What changed in this filing

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Item 1. Business

2022-02-28 compared with 2021-02-26 · 147 added, 167 removed, 584 unchanged (35% of the section changed)

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Early detection of heart rhythm disorders, such as atrial fibrillation (“AF”) and other clinically relevant arrhythmias, allows for appropriate medical intervention and helps avoid more serious downstream medical events, including stroke.

Since receiving clearance from the Food and Drug Administration (“FDA”) in 2009, we have provided the Zio service to over three million patients and have collected over 750 million hours of curated heartbeat data, creating what we believe to be the world’s largest repository of ambulatory ECG patient data.

Since receiving clearance from the Food and Drug Administration (“FDA”) in 2009, we have provided the Zio service to over four million patients and have collected over one billion hours of curated heartbeat data, creating what we believe to be the world’s largest repository of ambulatory ECG patient data.

This data provides us with a competitive advantage by informing our proprietary deep-learned algorithms, which may enable operating efficiencies, gross margin improvement and business scalability.

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In summary, we interpreted the clinical results to show that the Zio service is preferred by patients and allows for significantly longer continuous monitoring, improved clinical accuracy, increased detection of arrhythmias by physicians, and meaningful changes in clinical management.

Over three million patients have utilized the Zio service since its commercialization, and as of December 31, 2020, we have achieved both policy coverage and, where applicable, contracts with the majority of payors in the United States including the Centers for Medicare & Medicaid Services (“CMS”) and other government agencies.

Over four million patients have utilized the Zio service since its commercialization, we have achieved both policy coverage and, where applicable, contracts with the majority of payors in the United States, including the Centers for Medicare & Medicaid Services (“CMS”) and other government agencies.

Over 95% of patients in the U.S.

are able to access reimbursed Zio services through our third-party payor contracts, our IDTF participation status with CMS, and self-pay programs when excluding state Medicaid programs.

are able to access reimbursed Zio services through our third-party payor contracts, our independent diagnostic testing facilities ("IDTF") participation status with CMS, and self-pay programs when excluding state Medicaid programs.

We have designed a comprehensive strategy to allow us to compete favorably in the ambulatory cardiac monitoring market, which includes capturing market share from existing monitoring devices in the United States and international markets as well as expanding the market through new indications.

We expect to drive sales and margin growth in our business by expanding our sales organization, securing additional contracts with commercial payors, maintaining technology leadership through research and development, and continuing to build clinical evidence supporting the benefits of the Zio service.

We have collected over 750 million hours of curated heartbeat data, creating what we believe to be the world’s largest repository of annotated, continuous ambulatory ECG recordings with contextual patient information.

We have collected over one billion hours of curated heartbeat data, creating what we believe to be the world’s largest repository of annotated, continuous ambulatory ECG recordings with contextual patient information.

This extensive database, along with our proprietary analytic platform, differentiates the Zio service and gives us a competitive advantage.

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We manufacture our devices in Cypress, California.

As of December 31, 2020, we had 1,157 full-time employees.

Our revenue was $322.8 million and $265.2 million for the years ended December 31, 2021 and 2020, respectively and we incurred a net loss of $101.4 million and $43.8 million for those same periods.

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An AF burden of 11.4% or higher was associated with more than three-fold increased risk for stroke or TE event after adjusting for either CHA2DS2-VASc or ATRIA scores, two tools physicians use to assess stroke risk.

Heart Block post Transcatheter Aortic Valve Replacement ("TAVR")

TAVR is now the preferred strategy for aortic valve replacement in most patients with severe symptomatic aortic stenosis.

Due to the less invasive strategy, TAVR provides treatment for patients who would have been declined surgical replacement.

According to the American College of Cardiology ("ACC"), it is estimated 100,000 patients undergo TAVR procedure annually in the United States, and expected to increase with over 250,000 procedures conducted worldwide by 2025.

One out of ten patients experiences injury to the conduction system during TAVR resulting in high-degree atrioventricular block (“HAVB”) necessitating permanent pacemaker implantation.

While most HAVB occurs within 48 hours of TAVR, there is a growing number of patients developing HAVB after initial TAVR hospitalization due to the trend for early discharge post-TAVR.

Well-established risk factors can be used to identify and advise high-risk patients and guide management.

As the population of patients at increased risk for late presentation of HAVB grows, development of algorithms for mobile outpatient cardiac telemetry monitoring post-TAVR, particularly in the first 2 weeks after discharge, may be needed to reduce the risk of adverse events.

Ambulatory Cardiac Monitoring Overview

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Additionally, MCT technology has unique limitations including the need for patients to keep the transmitter close at all times and frequently change the battery or recharge the device to ensure timely transmissions as well as notifications sent to physicians of non-actionable events.

These limitations can severely impact a physician’s ability to provide a timely diagnosis and result in a lower diagnostic yield.

These limitations can severely impact a physician’s ability to provide

a timely diagnosis and result in a lower diagnostic yield.

More recently, there have been new MCT products introduced to the market that include patch-based or combined recorder-transmitter features to try and address some of these limitations.

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We have developed an uninterrupted, long-term continuous ambulatory cardiac monitoring platform known as the Zio service that provides continuous ambulatory cardiac monitoring through both the Zio XT monitor and Zio AT monitor.

The FDA-cleared and CE-marked Zio service combines a wire-free, patch-based, 14-day wearable biosensor with a proprietary cloud-based data analytic platform to help physicians monitor patients and diagnose arrhythmias with a high degree of accuracy and confidence.

Since commercialization, over three million patients have utilized the Zio service, and we have collected over 750 million hours of heartbeats, creating what we believe to be the world’s largest repository of curated ambulatory ECG patient data.

The Zio service combines an FDA-cleared and CE-marked wire-free, patch-based, 14-day wearable biosensor with a proprietary cloud-based data analytic platform to help physicians monitor patients and diagnose arrhythmias with a high degree of accuracy and confidence.

Since commercialization, over four million patients have utilized the Zio service, and we have collected over one billion hours of heartbeats, creating what we believe to be the world’s largest repository of curated ambulatory ECG patient data.

While wearing either the Zio XT or Zio AT monitor, patients have the ability to mark when symptoms occur by pressing a trigger button on the device, and separately recording contextual data like activities and circumstances in a written symptom diary or digitally via the myZio application.

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Clinical studies have shown that our innovative digital healthcare solution improves physicians’ abilities to detect arrhythmias by increasing diagnostic yield, and potentially allows them to change the course of treatment.

Our proprietary deep-learned algorithms give us a competitive advantage due to the depth and breadth of ECG data available from the over 750 million hours of curated and annotated ECG data collected to date.

Our proprietary deep-learned algorithms give us a competitive advantage due to the depth and breadth of ECG data available from the over one billion hours of curated and annotated ECG data collected to date.

Additionally, we believe we have the first mover advantage in the long-term continuous market, particularly related to our efforts to secure both policy coverage and, where applicable, contracts with the majority of payors in the United States, including CMS and other government agencies.

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Patients wear it discreetly during activities of daily life including exercising and showering for up to 14 consecutive days.

For a small percentage of patients, an additional Zio AT monitor is provided for longer monitoring prescriptions.

We interpreted a clinical study by Barrett et al published in The American Journal of Medicine in January 2014, or the Barrett Study, to confirm that the Zio service is a patient-friendly monitoring option, and the study noted that 94% of patients found the Zio monitor comfortable to wear.

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The Zio service has been shown in multiple peer-reviewed published clinical studies to detect more arrhythmias compared to Holter monitoring during their respective prescribed wear periods confirming the Zio service's added benefit of higher diagnostic yield beyond 48 hours of wear time.

We analyze and generate patient reports at our CMS-certified independent diagnostic testing facilities (“IDTFs”) staffed with our certified cardiographic technicians who specialize in advanced arrhythmia interpretation to help ensure high accuracy and quality of reports before delivering them to the prescribing physician.

We analyze and generate patient reports at our CMS-certified IDTFs staffed with our certified cardiographic technicians who specialize in advanced arrhythmia interpretation to help ensure high accuracy and quality of reports before delivering them to the prescribing physician.

Due to high patient compliance, the reports include up to 14 days of non-interrupted data correlated with patient-triggered and diary symptom events.

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From our review, we determined that in 28% of cases observed in a clinical study by Rosenberg et al published in Pacing and Clinical Electrophysiology in March 2013, or the Rosenberg Study, the physician changed the patient’s clinical management after prescribing the Zio service as compared to a Holter monitor.

Additionally, the Zio service allows clinical staff to focus on more value-added activities by not requiring electrode changes or battery recharging during use, device cleaning and maintenance following use, and by reducing physician and

hospital staff time needed to review and curate ECG data.

Our 24/7 customer service team provides troubleshooting for patient-related issues, removing this burden from the physician practice.

Value to Payors

The Zio service offers a high-yield, low-cost solution compared to other monitoring modalities.

The graph above compares the costs of monitoring to the diagnostic yield of various ambulatory cardiac monitors.

The graph above compares the costs of monitoring to the diagnostic yield of various ambulatory cardiac monitors in the United States.

The analysis, completed by Decision Drivers Analytics and commissioned by us, uses cost data from the Centers for Medicare & Medicaid Services (“CMS”) published diagnostic yields, and our internal database, and demonstrates that the Zio service has a diagnostic yield on par with much more expensive devices but superior to less expensive options.

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It consists of (1) a patient-friendly, patch-based biosensor that maximizes patient comfort and compliance, (2) a deep-learned neural network algorithm that provides accurate analytics and clinical results, (3) skilled clinical and operational staff who utilize proprietary software to ensure quality in clinical results and are available 24/7 to support physician and patient needs, and (4) a cloud-based portal, ZioSuite, through which physicians can access and interpret the Zio reports via a web browser or mobile application.

The platform typically collects up to 1.5 million heartbeats of data for each patient during a single application of up to 14 consecutive days.

The platform typically collects approximately 1.5 million heartbeats of data for each patient during a single application of up to 14 consecutive days.

Our Zio service delivers a curated, concise, and clinically actionable report to the prescribing physician.

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• sufficient battery power for the entire wear period, without the need to recharge or replace batteries.

Symptoms can be logged through a paper symptom log or through two digital platforms:

• myZio.com website

• myZio App (iOS and Android)

Symptoms can be logged through a paper symptom log or through the myZio App (iOS and Android).

The Zio XT service monitors continuously for up to 14 days, delivering a comprehensive report after return and analysis.

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These timely alerts are provided via a Bluetooth capability in the Zio AT monitor that sends data to a wireless gateway.

The wireless gateway, slightly larger than a smart phone, is provided to the patient at the time of monitor application and will collect and transmit data from the monitor to the cloud via an LTE protocol.

Enrollment and Initiation of the Zio service

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With this option, the physician enrolls the patient and the patient receives the Zio monitor in the mail along with a detailed set of self-application instructions.

Additionally, the Zio service can be ordered directly through the physicians’ electronic health record system through the use of iRhythm’s Electronic Health Record ("EHR") integration service.

Additionally, the Zio service can be ordered directly through the physicians’ electronic health record system through the use of the Company's Electronic Health Record (“EHR”) integration service.

The Zio monitor is worn continuously by the patient for up to 14 days without the need for patient maintenance.

The Zio monitor can be worn in the shower, while sleeping, and during moderate exercise.

During the wear period, the device continuously stores and records all ECG data.

During the wear period, the device continuously records and stores ECG data.

The Zio monitor features a patient trigger button for marking any symptoms during the wear period;

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Further analysis indicates that Zio AT achieves a higher diagnostic yield in half the time of leading competitive MCT services (83% diagnostic yield in just 14 days vs.

61% of a competitive service over a 30 day prescription period.) Additionally to date, 99.6% of interpreting physicians have agreed with the findings of the final Zio AT patient report, which we believe demonstrates efficiency and time-savings gains for interpreting physicians.

61% of a competitive service over a 30 day prescription period.) To date, 99.6% of interpreting physicians have agreed with the findings of the final Zio AT patient report, which we believe demonstrates efficiency and time-savings gains for interpreting physicians.

Our Collaboration with Verily

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Pursuant to the terms of the Development Agreement, the parties will develop certain next-generation AF screening, detection, or monitoring products, which involve combining Verily and our technology platforms and capabilities.

The solution combines a long-term, patient-compliant, non-invasive, low-cost Zio Watch with a diagnostic-grade, AI-based approach to AF detection and burden to address an unmet AF monitoring need by leveraging the Zio service infrastructure.

Under the terms of the Development Agreement, we paid Verily an upfront fee of $5.0 million in cash.

In addition, we will pay Verily up to an aggregate of $12.75 million in additional milestone payments upon achievement of various development and regulatory milestones over the 24 months of the Development Agreement, which payments will be made in cash directly to Verily.

During the year ended December 31, 2020, we made $4.0 million in milestone payments to Verily.

In addition, we agreed to pay Verily up to an aggregate of $12.75 million in additional milestone payments upon achievement of various development and regulatory milestones over the duration of the Development Agreement, which payments will be made in cash directly to Verily.

Through December 31, 2021, we have achieved milestones and related payment obligations totaling, $11.0 million, including a $3.0 million obligation incurred during our most recent quarter.

We have agreed to make additional payments up to an aggregate of $1.75 million, subject to the achievement of certain development and regulatory milestones including provision of the Zio Watch and completion of market evaluation scheduled to begin between late 2022 and early 2023.

The Development Agreement provides each party with certain licenses to use certain intellectual property of the other party for development activities in the field of AF screening, detection, or monitoring.

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This seamless integration of Zio workflow processes into those already used within the IDN has proven to be a key factor in spurring growth within existing and new accounts and is an important part of our ongoing market penetration strategy.

• Expanding our sales organization in the U.S.

To capture new account opportunities and support growth in existing accounts, we have built a direct sales organization consisting of sales management, field billing specialists, quota-carrying sales representatives, and a customer experience team.

We will continue to invest in the expansion of this scalable infrastructure and believe this investment will drive adoption of the Zio service.

• Pursuing international expansion opportunities.

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We are also conducting diligence and prioritizing other geographies based on market size, regulatory pathway and reimbursement opportunity.

We estimate the total addressable market in our initial selected countries of the U.K.

and Japan, where we have started regulatory and reimbursement efforts is at least five million existing ambulatory monitoring tests annually.

• Expanding indications and clinical use cases.

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◦ post-transcatheter aortic valve patients, estimated to be 100,000 annual procedures

We believe there is a significant near-term opportunity for us to expand the Zio service into adjacent markets such as silent AF.

Initial efforts to proactively monitor this asymptomatic population with Zio XT, including end-to-end care pathway pilots, are planned in 2022.

In addition, we believe there is potential to increase the core symptomatic total addressable market by moving further upstream in the care pathway to the primary care physician call point.

We believe that nearly eight million patients with palpitations in the United States visit their primary care physicians annually and that we can educate these primary care physicians on the benefits of the Zio service for this patient population.

• Advancing our product portfolio and core technology offering.

We continue to invest in building a unique, innovative product portfolio and digital platform that addresses unmet needs in the ambulatory cardiac monitoring market.

We will continue to invest in research and development efforts to further differentiate our biosensor, data analytics and reporting, information system and digital platform.

We will continue to invest in research and development efforts to further differentiate our

biosensor, data analytics and reporting, information system and digital platform.

In 2021, we received FDA clearance for our third-generation biosensor, the Zio Monitor and second-generation deep-learned ECG detection algorithm.

• Expanding our footprint in digital healthcare.

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Clinical Results and Studies

The Zio service has been the subject of many peer-reviewed publications on its effectiveness to date.

The Zio service has been the subject of over 35 peer-reviewed publications on its effectiveness to date.

This body of clinical evidence is driving clinical adoption and clinical use case expansion.

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This clinical trial, however, was also a single center study with a relatively small sample size.

The mHealth Screening to Prevent Strokes, or mSToPS study, published in the Journal of the American Medical Association in July 2018, in collaboration with Janssen Scientific Affairs, LLC, utilized a web-based platform to remotely recruit from 5,214 eligible patients from the Aetna Commercial Fully Insured and Medicare Advantage programs.

The mHealth Screening to Prevent Strokes, or mSToPS study , led by researchers at the Scripps Research Translational Institute (“SRTI”) and in collaboration with Aetna Inc., Healthagen LLC, Janssen Research and Development, LLC and Johnson & Johnson, utilized a web-based platform to remotely recruit from 5,214 eligible patients from the Aetna Commercial Fully Insured and Medicare Advantage programs.

Women over the age of 65 and men over 55 with certain risk factors were selected to participate based on information derived from claims data that placed them at a potentially increased risk of undiagnosed asymptomatic AF.

Three peer-reviewed articles were published on the mSToPS study between 2018 and 2021.

The study design was published in the Journal of the American Medical Association in July 2018.

The one-year results were published in Heart Rhythm O2 in December 2020.

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We concluded that these results suggest active monitoring with the Zio service can significantly reduce high-cost healthcare resource utilization and shift toward appropriate care settings at one year.

The three-year results were presented at the American Heart Association Scientific Sessions during the Late Breaking Science session in November 2020.

At the end of three years after the initial onset of monitoring:

The three-year follow-up intended to assess whether screening asymptomatic individuals for AF and other arrhythmias with the Zio service can improve clinical outcomes.

The three-year study results were published in PLOS One in October 2021.

Over the course of the study:

• AF was newly diagnosed in 11.4% of those actively monitored with the Zio service versus only 7.7% of the control group (a statistically significant 48% improvement).

• The trial found the incidence rate of a cardiac event (stroke, myocardial infarction, systemic embolism, or death) was 8.4 per 100 person-years in people diagnosed with AF who underwent active monitoring, compared to the control group incidence rate of 13.8 per 100 person-years (a statistically significant improvement).

This data demonstrates the Zio service’s detection of AF in moderate-risk patients supported the prevention of serious cardiac events after diagnosis.

• Active monitoring with the Zio service led to a statistically significant reduction in the combined primary endpoint of cardiac event (death, stroke, systemic emboli or myocardial infarction) versus clinical care.

The study found the incidence rate of a cardiac event was 3.6 per 100 person-years in people diagnosed with AF who underwent active monitoring, compared to the control group incidence rate of 4.5 per 100 person-years.

• Active monitoring with the Zio service also led to fewer hospitalizations for bleeding, the primary safety endpoint for the study (incidence rate of 0.32 per 100 person-years versus 0.71 per 100 person-years).

• Active monitoring also led to fewer total hospitalizations (12.9 versus 18.9 per 100 person-years).

• An additional finding showed a clinical event was common in the four weeks surrounding a clinical diagnosis of AF not detected by screening.

Cumulatively, 42.9% of participants in the control group were hospitalized in the four weeks surrounding the AF diagnosis;

however, for those diagnosed utilizing data provided by the Zio service, only one person experienced a negative clinical outcome in the period surrounding his or her diagnosis.

We concluded the mSToPS study found that active screening for AF, as part of a prospective, pragmatic, direct-to-participant and nationwide study, was associated with a significant improvement in clinical outcomes and safety at three years relative to routine care.

An additional study examining early detection of AF using the Zio service in high risk patients is the Home-based Screening for Early Detection of AF, or SCREEN-AF.

Initial results were presented at the combined European Stroke Organization / World Stroke Organization Conference in November 2020.

This randomized control trial recruited 822 patients older than 75 years with hypertension and no known AF from 49 family practice clinics across Canada and Germany between 2015 to 2019.

An additional study examining early detection of AF using the Zio service in high risk patients is the Home-based Screening for Early Detection of AF, or SCREEN-AF was published in the Journal of the American Medical Association (“JAMA”) in February 2021.

This randomized control trial recruited 856 participants 75 years or older with hypertension and no known AF from 48 primary care clinics across Canada and Germany between 2015 and 2019.

The intervention group included ambulatory screening for AF for two weeks with the Zio service utilized at baseline and again at three months, in addition to standard care for six months.

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We market our ambulatory cardiac monitoring solution in the United States through a direct sales organization comprised of sales management, field billing specialists, quota-carrying sales representatives, and a customer experience team.

As of December 31, 2020 we had 145 sales representatives on a full-time equivalent basis, compared to 139 in 2019, and 112 in 2018.

Our sales representatives focus on initial introduction into new accounts, penetration across a sales region, driving adoption within existing accounts and conveying our message of clinical and economic value to service line managers, hospital administrators, and other clinical departments.

We continue to increase the size of our U.S.

We continue to optimize the structure of our U.S.

sales organization to expand the current customer account base and increase utilization of our Zio service.

In addition, we will continue exploring sales and marketing expansion opportunities in international geographies.

We market our Zio service to a variety of physician specialties including general cardiologists, electrophysiologists, neurologists, and other physician specialists who diagnose and manage care for patients with arrhythmias.

We market our Zio service to a variety of physician specialties including general cardiologists, electrophysiologists, neurologists, primary care physicians and other physician specialists who diagnose and manage care for patients with arrhythmias.

We have found success focusing on IDNs, in which large networks of facilities and providers work together to offer a continuum of care to a specific geographic area or market.

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Large competitors in the ambulatory cardiac market include companies that sell standard Holter monitors including GE Healthcare, Philips Healthcare, Mortara Instrument, Inc., Spacelabs Healthcare Inc.

and Welch Allyn Holdings, Inc., which was acquired by Hill-Rom Holdings, Inc.

and Welch Allyn Holdings, Inc.

(acquired by Hill-Rom Holdings, Inc.).

Additional competitors, such as BioTelemetry, Inc.

recently acquired by Royal Philips, Preventice Solutions, Inc., being acquired by Boston Scientific, Inc.

and Bardy Diagnostics, Inc., being acquired by Hill-Rom Holdings, Inc.

offer ambulatory cardiac monitoring services and also function as service providers.

(acquired by Royal Philips), Preventice Solutions, Inc.

(acquired by Boston Scientific, Inc.) and Bardy Diagnostics, Inc.

(acquired by Hill-Rom Holdings, Inc.

which was recently acquired by Baxter International, Inc.) offer ambulatory cardiac monitoring services and also function as service providers.

Recently, there has been increased acquisition activity and consolidation in our industry.

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Large medical device companies may continue to acquire or form alliances with these smaller companies in order to diversify their product offering and participate in the digital health space.

Future competition could come from manufacturers of wearable fitness products or large information technology companies focused on improving healthcare.

For example, Apple Inc.

has added capabilities on its watch platform to measure non-continuous ECG and to alert users to the potential presence of irregular heartbeats suggestive of asymptomatic AF.

These competitors and potential competitors may introduce new products and services that more directly compete with our Zio service.

We believe the principal competitive factors in our market include:

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• ease of use of service workflow for physicians and supporting clinicians;

• digital tools for data management including mobile app, website tools and EHR integration;

• contracted rates with third-party payors;

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To protect our proprietary rights, we rely on a combination of trademark, copyright, patent, trade secret and other intellectual property laws, employment, confidentiality and invention assignment agreements and protective contractual provisions with our employees, contractors, consultants, suppliers, partners and other third parties.

As of December 31, 2020 we owned, or retained an exclusive license to, twenty issued patents from the U.S.

Patent Office, seven issued patents from the Japanese Patent Office, two issued patents from the Australian Patent Office, four issued patents from the Canadian Patent Office, four issued patents from the European Patent Offices, and two issued patents from the Korean Patent Office:

Issue Date Expiration Date

USA 8,150,502 4/3/2012 11/20/2028

USA 8,160,682 4/17/2012 2/3/2029

USA 8,244,335 8/14/2012 1/21/2029

USA 8,538,503 9/17/2013 5/12/2031

USA 8,560,046 10/15/2013 6/2/2031

USA 9,173,670 11/3/2015 4/7/2034

USA 9,241,649 1/26/2016 10/19/2031

USA 9,451,975 9/27/2016 4/7/2034

USA 9,597,004 3/21/2017 10/30/2035

USA 9,955,887 5/1/2018 10/30/2035

USA 10,098,559 10/16/2018 10/30/2035

USA 10,271,754 4/30/2019 1/23/2034

USA 10,299,691 5/28/2019 10/20/2035

USA D852965 7/2/2019 7/2/2034

USA D854167 7/16/2019 7/16/2034

USA 10,405,799 9/10/2019 4/10/2033

USA 10,517,500 12/31/2019 5/12/2031

USA 10,555,683 2/11/2020 1/23/3034

USA 10,667,712 6/2/2020 10/30/2035

USA 10,813,565 10/27/2020 10/30/2035

Japan 5,203,973 2/22/2013 2/6/2027

Japan 5,559,425 6/13/2014 5/12/2031

Japan 6,198,849 9/1/2017 1/23/2034

Japan 6,336,640 5/11/2018 1/23/2034

Japan 6,491,826 3/8/2019 5/12/2031

Japan 6,495,228 3/15/2019 5/12/2031

Japan 6,766,199 9/18/2020 5/12/2031

Australia 2,011,252,998 12/10/2015 5/12/2031

Australia 2,014,209,376 6/29/2017 1/23/2034

Canada 2,651,203 9/19/2017 2/6/2027

Canada 2,797,980 8/18/2015 5/12/2031

Canada 2,898,626 5/12/2020 1/23/2034

Canada 2,966,180 6/9/2020 10/30/2035

Korea 10-1513288 4/13/2015 5/12/2031

Korea 10-2145450

8/11/2020 1/23/2034

Europe 1981402 8/10/2016 2/6/2027

Europe 2568878 7/25/2018 5/12/2031

Europe 2948050 5/12/2020 1/23/2034

Europe 3165161 5/6/2020 5/12/2031

As of December 31, 2020, we had nineteen pending patent applications globally, including eight in the United States, four in the European Patent Office, three in Japan, and one in each of Australia, Korea, China and India.

In addition, we have entered into exclusive and non-exclusive licenses in the ordinary course of business relating to a wide array of technologies or other intellectual property rights or assets.

Our patent portfolio includes numerous issued and pending patent applications in the U.S.

and other parts of the world, which in the aggregate, we believe to be of material importance in the operation of our business.

patents, as well as most foreign patents, are generally effective for 20 years from the date the earliest application was filed.

In some cases, the patent term may be extended.

As of December 31, 2021 we owned, or retained an exclusive license to, twenty-three issued patents from the U.S.

Patent Office, eight issued patents from the Japanese Patent Office, two issued patents from the Australian Patent Office, four issued patents from the Canadian Patent Office, five issued patents from the European Patent Offices, three issued patents from the Korean Patent Office, and one issued patent from the Chinese Patent Office.

issued patents as of December 31, 2021 are set to expire over a range of years, from November 2028, with respect to some of our earlier patents, to February 2041, subject to any extensions.

As of December 31, 2021, we had twenty-six pending patent applications globally, including twelve in the United States, three in the European Patent Office, four in Japan, three Patent Cooperation Treaty (“PCT”) international applications, and one in each of Australia, Korea, China and India.

As of December 31, 2021, our trademark portfolio contained a U.S.

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It further contained pending applications for the mark ZIO in Australia, Canada, China, Japan, Norway and Switzerland and a registered trademark for ZIO in the European Union.

We also seek to maintain certain intellectual property and proprietary know-how as trade secrets, and generally require our partners to execute non-disclosure agreements prior to any substantive discussions or disclosures of our technology or business plans.

Our trade secrets include proprietary algorithms, adhesive formulations, workflow tools and operational processes.

Our patents and patent applications seek to protect aspects of our core technologies and our product concepts for continuous cardiac monitoring.

We believe that our patent position provides us with sufficient rights to protect our current and proposed commercial products.

However, our patent applications may not result in issued patents, and any patents that have been issued or might be issued may not protect our intellectual property rights.

We also rely on trade secrets, technical know-how and continuing innovation to develop and maintain our competitive position.

We seek to protect our proprietary information and other intellectual property by generally requiring our employees, consultants, contractors, suppliers, outside scientific collaborators and other advisors to execute non-disclosure and assignment of invention agreements on commencement of their employment or engagement.

Agreements with our employees also forbid them from bringing the proprietary rights of third parties to us.

We also generally require confidentiality or material transfer agreements from third parties that receive our confidential data or materials.

Manufacturing and Supply

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This 17,558 square foot facility provides space for our assembly and production operations, including packaging, storage and shipping.

We believe our manufacturing facilities will be sufficient to meet our manufacturing needs for at least the next year, and plan to move into a new, larger facility in that time.

We believe our manufacturing facilities will be sufficient to meet our manufacturing needs for at least the next year, but plan to move into a new, larger facility during 2022.

Our manufacturing operations are subject to regulatory requirements of the FDA’s Quality System Regulation (“QSR”) for medical devices sold in the United States, set forth at 21 CFR part 820, the Medical Devices Directive 93/42/EEC (“MDD”) and the Medical Device Regulations 2017/745 of the European Parliament and of the Council (“MDR”), which is required for doing business in the European Union (“EU”), and the UK Medical Device Regulations 2002 (as amended) (“UK MDR”).

We are also subject to applicable requirements relating to the environment, waste management and health and safety matters, including measures relating to the release, use, storage, treatment, transportation, discharge, disposal, sale, labeling, collection, recycling, treatment and remediation of hazardous substances.

The FDA enforces the QSR through periodic unannounced inspections that may include our manufacturing facilities or those of our suppliers.

Our EU Notified Body, the National Standard Authority of Ireland (“NSAI”), enforces the MDD through both scheduled and unscheduled inspections of our manufacturing facilities.

Our failure or the failure of our suppliers to maintain compliance with either the QSR or MDD requirements could result in the shutdown of our manufacturing operations or the recall of our products, which would harm our business.

Our failure or the failure of our suppliers to maintain compliance with either the QSR, MDR, MDD, or UK MDR requirements could result in the shutdown of our manufacturing operations, recall of our products, and various enforcement actions such as warning letters or loss of clearance or certification, which would harm our business.

In the event that one of our suppliers fails to maintain compliance with our or governmental quality requirements, we may have to qualify a new supplier and could experience manufacturing delays as a result.

Our quality control management programs have earned us a number of quality-related designations.

Our Cypress, California manufacturing facilities, have received EN ISO 13485:2012 certification.

The NSAI most recently conducted an ISO 13485 recertification audit in 2017, and ISO certification was received.

Our manufacturing facilities, have received EN ISO 13485:2016 certification.

The NSAI most recently conducted an ISO 13485 surveillance audit in 2021 and a renewed ISO certification was received in August 2021.

We have been an FDA-registered medical device manufacturer since 2008 and have been a California-licensed medical device manufacturer since 2009.

The most recent FDA audit of our manufacturing facility occurred in October 2018, and no formal observations resulted.

No additional follow up with the FDA was required and we believe that we are in substantial compliance with the QSR.

Circuit board components of the Zio XT and Zio AT monitors are provided by contract electronic manufacturers, Cal-Comp USA, Kimball Electronics, Inc., and Veris Manufacturing, Inc.

The most recent FDA inspection of our manufacturing facility occurred in October 2021, and no FDA Form 483 observations resulted.

The FDA also performed a Remote Regulatory Assessment (“RRA”) of our design facilities in San Francisco, California, which concluded in May 2021.

Unlike on-site inspections, the FDA does not issue formal 483 observations at the conclusion of RRAs.

Circuit board components of the Zio XT and Zio AT monitors are provided by contract electronic manufacturers, Cal-Comp USA, and Veris Manufacturing, Inc.

We have manufacturing service agreements with both providers that allow either party to terminate the agreement with 90 days prior written notice.

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To date, we have not experienced unmanageable delays in obtaining any of our components or subassemblies.

The COVID-19 pandemic has significantly impacted the global economy and has contributed to cost increases, supply constraints and increasing inflationary pressures.

We continuously monitor the effects of inflationary factors and supply chain constraints, such as increases in the cost of our components and increasing labor costs due to high wage inflation and challenging labor market conditions.

Competitive and regulatory conditions may restrict our ability to fully recover these costs through price increases.

As a result, it may be difficult to fully offset the impact of persistent inflation.

Government Regulation

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The Zio XT and Zio AT monitors are considered medical devices subject to extensive and ongoing regulation by the FDA under the Federal Food, Drug, and Cosmetic Act (“FD&C Act”) and its implementing regulations, as well as other federal and state regulatory bodies in the United States.

The laws and regulations govern, among other things, product design and development, pre-clinical and clinical testing, manufacturing, packaging, labeling, storage, recordkeeping and reporting, clearance or approval, marketing, distribution, promotion, import and export, and post-marketing surveillance.

The FDA regulates the medical device market to ensure the safety and efficacy of these products.

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Most Class I devices are exempt from 510(k) requirements.

Most Class II devices, including the Zio XT and Zio AT monitors, and the Zio ECG Utilization Service System, or the ZEUS System, require 510(k) clearance from the FDA in order to be marketed in the United States.

Most Class II devices, including the Zio XT and Zio AT monitors, and the Zio ECG Utilization Service System (“ZEUS System”), require 510(k) clearance from the FDA in order to be marketed in the United States.

A 510(k) submission must demonstrate that the device is substantially equivalent to a device legally in commercial distribution in the United States:

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The PMA process for Class III devices is more involved and includes the submission of clinical data to support claims made for the device.

The Zio XT and Zio AT monitors maintain FDA 510(k) clearance as Class II devices, with each new generation of a device receiving individual clearance.

In addition, the ZEUS System originally received FDA 510(k) clearance in 2009 as a Class II device.

The Zio XT and Zio AT monitors maintain FDA 510(k) clearance as Class II devices, with the Zio monitor receiving a new 510(k) clearance in May 2021.

In addition, the ZEUS System's most recent update received FDA 510(k) clearance in May 2021 as a Class II Software as a Medical Device.

The ZEUS System is the combination of proprietary algorithms and software tools that our certified cardiac technicians utilize to curate the ECG data and create the Zio Report electronically.

Significant modifications made to the ZEUS System since its original clearance have been regularly evaluated by the FDA, the most recent update receiving 510(k) clearance in August 2018.

Significant modifications made to the ZEUS System since its original clearance have been regularly evaluated by the FDA.

Pervasive and Continuing Regulation

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These include:

• the FDA’s QSR, which requires manufacturers, including their suppliers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the manufacturing process;

• labeling regulations and FDA prohibitions against the promotion of products for un-cleared, unapproved or off-label uses;

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• post-market surveillance regulations, which apply when necessary to protect the public health or to provide additional safety and effectiveness data for the device.

After a device receives 510(k) clearance or PMA approval, any modification that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use, will require a new clearance or approval.

The FDA requires each manufacturer to make this determination initially, but the FDA can review any such decision and can disagree with a manufacturer’s determination.

If the FDA disagrees with the determination not to seek a new 510(k) clearance or PMA, the FDA may retroactively require a new 510(k) clearance or premarket approval.

If the FDA disagrees with the determination not to seek a

new 510(k) clearance or PMA, the FDA may retroactively require a new 510(k) clearance or premarket approval.

The FDA could also require a manufacturer to cease marketing and distribution and/or recall the modified device until 510(k) clearance or premarket approval is obtained.

Also, in these circumstances, the manufacturer may be subject to significant regulatory fines, penalties, and warning letters.

We have registered with the FDA as a medical device manufacturer and have obtained a manufacturing license from the California Department of Public Health, or CDPH.

Also, in these circumstances, the manufacturer may be subject to significant regulatory fines, penalties, and other enforcement actions, such as warning letters.

We have registered our facilities with the FDA as a medical device manufacturer and have obtained a manufacturing license from the California Department of Public Health, or CDPH.

The FDA and CDPH have broad post-market and regulatory enforcement powers.

We are subject to unannounced inspections by the FDA and the Food and Drug Branch of CDPH to determine our compliance with the QSR and other regulations, and these inspections may include the manufacturing facilities of our suppliers.

Additionally, NSAI regularly inspects our manufacturing, design and operational facilities to ensure ongoing ISO 13485 compliance and periodically reviews technical design files in accordance with the Medical Device Directive in order to maintain our CE mark.

Additionally, the EU Notified Body regularly inspects our manufacturing, design and operational facilities to ensure ongoing ISO 13485 compliance and periodically reviews technical design files in accordance with the Medical Device Regulations in order to maintain our CE mark or issue CE mark for new or updated devices.

Failure to comply with applicable regulatory requirements can result in enforcement action by the FDA, which may include any of the following sanctions:

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• criminal prosecution

European Union

European Union and United Kingdom

The Zio XT monitor is currently regulated in the European Union as a medical device per the European Union Directive 93/42/EEC, also known as the Medical Device Directive (“MDD”).

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The system of regulating medical devices operates by way of a certification for each medical device.

Each certified device is marked with the CE mark which shows that the device has a Certificat de Conformité.

There are national bodies known as Competent Authorities in each member state which oversee the implementation of the MDD within their jurisdiction.

Each certified device is marked with the CE mark which shows that the device has a certificate of conformance.

There are national bodies known as Competent Authorities in each member state which oversee the implementation of the MDD and MDR within their jurisdiction.

The means for achieving the requirements for the CE mark vary according to the nature of the device.

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The class of a product determines the conformity assessment required before the CE mark can be placed on a product.

Conformity assessments for our products are carried out as required by the MDD.

Conformity assessments for our products are carried out as required.

Each member state can appoint Notified Bodies within its jurisdiction.

If a Notified Body of one member state has issued a Certificat de Conformité, the device can be sold throughout the European Union without further conformance tests being required in other member states.

If a Notified Body of one member state has issued a CE mark, the device can be sold throughout the European Union without further conformance tests being required in other member states.

The CE mark is contingent upon continued compliance with the applicable regulations and the quality system requirements of the ISO 13485 standard.

Our current CE mark for Zio XT is issued by the National Standards Authority of Ireland, or NSAI.

Our current CE mark for Zio XT is issued by the National Standards Authority of Ireland, or NSAI under the MDD.

We will need to pursue CE mark under the new MDR.

Due to United Kingdom’s departure from the European Union, the UK Medicines & Healthcare products Regulatory Agency (“MHRA”) has issued new requirements associated with the UK Conformity Assessed (“UKCA”) mark.

The UKCA marking is a new UK product marking that is used for goods being placed on the market in Great Britain.

It covers most goods which previously required the CE marking.

The UKCA requirement became effective on January 1, 2021.

However, to allow businesses time to adjust to the new requirements, we will still be able to use the CE marking until 2023.

Additionally, MHRA has indicated that additional new or modified regulations are planned in the future beyond those outlined in UK MDR 2002.

We will need to pursue UKCA marking under this new requirement.

Health Insurance Portability and Accountability Act

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Any changes to, or repeal of, the ACA may have a material adverse effect on our results of operations.

Effective as of January 1, 2022, the U.S.

federal No Surprises Act, prohibits providers from charging patients an amount beyond the in-network cost sharing amount for services rendered by out-of-network providers, subject to limited exceptions.

Further, the No Surprises Act requires providers to send an insured patient’s health plan a good faith estimate of expected charges, including billing and diagnostic codes, prior to when the patient is scheduled to receive the item or service.

We cannot predict what other health care programs and regulations will ultimately be implemented at the federal or state level or the effect of any future legislation or regulation in the United States may have on our business.

Human Capital

Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and new employees, advisors and consultants into our company.

The principal purposes of our cash and equity incentive plans are to attract, retain and reward personnel through the granting of cash-based and stock-based compensation awards, in order to increase stockholder value and the success of our company by motivating such individuals to perform to the best of their abilities and achieve our short- and long-term business goals.

Diversity, Inclusion & equal opportunity

We are committed to providing a work environment that is free of discrimination and harassment.

We are an equal-opportunity employer.

We make employment decisions on the basis of a person’s qualifications, and our business needs.

As of December 31, 2021, we have approximately 1,700 employees globally.

None of our employees are represented by a collective bargaining agreement, and we believe our employee relations are good.

Although the COVID-19 pandemic has disrupted how and where we work, our employees have demonstrated ongoing resilience.

During 2021, employees continued to effectively navigate strict safety protocols for those working onsite, primarily in manufacturing, and the majority of our employees were not required to be onsite and worked from home.

Diversity, Equity & Inclusion

We believe in the richness and quality of a working environment that is informed by people from all walks of life and strive to create a genuinely inclusive environment.

We have implemented Diversity, Equal opportunity, and Inclusion action planning teams focused on analysis from diversity surveys and focus groups.

We have ongoing outreach efforts to recruit a diverse candidate pool and are building questions into our engagement survey to promote a diverse and inclusive environment.

We are committed to ensuring our team members are treated with fairness and respect.

We believe that a cooperative work environment, based in trust and mutual respect, is essential to our success.

We embrace the diversity of our workforce and celebrate the creative value added by individuals with differing backgrounds and encourage employee resource groups such as our Women in iRhythm group which focuses on leadership for women within our sales organization.

We expressly prohibit intimidation, hostility, harassment, discrimination, and other inappropriate behavior.

Furthermore, we expect associates to conduct themselves in a professional and dignified manner at all times;

in doing so, we seek to avoid making associates feel

uncomfortable at work.

We are building tools for managers to promote inclusive development, promotion and retention strategies.

As new employees join us, they learn more about our policies and culture through orientation and onboarding, our Employee Handbook, Code of Conduct, and compliance trainings.

These all provide guidance on how we expect to operate in order to foster diversity, equity and inclusion across our company.

Health, Safety, and Wellness

We are committed to maintaining a healthy, safe, and secure work environment that protects our employees and the public from harm.

Most of our employees are working from home and PPE has been provided to all employees coming into the office.

Where feasible, physical distancing has been implemented.

We use a multi-faceted approach to ensure the health and safety of our employees, from our Code of Conduct to our policies governing the way we act within and outside of our Company.

We comply with applicable health, safety, and environmental laws as well as related company policies and procedures.

We have a zero-tolerance policy against aggressive behavior, violence, direct and indirect threats, harassment, intimidation, and possession of weapons on company property.

Moreover, we strive to conduct our everyday business activities in an environmentally sustainable way through wellness programs, and webinars through our health insurance providers.

We are proud that, overall, our workforce is more than 60% female and greater than 50% of employees are ethnically diverse.

To further build on our commitment to diversity, equity and inclusion, we have formed a Diversity Council of representatives from across our company that is working to coordinate efforts as we define our corporate strategy.

In addition, we have an active Employee Resource Group (“ERG”) with plans to increase the number of ERGs to reflect the diversity of our workforce, and we are building external partnerships to expand the diversity of our talent outreach.

We value our differences, recognizing that from those differences comes our strengths, and we are committed to continuing to build a culture of diversity, equity, and inclusion.

Health & Safety

We are committed to maintaining a healthy, safe, and secure work environment that protects our employees from harm.

We comply with applicable health, safety, and environmental laws as well as related company policies and procedures, and provide necessary training as appropriate by role and location.

Total Rewards

We offer an attractive mix of compensation and benefit plans to support our employees and their families’ physical, mental, and financial well-being.

We believe that we employ a fair and merit-based total compensation system for our employees.

Employees are generally eligible for medical, dental, vision and other comprehensive benefits, most of which become effective on their start date.

Below are some of the types of health and wellness related benefits offered to employees:

• Medical, dental and vision insurance

• Retirement plan with Company matching contribution feature

• Flexible Spending Accounts for medical expenses, childcare, parking and transit

• Health Savings Account (with employer contribution)

• Life insurance

• Short & long-term disability

• Paid time off and leave of absences

• Employee assistance program

We believe that we employ a fair and merit-based total compensation system, and we evaluate our compensation programs to ensure our employees are compensated fairly for the important work they do, and that we reward outstanding performance.

We are also committed to achieving internal pay equity.

We offer our employees competitive benefits that follow local standards and support physical, mental and financial wellness.

In support of employee wellness, we provide a variety of benefits options, resources, programs, online tools and regular webinars.

We generally offer to full time employees globally health benefits, retirement plan, paid time off and family leave, an Employee Stock Purchase Plan (“ESPP”), and an employee assistance program that is available to employees and their families with a variety of support services.

It is important that all employees have an opportunity to have an ownership interest in our company, and there are several programs that provide the ability to own our stock.

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During their tenure with our company, all employees have an opportunity to receive an equity award, either upon hire and/or during an annual review process to recognize those with significant impact on achieving our goals.

Another program offered to all employees, whether part or full time, is the ability to participate in our Employee Stock Purchase Plan (“ESPP”).

Another program offered to all employees, whether part or full time, is the ability to participate in our ESPP.

Participants in the ESPP may purchase our stock at a 15% discount to market price.

We believe our discounted stock purchase program helps to build an ownership mentality amongst participating employees.

Talent attraction and retention

As we recruit top talent to join our team, we use job boards focused on outreach to underrepresented communities, including ethnic or racial, women, veterans, LGBTQIA, people with disabilities, and indigenous populations.

Workforce Development

The growth and success of our employees is a top priority.

The growth and success of our employees is a top priority, as it impacts our overall company performance.

We are investing heavily to build in-house tools and resources to support managers and employees on the road to success and ongoing growth.

Our core competencies are the foundation for programs and tools being developed to identify top talent, prepare future managers and leaders, and provide equal access to growth opportunities.

We offer a variety of training opportunities, whether focused on building vocational or management and leadership skills.

Our sales and clinical training programs equip employees to perform specialized work to support our patients and customers.

Our clinical training program consists of approximately 80 hours of training upon hire, plus ongoing training opportunities to ensure quality and consistency standards in patient care.

We have implemented Linkedin Learning to expand options for skill building and are creating a grow environment by asking all employees to have personal development plan.

Our commercial program provides 40 hours of product training and ongoing field and classroom education to prepare employees to support our customers with high quality service and support.

Our management and leadership skill building in 2020 was focused on coaching and core-manager skills.

Despite the challenges of COVID-19 on our work location, we facilitated several online courses around our core competencies and coaching practices, and we rolled out a toolbox on our intranet with tools for employees and managers across the employee lifecycle.

We conducted an Employee Net Promoted Score survey in 2019 and have ongoing surveys to engage employee feedback.

We encourage employee service days and have donation matching programs for company sponsored charities.

We use tools like Linkedin Learning to expand readiness of content and options for skill building.

Despite the ongoing challenges of COVID-19, we continued to facilitate sessions around our core competencies, interview skills and coaching practices, and we rolled out a toolbox on our intranet with resources for employees and managers across the employee lifecycle.

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

What changed 10-K

Item 1. Business