What changed in this filing

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Item 1. Business

2022-03-01 compared with 2021-03-15 · 102 added, 86 removed, 878 unchanged (18% of the section changed)

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We market and sell our products in the United States through a direct sales organization.

Our sales territory managers are focused on promoting awareness and increasing adoption of our solution primarily among the approximately 800 pulmonologists performing interventional pulmonary procedures and across approximately 500 high volume hospitals in the United States.

Our sales territory managers are focused on promoting awareness and increasing adoption of our solution primarily among the pulmonologists performing interventional pulmonary procedures across approximately 500 high volume hospitals in the United States.

We are expanding our commercial operations in the United States while continuing to foster our international growth.

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At this point, physicians may refer patients to thoracic surgeons for LVRS, in which hyperinflated tissue is cut away and removed, or for single or double lung transplantation.

LVRS is an invasive surgery that involves cutting away diseased tissue to create space for the remaining lung to more fully inflate.

LVRS is an invasive surgery that involves cutting away diseased tissue to create space for the remaining lung to inflate more fully.

LVRS was studied extensively in the National Emphysema Treatment Trial (“NETT”), which showed that while a broad group of patients gained quality of life and exercise capacity from the surgery, it also involved substantial risks of complications, prolonged hospital stays and even death.

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• Significant, durable improvements in lung function, exercise capacity and quality of life , demonstrated in a substantial body of clinical data;

• Well-characterized safety profile , evidenced by the inclusion in global treatment recommendations and more than 20,000 patients treated globally with Zephyr Valve;

• Well-characterized safety profile , evidenced by the inclusion in global treatment recommendations and more than 25,000 patients treated globally with Zephyr Valves;

• High procedural success driven by innovative and effective patient assessment tools;

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By comparison, patients selected using the Chartis System in four randomized controlled clinical trials had a success rate of 84%, 88%, 89% and 90%.

quantitative fissure analysis is an important tool for non-invasively screening out ineligible lobes, we believe it is insufficient for identifying responders to treatment with high accuracy.

Thus, while quantitative fissure analysis is an important tool for non-invasively screening out ineligible lobes, we believe it is insufficient for identifying responders to treatment with high accuracy.

Treatment Steps

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Clinical Trials and Results

The safety, effectiveness and clinical benefits of the Zephyr Valve in patients selected using the Chartis System have been evaluated in multiple randomized controlled clinical trials that have collectively evaluated approximately 450 patients in Austria, Belgium, Brazil, France, Germany, the Netherlands, Sweden, the United Kingdom and the United States.

The results of our LIBERATE study, which served as the basis for the FDA approval of our PMA application, were published in the American Journal of Respiratory and Critical Care Medicine in 2018 and met all its primary and secondary effectiveness endpoints.

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Our sales territory managers also call on community physicians and pulmonary rehabilitation centers to raise awareness of Zephyr Valves as a treatment option.

We seek to recruit sales territory managers with strong sales backgrounds, with direct experience developing markets with new technologies and an understanding of medical device reimbursement and the prior authorization process.

We seek to recruit sales territory managers with strong sales backgrounds, with direct experience developing markets with new technologies and an understanding of medical device reimbursement.

In the United States, our territory managers are managed by region directors.

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we can efficiently serve the United States market, focusing on approximately 500 high volume hospitals, of which we currently cover a small fraction.

We intend to continue to promote awareness of our solution through training and educating physicians, pulmonary rehabilitation centers, key opinion leaders and various medical societies on the proven clinical benefits of Zephyr Valves.

We intend to continue to promote awareness of our solution through training and educating physicians, pulmonary rehabilitation centers, key opinion leaders, various medical societies, and prospective patients on the proven clinical benefits of Zephyr Valves.

We continue to develop our relationships with credible third parties, such as our partnership with the American College of Chest Physicians, on continuing medical education-accredited training and with the COPD Foundation on patient and physician education.

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We also plan to continue building patient awareness through our direct-to-patient marketing initiatives, which include advertising, social media and online education.

We also intend to continue helping physicians in their outreach to patients and other healthcare providers.

The objective of this outreach is to bring patients to our website, where they can find educational materials on Zephyr Valves, determine if they may be eligible, find contact information for physicians in their area and sign up for support and news.

We also intend to continue supporting physicians in their outreach to patients and other healthcare providers.

We conduct our international business through direct sales in markets with established reimbursement and substantial market potential, and through a distributor-based sales model in smaller markets or markets where we are still developing reimbursement.

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Reimbursement from commercial payors is typically based on a similar methodology but rates vary depending on the procedure performed, the hospital, the commercial payor, contract terms and other factors.

These ICD-10 PCS codes map to the MS-DRG classifications for Major Chest Procedures, with national average reimbursement rates between $12,000 and $32,000, for the year 2020, depending on co-morbidities and complications.

The ICD-10 PCS procedure codes that best describe our procedure map to the MS-DRG classifications for Major Chest Procedures, depending on co-morbidities and complications.

MS‐DRG classifications calibrate payment for groups of services based on the severity of a patient’s illness and clinical cohesiveness of care.

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Payment for Zephyr Valve is expected to, on average, be sufficient to cover costs of the procedure.

If a patient is positive for collateral ventilation following an assessment by the Chartis System, the patient is typically discharged the same day and the procedure therfore billed as an outpatient procedure.

The CPT code used to provide payment for the Chartis procedure, for patients who do not receive the Zephyr Valve due to collateral ventilation, maps to an Ambulatory Payment Classification, with a national average payment of $5,823.

If a patient is positive for collateral ventilation following an assessment by the Chartis System, the patient is typically discharged the same day and the procedure therefore billed as an outpatient procedure.

The national average payment for this procedure is sufficient to cover costs of the procedure.

If a patient receives the Zephyr Valve, there is no separate reimbursement for the Chartis System procedure;

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A key element of our strategy remains to broaden our coverage by private third-party payor policies.

Commercial payors such as Aetna, Humana, Health Care Service Corporation, and Highmark have issued positive coverage policies for the Zephyr Valve, and United Healthcare no longer considers the procedure unproven or experimental.

We continue to engage with commercial payors to establish positive national coverage policies by highlighting our compelling and robust clinical data, unique patient selection tools, favorable cost profile to more invasive options, increased patient demand and support from global treatment recommendations for the management of COPD and emphysema.

Commercial payors such as Aetna, Humana, and many of the largest Blue Cross Blue Shield plans including Anthem, Health Care Service Corporation, and BCBS Michigan have all issued positive coverage policies for the Zephyr Valve, and United Healthcare no longer considers the procedure unproven or experimental.

We continue to engage with commercial payors to establish positive national coverage policies by highlighting our compelling and robust clinical data, unique patient selection tools, favorable safety profile to more invasive options, increased patient demand and support from global treatment recommendations for the management of COPD and emphysema.

Prior Authorization Approval Process

A second key element of our reimbursement strategy includes leveraging our patient reimbursement support team and knowledge of the published data to assist patients and physicians in obtaining appropriate prior authorization approvals in advance of treatment for payers that require it.

We believe our patient reimbursement support team is

highly effective in working with patients and physicians to obtain appropriate prior authorizations for the Zephyr Valve treatment even when a non-coverage policy exists.

We believe patients and providers will continue to benefit from support through the prior authorization process until widespread coverage is established across most commercial payors.

We believe our patient reimbursement support team is highly effective in working with patients and physicians to obtain appropriate prior authorizations for the Zephyr Valve treatment even when a non-coverage policy exists.

We believe patients and providers will continue to benefit

from support through the prior authorization process until widespread coverage is streamlined across most commercial payors.

Reimbursement Outside of the United States

Outside of the United States, reimbursement levels vary significantly by country and by patient.

Reimbursement is obtained from a variety of sources, including government sponsors, hospital budgets or private health insurance plans, or combinations thereof.

We have established reimbursement access in countries across Europe and Asia Pacific, including Australia, Belgium, France, Germany, the Netherlands, South Korea, the United Kingdom and other countries.

Reimbursement is obtained from a variety of sources, including national health care systems or private health insurance plans, or combinations thereof.

We have established market access in countries across Europe and Asia Pacific, including Australia, Austria, Belgium, France, Germany, the Netherlands, United Kingdom, Scotland, Switzerland and South Korea, and other countries.

The procedure is now included as a treatment option in national and international COPD management and treatment guidelines across Europe and Asia Pacific.

Research, Development and Clinical Programs

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This includes innovations in our airway sizing and delivery catheters, the introduction of new sizes of Zephyr Valves, improvements to the user interface of the Chartis System to accommodate a variety of anesthesia options and the StratX Platform to assist with patient selection and procedure planning.

We have had discussions with the FDA regarding expanding the Zephyr Valve indication to include the management of persistent air leaks.

We believe there are approximately 7,000 patients who suffer from a persistent air leak per year in the United States that could benefit from treatment with Zephyr Valves.

We are in discussions with the FDA regarding expanding the Zephyr Valve indication to include the management of persistent air leaks.

Our pipeline of products that we are currently considering includes innovations in image analysis to support advanced patient selection and optimize patient outcomes, catheter technologies to improve valve deliverability and reduce procedure time and the AeriSeal system for addressing the needs of severe emphysema patients who are not eligible for Zephyr Valves due to collateral ventilation.

In December 2020, AeriSeal received designation as a Breakthrough Device by the FDA.

The breakthrough designation will provide prioritized and potentially accelerated review by the FDA, and provides eligibility for Medicare Coverage of Innovation Technology (MCIT), a rule which enables receipt of Medicare coverage as early as the same day as FDA market authorization for breakthrough devices and provides coverage for four years.

AeriSeal is a polymerizing sealant that can be delivered via a bronchoscope to a targeted region of the lung to reduce volume in the treated area.

We intend to submit an IDE to the FDA for commencing a clinical trial with the AeriSeal system.

We have only conducted initial feasibility research on AeriSeal to date.

We believe that positive results from this clinical trial would enable the treatment of patients with collateral ventilation, which would complement the screening of patients for Zephyr Valves.

We believe that AeriSeal would enable the treatment of patients with collateral ventilation, which would complement the screening of patients for Zephyr Valves.

We have secured CE mark and Therapeutic Goods Administration approval in Australia for AeriSeal and have completed initial feasibility research.

We further have funded a feasibility study using AeriSeal to expand the number of patients that can be treated with Zephyr Valves and are exploring additional studies.

We have funded an independent feasibility study using AeriSeal and sponsored another study to expand the number of patients that can be treated with Zephyr Valves.

In December 2020, AeriSeal received designation as a Breakthrough Device by the FDA.

The breakthrough designation will provide prioritized and potentially accelerated review by the FDA.

We intend to submit an IDE to the FDA for commencing a clinical trial with the AeriSeal system.

If successfully developed and approved, AeriSeal could further expand the addressable market of our solution.

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not approved for use in the United States).

The Spiration Valve System is an endobronchial technology designed to offer patients with severe emphysema a minimally invasive treatment option for lung volume reduction by redirecting air away from diseased areas of the lung to healthier tissue so that patients may breathe easier.

The Spiration Valve System is an endobronchial technology designed to offer patients with severe emphysema a minimally invasive treatment option for lung

volume reduction by redirecting air away from diseased areas of the lung to healthier tissue so that patients may breathe easier.

Like Zephyr Valves, the Spiration Valve System is indicated to treat patients with heterogeneous emphysema;

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InterVapor System offers a non-surgical and non-implant therapy developed for lung disease including emphysema and lung cancer where vapor ablation is simply the application of heated pure water to tissue.

Some of our current or future competitors may have several competitive advantages, including established relationships with pulmonologists who commonly treat patients with emphysema, significantly greater name recognition and significantly greater sales and marketing resources.

Some of our competitors have several competitive advantages, including more established operating histories, established relationships with pulmonologists who commonly treat patients with emphysema, significantly greater name recognition, widespread distribution channels, and significantly greater sales and marketing resources.

In addition to competing for market share, we also compete against these companies for personnel, including qualified sales and other personnel that are necessary to grow our business.

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In addition to existing competitors, other companies may acquire or in-license competitive products and could directly compete with us.

These competitors may also try to compete with us on price both directly, through rebates and promotional programs to high volume physicians and coupons to patients, and indirectly, through attractive product bundling with complementary products that offer convenience and an effectively lower price compared to

the total price of purchasing each product separately.

Larger competitors may also be able to offer greater customer loyalty benefits to encourage repeat use of their products and finance a sustained global advertising campaign to compete with commercialization efforts of our products.

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Our technologies and products may be rendered obsolete or uneconomical by technological advances or entirely different approaches developed by one or more of our competitors.

As more companies develop new intellectual property in our market, there is the possibility of a competitor acquiring patents or other rights that may limit our ability to update our technologies and products which may impact demand for our products.

As more companies develop new intellectual property in our market, there is the possibility of a

competitor acquiring patents or other rights that may limit our ability to update our technologies and products which may impact demand for our products.

Intellectual Property

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As of December 31, 2021, we had rights to 58 issued United States patents, 18 pending United States patent applications, 125 issued foreign patents and 15 pending foreign patent applications.

Our most material foreign patents issued and patent applications pending are in the European Union, France, Germany, Japan and the United Kingdom.

Our most material foreign patents issued and patent applications pending are in the European Union (“EU”), France, Germany, Japan and the United Kingdom.

Our patents cover aspects of our current Zephyr Valve, loading system, airway sizing, EDC, Chartis System, AeriSeal and future product concepts.

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We also rely upon trademarks to build and maintain the integrity of our brand.

As of December 31, 2020, we had eight registered trademark filings, some of which may apply to multiple countries, and several pending trademark applications in various countries.

As of December 31, 2021, we had nine registered trademark filings, some of which may apply to multiple countries, and several pending trademark applications in various countries.

We also rely, in part, upon unpatented trade secrets, know-how and continuing technological innovation, and licensing arrangements, to develop and maintain our competitive position.

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Our lease terminates on July 31, 2025.

This facility supports production and distribution operations, including manufacturing, quality control, raw material and finished goods storage.

This facility supports production operations, including manufacturing and quality control.

We lease additional facilities in Redwood City, California of approximately 8,000 square feet and 17,000 square feet of space under lease agreements that terminates on May 31, 2024 and September 30, 2024, respectively.

These facilities support finished goods storage and distribution.

We have manufactured all our products at this facility for over 10 years and to date we have manufactured over 80,000 Zephyr Valves.

We also store finished goods at other facilities in Redwood City, California where we lease approximately 8,000 square feet and 17,000 square feet of space under lease agreements that terminates on May 31, 2024 and September 30, 2024, respectively.

There is a mutual early termination option starting November 30, 2021 on the 8,000 square feet of space.

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Based on our prior experience with such suppliers to manufacture products for commercialization both inside and outside the United States, we believe these suppliers are capable of continuing to meet our specifications and maintaining quality.

Several components used in our devices rely on single source

suppliers and we routinely prioritize, evaluate and qualify backup sources.

Several components used in our devices rely on single source suppliers and we routinely prioritize, evaluate and qualify backup sources.

We typically maintain several months of product in inventory however if one or more of our single source suppliers were to encounter a manufacturing issue or chooses to end supply, we estimate that some of our custom components could take between one and two years to qualify a second source supplier in all markets.

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Order quantities and lead times for components purchased from suppliers are based on our forecasts derived from historical demand and anticipated future demand.

Lead times for components may vary depending on the size of the

order, time required to manufacture and test the components, specific supplier requirements and current market demand for the components, sub-assemblies and materials.

Lead times for components may vary depending on the size of the order, time required to manufacture and test the components, specific supplier requirements and current market demand for the components, sub-assemblies and materials.

We perform assembly, testing, inspection and final product release activities for our products.

Government Regulation

United States Food and Drug Administration

United States Food and Drug Administration (“FDA”)

Our products and operations are subject to extensive and ongoing regulation by the FDA under the Federal Food, Drug, and Cosmetic Act of 1938 and its implementing regulations (“FDCA”), as well as other federal and state regulatory bodies in the United States.

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The Zephyr Valve is a Class III device that has received FDA PMA approval.

The Investigational Device Exemption Process

The Investigational Device Exemption Process (“IDE”)

In the United States, absent certain limited exceptions, human clinical trials intended to support medical device clearance or approval require an IDE application.

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If the FDA evaluation of a PMA is favorable, the FDA will issue either an approval letter, or an approvable letter, the latter of which usually contains a number of conditions that must be met in order to secure final approval of the PMA.

When and if those conditions have been fulfilled to the satisfaction of the FDA, the agency will issue a PMA

approval letter authorizing commercial marketing of the device, subject to the conditions of approval and the limitations established in the approval letter.

If the FDA’s evaluation of a PMA application or manufacturing facilities is not favorable, the FDA will deny approval of the PMA or issue a not approvable letter.

When and if those conditions have been fulfilled to the satisfaction of the FDA, the agency will issue a PMA approval letter authorizing commercial marketing of the device, subject to the conditions of approval and the limitations established in the approval letter.

If the FDA’s evaluation of a PMA application or manufacturing

facilities is not favorable, the FDA will deny approval of the PMA or issue a not approvable letter.

The FDA also may determine that additional tests or clinical trials are necessary, in which case the PMA approval may be delayed for several months or years while the trials are conducted and data is submitted in an amendment to the PMA, or the PMA is withdrawn and resubmitted when the data are available.

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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 third-party suppliers.

Additionally, our Notified Body, the BSI, regularly inspects our manufacturing, design and operational facilities to ensure ongoing ISO 13485 compliance in order to maintain our CE mark.

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 third-party suppliers.

Additionally, our Notified Body, the BSI, regularly inspects our manufacturing, design and operational

facilities to ensure ongoing ISO 13485 compliance in order to maintain our CE mark.

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

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Our portfolio of products is regulated in the European Union as a medical device per the European Union Medical Devices Directive (Council Directive 93/42/EEC) (“MDD”) and, starting on May 26, 2021, the Medical Device Regulation (Regulation (EU) 2017/745) (“MDR”).

The MDD and MDR set out the basic regulatory framework for medical devices in the European Union.

The MDR sets out the basic regulatory framework for medical devices in the European Union.

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 Certificate de Conformité.

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

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 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 or MDR.

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

Each member state can appoint Notified Bodies within its jurisdiction.

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The HIPAA security standards require the adoption of administrative, physical and technical safeguards and the adoption of written security policies and procedures.

In addition, HIPAA requires Covered Entities to execute Business Associate Agreements with their Business

Associates and subcontractors who provide services for or on behalf of Covered Entities.

In addition, HIPAA requires Covered Entities to execute Business Associate Agreements with their Business Associates and subcontractors who provide services for or on behalf of Covered Entities.

Business Associates have a corresponding obligation to maintain appropriate Business Associate Agreements under HIPAA.

In addition, companies that would not otherwise be subject to HIPAA may become contractually obligated to follow HIPAA requirements through agreements with Covered Entities and Business Associates, and some of our customers may require us to agree to these provisions.

In addition, various states, such as California and Massachusetts, have implemented similar privacy laws and regulations, such as the California Confidentiality of Medical Information Act, that impose restrictive requirements regulating the use and disclosure of health information and other personally identifiable information.

In addition to fines and penalties imposed upon violators, some of these state laws also afford private rights of action to individuals who believe their personal information has been misused.

California’s patient privacy laws, for example, provide for penalties of up to $250,000 and permit injured parties to sue for damages.

The interplay of federal and state laws may be subject to varying interpretations by courts and government agencies, creating complex compliance issues and potentially exposing us to additional expense, adverse publicity and liability.

The compliance requirements of these laws, including additional breach reporting requirements, and the penalties for violation vary widely, and new privacy and security laws in this area are evolving.

Requirements of these laws and penalties for violations vary widely.

In addition, companies that would not otherwise be subject to HIPAA may become contractually obligated

to follow HIPAA requirements through agreements with Covered Entities and Business Associates, and some of our customers may require us to agree to these provisions.

If we or our operations are found to be in violation of HIPAA, HITECH or their implementing regulations, and similar state laws, we may be subject to significant penalties, including civil, criminal and administrative penalties, fines, imprisonment and exclusion from participation in federal or state healthcare programs, and the curtailment or restructuring of our operations.

In addition, HITECH created four new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to Business Associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorney’s fees and costs associated with pursuing federal civil actions.

Privacy and Information Security Laws

In the ordinary course of our business, we may process personal data, including health data.

Accordingly, we are, or may become, subject to numerous data privacy and security obligations, including federal, state, local, and foreign laws, regulations, guidance, and industry standards related to data privacy, security, and protection.

Such obligations may include, without limitation, the Federal Trade Commission Act, the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003, the California Consumer Privacy Act of 2018 (“CCPA”), the European Union’s General Data Protection Regulation 2016/679 (“EU GDPR”), and the EU GDPR as it forms part of UK law by virtue of section 3 of the European Union (Withdrawal) Act 2018 (“UK GDPR”).

In addition, states within the United States have enacted or proposed data privacy laws.

For example, Virginia passed the Consumer Data Protection Act and Colorado passed the Colorado Privacy Act.

The CCPA and EU GDPR are examples of the increasingly stringent and evolving regulatory frameworks related to personal data processing and that increase our compliance obligations and exposure for any non-compliance.

For example, the CCPA imposes obligations on covered businesses to provide specific disclosures related to a business’s collecting, using and disclosing personal data and to respond to certain requests from California residents related to their personal data (for example, requests to know of the business’s personal data processing activities, to delete the individual’s personal data and to opt out of certain personal data disclosures).

Also, the CCPA provides for civil penalties and a private right of action for data breaches that may include an award of statutory damages.

In addition, it is anticipated that the California Privacy Rights Act of 2020 (“CPRA”), effective January 1, 2023, will expand the CCPA.

The CPRA will, among other things, give California residents the ability to limit use of certain sensitive personal data, establish restrictions on personal data retention, expand the types of data breaches subject to the CCPA’s private right of action, and establish a new California Privacy Protection Agency to implement and enforce the new law.

US federal and state consumer protection laws may require us to publish statements that accurately and fairly describe how we handle personal data and choices individuals may have about the way we handle their personal data.

European data protection laws (including the EU GDPR and UK GDPR) impose significant and complex compliance obligations on entities that are subject to those laws.

For example, the EU GDPR applies to any company established in the European Economic Area (“EEA”) and to companies established outside the EEA that process personal data in connection with the offering of goods or services to data subjects in the EEA or the monitoring of the behavior of data subjects in the EEA.

These obligations may include limiting personal data processing only to what is necessary for specified, explicit and legitimate purposes;

requiring a legal basis for personal data processing;

requiring the appointment of a data protection officer in certain circumstances;

increasing transparency obligations to data subjects;

requiring data protection impact assessments in certain circumstances;

limiting the collection and retention of personal data;

increasing rights for data subjects;

formalizing a heightened and codified standard of data subject consents;

requiring the implementation and maintenance of technical and organizational safeguards for personal data;

mandating notice of certain personal data breaches to the relevant supervisory authorities and affected individuals;

and mandating the appointment of representatives in the United Kingdom and/or the European Union in certain circumstances.

See also Part I, Item 1A, “Risk Factors—Risks Related to Government Regulation and Our Industry” for additional information about the laws and regulations to which we are or may become subject and the risks to our business associated with such laws and regulations.

Federal, State and Foreign Fraud and Abuse Laws

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Our business is subject to compliance with these laws.

If our operations are found to be in violation of any of the federal, state and foreign laws described below or any other current or future fraud and abuse or other healthcare laws and regulations that apply to us, we may be subject to significant penalties, including significant criminal, civil, and administrative penalties, damages, fines, imprisonment for individuals, additional oversight and reporting obligations, exclusion from participation in government programs, such as Medicare and Medicaid, imprisonment, contractual damages, reputation harm and disgorgement and we could be required to curtail or cease our operations.

Anti-Kickback Statutes

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Several courts have interpreted the statute’s intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal healthcare covered businesses, the statute has been violated.

Violations of the federal Anti-Kickback Statute may result in civil monetary penalties up to $100,000 for each violation, plus up to three times the remuneration involved.

Violations can also result in criminal penalties, including criminal fines of up to $100,000 and imprisonment of up to ten years.

Violations of the federal Anti-Kickback Statute may result in civil monetary penalties.

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

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The Physician Payments Sunshine Act (“Open Payments”), enacted as part of the Affordable Care Act, requires certain pharmaceutical, medical device and medical supply manufacturers covered by Medicare, Medicaid or the Children’s Health Insurance Program to report annually to CMS:

payments and transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists, and chiropractors) and teaching hospitals, and applicable manufacturers and group purchasing organizations, as well as to report annually ownership and investment interests held by physicians and their immediate family members.

Failure to submit required information may result in civil monetary penalties of $11,052 per failure up to an aggregate of $165,786 per year (or up to an aggregate of $1.105 million per year for “knowing failures”), for all payments, transfers of value or ownership or investment interests that are not timely, accurately and completely reported in an annual submission, and may result in liability under other federal laws or regulations.

Effective January 1, 2022, these reporting obligations will extend to include payments and other transfers of value made in the previous year to physician assistants, nurse practitioners, clinical nurse specialists, anesthesiologist assistants, certified registered nurse anesthetists and certified nurse midwives.

payments and transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists, and chiropractors), other health care professionals (such as physician assistants and nurse practitioners) and teaching hospitals, and applicable manufacturers and group purchasing organizations, as well as information regarding ownership and investment interests held by physicians and their immediate family members.

These reporting obligations include payments and other transfers of value made in the previous year to physician assistants, nurse practitioners, clinical nurse specialists, anesthesiologist assistants, certified registered nurse anesthetists and certified nurse midwives.

We are subject to Open Payments and the information we disclose may lead to greater scrutiny, which may result in modifications to established practices and additional costs.

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Violations of these anti-bribery laws, or allegations of such violations, could have a negative impact on our business, results of operations and reputation.

For instance, in the United Kingdom, under the U.K.

Bribery Act of 2010 (Bribery Act), a bribery occurs when a person offers, gives or promises to give a financial or other advantage to induce or reward another individual to improperly perform certain functions or activities, including any function of a public nature.

For instance, in the United Kingdom, under the Bribery Act of 2010 (“Bribery Act”), a bribery occurs when a person offers, gives or promises to give a financial or other advantage to induce or reward another individual to improperly perform certain functions or activities, including any function of a public nature.

Bribery of foreign public officials also falls within the scope of the Bribery Act.

An individual found in violation of the U.K.

Bribery Act of 2010, faces imprisonment of up to ten years.

An individual found in violation of the Bribery Act, faces imprisonment of up to ten years.

In addition, the individual can be subject to an unlimited fine, as can commercial organizations for failure to prevent bribery.

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Our failure to comply with these privacy laws or significant changes in the laws restricting our ability to obtain required patient information could significantly impact our business and our future business plans.

United States Centers for Medicare and Medicaid Services

United States Centers for Medicare and Medicaid Services (“CMS”)

Medicare is a federal program administered by CMS through Medicare Administrative Contractors.

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Concurrently, Congress considered legislation to repeal or repeal and replace all or part of the Affordable Care Act.

While Congress has not passed comprehensive repeal legislation, it has enacted laws that modify certain provisions of the Affordable Care Act such as removing penalties, starting January 1, 2019, for not complying with the Affordable Care Act’s individual mandate to carry health insurance and delaying the implementation of certain fees mandated by the Affordable Care

On December 14, 2018, a Texas U.S.

District Court Judge ruled that the Affordable Care Act is unconstitutional in its entirety because the individual mandate was repealed by Congress as part of the Tax Cuts and Jobs Act of 2017.

Additionally, on December 18, 2019, the U.S.

Court of Appeals for the 5th Circuit upheld the District Court ruling that the individual mandate was unconstitutional and remanded the case back to the District Court to determine whether the remaining provisions of the Affordable Care Act are invalid as well.

The United States Supreme Court is currently reviewing this case, but it is unknown when a decision will be reached.

Although the Supreme Court has not yet ruled on the constitutionality of the Affordable Care Act, on January 28, 2021, President Biden issued an executive order to initiate a special enrollment period from February 15, 2021 through May 15, 2021 for purposes of obtaining health insurance coverage through the Affordable Care Act marketplace.

The executive order also instructs certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the Affordable Care Act.

It is unclear how the Supreme Court ruling, other such litigation and the healthcare reform measures of the Biden administration will impact the Affordable Care Act and our business.

On June 17, 2021, the U.S.

Supreme Court dismissed a challenge on procedural grounds that argued the Affordable Care Act is unconstitutional in its entirety because the “individual mandate” was repealed by Congress.

Thus, the Affordable Care Act will remain in effect in its current form.

On January 28, 2021, President Biden issued an executive order that initiated a special enrollment period for purposes of obtaining health insurance coverage through the Affordable Care Act marketplace.

The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the Affordable Care Act.

It is possible that the Affordable Care Act will be subject to judicial or congressional challenges in the future, including congressional legislation to modify or replace the Affordable Care Act or elements of the Affordable Care Act.

It is unclear how such challenges and the healthcare reform measures of the Biden administration will impact the Affordable Care Act and our business.

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

For example, the Budget Control Act of 2011, among other things, included reductions to CMS payments to providers of 2% per fiscal year, which went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2030 unless additional Congressional action is taken.

For example, the Budget Control Act of 2011, among other things, included reductions to CMS payments to providers of 2% per fiscal year, which went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute, including the Infrastructure Investment and Jobs Act, will remain in effect through 2031 unless additional Congressional action is taken.

However, COVID-19 relief legislation suspended the 2% Medicare sequester from May 1, 2020 through March 31, 2022.

Under current legislation the actual reduction in Medicare

payments will vary from 1% in 2022 to up to 3% in the final fiscal year of this sequester.

Additionally, the American Taxpayer Relief Act of 2012, among other things, reduced CMS payments to several providers, including hospitals, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

4 unchanged sentences

Human Capital Management

As of December 31, 2020, we had 170 employees in the U.S., 38 in Europe, and 12 in Asia Pacific.

As of December 31, 2021, we had a total of 253 employees, with 198 employees in the U.S., 39 in Europe, and 16 in Asia Pacific.

None of our employees are represented by a labor union or are a party to a collective bargaining agreement.

6 unchanged sentences

At Pulmonx, we value diverse perspectives and experiences.

We strive to create an inclusive culture where differences drive innovation.

In 2020, we created a task force that seeks to ensure we make meaningful progress in advancing our commitment to being an inclusive organization where employees feel valued, respected, and heard.

We continue to create an inclusive culture where differences drive innovation.

In 2021, our task force identified opportunities to increase awareness as well as initiatives to identify, attract and retain underrepresented diverse talent.

Talent Management & Development

26 unchanged sentences

Securities and Exchange Commission, or SEC, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended.

We make available on our website at www.pulmonx.com, free of

charge, copies of these reports and other information as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

We make available on our website at www.pulmonx.com, free of charge, copies of these reports and other information as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

All SEC filings are also available at the SEC’s website at www.sec.gov

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