What changed in this filing

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Item 1. Business

2024-02-27 compared with 2023-03-01 · 90 added, 81 removed, 460 unchanged (27% of the section changed)

12 unchanged sentences

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

In international markets, we employ both direct and distributor-based sales models, with over 95% of our revenue generated in markets where we sell directly.

In international markets, we employ both direct and distributor-based sales models, with over 96% of our revenue generated in markets where we sell directly for the year ended December 31, 2023.

We generated revenue of $68.7 million, with a gross margin of 73.9% and a net loss of $60.8 million, for the year ended December 31, 2023 compared to revenue of $53.7 million, with a gross margin of 74.3% and a net loss of $58.9 million, for the year ended December 31, 2022.

6 unchanged sentences

COPD refers to a group of lung diseases characterized by obstruction of airflow that interferes with normal breathing.

In 2015, it affected approximately 175 million patients and was responsible for 3.2 million deaths globally.

In the United States, COPD is the third leading cause of death and affected approximately 16 million Americans as of 2013.

According to the World Health Organization, COPD is the third leading cause of death worldwide, causing 3.23 million deaths in 2019.

Emphysema, a form of COPD, which accounts for approximately 25% of all COPD patients, is a debilitating and life-threatening disease that progressively destroys lung tissue, resulting in a diminishing ability to breathe and engage in the most basic daily activities such as climbing a flight of stairs, walking, or showering, leading to a high mortality rate.

21 unchanged sentences

This procedure is highly time and resource intensive due to the complexity of the surgery.

Even with a successful procedure and consistent use of anti-rejection medications, lung transplantation patients have a five-year survival rate on average.

Even with a successful

procedure and consistent use of anti-rejection medications, lung transplantation patients have a five-year survival rate on average.

In addition to recently approved endobronchial valves, there are other approaches to a minimally invasive alternatives to LVRS, including the use of airway bypass, coils and vapor.

45 unchanged sentences

After the physician captures a CT scan of the patient’s chest according to the StratX parameters, the CT scan is de-identified of patient information, and the hospital staff uploads the CT scan to a third-party cloud service provider where it is analyzed using validated algorithms within the StratX Platform.

The StratX Platform is designed to enable physicians to screen treatment candidates non-invasively, prioritize between multiple potential treatment targets, if applicable, enhance case

planning and optimize procedure time, and educate themselves and their patients using the simple-to-read StratX Lung Report.

The StratX Platform is designed to enable physicians to screen treatment

candidates non-invasively, prioritize between multiple potential treatment targets, if applicable, enhance case planning, and educate themselves and their patients using the simple-to-read StratX Lung Report.

In order to make the StratX Platform available to physicians, we contract with a third-party cloud service provider.

2 unchanged sentences

The StratX Lung Report is then made available to physicians in the third-party cloud service.

The software of each of these third-party service providers has received either 510(k) approval or successfully underwent a conformity assessment procedure with a Notified Body and was subsequently CE Marked..

We provide exclusive access to physicians to their StratX accounts and cases and monitor this CT scan upload and analysis process to ensure quality control.

3 unchanged sentences

When the balloon is inflated, the target lobe is blocked, and air can only escape through the catheter’s central lumen.

Airflow and pressure are displayed on the console of the Chartis System allowing for a measurement of collateral ventilation in the targeted lobe.

Airflow and pressure can be displayed on the console of the Chartis System allowing for a measurement of collateral ventilation in the targeted lobe.

The system works with spontaneous breathing or mechanical ventilation.

6 unchanged sentences

In addition, over 100 scientific articles have been published on the clinical benefits of Zephyr Valves, including multiple meta-analyses, review articles, cost-effectiveness analyses and risk-benefit analyses.

We are following patients enrolled in the LIBERATE study for up to five years for safety and effectiveness (FEV 1 ) assessments.

We have also established a patient registry to collect additional data on the safety and effectiveness of the Zephyr Valve (FEV 1 ) in the United States.

We have established a similar registry in France.

We have followed patients enrolled in the LIBERATE study for up to five years for safety and effectiveness (FEV 1 ) assessments.

We have also established a patient registry to collect additional data on the safety and effectiveness (FEV 1 ) of the Zephyr Valve in the United States.

We have established a similar registry in France and Japan.

As seen in the table below, the results from multiple randomized clinical trials have consistently shown statistically significant and clinically meaningful benefits of Zephyr Valves across multiple measures of effectiveness.

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We sell Zephyr Valves primarily through a direct sales force that engages with pulmonologists in the United States, Europe and Asia Pacific.

Zephyr Valves are typically implanted by an interventional pulmonologist at a hospital, and patients are often evaluated in a multi-disciplinary team approach that includes other lung physicians, radiologists, respiratory therapy specialists or surgeons.

Our sales personnel work closely with these stakeholders to ensure quality outcomes.

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Our sales personnel work with hospitals to leverage their existing resources to efficiently establish and market Zephyr Valves as a service line.

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

Our strategy is to identify territories with high unmet need, identify leading hospitals and work with champions of our solution to build emphysema centers of excellence.

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

Our strategy is to identify territories with high unmet need, identify leading hospitals and work with champions of our solution to establish quality Zephyr Valve programs.

We believe there is a significant growth opportunity for hospitals to provide high quality comprehensive diagnosis and treatment for advanced COPD patients.

We facilitate sharing of best practices among hospitals on how to efficiently educate stakeholders, screen patients, and manage patient care.

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 American Lung Association and the COPD Foundation on patient and physician education.

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

In addition, we intend to continue to publish additional clinical data in various industry and scientific journals, online and through presentations at various industry conferences.

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“Coding” refers to distinct numeric and alphanumeric billing codes that are used by healthcare providers to report the provision of medical services procedures and the use of supplies for specific patients to payors.

CPT codes are published by the American Medical Association and are used to report medical services and procedures performed by or under the direction of physicians.

Medicare generally pays physicians for services based on submission of a claim using one or more

specific CPT codes.

CPT codes are published by the American Medical

Association and are used to report medical services and procedures performed by or under the direction of physicians.

Medicare generally pays physicians for services based on submission of a claim using one or more specific CPT codes.

Physician payment for procedures may vary according to site of service.

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Approximately 20% of the potential Zephyr Valve patient population is under third-party commercial payor policies.

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.

Commercial payors such as Aetna, Humana, and many of the largest Blue Cross Blue Shield plans including Anthem, Health Care Service Corporation, BCBS Michigan, and Highmark 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.

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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.

We have established market access in countries across Europe and Asia Pacific, including Australia, Austria, Belgium, France, Germany, Japan, 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.

2 unchanged sentences

We also work with external vendors in the design and testing of new technologies.

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 use of AeriSeal for addressing the needs of severe emphysema patients who are not eligible for Zephyr Valves due to collateral ventilation.

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 Chartis assessment, valve deliverability and reduce procedure time and the use of AeriSeal for addressing the needs of severe emphysema patients who are not eligible for Zephyr Valves due to collateral ventilation.

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

We have successfully undertaken the conformity assessment procedure in the EU with a Notified Body and CE marked AeriSeal and have Therapeutic Goods Administration approval in Australia for the medical device and have completed initial feasibility research.

We have successfully undertaken the conformity assessment procedure in the EU with a Notified Body and CE marked AeriSeal on the basis of the MDD (as defined below), which we continue to place on the market in accordance with the transitional provisions of the MDR (as defined below), and have Therapeutic Goods Administration approval in Australia for the medical device and have completed initial feasibility research.

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.

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

We have received a staged IDE approval to commence a clinical trial with AeriSeal.

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

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however, the Spiration Valve System is contraindicated for patients with homogeneous emphysema.

We believe our solution competes favorably with the Spiration Valve System for several reasons, including the strength of our published clinical data, differentiated patient selection tools and our comprehensive

technical and reimbursement support.

We believe our solution competes favorably with the Spiration Valve System for several reasons,

including the strength of our published clinical data, differentiated patient selection tools and our comprehensive technical and reimbursement support.

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.

5 unchanged sentences

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.

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

The term of individual patents depends on the legal term for patents in the countries in which they are granted.

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

As of December 31, 2022, we had nine registered trademark filings, some of which may apply to multiple countries, and several pending trademark applications in various countries.

As of December 31, 2023, we had nine registered trademarks, some of which 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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provided, that, the parties are required to negotiate in good faith during such 60-day notice period to attempt to enter into a replacement cross-license prior to such termination.

Neither party may assign or otherwise transfer the Spiration Cross-License without the written consent of the other

party, except in connection with certain change-of-control transactions.

Neither party may assign or otherwise transfer the Spiration Cross-License without the written consent of the other party, except in connection with certain change-of-control transactions.

We do not have any relationship with Spiration other than with respect to this cross-license agreement.

2 unchanged sentences

Our lease terminates on July 31, 2025.

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.

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

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 terminate contemporaneously on September 30, 2024.

We rely on a combination of in-house processing and third-party suppliers for raw materials and components.

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The FDA monitors compliance with the QSR through periodic inspections of our facilities, which may include inspection of our suppliers’ facilities as well.

Our European Union and Great Britain Notified Body, British Standards Institute (“BSI”), monitors compliance with the MDD (as defined below) requirements through both annual scheduled audits and periodic unannounced audits of our manufacturing facilities as well as our contract third-party suppliers’ facilities.

Our European Union Notified Body and Great Britain approved body, British Standards Institute (“BSI”), monitors compliance with the European Union Medical Devices Directive (Council Directive 93/42/EEC) (“MDD”), the Medical Device Regulation (Regulation (EU) 2017/745) (“MDR”), and the UK Medical Devices Regulations 2002 requirements through both annual scheduled audits and periodic unannounced audits of our manufacturing facilities as well as our contract third-party suppliers’ facilities.

Our quality management system in our Redwood City manufacturing facility is currently ISO 13485:2016 certified and licensed by the California Department of Public Health (“CDPH”) Food and Drug Branch.

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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.

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

The laws and regulations govern, among other things, product design and development, pre-clinical and clinical testing, manufacturing, packaging, labeling, storage, record keeping and

reporting, clearance or approval, marketing, distribution, promotion, import and export and post-marketing surveillance.

Unless an exemption applies, each new or significantly modified medical device we seek to commercially distribute in the United States will require either a premarket notification to the FDA requesting permission for commercial distribution under Section 510(k) of the FDCA, also referred to as a 510(k) clearance, or approval from the FDA of a PMA application.

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Generally, clinical trials for a significant risk device may begin once the IDE application is approved by the FDA and the study protocol and informed consent are approved by appropriate IRBs at the clinical trial sites.

There can be no assurance that submission of an IDE application will result in the ability to commence clinical trials, and although the FDA’s approval of an IDE application allows clinical testing to go forward for a specified number of subjects, it does not

bind the FDA to accept the results of the trial as sufficient to prove the product’s safety and effectiveness, even if the trial meets its intended success criteria.

There can be no assurance that

submission of an IDE application will result in the ability to commence clinical trials, and although the FDA’s approval of an IDE application allows clinical testing to go forward for a specified number of subjects, it does not bind the FDA to accept the results of the trial as sufficient to prove the product’s safety and effectiveness, even if the trial meets its intended success criteria.

All clinical trials must be conducted in accordance with the FDA’s IDE regulations that govern investigational device labeling, prohibition of promotion, recordkeeping, and reporting and monitoring responsibilities of study sponsors and study investigators.

21 unchanged sentences

PMA supplements often require submission of the same type of information as an initial PMA application, except that the supplement is limited to information needed to support any changes from the device covered by the approved PMA application and may or may not require as extensive technical or clinical data or the convening of an advisory panel, depending on the nature of the proposed change.

In approving a PMA application, as a condition of approval, the FDA may also require some form of post-approval study (“PAS”) or post-market surveillance, whereby the applicant conducts a follow-up study or follows certain patient groups for a number of years and makes periodic reports to the FDA on the clinical status of those patients

when necessary to protect the public health or to provide additional or longer-term safety and effectiveness data for the device.

The FDA may also require post-market surveillance for certain devices cleared under a 510(k) notification, such as implants or life-supporting or life-sustaining devices used outside a device user facility.

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On May 26, 2021, the MDR entered into application, repealing and replacing both the MDD, and Directive 90/385/EEC concerning active implantable medical devices, or AIMD.

The Medical Device Regulation and its associated guidance documents and harmonized standards govern, among other things, device design and development, preclinical and clinical or performance testing, premarket conformity assessment, registration and listing, manufacturing, labeling, storage, claims, sales and distribution, export and import and post-market surveillance, vigilance, and market surveillance.

Medical devices must comply with the General Safety and Performance Requirements, or GSPRs, set out in Annex I of the Medical Device Regulation.

The MDR and its associated guidance documents and harmonized standards govern, among other things, device design and development, preclinical and clinical or performance testing, premarket conformity assessment, registration and listing, manufacturing, labeling, storage, claims, sales and distribution, export and import and post-market surveillance, vigilance, and market surveillance.

Medical devices must comply with the General Safety and Performance Requirements, or GSPRs, set out in Annex I of the MDR.

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

To demonstrate compliance with the GSPRs provided in the Medical Device Regulation and obtain the right to affix the CE mark, medical devices manufacturers must undergo a conformity assessment procedure, which varies according to the type of medical device and its classification.

To demonstrate compliance with the GSPRs provided in the MDR and obtain the right to affix the CE mark, medical devices manufacturers must undergo a conformity assessment procedure, which varies according to the type of medical device and its classification.

Apart from low risk medical devices (Class I with no measuring function and which are not sterile), in relation to which the manufacturer may issue an EC Declaration of Conformity based on a self-assessment of the conformity of its products with the GSPRs, a conformity assessment procedure requires the intervention of a Notified Body, which is an organization designated by a Competent Authority of an EEA country to conduct conformity assessments.

Depending on the relevant conformity assessment procedure, the Notified Body audits and examines the technical documentation and the quality system for the manufacture, design and final inspection of the medical devices.

The Notified Body issues a CE Certificate of Conformity following successful completion of a conformity assessment procedure conducted in relation to the medical device and its manufacturer and their conformity with the GSPRs.

This Certificate and the related

conformity assessment process entitles the manufacturer to affix the CE mark to its medical devices after having prepared and signed a related EC Declaration of Conformity.

Notified Body issues a CE Certificate of Conformity following successful completion of a conformity assessment procedure conducted in relation to the medical device and its manufacturer and their conformity with the GSPRs.

This Certificate and the related conformity assessment process entitles the manufacturer to affix the CE mark to its medical devices after having prepared and signed a related EC Declaration of Conformity.

As a general rule, demonstration of conformity of medical devices and their manufacturers with the GSPRs must be based, among other things, on the evaluation of clinical data supporting the safety and performance of the products during normal conditions of use.

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After a device is placed on the market, it remains subject to significant regulatory requirements.

The MDR includes transitional provisions.

Accordingly, CE Certificates of Conformity issued by Notified Bodies in accordance with the MDD or the AIMD, prior to 25 May 2017 will remain valid until the expiration of the CE Certificate of Conformity, except for EC verification CE Certificates of Conformity issued in accordance with Annex IV to the MDD and Annex 4 to the AIMD which shall become void at the latest on 27 May 2022.

In addition, CE Certificates of Conformity issued by Notified Bodies in accordance with the MDD or the AIMD, from 25 May 2017 will remain valid until the expiration of the CE Certificate of Conformity and at the latest on 27 May 2024.

Medical devices with such valid CE Certificates of Conformity issued under the MDD or the AIMD may continue to be placed on the market for the remaining validity of the CE Certificate of Conformity or until May 27, 2024 at the latest, provided that (i) the devices continue to comply with the requirements of the MDD or AIMD, (ii) there are no significant changes in the design or intended purpose and (iii) from 26 May 2021, compliance with the EU Medical Device Regulation relating to post-market surveillance, market surveillance, vigilance, registration of economic operators and of devices is ensured in place of the corresponding requirements in the MDD or AIMD.

In early January 2023 the European Commission proposed that these dates be revised to extend current transitional provisions.

In February 2023, the European Parliament voted to adopt the proposal..

The MDR includes transitional provisions, amended by Regulation (EU) 2023/603.

Accordingly, CE Certificates of Conformity issued by Notified Bodies in accordance with the MDD or the AIMD from May 25, 2017, and which remained valid on May 26, 2021 and have not since been withdrawn will, with certain exceptions, remain valid until December 31, 2027 for Class III and Class IIb implantable medical devices and until December 31, 2028 for other Class Iib, Class Iia and Class I devices with a measuring function or which are sterile.

Class I medical devices, for which the conformity assessment procedure in accordance with the MDD or the AIMD did not require the involvement of a Notified Body but will require the involvement of a Notified Body in accordance with the MDR and for which an EU Declaration of Conformity was issued in accordance with the MDD or the AIMD prior to May 26, 2021, can continue to be placed on the EEA market until December 31, 2028.

Manufacturers of medical devices may only benefit from the above extended transitional provisions deadlines if the following conditions are fulfilled:

(i) the devices continue to comply with the requirements of the MDD or AIMD, (ii) there are no significant changes in the design and intended purpose, (iii) the devices do not present an unacceptable risk to the health or safety of patients, users or other persons, or to other aspects of the protection of public health, (iv) the manufacturer implements a quality management system by May 26, 2024 which complies with the requirements of the Medical Devices Regulation, (v) by May 26, 2024 an application is lodged with a Notified Body for conduct of the conformity assessment of the devices covered by the CE Certificate of Conformity, or the devices intended to substitute for such devices, in accordance with the MDR and a related written agreement is signed with the Notified Body by September 26, 2024, and (vi) from May 26, 2021, compliance with the MDR relating to post-market surveillance, market surveillance, vigilance, registration of economic operators and of devices is ensured in place of the corresponding requirements in the MDD or AIMD.

In addition, CE Certificates of Conformity issued by Notified Bodies in accordance with the MDD or the AIMD from May 25, 2017, which were valid on May 26, 2021 and have not been withdraw since but which expired before March 20, 2023, will only continue to be valid in accordance with the extended transitional deadlines above if either (i) the manufacturer signed a written agreement with a Notified Body for the conformity assessment of the device covered by the expired CE Certificate of Conformity, or the device intended to substitute that device, in accordance with the Medical Device Regulation before the date of expiry of the CE Certificate of Conformity, or (ii) a competent authority of an EU Member State has granted a derogation from the application conformity assessment procedure in accordance with Article 59(1) or Article 97(1) of the Medical Device Regulation.

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

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Before a medical device can be marketed in the EU it must undergo a conformity assessment procedure after which the manufacturer may affix the CE mark on the devices.

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

Our devices are Class IIa and Class IIb and require the involvement of a Notified Body.

The class of a product determines the conformity assessment

required before the CE mark can be placed on a product.

Our devices are Class IIa and Class IIb on the basis of the MDD and require the involvement of a Notified Body.

Once the Notified Body has issued a Certificate of Conformity, the manufacturer has drawn up the Declaration of Conformity and affixed the CE mark the device can be sold throughout the European Union.

We remain subject to ongoing MDR requirements including among others market surveillance after affixing the CE mark to our devices.

We are currently placing our medical devices on the market in accordance with the stringent requirements of the transitional provisions of the MDR, the requirements of the MDD and the guidance of the European Commission’s Medical Devices Coordination Group.

We intend to complete conformity assessment procedures for our medical devices in accordance with the MDR prior to the expiration of the existing Certificate(s) of Conformity issued by our Notified Body BSI.

We are currently placing our medical devices on the market in accordance with the MDR, as well as the stringent requirements of the transitional provisions of the MDR and the requirements of the MDD, as applicable to our products, and the guidance of the European Commission’s Medical Devices Coordination Group.

For those devices we are placing on the market in accordance with the transitional provisions of the MDR, we intend to complete conformity assessment procedures in accordance with the MDR prior to the expiration of our existing CE Certificate(s) of Conformity issued by our Notified Body BSI on the basis of the MDD, and the expiration of the transitional provisions of the MDR.

Following the result of a referendum in 2016, the United Kingdom left the European Union on January 31, 2020, commonly referred to as Brexit.

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The United Kingdom and the European Union have signed a EU-UK Trade and Cooperation Agreement, or TCA, which became provisionally applicable on January 1, 2021 and entered into force on May 1, 2021.

This agreement provides details on how some aspects of the United Kingdom and European Union’s relationship will operate going forwards

however there are still many uncertainties.

This agreement provides details on how some aspects of the United Kingdom and European Union’s relationship will operate going forwards however there are still many uncertainties.

The TCA primarily focuses on ensuring free trade between the European Union and the UK in relation to goods.

Among the changes that will now occur are that Great Britain (England, Scotland and Wales) will be treated as a “third country,” a country that is not a member of the European Union and whose citizens do not enjoy the European Union right to free movement.

Northern Ireland will continue to follow many aspects of the European Union regulatory rules, particularly in relation to trade in goods.

Northern Ireland will continue to follow many aspects of the European Union regulatory rules, particularly in relation to trade in goods, and including the MDR.

In light of the fact that the CE Marking process is set out in EU law, which no longer applies in the United Kingdom, the United Kingdom has devised a new route to market culminating in a UKCA Mark to replace the CE Mark.

Northern Ireland will, however, continue to be covered by the regulations governing CE Marks.

The UK Government has established transitional provision to recognize the acceptance of CE marked medical devices on the Great Britain market.

Accordingly, Class III and Class IIb implantable medical devices which have been CE marked in accordance with the MDD or AIMD and for which a CE Certificate of Conformity has been delivered by a Notified Body in accordance with the MDD or AIMD, can be placed on the Great Britain market until the sooner of the expiry of the related CE Certificate of Conformity or June 30, 2028.

However, in light of the extended transitional provisions of the Medical Device Regulation, related CE Certificates of Conformity will expire, at the latest, on December 31, 2027.

Other Class IIb, Class IIa and Class I devices with a measuring function which have been CE marked in accordance with the MDD or AIMD and for which a CE Certificate of Conformity has been delivered by a Notified Body in accordance with the MDD or AIMD, can be placed on the Great Britain market until the sooner of the expiry of the related CE Certificate of Conformity or June 30, 2028.

Class I medical devices, for which the conformity assessment procedure in accordance with the MDD or the AIMD did not require the involvement of a Notified Body but will require the involvement of a Notified Body in accordance with the Medical Device Regulation and for which an EU Declaration of Conformity was issued in accordance with the MDD or the AIMD prior to May 26, 2021, can continue to be placed on the Great Britain market until June 30, 2028.

Medical devices which have been CE marked in accordance with the Medical Device Regulation may be placed on the Great Britain market until June 30, 2030.

The UK government plans on introducing new legislation governing medical devices with an aim for core aspects of the future regime for medical devices to apply from July 1, 2025.

New legislation is also anticipated in 2024 to bring into force strengthened post-market surveillance requirements ahead of the wider future regulatory regime.

These post-market surveillance requirements are expected to apply from mid-2024.

Our devices were regulated under MDD prior to Brexit and are subject to the UK Medical Devices Regulations 2002.

Pulmonx has registered all products in accordance with the regulation and will be transitioning to the regulation by June 2023 (the end of the transition period).

Pulmonx has registered all products in accordance with the regulation, we received a related certificate of conformity from our Great Britain Approved Body BSI.

In addition, the advertising and promotion of medical devices in the EU is subject to the national laws of the individual EU Member States that implemented the MDD, the AIMD and that apply the MDR, Directive 2006/114/

EC concerning misleading and comparative advertising, and Directive 2005/29/EC on unfair commercial practices, as well as other national legislation of individual EU Member States governing the advertising and promotion of medical devices.

EU Member States’ national legislation may also restrict or impose limitations on our ability to advertise our products directly to the general public.

In addition, voluntary EU and national industry Codes of Conduct provide guidelines on the advertising and promotion of our products to the general public and may impose limitations on our promotional activities with healthcare professionals.

Health Insurance Portability and Accountability Act

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Privacy and Information Security Laws

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

In the ordinary course of our business, we may process personal data, including health data collected through the clinical trial process, our research collaborations, and directly from individuals or their healthcare providers under our patient reimbursement support programs.

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 and contractual obligations related to data privacy, security, and protection.

In addition, states within the United States have enacted or proposed data privacy laws including Virginia, Colorado, Utah, and Connecticut.

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.

Such obligations may include, without limitation, 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 United Kingdom (“UK”) law (the “UK GDPR”) (collectively, the “GDPR”).

In addition, states within the United States have enacted data privacy laws including Virginia, Colorado, Utah, and Connecticut.

The CCPA and 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.

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, the California Privacy Rights Act of 2020 (“CPRA”), which became effective January 1, 2023, will expand the CCPA by, among other things, giving California residents the ability to limit use of certain sensitive personal data, along with establishing restrictions on personal data retention and a new California Privacy Protection Agency to implement and enforce the new law.

In addition, the California Privacy Rights Act of 2020 (“CPRA”), which became effective January 1, 2023, expands the CCPA by, among other things, giving California residents the ability to limit use of certain sensitive personal data, along with establishing restrictions on personal data retention and 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 (collectively “GDPR”)) impose significant and complex compliance obligations on entities that are subject to those laws.

The GDPR applies to personal data about identified or identifiable data subjects processed by automated means and data contained in, or intended to be part of, non-automated filing systems (traditional paper files) as well as transfer of such data to a country outside of the EU/EEA.

The GDPR provides the competent authorities of the EU Member States with extensive competences and powers to investigate and act against non-compliances or infringements including the potential to impose fines of up to €20 million, or 4% of the firm’s worldwide annual revenue from the preceding financial year, whichever amount is higher.

The processing of personal health data of patients in the EU and the UK is subject to stringent requirements regarding transparency and communication towards patients, identifying an appropriate legal basis for processing the personal data, purpose limitation and implementing appropriate technical and security measures as well as safeguards for the transfer of personal data outside of the EU and the UK to countries like the USA.

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

and increasing rights for data subjects.

European data protection laws, including the GDPR, impose strict compliance obligations on entities for processing personal data, including health data.

For example, the GDPR provides the competent authorities with extensive competences and powers to investigate and act against non-compliances or infringements including the potential to impose fines of up to €20 million under the EU GDPR, £17.5 million under the UK GDPR, or, in each case, 4% of the firm’s worldwide annual revenue from the preceding financial year, whichever amount is higher.

The processing of personal health data of patients in the EU and the UK is subject to further stringent requirements.

For example, such processing requires both a lawful basis under Article 6 GDPR and at least one separate condition

for processing under Article 9 GDPR.

In addition, such processing must meet high standards under the GDPR regarding transparency and communication towards patients, identifying an appropriate legal basis for processing the personal data, purpose limitation and implementing appropriate technical and security measures safeguards for the transfer of personal data outside of the EU and the UK to countries like the USA, limiting personal data processing only to what is necessary, and increasing rights for data subjects.

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.

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The failure of a transaction or arrangement to fit precisely within one or more safe harbors does not necessarily mean that it is illegal or that prosecution will be pursued.

However, conduct and business arrangements that do not fully satisfy an applicable safe harbor may result in increased scrutiny by government enforcement authorities such as the HHS Office of the Inspector General (“OIG”).

Many states have adopted laws similar to the federal Anti-Kickback Statute.

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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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The Foreign Corrupt Practices Act (“FCPA”) prohibits any United States individual or business from paying, offering or authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business.

The FCPA also obligates companies whose securities are listed in the United States to comply with accounting provisions requiring us to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, if any, and to devise and maintain an adequate system of internal accounting controls for international operations.

The FCPA also obligates companies whose securities are listed in the United States to comply with accounting provisions requiring us to maintain books and records that

accurately and fairly reflect all transactions of the corporation, including international subsidiaries, if any, and to devise and maintain an adequate system of internal accounting controls for international operations.

International Laws

Outside the United States, interactions between medical device companies and healthcare professionals are also governed by strict laws, such as national anti-bribery laws of European countries, national sunshine rules, regulations, industry self-regulation codes of conduct and physicians’ codes of professional conduct.

In Europe, various countries have adopted anti-bribery laws providing for severe consequences in the form of criminal penalties and significant fines for individuals or companies committing a bribery offense.

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

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

Medicare is a federal program administered by CMS through MACs.

Available to individuals age 65 or over, and certain other individuals, the Medicare program provides, among other things, healthcare benefits that cover, within prescribed limits, the major costs of most medically necessary care for such individuals, subject to certain deductibles and copayments.

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Any changes in federal legislation, regulations and policy affecting CMS coverage and reimbursement relative to the procedure using our products could have a material effect on our performance.

While no NCD or LCD exists for endobronchial valves currently, CMS could develop an NCD, or one or more Medicare contractors could develop an LCD that either restricts coverage or restricts the patient population deemed appropriate for the treatment.

While no NCD or LCD exists for endobronchial valves currently, CMS could develop an NCD, or one or more MACs could develop an LCD that either restricts coverage or restricts the patient population deemed appropriate for the treatment.

CMS also administers the Medicaid program, a cooperative federal/state program that provides medical assistance benefits to qualifying low income and medically needy persons.

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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 until 2032 unless additional congressional action is taken.

Under current legislation the actual reduction in Medicare payments will vary from 1% in 2022 to up to 4% in the final fiscal year of this sequester.

We believe that there will continue to be proposals by legislators at both the federal and state levels, regulators and third-party payors to reduce costs while expanding individual healthcare benefits.

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As of December 31, 2023, we had a total of 279 full time employees, with 213 employees in the U.S., 55 in Europe, and 11 in Asia Pacific.

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

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

bargaining agreement.

We believe that we have good relations with our employees.

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

In 2022, our human resources task force identified opportunities to increase awareness as well as initiatives to identify, attract and retain underrepresented diverse talent.

Compensation Philosophy

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The Company identifies potential workplace risks in order to develop measures to mitigate possible hazards.

In response to the COVID-19 pandemic, the Company established safety protocols,

facility enhancements, and work from home strategies to protect our employees.

Some of our employees continue to work remotely.

Employees that work on site are provided with personal protective equipment and are required to report and document exposures following guidelines issued by the Centers for Disease Control or mandated by local regulations.

Available Information

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

What changed 10-K

Item 1. Business