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Any of the following risks could materially and adversely affect our results of operations or financial condition.
−Removed: Business and Operating Risks
−Removed: 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.
−Removed: Our risk mitigation plans employed with key suppliers of materials (such as resins) that are critical to our ability to manufacture our products, the supply of which is currently from a sole supplier, may not suffice to ensure that we are able to receive requisite materials as and when needed an in sufficient quantity.
−Removed: 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.
−Removed: 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.
−Removed: Upon identification, the qualification process of new suppliers and component materials can take a considerable amount of time.
−Removed: We may be unable to find a sufficient alternative supply channel in a reasonable time or on commercially reasonable terms.
−Removed: 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.
−Removed: 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 the cost and availability of raw materials and components due to shortages and resulting cost inflation.
−Removed: The COVID-19 pandemic continues to impact supply channels resulting in raw material shortages and supply chain disruptions generally.
−Removed: Furthermore, our contract manufacturers could require us to move to another one of their production facilities.
−Removed: 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.
−Removed: Additionally, we are subject to FDA and foreign regulations, which could further delay our ability to obtain a qualified alternative supplier.
−Removed: 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.
−Removed: Due to the highly competitive nature of the healthcare industry and the cost controls of our customers and third party payors, as well as entering into long-term fixed price contracts we may be unable to pass along cost increases for any key components or raw materials through higher prices to our customers.
−Removed: 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.
−Removed: Damage to any of our manufacturing facilities or disruption to our supply chain network could impair our ability to produce our products.
−Removed: 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), the impact of war or political instability (such as the conflict in the Ukraine), 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.
−Removed: The COVID-19 pandemic caused us to temporarily shut down some of our facilities.
−Removed: Additionally, in 2021, we 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.
−Removed: In 2022, we continued to experience these supply chain disruptions, as well as an increase in raw material costs and shipping costs, as prices on several commodities, including oil and gas, increased as a result of the conflict in the Ukraine and it's impact on the global economy.
−Removed: We have a single manufacturing facility for our Clave products located in Salt Lake City, Utah.
−Removed: Our Salt Lake City facility also produces other components on which our manufacturing operations in Mexico and Costa Rica rely.
−Removed: 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.
−Removed: We have also added various other manufacturing facilities with the acquisition of Smiths Medical in the U.S., Mexico, Italy and Czech Republic.
−Removed: 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
−Removed: manner, and our ability to make product sales.
−Removed: 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.
−Removed: Damage to any of our facilities or interruptions at our facilities due to 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.
−Removed: Several of our manufacturing facilities are located near known earthquake fault zones and are vulnerable to damage from earthquakes.
−Removed: We carry insurance for damage to our property and disruption of our business, but this insurance may not be adequate to 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.
−Removed: Prolonged periods of inflation, rising interest rates and the impact of foreign currency exchange rates as a result of the current global macroeconomic and geopolitical conditions have had and could in the future have a material adverse effect on our results of operations.
−Removed: Global supply chain disruptions as a result of COVID-19 and, more recently, the war in the Ukraine has resulted in, and may continue to result in, a challenging macroeconomic environment with higher interest rates and capital costs, increased raw material costs, higher shipping costs, higher labor costs, and the negative impacts from weakening foreign exchange rates.
−Removed: We have experienced and may continue to experience these inflationary increases in our manufacturing costs and operating expenses, including higher materials and labor costs, as well as negative impacts on our operating results from the strengthening of the U.S.
−Removed: dollar relative to foreign currencies weakening exchange rates.
−Removed: See the risk factor titled “ Our operations may be adversely impacted by our exposure to risks related to foreign currency exchange rates ” under the “Geographic Risks” subsection for a discussion of risks related to foreign currency exchange rates.
−Removed: Additionally, the majority of our sales are conducted pursuant to long-term contracts.
−Removed: Our efforts to minimize the impact of inflation on our business through contractual protections may not prove effective, and 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.
−Removed: 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.
−Removed: Prolonged inflation may also reduce or delay orders for our products and for certain products we may be unable to satisfy demand, both of which could have a material adverse impact on our sales and results of operations.
−Removed: The inflationary cost increases during 2022 caused by COVID -19 and the war in the Ukraine impacted our freight rates as well as, labor and materials costs.
−Removed: The COVID-19 pandemic has disrupted how we, our suppliers and our customers operate and the duration, and the extent to which this will impact our business, future results of operations, liquidity and overall financial performance remains uncertain.
−Removed: The COVID-19 pandemic has created significant volatility, uncertainty, and economic disruption.
−Removed: 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.
−Removed: We have also experienced significant reductions in demand for certain products as our health care customers re-prioritized the treatment of patients, delay elective procedures and shift resources and operations to fight COVID-19 and the complications it causes.
−Removed: For example, during 2020, we experienced lower demand from hospital customers for our Infusion Consumables non-dedicated sets and lower demand for our Infusion Systems dedicated sets.
−Removed: Additionally, the COVID-19 pandemic could potentially adversely affect our distributors if they are not able to maintain their historical levels of sales.
−Removed: The extent to which the COVID-19 pandemic continues to impact our business depends on future developments that cannot be fully predicted at this time.
−Removed: Accordingly, the impact of the COVID-19 pandemic on our future results of operations and overall financial performance remains uncertain and cannot as yet be quantified.
−Removed: 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:
−Removed: • 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;
−Removed: • labor shortages as a result of COVID-19 infections and quarantine protocols;
−Removed: • 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;
−Removed: • 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;
−Removed: • potential lower demand in future periods due to over-purchasing of our products due to the COVID-19 pandemic and supply chain disruption;
−Removed: • reduced revenue due to delays in implementation of our infusion systems and oncology products at hospital locations due to restricted access;
−Removed: • higher operating costs related to additional compensation paid to our manufacturing and distribution facility workers;
−Removed: • volatility in cash flow, revenue and income due to foreign currency fluctuations and volatility;
−Removed: • lower income due to a delay in cost savings projects as a result of the travel and social distancing requirements of COVID-19.
−Removed: 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, 2022, including the risks resulting from our dependency on key personnel;
−Removed: impairment of our supply chain or manufacturing facilities;
−Removed: and the impact of negative economic conditions.
−Removed: 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.
−Removed: Significant sales through distributors expose us to risks that could have a material effect on our results of operations.
−Removed: For the year ended December 31, 2022, business from one distributor, Medline, accounted for 15% of our consolidated revenues.
−Removed: We may rely on one or more key distributors for a product, and the loss of these distributors could reduce our revenue.
−Removed: Additionally, distributors may face financial difficulties, including bankruptcy, which could harm our collection of accounts receivable and financial results.
−Removed: Failure to manage risks related to our use of distributors may reduce sales, increase expenses, and weaken our competitive position, any of which could have a material adverse effect on our results of operations.
−Removed: We may not be successful in achieving expected operating efficiencies or expense reductions associated with cost reduction and restructuring efforts and may experience a decline in our profitability, business disruptions or other adverse consequences to our business as a result.
−Removed: We have engaged in restructuring activities in the past and may engage in other restructuring activities in the future.
−Removed: For example, since the Smiths Medical acquisition, we have taken realignment and cost reduction initiatives to achieve operating efficiencies for the combined company.
−Removed: These types of cost reduction and restructuring activities are complex.
−Removed: If we do not successfully manage our current restructuring activities, or any other restructuring activities that we may take in the future, any expected efficiencies and benefits might be delayed or not fully realized, and our operations and business could be disrupted.
−Removed: In addition, the costs associated with implementing restructuring activities might exceed expectations, which could result in additional future charges.
−Removed: The agreements governing our debt contain a number of restrictive covenants which limit our flexibility in operating our business, finance future operations or pursue our business strategies.
−Removed: The credit agreement governing our Senior Secured Credit Facilities 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.
−Removed: While we have not previously breached and are not currently in breach of these or any other covenants contained in our credit agreement.
−Removed: Our ability to comply with these covenants may be affected by events beyond our control, including the COVID-19 pandemic, the conflict in the Ukraine, supply chain interruptions or general economic environment, including increases in inflation and interest rates.
−Removed: 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.
−Removed: As such, these restrictive covenants contained in our Senior Secured Credit Facility may restrict our ability to pursue our business strategies.
−Removed: Our operating results may be adversely affected by unfavorable economic conditions that affect our customers’ ability to buy our products and could affect our relationships with our suppliers.
−Removed: Disruptions in financial markets worldwide and other worldwide macro-economic challenges have caused and may in the future cause our customers and suppliers to experience cash flow concerns.
−Removed: If job losses and the resulting loss of health insurance and personal savings cause individuals to forego or postpone treatment, the resulting decreased hospital use could affect the demand for our products.
−Removed: As a result, customers may modify, delay or cancel plans to purchase our products and suppliers may increase their prices, reduce their output or change terms of sales.
−Removed: Additionally, if customers’ or suppliers’ operating and financial performance deteriorates, or if they are unable to make scheduled payments or obtain credit, customers may not be able to pay, or may delay payment of, accounts receivable owed to us and suppliers may impose different payment terms that are less favorable to us.
−Removed: Any inability of current and/or potential customers to pay us for our products or any demands by suppliers for different payment terms may adversely affect our earnings and cash flow.
Market and Other External Risks
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The consumable medical device segment of the health care industry and in particular the infusion products market is intensely competitive and continues to experience both horizontal and vertical consolidation.
−Removed: 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.
+Added: 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, including demand for more environmentally friendly products and focus on using materials of concern, 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.
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The successful implementation of such a strategy by one or more of our competitors could materially and adversely affect us.
−Removed: If we do not successfully develop and commercialize enhanced or new products that remain competitive with new products or alternative technologies developed by others, we could lose revenue opportunities and customers, and our ability to grow our business would be impaired.
−Removed: The medical device industry is characterized by rapid product development and technological advances, which places our products at risk of obsolescence.
−Removed: Our long-term success and profit margins depend upon the development and successful commercialization of new products, new or improved technologies and additional applications of our technology.
−Removed: The research and development process is time-consuming and costly, and may not result in products or applications that we can successfully commercialize.
−Removed: We can give no assurance that we will be able to successfully develop and commercialize enhanced or new products or that they will be accepted in the marketplace.
−Removed: Product development requires substantial investment that may be difficult for us to fund and may be challenging to
−Removed: recover through commercial product sales.
−Removed: Innovations generally require a substantial investment in product development before we can determine their commercial viability, and we may not have the financial resources necessary to fund these innovations.
−Removed: Even if we succeed in creating new product candidates from these innovations, those innovations still may fail to result in commercially successful products.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: If demand for our products were to decline significantly, we might not be able to recover the cost of our expensive automated molding and assembly equipment and tooling, which could have an adverse effect on our results of operations.
+Added: If demand for our products were to decline significantly, we might not be able to recover the cost of our expensive automated molding and assembly equipment and tooling, which could have an adverse effect on our financial condition and results of operations.
Our production tooling is relatively expensive, with each "module," which consists of an automated assembly machine and the molds and molding machines that mold the components, costing several million dollars.
Most of the modules are for the Clave product family.
−Removed: If the demand for these products changes significantly, which could happen with the loss of a customer or a change in product mix, it may be necessary for us to recognize an impairment charge for the value of the production tooling because its cost may not be recovered through production of saleable product, which could adversely affect our financial condition.
+Added: If the demand for these products changes significantly, which could happen with the loss of customers or a change in product mix, it may be necessary for us to recognize an impairment charge for the value of the production tooling because its cost may not be recovered through production of saleable product, which could adversely affect our financial condition.
We have been and will be ordering production molds and equipment for our new products.
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If we do not achieve significant sales of these new/transitioned products, it might be necessary for us to recognize an impairment charge for the value of the production tooling because its costs may not be recovered through production of saleable product, which could adversely affect our financial condition.
+Added: Product development requires substantial investment that may be difficult for us to fund and may be challenging to
+Added: recover through commercial product sales.
+Added: Innovations generally require a substantial investment in product development before we can determine their commercial viability, and we may not have the financial resources necessary to fund these innovations.
+Added: Even if we succeed in creating new product candidates from these innovations, we may still fail to successfully commercially such products.
+Added: The success of new medical 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.
+Added: 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.
+Added: 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.
+Added: Finally, innovations may not be accepted in the marketplace quickly or at all because of, among other things, entrenched patterns of clinical practice and uncertainty over third-party reimbursement.
+Added: If we do not successfully develop and commercialize enhanced or new products that remain competitive with new products or alternative technologies developed by others, we could lose revenue opportunities and customers, and our ability to grow our business would be impaired.
+Added: The medical device industry is characterized by rapid product development and technological advances, which places our products at risk of obsolescence.
+Added: Our long-term success and profit margins depend upon the development and successful commercialization of new products, new or improved technologies and additional applications of our technology.
+Added: The research and development process is time-consuming and costly, and may not result in products or applications that we can successfully commercialize.
+Added: We can give no assurance that we will be able to successfully develop and commercialize enhanced or new products or that they will be accepted in the marketplace.
+Added: Even if we successfully develop and commercialize enhanced or new products, they may be quickly rendered obsolete by competitors’ innovations, changing customer preferences or changing industry or regulatory standards.
+Added: Cost volatility or loss of supply of our raw materials could have an adverse effect on our profitability.
+Added: Most of the materials used in our products are resins, plastics and other material that depend upon oil or natural gas as their raw material.
+Added: Crude oil and natural gas prices have been volatile in recent years.
+Added: Crude oil markets have historically been affected by political uncertainty in the Middle East and more recently, by the conflict in the Ukraine.
+Added: As the current conflict in the Middle East continues to develop and geopolitical tensions rise in the region or globally, there is no assurance that crude oil supplies will not be interrupted or crude oil prices will not rise in the future.
+Added: New laws or regulations adopted in response to climate change could also increase energy costs as well as the costs of certain raw materials and components.
+Added: Any such regulations or interruptions could have an adverse effect on our ability to produce, or the cost to produce, our products.
+Added: Our suppliers have historically passed some of their cost increases on to us, and if such prices are sustained or increase further, our suppliers may pass further cost increases on to us.
+Added: In addition to the effect on resin prices, transportation costs have increased because of the effect of higher crude oil prices, and we believe most of these costs have been passed on to us.
+Added: Our ability to recover these increased costs may depend upon our ability to raise prices on our products.
+Added: In the past, we have rarely raised
+Added: prices and it is uncertain that we would be able to raise them to recover higher prices from our suppliers.
+Added: Our inability to raise prices in those circumstances, or to otherwise recover these costs, could have an adverse effect on our profitability.
+Added: 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.
+Added: We expanded our manufacturing capacity substantially in recent years, and we expect that continued expansion may be necessary.
+Added: Molds and automated assembly machines generally have a long lead-time with vendors, often nine months or longer.
+Added: Inability to secure such tooling in a timely manner, or unexpected increases in production demands, could cause us to be unable to meet customer orders.
+Added: Such inability could cause customers to seek alternatives to our products, which would adversely affect our sales.
+Added: Heightened inflation, higher interest rates and foreign currency rate fluctuations as a result of global macroeconomic and geopolitical conditions have had and could in the future have a material adverse effect on our operations.
+Added: Global macroeconomic conditions and geopolitical tensions, such as the conflicts in Eastern Europe and the Middle East, and resulting impacts therefrom, for example, heightened inflation, higher interest rates and capital costs, and currency rate fluctuations have resulted in, and may continue to result in, increased raw material costs, higher shipping costs, higher labor costs, and global supply chain disruptions.
+Added: In 2022, we experienced these supply chain disruptions, increased raw material costs and shipping costs, as prices on several commodities, including oil and gas, increased as a result of the conflict in the Ukraine and its impact on the global economy.
+Added: Although these costs were less volatile in 2023, we may continue to experience these inflationary increases in our manufacturing costs and operating expenses, including higher materials and labor costs, as well as negative impacts on our operating results from the strengthening of the U.S.
+Added: dollar relative to foreign currencies weakening exchange rates.
+Added: See the risk factor titled “Our operations may be adversely impacted by our exposure to risks related to foreign currency exchange rates” under the “Geographic Risks” subsection for a discussion of risks related to foreign currency exchange rates.
+Added: Additionally, the majority of our sales are conducted pursuant to long-term contracts.
+Added: Our efforts to minimize the impact of inflation on our business through contractual protections may not prove effective, and 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.
+Added: 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.
+Added: Heightened inflation may also reduce or delay orders for our products and for certain products we may be unable to satisfy demand, both of which could have a material adverse impact on our sales and results of operations.
+Added: Our operating results may be adversely affected by unfavorable economic conditions that affect our customers’ ability to buy our products and our suppliers' demand for payment terms.
+Added: Disruptions in financial markets worldwide and other worldwide macro-economic challenges have caused and may in the future cause our customers and suppliers to experience cash flow concerns.
+Added: If job losses and the resulting loss of health insurance and personal savings cause individuals to forego or postpone treatment, the resulting decreased hospital use could affect the demand for our products.
+Added: As a result, customers may modify, delay or cancel plans to purchase our products and suppliers may increase their prices, reduce their output or change terms of sales.
+Added: Additionally, if customers’ or suppliers’ operating and financial performance deteriorates, or if they are unable to make scheduled payments or obtain credit, customers may not be able to pay, or may delay payment of, accounts receivable owed to us and suppliers may impose different payment terms that are less favorable to us.
+Added: Any inability of current and/or potential customers to pay us for our products or any demands by suppliers for different payment terms may adversely affect our earnings and cash flow.
Continuing pressures to reduce healthcare costs and inadequate coverage and reimbursement may adversely affect our prices.
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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.
−Removed: 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.
+Added: The ability of our customers to obtain appropriate coverage and reimbursement for healthcare
+Added: services and products from third-party payors is critical because it affects the kinds of 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.
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additional prior authorization requirements.
−Removed: 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,
−Removed: which could have an adverse effect on our business, financial condition and results of operations and impair our ability to grow our business.
+Added: 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 of these results would adversely affect our future results of operations.
+Added: 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.
+Added: The ability of 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.
+Added: Average review times at the FDA, other government agencies, foreign regulatory authorities and notified bodies have fluctuated in recent years as a result.
+Added: 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.
+Added: For example, over the last several years, the U.S.
+Added: 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.
+Added: One such shut down was as a result of COVID-19, the FDA postponed most inspections of domestic and foreign manufacturing facilities at various points.
+Added: Even though the FDA has resumed standard inspection operations, any resurgence of the virus or comparable health concerns may lead to future inspectional or administrative delays.
+Added: If a prolonged government shutdown occurs, or if a global health concern prevents 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.
+Added: For instance, in the EU, notified bodies must be officially designated to certify products and services in accordance with the EU Medical Devices Regulation.
+Added: Their designation process, which is significantly stricter under the new Regulation, has experienced considerable delays as a result of COVID-19.
+Added: Despite a recent increase in designations, the current number of notified bodies designated under the new Regulation remains significantly lower than the number of notified bodies designated under the previous regime.
+Added: The current designated notified bodies are therefore facing a backlog of requests as a consequence of which review times have lengthened.
+Added: This situation may impact the way we are conducting our business in the EU and the EEA and the ability of our notified body to timely review and process our regulatory submissions and perform its audits.
Failure to protect our information technology systems against security breaches, service interruptions, or misappropriation of data could disrupt operations, compromise sensitive data, and expose us to liability, possibly causing our business and reputation to suffer.
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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.
−Removed: 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.
−Removed: 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.
−Removed: Despite the implementation of security measures, our information technology systems, and those of third parties on which we rely, are vulnerable to attack and damage from, among others, computer viruses, malware (e.g.
−Removed: ransomware), malicious code, natural disasters, terrorism, war, telecommunication and electrical failures, cyber-attacks or cyber-intrusions over the Internet, attachments to emails, persons inside our organization, or persons with access to systems inside our organization or similar disruptive problems.
+Added: Further, as cybersecurity 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.
+Added: Our ability to execute our business strategy depends, in part, on the continued and uninterrupted performance of our information technology systems and those of our third-party service providers, strategic partners and other contractors or consultants, which support our operations.
+Added: Despite the implementation of security measures, our information technology systems, and those of third parties on which we rely, are vulnerable to attack, interruption and damage from, among others, computer viruses, malware (e.g.
+Added: ransomware), malicious code, natural disasters, terrorism, war, telecommunication and electrical failures, hacking, cyber-attacks or cyber-intrusions over the Internet, phishing and other social engineering schemes, human error, theft or misuse by persons inside our organization, or persons with access to systems inside our organization, fraud, denial or degradation of service attacks and sophisticated nation-state and nation-state-supported actors or similar disruptive problems.
The risk of a security breach or disruption, particularly through cyber-attacks or cyber-intrusion, including by computer hackers, foreign governments, and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased.
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Even if identified, we may be unable to adequately investigate or remediate incidents or breaches due to attackers increasingly using tools and techniques that are designed to circumvent controls, to avoid detection, and to remove or obfuscate forensic evidence.
−Removed: We and certain of our service providers are from time to time subject to cyberattacks and security incidents.
−Removed: While we do not believe that we have experienced any significant system failure, accident or security breach to date, if such event were to occur, public perception of the effectiveness of our security measures and brand could be harmed and our results of operations could be negatively affected.
−Removed: Data security breaches and other incidents may also result from non-technical means (e.g., actions by employees or contractors).
−Removed: Any such security breach may compromise information stored on our networks and may result in significant data losses or theft of personally identifiable information.
+Added: We and certain of our service providers have been in the past and may from time to time in the future be subject to cyberattacks and security incidents.
+Added: Data security breaches and other cybersecurity incidents may result from, for example, non-technical means (e.g., actions by employees or contractors), system failure, accident or unauthorized access.
+Added: Any such security breach may compromise information stored on our networks or those of third parties on which we rely 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.
1 unchanged sentence
Any such compromise could also result in damage to our reputation and a loss of confidence in our security and privacy or data protection measures.
−Removed: In addition, a cybersecurity attack could result in other negative consequences, including disruption of our internal operations, increased cyber security protection costs, lost revenue, regulatory actions or litigations.
+Added: In addition, a cybersecurity attack could result in other negative consequences, including disruption of our internal operations, increased cybersecurity protection costs, lost revenue, regulatory actions or litigations.
Any of these effects could materially and adversely affect our business, financial condition and results of operations.
−Removed: Our cyber liability insurance may not be sufficient to cover the financial, legal, business or reputational losses that may result from an interruption or breach of our systems.
−Removed: 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.
−Removed: We expanded our manufacturing capacity substantially in recent years, and we expect that continued expansion may be necessary.
−Removed: Molds and automated assembly machines generally have a long lead-time with vendors, often nine months or longer.
−Removed: Inability to secure such tooling in a timely manner, or unexpected increases in production demands, could cause us to be unable to meet customer orders.
−Removed: Such inability could cause customers to seek alternatives to our products, which would adversely affect our sales.
−Removed: Cost volatility or loss of supply of our raw materials could have an adverse effect on our profitability.
−Removed: Most of the materials used in our products are resins, plastics and other material that depend upon oil or natural gas as their raw material.
−Removed: Crude oil markets have historically been affected by political uncertainty in the Middle East and more recently, by the conflict in the Ukraine, and there is no assurance that crude oil supplies will not be interrupted in the future.
−Removed: New laws or regulations adopted in response to climate change could also increase energy costs as well as the costs of certain raw materials and components.
−Removed: Any such regulations or interruptions could have an adverse effect on our ability to produce, or the cost to produce, our products.
−Removed: Also, crude oil and natural gas prices have been volatile in recent years.
−Removed: Our suppliers have historically passed some of their cost increases on to us, and if such prices are sustained or increase further, our suppliers may pass further cost increases on to us.
−Removed: In addition to the effect on resin prices, transportation costs have increased because of the effect of higher crude oil prices, and we believe most of these costs have been passed on to us.
−Removed: Our ability to recover these increased costs may depend upon our ability to raise prices on our products.
−Removed: In the past, we have rarely raised prices and it is uncertain that we would be able to raise them to recover higher prices from our suppliers.
−Removed: Our inability to raise prices in those circumstances, or to otherwise recover these costs, could have an adverse effect on our profitability.
+Added: Our cyber liability insurance may not be sufficient to cover the financial, legal, business or reputational losses that may result from such an interruption or breach.
+Added: Furthermore, there can be no assurance that our cybersecurity risk management program and processes, including our policies, controls or procedures, will be fully implemented, complied with or effective in protecting our systems and information.
Our business could suffer if we lose the services of key personnel.
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The public equity market can be highly volatile, and we have experienced significant volatility in the price of our common stock in the past.
−Removed: We believe that factors such as quarter-to-quarter fluctuations in financial results, differences between stock analysts’ expectations and actual quarterly and annual results, new product introductions by us or our competitors, acquisitions or divestitures, changing regulatory environments, litigation, changes in healthcare reimbursement policies, sales or the perception in the market of possible sales of common stock by insiders, market rumors, general economic trends (including macroeconomic challenges related to the COVID-19 pandemic and the conflict in the Ukraine) and substantial product orders could contribute to the volatility in the price of our common stock.
+Added: We believe that factors such as quarter-to-quarter fluctuations in financial results, differences between stock analysts’ expectations and actual quarterly and annual results, new product introductions by us or our competitors, acquisitions or divestitures, changing regulatory environments, litigation, changes in healthcare reimbursement policies, sales or the perception in the market of possible sales of common stock by insiders, market rumors, general macroeconomic trends (including as a result of pandemics or other health outbreaks, geopolitical tensions and uncertainties including as a result of the current conflicts in Eastern Europe and the Middle East) and substantial product orders could contribute to the volatility in the price of our common stock.
Most of our common stock is held by, or included in accounts managed by, institutional investors or managers.
1 unchanged sentence
If one or more of the institutions or if our other large stockholders should decide to reduce or eliminate their position in our common stock, it could cause a significant decrease in the price of our common stock.
−Removed: 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.
−Removed: 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.
−Removed: Average review times at the agency have fluctuated in recent years as a result.
−Removed: 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.
−Removed: 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.
−Removed: Average review times at the FDA, other government agencies, foreign regulatory authorities and notified bodies have fluctuated in recent years as a result.
−Removed: 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.
−Removed: For example, over the last several years, the U.S.
−Removed: 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.
−Removed: Separately, in response to the COVID-19 pandemic, the FDA postponed most inspections of domestic and foreign manufacturing facilities at various points.
−Removed: Even though the FDA has since resumed standard inspection operations of domestic facilities where feasible, 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, and any resurgence of the virus or emergence of new variants may lead to further inspectional delays.
−Removed: Regulatory authorities and notified bodies outside the U.S.
−Removed: have adopted similar restrictions or other policy measures in response to the COVID-19 pandemic.
−Removed: 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.
−Removed: For instance, in the EU, notified bodies must be officially designated to certify products and services in accordance with the EU Medical Devices Regulation.
−Removed: While several notified bodies have been designated under the EU Medical Devices Regulation 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.
−Removed: This situation could impact our ability to grow our business in the EU and EEA and the ability of our notified body to timely review and process our regulatory submissions and perform its audits.
+Added: Climate-related events and other events could harm our business .
+Added: Natural disasters, disease outbreaks and pandemics, power shortages, terrorism, political unrest, telecommunications failure, vandalism, geopolitical instability, war, climate-related events, and other events beyond our control could negatively impact our operations or otherwise harm our business.
+Added: Such events may result in damage or loss of service to assets that our operations rely on or cause delays in product manufacturing or distribution, any of which may adversely impact our operations.
+Added: In addition, the impacts of climate-related events on the global economy and our industry are rapidly evolving.
+Added: Physical impacts of climate-related events (including but not limited to floods, droughts, more frequent and/or intense storms and wildfires), or chronic changes (such as droughts, heat waves or sea level changes) in climate patterns can adversely impact our operations, as well as the operations of our suppliers and customers.
+Added: If a catastrophic event occurs at or near any of our manufacturing facilities or our suppliers’ facilities, or utility providers or public health officials take certain actions (e.g., shut off power to our or our suppliers’ facilities), our operations may be interrupted, which could adversely impact our business and results of operations.
+Added: Transition impacts of climate-related events may subject us to increased regulations, reporting requirements, standards or expectations regarding the environmental impacts of our business.
+Added: Any of such adverse impacts from these or other climate-related events may also adversely affect our reputation, business, or financial performance.
+Added: The increasing focus on environmental sustainability and social initiatives could increase our costs, harm our reputation and adversely impact our financial results.
+Added: There has been increasing public focus by investors, patients, environmental activists, the media and governmental and nongovernmental organizations on a variety of environmental, social and other sustainability matters.
+Added: We may experience pressure to make commitments relating to sustainability matters that affect us, including the design and implementation of specific risk mitigation strategic initiatives relating to sustainability.
+Added: Expectations regarding the management of ESG initiatives continues to evolve rapidly.
+Added: While we may from time to time engage in various initiatives (including but not limited to voluntary disclosures, policies, or goals) to improve our ESG profile or respond to stakeholder expectations, we cannot guarantee that these initiatives will have the desired effect.
+Added: If we are not effective in addressing environmental, social and other sustainability matters affecting our business, or setting and meeting relevant sustainability goals, our reputation and financial results may suffer.
+Added: In addition, even if we are effective at addressing such concerns, we may experience increased costs as a result of executing upon our sustainability goals that may not be offset by any benefit to our reputation, which could have an adverse impact on our business and financial condition.
+Added: In addition, various regulatory authorities have imposed, and may continue to impose, mandatory substantive and/or disclosure requirements with respect to ESG matters.
+Added: For example, we and/or certain of our subsidiaries or affiliates may be
+Added: subject to the requirements of the European Union Corporate Sustainability Reporting Directive (and its implementing laws and regulations and other European Union directives or European Union and European Union member state regulations, various disclosure requirements (such as information on greenhouse gas emissions, climate risks, use of offsets, and emissions reduction claims) from the State of California, the SEC’s climate disclosure proposal, if finalized, as well as the International Sustainability Standards Board’s sustainability and climate disclosure standards, to the extent adopted by jurisdictions in which we operate, among other regulations or requirements.
+Added: Operating in more than one jurisdiction is likely to make our compliance with ESG and sustainability-related rules more complex and expensive, and potentially expose us to greater levels of legal risks associated with our compliance.
+Added: Our failure to comply with any applicable rules or regulations could lead to penalties and adversely impact our reputation, customer attraction and retention, access to capital and employee retention.
+Added: Such ESG matters may also impact our suppliers and customers, which may augment or cause additional impacts on our business, financial condition, or results of operations.
+Added: Business and Operating Risks
+Added: Damage to, or interruptions at, any of our manufacturing facilities or our suppliers' facilities could impair our ability to produce our products.
+Added: A severe weather event, including climate change-related severe weather or disasters, other natural or man-made disaster, or any other significant disruption, such as global epidemics/pandemics, the impact of war or political instability (such as the conflicts in Eastern Europe and the Middle East), 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.
+Added: For example the impact of COVID-19 caused us to temporarily shut down some of our facilities in 2021.
+Added: We have a single manufacturing facility for our Clave products located in Salt Lake City, Utah.
+Added: Our Salt Lake City facility also produces other components on which our manufacturing operations in Ensenada, Mexico and Costa Rica rely.
+Added: Our IV Solutions are manufactured at our manufacturing facility in Austin, Texas and in past years also by a third party manufacturer, Pfizer, in Rocky Mount, North Carolina or our suppliers’ facilities.
+Added: We also operate various other manufacturing facilities in the U.S., Mexico, Italy and Czech Republic.
+Added: If our facilities or our suppliers' 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.
+Added: For example, during July 2023, Pfizer's Rocky Mount, North Carolina facility sustained damage and destroyed inventory as a result of a tornado, which resulted in minor delayed shipments of certain products.
+Added: 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.
+Added: Damage to, or interruptions at, any of our facilities or our suppliers' facilities due to work stoppages or labor shortages could render us unable to manufacture our products or require us to reduce the output of products at such facilities.
+Added: Several of our manufacturing facilities are located near known earthquake fault zones and are vulnerable to damage from earthquakes.
+Added: We carry insurance for damage to our property and disruption of our business, but this insurance may not be adequate to 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.
+Added: 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.
+Added: We currently rely on a single source supplier for the supply of certain materials (such as resins) that are critical to our ability to manufacture our products.
+Added: Our risk mitigation plans employed with such key supplier, or that we may use with other key suppliers, may not suffice to ensure that we are able to receive requisite materials as and when needed and in sufficient quantity.
+Added: 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.
+Added: 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.
+Added: Upon identification, the qualification process of new suppliers and component materials can take a considerable amount of time.
+Added: We may be unable to find a sufficient alternative supply channel in a reasonable time or on commercially reasonable terms.
+Added: Additionally, we are subject to FDA and foreign regulations, which could further delay our ability to obtain a qualified alternative supplier.
+Added: 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, extreme weather events, geopolitical developments, global economic uncertainty or downturns, sanctions and trade restrictions, and other governmental regulatory actions.
+Added: Furthermore, our contract manufacturers
+Added: could require us to move to another one of their production facilities.
+Added: 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 the cost and availability of raw materials and components due to shortages and resulting cost inflation..
+Added: If we encounter delays or difficulties in securing these components, materials or services and, if we cannot then obtain an acceptable substitute on a timely basis, our commercial operations could be interrupted, and we could experience an adverse effect on our results of operations and financial condition , and.
+Added: Additionally, 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.
+Added: Due to the highly competitive nature of the healthcare industry and the cost controls of our customers and third party payors, as well as entering into long-term fixed price contracts, we may be unable to pass along cost increases for any key components or raw materials through higher prices to our customers.
+Added: 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 results of operations and financial condition.
+Added: We may not be successful in achieving expected operating efficiencies or expense reductions associated with cost reduction and restructuring efforts and may experience a decline in our profitability, business disruptions or other adverse consequences to our business as a result.
+Added: We have engaged in restructuring activities in the past and may engage in other restructuring activities in the future.
+Added: For example, since the Smiths Medical acquisition, we have taken realignment and cost reduction initiatives to achieve operating efficiencies for the combined company.
+Added: These types of cost reduction and restructuring activities are complex.
+Added: If we do not successfully manage our current restructuring activities, or any other restructuring activities that we may take in the future, any expected efficiencies and benefits might be delayed or not fully realized, and our operations and business could be disrupted.
+Added: In addition, the costs associated with implementing restructuring activities might exceed expectations, which could result in additional future charges.
+Added: The agreements governing our debt contain a number of restrictive covenants which limit our flexibility in operating our business, finance future operations or pursue our business strategies.
+Added: The credit agreement governing our Senior Secured Credit Facilities 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.
+Added: While we have not previously breached and are not currently in breach of these or any other covenants contained in our credit agreement, our ability to comply with these covenants may be affected by events beyond our control, including health crises and global pandemics, other geopolitical events, such as the conflicts in Eastern Europe and the Middle East, supply chain interruptions or general economic environment, including high inflation and interest rates.
+Added: 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.
+Added: As such, these restrictive covenants contained in our Senior Secured Credit Facility may restrict our ability to pursue our business strategies.
+Added: Significant sales through distributors expose us to risks that could have a material effect on our results of operations.
+Added: For the year ended December 31, 2023 and 2022, business from one distributor, Medline, accounted for approximately 16% and 15% of our consolidated revenues, respectively.
+Added: We may rely on one or more key distributors for a product, and the loss of these distributors could reduce our revenue.
+Added: Additionally, distributors may face financial difficulties, including bankruptcy, which could harm our collection of accounts receivable and financial results.
+Added: Failure to manage risks related to our use of distributors may reduce sales, increase expenses, and weaken our competitive position, any of which could have a material adverse effect on our business and results of operations.
Legal, Compliance, and Regulatory Risks
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The global data protection landscape is rapidly evolving, and implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future.
−Removed: 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.
+Added: 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 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")).
−Removed: 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.
+Added: For example, the privacy, security and breach notification rules promulgated under the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, and regulations implemented thereunder (collectively ("HIPAA") 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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Although there are limited exemptions for health-related information, including PHI maintained by covered entities and business associates, the CCPA may increase our compliance costs and potential liability.
−Removed: Further, the California Privacy Rights Act ("CPRA") recently passed in California.
−Removed: The CPRA imposes 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.
−Removed: 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.
−Removed: The majority of the provisions went into effect on January 1, 2023, and additional compliance investment and potential business process changes may be required.
−Removed: Similar laws have passed in Virginia, Connecticut, Utah 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.
+Added: Further, the California Privacy Rights Act ("CPRA") generally went into effect on January 1, 2023, and imposes 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.
+Added: It also created a new California data protection agency authorized to issue substantive regulations and could result in increased privacy and information security enforcement.
+Added: Additional compliance investment and potential business process changes may be required.
+Added: Similar laws have passed in other states, and are continuing to be proposed at the state and 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.
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Foreign data protection laws, including the 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 U.S.
−Removed: The GDPR imposes strict requirements for processing the personal data of individuals within the EEA.
+Added: The GDPR imposes strict requirements for processing the personal data of individuals within the EEA or in the context of our activities within the EEA.
The GDPR has and will continue to increase compliance burdens on us, including by mandating potentially burdensome documentation requirements and granting certain rights to individuals to control how we collect, use, disclose, retain and process data about them.
Fines for non-compliance with the GDPR are significant - the greater of €20 million or 4% of global turnover.
+Added: In addition to fines, a breach of the GDPR may result in regulatory investigations, reputational damage, orders to cease/ change our data processing activities, enforcement notices, assessment notices (for a compulsory audit) and/ or civil claims (including class actions).
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.
−Removed: 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.
−Removed: by invalidating the Privacy Shield for purposes of international transfers and imposing further restrictions on use of the standard contractual clauses ("SCCs").
−Removed: In March 2022, the US and EU announced a new regulatory regime intended to replace the invalidated regulations;
−Removed: however, this new EU-US Data Privacy Framework has not been implemented beyond an executive order signed by President Biden on October 7, 2022 on Enhancing Safeguards for United States Signals Intelligence Activities.
−Removed: 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.
−Removed: 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.
−Removed: 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
−Removed: other means, such supervisory authority is under an obligation to suspend or prohibit that transfer.
−Removed: 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.
−Removed: The revised SCCs must be used for relevant new data transfers from September 27, 2021;
−Removed: existing standard contractual clauses arrangements must be migrated to the revised clauses by December 27, 2022.
−Removed: 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.
−Removed: The revised SCCs apply only to the transfer of personal data outside of the EEA and not the UK.
−Removed: The UK’s Information Commissioner’s Office has published new data transfer standard contracts for transfers from the UK under the UK GDPR.
−Removed: This new documentation will be mandatory for relevant data transfers from September 21, 2022;
−Removed: existing standard contractual clauses arrangements must be migrated to the new documentation by March 21, 2024.
−Removed: 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.
+Added: Among other requirements, the GDPR regulates transfers of personal data subject to the GDPR to third countries that have not been found to provide adequate protection to such personal data, including the United States, and the efficacy and longevity of current transfer mechanisms between the European Economic Area, or the EEA, and the United States remains uncertain.
+Added: Case law from the Court of Justice of the European Union (“CJEU”) states that reliance on the standard contractual clauses - a standard form of contract approved by the European Commission as an adequate personal data transfer mechanism - alone may not necessarily be sufficient in all circumstances and that transfers must now be assessed on a case-by-case basis.
+Added: On October 7, 2022, President Biden signed an Executive Order on ‘Enhancing Safeguards for United States Signals Intelligence Activities’ which introduced new redress mechanisms and binding safeguards to address the concerns raised by the CJEU in relation to data transfers from the EEA to the United States and which formed the basis of the new EU-US Data Privacy Framework (“DPF”), as released on December 13, 2022.
+Added: The European Commission adopted its Adequacy Decision in relation to the DPF on July 10, 2023, rendering the DPF effective as a GDPR transfer mechanism to U.S.
+Added: entities self-certified under the DPF.
+Added: The DPF also introduced a new redress mechanism for EU citizens which addresses a key concern in the previous CJEU judgments and may mean transfers under standard contractual clauses are less likely to be challenged in future.
+Added: We currently rely on the EU standard contractual clauses and the UK Addendum to the EU standard contractual clauses and the UK International Data Transfer Agreement and the DPF as relevant to transfer personal data outside the EEA and the UK, including to the United States, with respect to both intragroup and third party transfers.
+Added: We expect the existing legal complexity and uncertainty regarding international personal data transfers to continue 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.
+Added: In particular, we expect the DPF Adequacy Decision to be challenged and international transfers to the United States and to other jurisdictions more generally to continue to be subject to enhanced scrutiny by regulators.
+Added: 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.
1 unchanged sentence
fines up to the greater of €20 million (£17.5 million) or 4% of global turnover.
+Added: On October 12, 2023, the UK Extension to the DPF came into effect (as approved by the UK Government), as a UK GDPR data transfer mechanism to U.S.
+Added: entities self-certified under the UK Extension to the DPF.
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.
6 unchanged sentences
There are numerous U.S.
−Removed: 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.
+Added: 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
+Added: licensed healthcare professionals.
Our business practices and relationships with providers are subject to scrutiny under these laws.
8 unchanged sentences
• 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 U.S.
−Removed: 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
−Removed: 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;
+Added: 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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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.
−Removed: 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.
+Added: We anticipate there will continue to be proposals by legislators at both the federal state and foreign levels, regulators and commercial payors to reduce costs while expanding individual healthcare benefits.
The ultimate implementation of any healthcare reform legislation and any new laws and regulations, and its impact on us, is impossible to predict, particularly in light of the new presidential administration.
Any significant reforms made to the healthcare system in the U.S., or in other jurisdictions, may have an adverse effect on our financial condition and results of operations.
+Added: On December 13, 2021, Regulation No 2021/2282 on Health Technology Assessment (“HTA”) amending Directive 2011/24/EU, was adopted.
+Added: While the Regulation entered into force in January 2022, it will only begin to apply from January 2025 onwards, with preparatory and implementation-related steps to take place in the interim.
+Added: Once applicable, it will have a phased implementation depending on the concerned products.
+Added: The Regulation intends to boost cooperation among EU member states in assessing health technologies, including certain high-risk medical devices, and provide the basis for cooperation at the EU level for joint clinical assessments in these areas.
+Added: It will permit EU member states to use common HTA tools, methodologies, and procedures across the EU, working together in four main areas, including joint clinical assessment of the innovative health technologies with the highest potential impact for patients, joint scientific consultations whereby developers can seek advice from HTA authorities, identification of emerging health technologies to identify promising technologies early, and continuing voluntary cooperation in other areas.
+Added: Individual EU member states will continue to be responsible for assessing non-clinical (e.g., economic, social, ethical) aspects of health technology, and making decisions on pricing and reimbursement.
Our business could be materially and adversely affected if we fail to defend and enforce our patents or other proprietary rights, if our products are found to infringe patents or other proprietary rights owned by others or if the cost to protect our patents or other proprietary rights becomes excessive or as our patents expire.
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If others choose to manufacture and sell products similar to or substantially the same as our products, it could have a material adverse effect on our business through loss of unit volume or price erosion, or both, and could adversely affect our ability to secure new business.
−Removed: In the past, we have faced patent infringement claims related to our Clave products, the CLC2000 Connector and Tego Connector.
−Removed: We believe these claims had no merit, and all have been settled or dismissed.
−Removed: We may also face claims in the future.
−Removed: Additionally, there has been substantial litigation regarding patent and other intellectual property rights in the medical device industry.
+Added: There has been substantial litigation regarding patent and other intellectual property rights in the medical device industry.
+Added: We have in the past faced and may in the future face patent infringement claims.
Patent infringement litigation, which may be necessary to enforce patents issued to us or to defend ourselves against claimed infringement of the rights of others, can be expensive and may involve a substantial commitment of our resources which may divert resources from other uses.
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From time to time we become aware of newly issued patents on medical devices, which we review to evaluate any infringement risk.
−Removed: We are aware of a number of patents for infusion connection systems that have been issued to others.
+Added: We are aware of a number of patents that have been issued to others.
While we believe these patents will not affect our ability to market our products, there is no assurance that these or other issued or pending patents might not interfere with our right or ability to manufacture and sell our products.
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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.
−Removed: 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.
−Removed: For example, in 2022, we acquired Smiths Medical, which has marketed its PORT-A-CATH implantable access systems pursuant to PMA approval.
+Added: For example, in 2022, we acquired Smiths Medical, which has marketed its PORT-A-CATH implantable access systems pursuant to PMA approval, and 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, such as the PMA approval process, or that, in any case, they will receive clearance or approval from the FDA..
FDA regulatory processes are time consuming and expensive.
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The FDA enforces these regulatory requirements through periodic unannounced inspections.
−Removed: 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.
+Added: Even after we have obtained the proper regulatory clearance or approval to market a product, we have ongoing responsibilities under FDA
+Added: regulations and applicable foreign laws and regulations.
The FDA, state and foreign regulatory authorities have broad enforcement powers.
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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.
−Removed: 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.
−Removed: For example, on February 23, 2022, the FDA issued a proposed rule to amend the Quality System Regulation, or QSR, which establishes current good manufacturing practice requirements for medical device manufacturers, to align more closely with the International Organization for Standardization, or ISO, standards.
−Removed: This proposal has not yet been finalized or adopted.
−Removed: Accordingly, it is unclear the extent to which this or any other proposals, if adopted, could impose additional or different regulatory requirements on us that could increase the costs of compliance or otherwise create competition that may negatively affect our business.
−Removed: Additionally, 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.
+Added: 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 or otherwise increase the costs associated with compliance.
+Added: For example, 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.
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or additional record keeping.
+Added: For example, in February 2024, the FDA issued a final rule to amend and replace the QSR, which sets forth the FDA’s current good manufacturing practice requirements for medical devices, to align more closely with the International Organization for Standardization standards.
+Added: Specifically, this final rule, which the FDA expects to go into effect on February 2, 2026, establishes the “Quality Management System Regulation,” (“QMSR”), which among other things, incorporates by reference the quality management system requirements of ISO 13485:2016.
+Added: Although the FDA has stated that the standards contained in ISO 13485:2016 are substantially similar to those set forth in the QSR, and although our quality system is currently designed to comply with ISO standards in connection with our device certifications outside the United States, it is unclear the extent to which this final rule, once effective, could impose additional or different regulatory requirements on us that could increase the costs of compliance or otherwise negatively affect our business.
+Added: If we are unable to comply with QMSR, once effective, or with any other changes in the laws or regulations enforced by FDA or comparable regulatory authorities, we may be subject to enforcement action, which could have an adverse effect on our business, financial condition and results of operations.
For instance, the EU landscape concerning medical devices recently evolved.
−Removed: On May 25, 2017, the EU Medical Devices Regulation entered into force, which repeals and replaces the EU Medical Devices Directive.
+Added: On May 26, 2021, the EU Medical Devices Regulation became applicable and repealed and replaced 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.
−Removed: 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.
−Removed: In particular, the certificate in question must still be valid.
+Added: In accordance with its recently extended transitional provisions, both (i) devices lawfully placed on the market pursuant to the EU Medical Devices Directive prior to May 26, 2021 and (ii) legacy devices lawfully placed on the EU market after May 26, 2021 in accordance with the EU Medical Devices Regulation transitional provisions may generally continue to be made available on the market or put into service, provided that the requirements of the transitional provisions are fulfilled.
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.
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Non-compliance with the above requirements would also prevent us from selling our products in these three countries.
−Removed: The rules applicable in Great Britain may differ from the EEA as a result of proposals for the new regulatory landscape which will be implemented, subject to a transitional period, as a result of Brexit.
−Removed: Following the transitional period, compliance
−Removed: with the UK regulations will be a prerequisite to be able to affix the UKCA mark to our products, without which they cannot be sold or marketed in Great Britain.
+Added: The rules applicable in Great Britain differ from the EEA as a result of Brexit.
+Added: Following the transitional periods whereby existing CE marks continue to be recognized in Great Britain, affixing the UKCA mark is expected to become a prerequisite to be able to place products on the market in Great Britain, without which they cannot be sold or marketed in Great Britain.
+Added: This might cause increased regulatory burden to our business.
See “Part 1, Item 1.
Government Regulation - Regulation of Medical Devices in the European Union - Brexit.”
−Removed: 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.
−Removed: 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.
−Removed: The FDA's cGMPs apply to the manufacture of medical device components and finished medical devices.
+Added: If we or our comp onent 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.
+Added: In the United States, we and some of our component manufacturers are required to comply with regulatory requirements known as the FDA's 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.
+Added: The QSR applies 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.
The FDA may conduct inspections or audits at any time, and we and some of our component suppliers are subject to such inspections.
−Removed: 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.
−Removed: 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.
+Added: Although we believe our manufacturing facilities and those of our critical component suppliers are in compliance with the QSR requirements, and with other applicable cGMPs for our products, we cannot provide assurance that any future inspection will not result in adverse findings.
+Added: For example, on October 1, 2021, Smiths Medical received a Warning Letter from the FDA following an inspection of
+Added: 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.
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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.
−Removed: There is no assurance that we will continue to meet the requirements for distribution of our products in Europe.
−Removed: In addition, the EU Medical Devices Regulation, among other things:
−Removed: • strengthens the rules on placing devices on the market (e.g.
−Removed: reclassification of certain devices and wider scope than the EU Medical Devices Directive) and reinforces surveillance once they are available;
−Removed: • establishes explicit provisions on manufacturers' responsibilities for the follow-up of the quality, performance and safety of devices placed on the market;
−Removed: • establishes explicit provisions on importers' and distributors' obligations and responsibilities;
−Removed: • imposes an obligation to identify a responsible person who is ultimately responsible for all aspects of compliance with the requirements of the new regulation;
−Removed: • 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;
−Removed: • sets up a central database (Eudamed) to provide patients, healthcare professionals and the public with comprehensive information on products available in the EU;
−Removed: • 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.
+Added: There is no assurance that we will continue to meet the requirements for distribution of our products in the EU and the EEA.
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.
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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.
−Removed: 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.
+Added: 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
+Added: and administrative penalties, damages, fines, disgorgement, exclusion from participation in government healthcare programs and the curtailment of our operations.
In addition, physicians may misuse our products or use improper techniques if they are not adequately trained, potentially leading to injury and an increased risk of product liability.
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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 or clinical studies, 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.
−Removed: 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.
+Added: Any attempts we take to manage our product liability exposure, for example, by proactively recalling or withdrawing from the market any defective products, and any required 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 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, approvals or certifications, seizure of our products or delay in clearance, approval, or certification of future products.
−Removed: 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.
+Added: 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
+Added: risk to health.
The FDA’s authority to require a recall must be based on a finding that there is reasonable probability that the device could cause serious injury or death.
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We can provide no assurance that our efforts to work with the FDA to complete the Class 1 recall, and ultimately close, this product recall will be accomplished in a timely manner, or at all.
−Removed: 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.
+Added: In addition, the costs associated with conducting and closing this recall or any other product recalls, 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.
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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.
−Removed: 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
−Removed: enforcement action.
+Added: 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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We face exposure to adverse movements in foreign currency exchange rates due to our operations in foreign markets through our foreign subsidiaries and other international distributors.
−Removed: Our primary foreign currency exchange rate exposures are currently with the Euro, Mexican Peso, Czech Koruna, Japanese Yen, Chinese Renminbi, Australian Dollar, and the Canadian Dollar against the U.S.
+Added: Our primary foreign currency exchange rate exposures are currently with the Euro, Mexican Peso, Canadian Dollar, Czech Koruna, Japanese Yen, Chinese Renminbi, and the Australian Dollar against the U.S.
Our income and expenses are based on a mix of currencies, and a decline in one currency relative to the other currencies could adversely affect our operating results.
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dollars, using the exchange rate in effect at the balance sheet date, or, for revenues and expenses, using the average monthly exchange rates during the year.
−Removed: Accordingly, our operating results are subject to volatility due to fluctuations in foreign currency exchange rates.
+Added: Accordingly, our operating results have been and continue to be subject to volatility due to fluctuations in foreign currency exchange rates.
Generally, when the U.S.
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We are also exposed to foreign currency risk on outstanding foreign currency denominated receivables and payables.
−Removed: Accordingly, changes in foreign currency exchange rates may adversely affect our results of operations.
−Removed: Fluctuations in currency exchange rates are caused by a number of factors that are beyond our control, including a country’s political and economic policies, inflationary conditions, disruptions in the financial markets, and global economic conditions.
−Removed: During 2022, we recorded $5.8 million in foreign exchange losses due to the volatility of foreign exchange rates as a result of continued global macroeconomic challenges.
−Removed: We currently only partially hedge against our foreign currency exchange rate risks, related to certain forecasted foreign currency-denominated revenues and expenses for Smiths Medical.
−Removed: We, therefore, believe our exposure to these risks may be higher than if we entered into hedging transactions, including forward exchange contracts or similar instruments that covered the whole company.
+Added: Currency exchange rates have been especially volatile in the recent past.
+Added: Accordingly, changes in foreign currency exchange rates have adversely affected and may continue to adversely affect our results of operations.
+Added: During 2023, we recorded $5.9 million in foreign exchange losses due to the volatility of foreign exchange rates such as the strengthening of the Mexican Peso which impacted margins and the devaluation of the Argentine Peso.
+Added: “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a further discussion of the financial impact of exchange rate fluctuations on our results of operations.
+Added: Fluctuations in currency exchange rates are caused by a number of factors that are beyond our control, including a country’s political and economic policies, inflationary conditions, disruptions in the financial markets, and global economic and geopolitical conditions.
+Added: We currently only partially hedge against our foreign currency exchange rate risks, related to certain forecasted foreign currency-denominated revenues and expenses.
+Added: We, therefore, believe our exposure to these risks may be higher than if we entered into hedging transactions, including forward exchange contracts or similar instruments that covered the company on a consolidated basis.
If we decide in the future to enter into additional forward foreign exchange contracts to attempt to reduce the risk related to foreign currency exchange rates, these contracts may not mitigate the potential adverse impact on our financial results due to the limitations and difficulty forecasting future activity.
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We attempt to mitigate a portion of foreign currency exchange rate risks through foreign currency hedging.
−Removed: Our hedging activities, however, may not sufficiently offset the adverse financial impact caused by unfavorable movement in foreign currency exchange rates applicable to our business, and such exchange rate impacts could materially adversely affect our financial condition or results of operations.
+Added: Our hedging activities, however, may not sufficiently offset the adverse financial impact caused by unfavorable movement in foreign currency exchange rates
+Added: applicable to our business, and such exchange rate impacts could materially adversely affect our financial condition or results of operations.
See “Item 7A.
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trade, tax or other policies could have a material adverse effect on our results of operations.
−Removed: International sales pose additional risks related to competition with larger international companies and established local companies and our possibly higher cost structure.
+Added: International sales pose additional risks related to competition with larger international companies and established local companies and higher credit risk.
We have undertaken an initiative to increase our international sales, and have distribution arrangements in all the principal countries in Western Europe, the Pacific Rim, Middle East, Latin America, Canada and South Africa.
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Our principal competitors in international markets consist of much larger companies as well as smaller companies already established in the countries into which we sell our products.
−Removed: Our cost structure is often higher than
−Removed: that of our competitors because of the relatively high cost of transporting product to some local markets as well as our competitors’ lower local labor costs in some markets.
+Added: Our cost structure is often higher than that of our competitors because of the relatively high cost of transporting products to some local markets as well as our competitors’ lower local labor costs in some markets.
Our international sales are subject to higher credit risks than sales in the U.S.
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The European hospitals tend to be significantly slower in payment which has resulted in and may continue to result in an increase to our days sales outstanding from previous years.
−Removed: Our prices to our international distributors, outside of Europe, for product shipped to the customers from the U.S., Costa Rica or Mexico are generally denominated in U.S.
+Added: Our prices to our international distributors, outside of Europe, for products shipped to the customers from the U.S., Costa Rica or Mexico are generally denominated in U.S.
dollars, but their resale prices are set in their local currency.
A decline in the value of the local currency in relation to the U.S.
−Removed: dollar may adversely affect their ability to profitably sell in their market the products they buy from us, and may adversely affect their ability to make payment to us for the products they purchase.
+Added: dollar has in prior years adversely affected and may in future years adversely affect their ability to profitably sell in their market the products they buy from us, and has in prior years adversely affected and may in future years adversely affect their ability to make payment to us for the products they purchase.
Legal recourse for non-payment of indebtedness may be uncertain.
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Business activity in the Ensenada area has expanded significantly, providing increased employment opportunities.
−Removed: This could have an adverse effect on our ability to hire or retain necessary personnel and result in higher labor costs.
+Added: This has had and may continue to have an adverse effect on our ability to hire or retain necessary personnel and has resulted in and may continue to result in higher labor costs.
In addition, minimum wages in regions within which we operate have increased labor costs significantly.
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Sales to customers outside of the U.S.
−Removed: made up approximately 36% of our revenues in 2022 and as our operations and sales located in Europe and other areas outside the U.S.
+Added: composed approximately 36% of our revenues in 2023 and as our operations and sales located in Europe and other areas outside the U.S.
increase, we may face new challenges and uncertainties, although we can give no assurance that such operations and sales will increase.
The risks associated with our operations outside the U.S.
−Removed: also include:
+Added: include, without limitation:
• economic and political uncertainty;
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• different labor regulations or work stoppages or strikes;
−Removed: • political instability and actual or anticipated military or political conflicts (such as the conflict in Ukraine);
−Removed: • economic instability in other parts of the world and the impact on interest rates, inflation and the credit worthiness of our customers in foreign countries;
+Added: • changing geopolitical conditions arising from political instability and any actual or anticipated military or political conflicts (such as the conflict in Ukraine and in the Middle East);
+Added: • economic instability in other parts of the world and the impact on interest rates, inflation and the credit worthiness of our customers in foreign countries, such as the devaluation of the Argentine Peso;
• uncertainties regarding judicial systems and procedures;
• minimal or diminished protection of intellectual property in some countries;
−Removed: • natural disasters or outbreak of diseases (including COVID-19);
+Added: • natural disasters or outbreak of diseases or pandemics;
• fluctuations in foreign currency exchange rates;
−Removed: • disputes between countries, trade relationships and conflicts );
−Removed: • imposition of government controls.
+Added: • changes to international trade agreements and trade relationships and conflicts between countries;
+Added: • imposition of government controls, such as economic sanctions and export controls.
These risks, individually or in the aggregate, could have an adverse effect on our results of operations and financial condition.
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Risks Related to our Strategic Transactions
−Removed: The Smiths Medical acquisition completed in January 2022 has resulted in organizational changes and significant growth to our business.
+Added: The Smiths Medical acquisition completed in January 2022 has resulted in organizational changes and an increase in size 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.
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Our total headcount as of December 31, 2023 is approximately 14,000 employees.
−Removed: We have incurred and will continue to incur significant expenditures and the allocation of management time to assimilate the Smiths Medical 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.
+Added: We have incurred and continue to incur significant expenditures and the allocation of management time to assimilate the Smiths Medical 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.
−Removed: The Smiths Medical acquisition is a significant acquisition for us and the product offerings within Smiths Medical are not product offerings that we previously offered.
+Added: The Smiths Medical acquisition was a significant acquisition for us and the product offerings within Smiths Medical are not product offerings that we previously offered.
The success of our business will depend, in part, on our ability to realize our anticipated benefits, opportunities and synergies from combining our legacy businesses and Smiths Medical.
We can provide no assurance that the anticipated benefits of the Smiths Medical acquisition will be fully realized in the time frame anticipated or at all.
−Removed: Integrating the operations of Smiths Medical with that of our legacy business has been and will continue to be a complex, costly and time-consuming process.
+Added: Integrating the operations of Smiths Medical with that of our legacy business has been and continues to be a complex, costly and time-consuming process.
The integration process may disrupt the businesses and, if implemented ineffectively, would restrict the realization of the full expected benefits.
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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.
+Added: For example, our vascular access product sales have been less than anticipated because of supply chain constraints prior to the closing of the acquisition which resulted in elevated back orders and eventual customer losses.
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.
−Removed: We may expand our product offerings through acquisitions of companies or product lines.
+Added: We may expand our product offerings through acquisitions of companies or product lines from time to time.
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 challenges.
−Removed: We recently acquired the Smiths Medical business, which includes syringe and ambulatory infusion devices, vascular access, and vital care products, but we have to make significant integration efforts to achieve the anticipated benefits.
+Added: In 2022, we acquired the Smiths Medical business, which includes syringe and ambulatory infusion devices, vascular access, and vital care products, but we have made and continue to make significant integration efforts to achieve the anticipated benefits.
See “ The Smiths Medical acquisition completed in January 2022 has resulted in organizational changes and significant growth to our business.
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The increasing burdens on our management resources and financial controls resulting from internal growth and acquisitions could adversely affect our operating results.
−Removed: 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.
−Removed: 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 acquisition, which could adversely affect our business, including by restricting our ability to engage in additional transactions or incur additional indebtedness.
−Removed: At December 31, 2022, we had $213.5 million of cash, cash equivalents and investment securities on hand, which was significantly less than the approximately $571.9 million of cash, cash equivalents and investment securities we had as of December 31, 2021, primarily as a result of the use of existing cash to partially fund the Smiths Medical acquisition.
−Removed: 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 the foreseeable future which could constrain our ability to grow our business.
+Added: In addition, acquisitions may involve a number of special risks in
+Added: 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.
+Added: For the Smiths Medical acquisition, we 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 acquisition, which could adversely affect our business, including by restricting our ability to engage in additional transactions or incur additional indebtedness.
+Added: At December 31, 2023 and 2022, we had $254.7 million and $213.5 million of cash, cash equivalents and investment securities on hand, respectively, which was significantly less in each case than the approximately $571.9 million of cash, cash equivalents and investment securities we had as of December 31, 2021, primarily as a result of the use of existing cash to partially fund the Smiths Medical acquisition.
+Added: Although our management believes that we continue to have sufficient access to cash to meet our business objectives and capital needs, we currently have a decreased availability of cash, cash equivalents and investment securities and expect to continue to have such decreased availability of cash for the foreseeable future which could constrain our ability to grow our business.
Furthermore, 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 entering into the Senior Secured Credit Facilities, we incurred additional borrowing costs.
+Added: At December 31, 2023, our long-term debt outstanding was $1.6 billion.
Our more leveraged financial position following the Smiths Medical transaction could make us more vulnerable to general economic downturns and industry conditions, and place us at a competitive disadvantage relative to our competitors.
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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.
−Removed: We invested significant time and resources into the HIS integration in order to achieve the anticipated benefits of the transaction, and we are doing the same with the Smiths Medical integration.
+Added: We invested significant time and resources into the HIS integration in order to achieve the anticipated benefits of the transaction, and we have been and continue 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
2 unchanged sentences
As such, there can be no assurance that any past or future transactions or investments will be successful.
−Removed: UNRESOLVED STAFF COMMENTS
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.