and our reputation could be harmed, each of which could adversely impact our business, financial condition and results of operations.

The actual impact of the Smiths Medical acquisition on our financial results may be worse than the assumptions we have used.

We have made certain assumptions relating to the impact on our financial results of the Smiths Medical acquisition.

These assumptions relate to numerous matters, including the acquisition costs, transaction and integration costs, and other financial and strategic risks of the acquisition.

If one or more of these assumptions are incorrect, it could have an adverse effect on our business and operating results, and the perceived benefits from the acquisition may not be realized.

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 recently acquired the Smiths Medical business, which

includes syringe and ambulatory infusion devices, vascular access, and vital care products, but we have significant integration efforts to achieve the anticipated benefits.

See “We may not realize the anticipated benefits of the Smiths Medical Transaction, which could adversely impact our business and our operating results.”

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.

In addition, acquisitions may involve 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.

As a result of the Smiths Medical acquisition, we have used a significant portion of our cash on hand and incurred a substantial amount of debt to finance the cash consideration portion and certain other amounts paid in connection with the Smiths Medical transaction, which could adversely affect our business, including by restricting our ability to engage in additional transactions or incur additional indebtedness.

Following the financing of the Smiths Medical acquisition transaction, we have significantly less cash, cash equivalents and investment securities on hand than the approximately $571.9 million of cash, cash equivalents and investment securities we had as of December 31, 2021.

Although our management believes that we continue to have sufficient access to cash to meet our business objectives and capital needs, we do have a decreased availability of cash, cash equivalents and investment securities and we expect to have such decreased availability of cash for a period of time following the consummation of the Smiths Medical transaction which could constrain our ability to grow our business.

In connection with the Smiths Medical transaction and the payment of the cash consideration, we entered into Senior Secured Credit Facilities (the "Senior Secured Credit Facilities") of $2.2 billion consisting of a term loan A facility of $850.0 million, a term loan B facility of $850.0 million and a revolving credit facility of $500.0 million.

As a result of the credit facilities, we incurred additional borrowing costs.

Our more leveraged financial position following the Smiths Medical transaction could make us vulnerable to general economic downturns and industry conditions, and place us at a competitive disadvantage relative to our competitors.

In the event that we do not have adequate capital to maintain or develop our business, additional capital may not be available to us on a timely basis, on favorable terms, or at all.

Moreover, our senior secured credit facilities have certain restrictions that may limit how we operate our business, including limiting our ability to engage in certain transactions and to incur additional indebtedness, and our business may be materially and adversely affected if these restrictions prevent us from implementing our business plan.

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 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.

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 and we acquired Smiths Medical in January 2022, which includes syringe and ambulatory infusion devices, vascular access, and vital care products.

We invested significant time and resources into the HIS integration in order to achieve the anticipated benefits of the transaction and we intend to do the same with the Smiths Medical integration.

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.

Business and Operating Risks

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.

Although we have risk mitigation plans in place with key suppliers, we have materials (such as resins) that are critical to our ability to manufacture our products, the supply of which is currently from a sole supplier.

We cannot be certain that our current suppliers will continue to provide us with the quantities of materials that we require or satisfy our anticipated specifications and quality requirements on a timely basis or at all.

Any supply interruption in limited or sole sourced raw materials could materially harm our ability to manufacture our products until a new source of supply, if any, could be identified and qualified.

Although we believe there are other suppliers of these raw materials, we may be unable to find a sufficient alternative supply channel in a reasonable time or on commercially reasonable terms.

The price and supply of these materials may be impacted or disrupted for reasons beyond our control including supplier shutdowns, transportation delays, inflationary pricing pressures, work stoppages, labor shortages and governmental regulatory actions.

We have experienced, and may continue to experience, significant challenges to our global transportation channels and other aspects of the global supply chain network, including to the cost and availability of raw materials and components due to shortages and resulting cost inflation.

Additionally, the COVID-19 pandemic continues to impact supply channels resulting in raw material shortages and supply chain disruptions generally.

Furthermore, our contract manufacturers could require us to move to another one of their production facilities.

An interruption in our commercial operations could occur if we encounter delays or difficulties in securing these components, materials or services and if we cannot then obtain an acceptable substitute.

Additionally, we are subject to FDA and foreign regulations, which could further delay our ability to obtain a qualified alternative supplier.

Any performance failure on the part of our suppliers could delay the development and manufacture of our products, which could have a material adverse effect on our business.

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 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 disruption to our 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 COVID-19 pandemic), work stoppages, labor shortages and similar interruptions 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.

Additionally, in 2021, we have experienced supply chain disruptions and general supply constraints as a result of the continued economic uncertainty and in part due to COVID-19 infections and quarantine protocols.

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

Our Salt Lake City facility also produces other components on which our manufacturing operations in Mexico and Costa Rica rely.

Our IV Solutions are manufactured at our manufacturing facility in Austin, Texas and by a third party manufacturer, Pfizer, in Rocky Mount, North Carolina or our suppliers’ facilities.

If our facilities are inoperable, for even a short period of time, it could adversely affect our ability to manufacture and distribute our products in a timely or cost-effective manner, and our ability to make product sales.

Furthermore, our facilities and the equipment we use to perform our manufacturing processes could be unavailable or costly and time-consuming to repair or replace.

Damage to any of our facilities, work stoppages or labor shortages could render us unable to manufacture our products or require us to reduce the output of products at our facilities.

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.

Prolonged periods of inflation could have a material adverse effect on our results of operations.

We have also experienced a significant increase in material component inflation in 2021, as well as inflation in other costs, such as freight and labor prices.

Continued supply chain disruptions and delays, as well as continued heightened inflation, could lead to continued inefficiencies and heightened costs that could negatively impact our performance and our results of operations.

Additionally the majority of our sales are conducted pursuant to long-term contracts.

Although we have attempted to minimize the effect of inflation on our business through contractual protections, the presence of longer pricing periods within our contracts along with sustained or higher than anticipated inflation increases the likelihood that the contract protections do not adequately mitigate the financial impact of inflation.

If our contractual protections do not adequately protect us in the context of substantial cost increases and inflationary pressures, it could have a material adverse effect on our results of operations.

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.

Many hospitals are limiting access to their facilities to essential personnel and prioritizing their time and attention to COVID patients, 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 have also experienced 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:

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;

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• 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.

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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;

• labor shortages as a result of COVID-19 infections and quarantine protocols;

• 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;

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

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

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• 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.

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;

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, 2021, including the risks resulting from our dependency on key personnel;

impairment of our supply chain or manufacturing facilities;

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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.

Any supply interruption in limited or sole sourced raw materials could materially harm our ability to manufacture our products until a new source of supply, if any, could be identified and qualified.

Although we believe there are other suppliers of these raw materials, we may be unable to find a sufficient alternative supply channel in a reasonable time or on commercially reasonable terms.

Furthermore, our contract manufacturers could require us to move to another one of their production facilities.

Additionally, we are subject to FDA regulations, which could further delay our ability to obtain a qualified alternative supplier.

Any performance failure on the part of our suppliers could delay the development and manufacture of our products, which could have a material adverse effect on our business.

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 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.

Our Salt Lake City facility also produces other components on which our manufacturing operations in Mexico and Costa Rica rely.

Our IV Solutions are manufactured at our manufacturing facility in Austin, Texas and by a third party manufacturer, Pfizer, in Rocky Mount, North Carolina or our suppliers’ facilities.

Furthermore, our facilities and the equipment we use to perform our manufacturing processes could be unavailable or costly and time-consuming to repair or replace.

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.

Expansion of our manufacturing facilities may result in inefficiencies that could have an adverse effect on our operations and financial results.

In the fourth quarter of 2006, we experienced significant production inefficiencies following a large increase in production volume in Mexico and the transfer of San Clemente production to Salt Lake City.

In 2007, we expanded our Mexico facility and, anticipating further increases in volume at that facility, increased the workforce.

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

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

Expansions of our production capacity will require significant management attention to avoid inefficiencies of the type experienced in 2006, and the effect of any inefficiencies can be particularly expensive in Salt Lake City because of the high fixed costs in this highly automated facility.

We may be unable to realize any benefit from our cost reduction and restructuring efforts and our profitability may be hurt or our business otherwise might be adversely affected.

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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.

The credit agreements governing our Credit Facility and Senior Secured Credit Facilities contain, 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.

While we have not previously breached and are not currently in breach of these or any other covenants contained in our credit agreements, 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, supply chain interruptions or general economic environment, including increases in inflation and interest rates.

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.

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

Market and Other External Risks

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We believe that our ability to compete depends upon numerous factors including, among other things, continued product innovation, the quality, convenience and reliability of our products, access to distribution channels, patent protection and pricing.

The ability to compete effectively depends on our ability to differentiate our products based on these factors, as well as our ability to perceive and respond to changing customer needs.

The ability to compete effectively depends on our ability to differentiate our products based on these factors, as well as our ability to perceive and respond to

changing customer needs.

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

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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.

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Even if we succeed in creating new product candidates from these innovations, those innovations still may fail to result in commercially successful products.

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.

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, clearances or certifications, and manufacture quality products in an economic and timely manner.

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.

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 notified bodies, or obtaining favorable pricing on those products.

Finally, innovations may not be accepted quickly in the marketplace because of, among other things, entrenched patterns of clinical practice and uncertainty over third-party reimbursement.

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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 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.

Increasing awareness of healthcare costs, public interest in healthcare reform and continuing pressure from Medicare, Medicaid, GPOs 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.

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

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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.

Third-party coverage and reimbursement for procedures using our products or any of our products in development for which we may receive regulatory approval or certification 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.

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Any such events could result in the loss of customers, revenue, or both, and could require us to incur significant expense to remediate, including legal claims or proceedings.

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.

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.

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.

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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.

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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.

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

Section 5 of the Federal Trade Commission Act (the "FTC Act")).

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, 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, as well as their covered subcontractors.

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.

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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.

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.

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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 applies to certain businesses that collect personal information from California residents.

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.

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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.

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

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

Similar laws have passed in Virginia and Colorado, and have been proposed in other states and at the federal level, reflecting a trend toward more stringent privacy legislation in the U.S.

The enactment of such laws could have potentially conflicting requirements that would make compliance challenging.

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.

Furthermore, the FTC and many state Attorneys General continue to enforce federal and state consumer protection laws against companies for online collection, use, dissemination and security practices that appear to be unfair or deceptive.

For example, according to the FTC, failing to take appropriate steps to keep consumers' personal information secure can constitute unfair acts or practices in or affecting commerce in violation of Section 5(a) of the FTC Act.

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

Foreign data protection laws, including 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 U.S.

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

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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.

Data privacy laws in the EU and the EEA are developing rapidly and, in July 2020, the Court of Justice of the EU (the "CJEU") limited how organizations could lawfully transfer personal data from the EEA to the U.S.

by invalidating the Privacy Shield for purposes of international transfers and imposing further restrictions on use of the standard contractual clauses ("SCCs").

While the CJEU upheld the adequacy of the SCCs, it made clear that reliance on them alone may not necessarily be sufficient in all circumstances.

Use of the SCCs must now be assessed on a case-by-case basis taking into account the legal regime applicable in the destination country, in particular applicable surveillance laws and rights of individuals and additional measures and/or contractual provisions may need to be put in place, however, the nature of these additional measures is currently uncertain.

The CJEU went on to state that if a competent supervisory authority believes that the SCCs cannot be complied with in the destination country and the required level of protection cannot be secured by other means, such supervisory authority is under an obligation to suspend or prohibit that transfer.

The European Commission issued revised SCCs on June 4, 2021 to account for the decision of the CJEU and recommendations made by the European Data Protection Board.

The revised SCCs must be used for relevant new data transfers from September 27, 2021;

existing standard contractual clauses arrangements must be migrated to the revised clauses by December 27, 2022.

There is some uncertainty around whether the revised clauses can be used for all types of data transfers, particularly whether they can be relied on for data transfers to

non-EEA entities subject to the GDPR.

The revised SCCs apply only to the transfer of personal data outside of the EEA and not the UK;

the UK's Information Commissioner's Office launched a public consultation on its draft revised data transfers mechanisms in August 2021.

As supervisory authorities issue further guidance on personal data export mechanisms, including circumstances where the SCCs cannot be used, and/or start taking enforcement action, we could suffer additional costs, complaints and/or regulatory investigations or fines, and/or if we are otherwise unable to transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we provide our services, the geographical location or segregation of our relevant systems and operations, and could adversely affect our financial results.

Further, from January 1, 2021, companies have to comply with the GDPR and also the UK GDPR, which, together with the amended UK Data Protection Act 2018, retains the GDPR in UK national law.

The UK GDPR mirrors the fines under the GDPR, e.g.

fines up to the greater of €20 million (£17.5 million) or 4% of global turnover.

The European Commission has adopted an adequacy decision in favor of the UK, enabling data transfers from EU member states to the UK without additional safeguards.

However, the UK adequacy decision will automatically expire in June 2025 unless the European Commission re-assesses and renews/extends that decision, and remains under review by the Commission during this period.

The relationship between the UK and the EU in relation to certain aspects of data protection law remains unclear, and it is unclear how UK data protection laws and regulations will develop in the medium to longer term, and how data transfers to and from the UK will be regulated in the long term.

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.

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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.

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.

Disruptions at the FDA, other government agencies or notified bodies caused by funding shortages or global health concerns could hinder their ability to hire, retain, or deploy key leadership and other personnel, or otherwise prevent new or modified products from being developed, cleared, approved, certified, or commercialized in a timely manner, or at all, 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.

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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 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.

Disruptions at the FDA, foreign regulatory authorities and notified bodies to review and approve or certify new products can be affected by a variety of factors, including government budget and funding levels, statutory, regulatory and policy changes, a government agency's ability to hire and retain key personnel and accept the payment of user fees, and other events that may otherwise affect the government's ability to perform routine functions.

Average review times at the FDA, other government agencies, foreign regulatory authorities and notified bodies have fluctuated in recent years as a result.

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.

For example, over the last several years, the U.S.

government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities.

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.

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 and on March 18, 2020, the FDA temporarily postponed routine surveillance inspections of domestic manufacturing facilities.

Subsequently, in July 2020 the FDA resumed certain on-site inspections of domestic manufacturing facilities subject to a risk-based prioritization system.

The FDA utilized this risk-based assessment system to assist in determining when and where it was safest to conduct prioritized domestic inspections.

In May 2021, the FDA outlined a detailed plan to move toward a more consistent state of inspectional operations, and in July 2021, the FDA resumed standard inspectional operations of domestic facilities and was continuing to maintain this level of operation as of September 2021.

More recently, the FDA has continued to monitor and implement changes to its inspectional activities to ensure the safety of its employees and those of the firms it regulates as it adapts to the evolving COVID-19 pandemic.

Regulatory authorities and notified bodies outside the U.S.

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, other regulatory authorities or notified bodies from conducting their regular inspections, audits, reviews, or other regulatory activities, it could significantly impact the ability of the FDA or other regulatory authorities or notified bodies to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

For instance, in the EU, notified bodies must be officially designated to certify products and services in accordance with the EU Medical Devices Regulation.

While several notified bodies have been designated the COVID-19 pandemic has significantly slowed down their designation process and the current designated notified bodies are facing a large amount of requests with the new regulation as a consequence of which review times have lengthened.

This situation could impact our ability to grow our business in the EU and EEA.

Legal, Compliance, and Regulatory Risks

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There are numerous U.S.

federal and state, as well as foreign, laws pertaining to healthcare fraud and abuse, including anti-kickback, false claims and physician transparency laws.

federal and state, as well as foreign, laws pertaining to healthcare fraud and abuse, including anti-kickback, false claims and transparency laws regarding payments and other transfers of value made to physicians and other

licensed healthcare professionals.

Our business practices and relationships with providers are subject to scrutiny under these laws.

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• 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;

• 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 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.

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• 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, 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;

Department of Health and Human Services' CMS information related to payments and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain other healthcare providers (physician assistants, nurse practitioners, clinical nurse specialists, anesthesiologist assistants, certified registered nurse anesthetists, anesthesiology assistants and certified nurse midwives, and teaching hospitals), and applicable manufacturers and GPOs, to report annually ownership and investment interests held by physicians and their immediate family members;

• 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.

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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.

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.

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.

Since its enactment, there have been efforts to challenge, repeal or replace the Affordable Care Act.

For example, the Tax Cuts and Jobs Acts was enacted, which, among other things, removes penalties for not complying with the individual mandate to carry health insurance, beginning in 2019.

On December 14, 2018, a U.S.

District Court Judge in the Northern District of Texas, ruled that the Affordable Care Act’s individual mandate to carry insurance coverage is a critical and inseverable feature of the Affordable Care Act, and therefore, because it was repealed as part of the Tax Cuts and Jobs Act, the remaining provisions of the Affordable Care Act are invalid as well.

On December 18, 2019, the U.S.

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.

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 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.

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 ACA was signed into law introducing comprehensive health insurance and healthcare reforms in the U.S.

The ACA, 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 ACA 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.

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.

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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.

The FDA and foreign regulatory agencies regulate, among other things, with respect to medical devices:

We and our products are subject to extensive regulation in the U.S.

and elsewhere, including by the FDA and its foreign counterparts.

The FDA and foreign regulatory agencies and notified bodies regulate, among other things, with respect to medical devices:

design, development and manufacturing;

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marketing, sales and distribution;

premarket clearance and approval;

pre-market clearance, approval and certification;

record keeping procedures;

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and product import and export.

In the U.S., our device products are subject to clearance or approval by the U.S.

FDA under the Food, Drug and Cosmetics Act ("FDC Act").

Before we can market a new medical device, or a new use of, new claim for, or significant modification to, an existing product, we must first receive either clearance under Section 510(k) of the FDC Act or approval of a premarket approval, or PMA, application from the FDA, unless an exemption applies.

Under the 510(k) process, the manufacturer must submit to the FDA a premarket notification, demonstrating that the device is "substantially equivalent," as defined in the statute, to a legally marketed predicate device.

In the U.S., our medical device products are subject to clearance or approval by the U.S.

FDA under the FDC Act.

Before we can market a new medical device, or a new use of, new claim for, or significant modification to, an existing product, we must first receive either clearance under Section 510(k) of the FDC Act or approval of PMA application from the FDA, unless an exemption applies.

Under the 510(k) process, the manufacturer must submit to the FDA a pre-market notification, demonstrating that the device is "substantially equivalent," as defined in the FDC Act, to a legally marketed predicate device.

To be "substantially equivalent," the proposed device must have the same intended use as the predicate device, and either have the same technological characteristics as the predicate device or have different technological characteristics and not raise different questions of safety or effectiveness than the predicate device.

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Accordingly, a PMA application typically includes, but is not limited to, extensive technical information regarding device design and development, pre-clinical and clinical trial data, manufacturing information, labeling and financial disclosure information for the clinical investigators in device studies.

Each of our current products has qualified, and we anticipate that any new products we are likely to market will qualify for clearance under the FDA’s expedited pre-market notification procedure pursuant to Section 510(k) of the FDC Act.

We currently market certain products that have received 510(k) clearance, and we may pursue 510(k) clearance for future products.

However, certain of our new products may require a longer time for clearance than we have experienced in the past and there can be no assurance that a PMA application will not be required.

Further, there is no assurance that other new products developed by us or any manufacturers that we might acquire will qualify for expedited clearance rather than a more time consuming pre-market approval procedure or that, in any case, they will receive clearance from the FDA.

Further, there is no assurance that other new products developed by us or any manufacturers that we might acquire will be eligible for 510(k) clearance rather than undergoing a more time consuming pre-market approval procedure or that, in any case, they will receive clearance or approval from the FDA.

For example, in 2022, we acquired Smiths Medical, which has marketed its PORT-A-CATH implantable access systems pursuant to PMA approval.

FDA regulatory processes are time consuming and expensive.

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The FDA enforces these regulatory requirements through periodic unannounced inspections.

We do not know whether we will pass any future FDA inspections.

Even after we have obtained the proper regulatory clearance or approval to market a product, we have ongoing responsibilities under FDA regulations and applicable foreign laws and regulations.

The FDA, state and foreign regulatory authorities have broad enforcement powers.

We do not know whether we will pass or be found compliant in any future inspections by FDA or other regulatory authorities.

Our failure to comply with applicable regulatory requirements could result in enforcement action by the FDA, state or foreign regulatory authorities which may include any of the following sanctions:

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• criminal prosecution.

The FDA’s and other regulatory authorities’ policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates.

The FDA's and other regulatory authorities' policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval or certification of our product candidates.

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, 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 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 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.

For example, in November 2018, FDA officials announced steps that the FDA intended to take to modernize the pre-market notification pathway under Section 510(k) of the FDC Act.

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

These proposals included 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.

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.

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.

More recently, in September 2019, the FDA issued revised final guidance describing an optional "safety and performance based" pre-market 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, thereby 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 maintains a list of device types appropriate for the "safety and performance based pathway" and continues to develop product-specific guidance documents that identify the performance criteria for each such device type, as well as recommended testing methods, 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.

In addition, FDA and foreign regulations and guidance are often revised or reinterpreted by the FDA and foreign counterparts 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, approval, or certification to 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;

additional testing prior to obtaining clearance, approval, or certification;

changes to manufacturing methods;

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or additional record keeping.

For instance, the EU landscape concerning medical devices recently evolved.

On May 25, 2017, the EU Medical Devices Regulation entered into force, which repeals and replaces the EU Medical Devices Directive.

Unlike directives, which must be implemented into the national laws of the EU member states, regulations are directly applicable (i.e., without the need for adoption of EU member state laws implementing them) in all EU member states and are intended to eliminate current differences in the regulation of medical devices among EU member states.

Devices lawfully placed on the market pursuant to the EU Medical Devices Directive prior to May 26, 2021 may generally continue to be made available on the market or put into service until May 26, 2025, provided that the requirements of the transitional provisions are fulfilled.

In particular, the certificate in question must still be valid.

However, even in this case, manufacturers must comply with a number of new or reinforced requirements set forth in the EU Medical Devices Regulation with regard to registration of economic operators and of devices, post-market surveillance, market surveillance and vigilance requirements.

Subject to the transitional provisions and in order to sell our products in EU member states, our products must comply with the general safety and performance requirements of the EU Medical Devices Regulation, which repeals and replaces EU

Medical Devices Directive.

Compliance with these requirements is a prerequisite to be able to affix the CE mark to our products, without which they cannot be sold or marketed in the EU.

See – Government Regulation.

To demonstrate compliance with the general safety and performance requirements, we must undergo a conformity assessment procedure, which varies according to the type of medical device and its (risk) classification.

Except for low risk medical devices (Class I), where the manufacturer can self-assess the conformity of its products with the general safety and performance requirements (except for any parts which relate to sterility, metrology or reuse aspects), a conformity assessment procedure requires the intervention of a notified body.

The notified body would typically audit and examine the technical file and the quality system for the manufacture, design and final inspection of our devices.

If satisfied that the relevant product conforms to the relevant general safety and performance requirements, the notified body issues a certificate of conformity, which the manufacturer uses as a basis for its own declaration of conformity.

The manufacturer may then apply the CE mark to the device, which allows the device to be placed on the market throughout the EU.

If we fail to comply with applicable laws and regulations, we would be unable to affix the CE mark to our products, which would prevent us from selling them within the EU.

The aforementioned EU rules are generally applicable in the EEA.

Non-compliance with the above requirements would also prevent us from selling our products in these three countries.

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.

We and some of our component manufacturers are required to comply with regulatory requirements known as the FDA's Quality System Regulation, or QSR, a complex regulatory scheme which covers the procedures and documentation of the design, testing, production, control, quality assurance, inspection, complaint handling, recordkeeping, management review, labeling, packaging, sterilization, storage and shipping of our device products.

The FDA's current Good Manufacturing Practices, or cGMPs apply to the manufacture of medical device components and finished medical devices.

The FDA's cGMPs apply to the manufacture of medical device components and finished medical devices.

The FDA audits compliance with these regulatory requirements through periodic announced and unannounced inspections of manufacturing and other facilities.

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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:

For example, on October 1, 2021, Smiths Medical received a Warning Letter from the FDA following an inspection of Smiths Medical’s Minneapolis, Minnesota Facility on March 30, 2021.

The Warning Letter cited, among other things, failures to comply with FDA's medical device reporting requirements and failures to comply with applicable portions of the QSR.

Although we believe Smiths Medical will be able to successfully resolve the issues identified in the Warning Letter, there is no guarantee that Smiths Medical will be able to do so in a timely manner or that similar compliance issues will not be identified in a future FDA inspection.

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 or foreign regulatory authorities could take enforcement action, including any of the following sanctions:

• untitled letters or warning letters;

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• operating restrictions or partial suspension or total shutdown of production;

• refusing or delaying our requests for clearance or approval of new products or modified products;

• withdrawing clearances or approvals that have already been granted;

• refusing or delaying our requests for clearance or approval or certifications of new products or modified products;

• withdrawing clearances, approvals, or certifications that have already been granted;

• refusal to grant export approval for our products;

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Any of these sanctions could adversely affect our business, financial conditions and operating results.

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

As a manufacturer that designs, manufactures and markets its own devices, we must comply with the quality management standards of ISO 13485 (2012).

Those quality standards are similar to the FDA’s Quality System Regulations.

Manufacturers of medical devices must also be in conformance with EC Directives such as Council Directive 93/42/EEC (“Medical Device Directive”) and their applicable annexes.

Those regulations assure that medical devices are both safe and effective and meet all applicable established standards prior to being marketed in the EC.

Once a manufacturer and its devices are in conformance with the Medical Device Directive, the “CE” Mark maybe affixed to its devices.

The CE Mark gives devices an unobstructed entry to all the member countries of the EC.

To market our products in the EU, we must conform to additional requirements and demonstrate conformance to harmonized quality standards.

A notified body would typically audit and examine a product's technical dossiers and the manufacturers' quality system (the notified body must presume that quality systems which implement the relevant harmonized standards – which is ISO 13485:2016 for Medical Devices Quality Management Systems – conform to these requirements).

Subject to the transitional provisions, manufacturers of medical devices must also comply with the EU Medical Devices

Compliance with these requirements assure that medical devices are both safe and effective and do not compromise the clinical condition or safety of patients, or the safety and health of users and – where applicable – other persons and meet all applicable established standards prior to being marketed in the EU.

There is no assurance that we will continue to meet the requirements for distribution of our products in Europe.

In May 2017, the Medical Device Regulation (Regulation 2017/745) entered into force to replace the Medical Device Directive, as amended.

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 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:

• strengthen the rules on placing devices on the market and reinforce surveillance once they are available;

• establish explicit provisions on manufacturers’ responsibilities for the follow-up of the quality, performance, and safety of devices placed on the market;

• improve the traceability of medical devices throughout the supply chain to the end-user or patient through a unique identification number;

• set up a central database to provide patients, healthcare professionals, and the public with comprehensive information on products available in the EU;

• strengthened rules for the assessment of certain high-risk devices, such as implants, which may have to undergo an additional check by experts before they are placed on the market.

As a result of these new requirements, we may be subject to risks associated with additional testing, modification, certification, or amendment of our existing market authorizations, or we may be required to modify products already installed at our customers’ facilities to comply with the official interpretations of these revised regulations.

Distribution of our products in other countries may be subject to regulation in those countries, and there is no assurance that we will obtain necessary approvals in countries in which we want to introduce our products.

In addition, the EU Medical Devices Regulation, among other things:

• strengthens the rules on placing devices on the market (e.g.

reclassification of certain devices and wider scope than the EU Medical Devices Directive) and reinforces surveillance once they are available;

• establishes explicit provisions on manufacturers' responsibilities for the follow-up of the quality, performance and safety of devices placed on the market;

• establishes explicit provisions on importers' and distributors' obligations and responsibilities;

• imposes an obligation to identify a responsible person who is ultimately responsible for all aspects of compliance with the requirements of the new regulation;

• improves the traceability of medical devices throughout the supply chain to the end-user or patient through the introduction of a unique identification number, to increase the ability of manufacturers and regulatory authorities to trace specific devices through the supply chain and to facilitate the prompt and efficient recall of medical devices that have been found to present a safety risk;

• sets up a central database (Eudamed) to provide patients, healthcare professionals and the public with comprehensive information on products available in the EU;

• strengthens rules for the assessment of certain high-risk devices, such as implants, which may have to undergo a clinical evaluation consultation procedure by experts before they are placed on the market.

As a result of these new requirements, we may be subject to risks associated with additional testing, modification, certification, or amendment of our existing certifications, or we may be required to modify products already installed at our customers' facilities to comply with the official interpretations of the EU Medical Devices Regulation.

Distribution of our products in other countries may be subject to regulation in those countries, and there is no assurance that we will obtain necessary approvals or certifications in countries in which we want to introduce our products.

The misuse or off-label use of our products may harm our reputation in the marketplace, result in injuries that lead to product liability suits or result in costly investigations, fines or sanctions by regulatory bodies if we are deemed to have engaged in the promotion of these uses, any of which could be costly to our business.

Our products have been cleared or approved by the FDA for specific indications.

Our products have been cleared, approved or certified by the FDA, foreign regulatory authorities and notified bodies for specific indications of use.

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.

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.

Furthermore, the use of our products for indications other than those cleared or approved by the FDA or approved by any foreign 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 authorities determine 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 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.

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Costs of the defense of such litigation, even if successful, could be substantial.

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

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

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.

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.

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.

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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.

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 foreign regulatory authorities, 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.

The discovery of serious safety issues with our products, or a recall of our products either voluntarily or at the direction of the FDA or another governmental authority, could have a negative impact on us.

We are subject to the FDA’s medical device reporting regulations and similar foreign regulations, which require us to report to the FDA when we receive or become aware of information that reasonably suggests that one or more of our products may have caused or contributed to a death or serious injury or malfunctioned in a way that, if the malfunction were to recur, it could cause or contribute to a death or serious injury.

We are subject to the FDA's medical device reporting regulations and similar foreign regulations, which require us to report to the FDA and foreign regulatory authorities when we receive or become aware of information that reasonably suggests that one or more of our products may have caused or contributed to a death or serious injury or malfunctioned in a way that, if the malfunction were to recur, it could cause or contribute to a death or serious injury.

The timing of our obligation to report is triggered by the date we become aware of the adverse event as well as the nature of the event.

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We may also fail to recognize that we have become aware of a reportable adverse event, especially if it is not reported to us as an adverse event or if it is an adverse event that is unexpected or removed in time from the use of the product.

If we fail to comply with our reporting obligations, the FDA could take action, including warning letters, untitled letters, administrative actions, criminal prosecution, imposition of civil monetary penalties, revocation of our device clearances or approvals, seizure of our products or delay in clearance or approval of future products.

If we fail to comply with our reporting obligations, the FDA or foreign regulatory authorities could take action, including warning letters, untitled letters, administrative actions, criminal prosecution, imposition of civil monetary penalties, revocation of our device clearances or approvals, seizure of our products or delay in clearance, approval, or certification of future products.

The FDA and foreign regulatory bodies have the authority to require the recall of commercialized products in the event of material deficiencies or defects in design or manufacture of a product or in the event that a product poses an unacceptable risk to health.

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Product defects or other errors may occur in the future.

Depending on the corrective action we take to redress a product’s deficiencies or defects, the FDA may require, or we may decide, that we will need to obtain new clearances or approvals for the device before we may market or distribute the corrected device.

Seeking such clearances or approvals may delay our ability to replace the recalled devices in a timely manner.

Moreover, if we do not adequately address problems associated with our devices, we may face additional regulatory enforcement action, including FDA warning letters, product seizure, injunctions, administrative penalties or civil or criminal fines.

Companies are required to maintain certain records of recalls and corrections, even if they are not reportable to the FDA.

We may initiate voluntary withdrawals or corrections for our products in the future that we determine do not require notification of the FDA.

If the FDA disagrees with our determinations, it could require us to report those actions as recalls and we may be subject to enforcement action.

For example, on June 26, 2020, Smiths Medical ASD initiated Class 1 recalls of a Medfusion Syringe Pump.

Although we plan to work with the FDA to complete the Class 1 recall, and ultimately close, this product recall, we can provide no assurance that we will be able to do so

in a timely manner, or at all.

In addition, the costs associated with conducting and closing this recall, including any liabilities we may incur, could have a material adverse effect on our business, financial condition and results of operations.

Depending on the corrective action we take to redress a product's deficiencies or defects, the FDA or foreign regulatory agencies may require, or we may decide, that we will need to obtain new clearances, approvals or certifications for the device before we may market or distribute the corrected device.

Seeking such clearances, approvals or certifications may delay our ability to replace the recalled devices in a timely manner.

Moreover, if we do not adequately address problems associated with our devices, we may face additional regulatory enforcement action, including FDA or foreign regulatory authorities warning letters, product seizure, injunctions, administrative penalties or civil or criminal fines.

Companies are required to maintain certain records of recalls and corrections, even if they are not reportable to the FDA or foreign regulatory authorities.

We may initiate voluntary withdrawals or corrections for our products in the future that we determine do not require notification of the FDA or foreign regulatory authorities.

If the FDA or foreign regulatory authorities disagree with our determinations, it could require us to report those actions as recalls and we may be subject to enforcement action.

A future recall announcement could harm our reputation with customers, potentially lead to product liability claims against us and negatively affect our sales.

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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.

Additionally, we are subject to income taxes in the U.S.

and numerous foreign jurisdictions.

Any significant changes in current U.S.

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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.

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.

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 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 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.

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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.

During 2021, we recorded $1.0 million in foreign exchange losses due to the volatility of foreign exchange rates as a result of continued uncertainty caused by the ongoing COVID-19 pandemic.

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

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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 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.

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.

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.

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.

General Risk Factors

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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;

• economic and political uncertainty;

• changes in non-U.S.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors