What changed in this filing

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Item 1. Business

2023-02-24 compared with 2022-03-01 · 134 added, 120 removed, 487 unchanged (34% of the section changed)

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We maintain an internet website at www.merit.com.

COVID-19 Pandemic

During the last two years, the COVID-19 pandemic has had an unsteady but significant impact on our business, suppliers, customers, employees, families and communities.

Measures designed to contain the virus, including travel bans and restrictions, border closures, quarantines, shelter-in-place orders, business limitations and shutdowns continued through the year.

In addition, we continued to execute, and enhance, protocols to promote the safety of our employees in the workplace while producing essential medical products.

During the last three years, COVID-19 has had an unsteady but significant impact on our business, suppliers, customers, employees, families and communities.

Measures designed to contain the virus, including travel bans and restrictions, border closures, quarantines, shelter-in-place orders, business limitations and shutdowns continued during portions of the year ended December 31, 2022.

In efforts to contain the spread of the virus, many of our hospital customers prioritized their efforts on their COVID-19 response, diverting their focus and resources away from their normal operations and restricting access to their sites.

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However, lingering effects continue, including unpredictable freight and other logistical expenses and obstacles, and the responses of government authorities and our customers vary from region to region.

Please refer to the discussion of the risks and uncertainties associated with the COVID-19 pandemic under the heading “ The COVID-19 pandemic has negatively impacted our business and operations around the world and may continue to materially and adversely impact our business, operations and financial results .” set forth below in Item 1A “Risk Factors.”

Please refer to the discussion of the risks and uncertainties associated with COVID-19 under the heading “ The COVID-19 pandemic and related ongoing implications have negatively impacted our business and operations around the world and may continue to materially and adversely impact our business, operations and financial results .” set forth below in Item 1A “Risk Factors.”

We design, develop, market and manufacture, through our own operations and contract manufacturers, medical products that offer a high level of quality, value and safety to our customers, as well as the patients they serve.

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We offer a broad line of medical devices used to gain and maintain vascular access.

These products include our micropuncture kits, angiographic needles, our family of Prelude® sheath introducers and a wide range of guide wires and safety products.

These products include our micropuncture kits, angiographic needles, our family of Prelude® Introducer Sheaths and a wide range of guide wires and safety products.

Our cardiovascular segment includes the following product categories:

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● Broad offering of peritoneal dialysis catheters, accessories and implantation kits for home dialysis therapy;

● Surfacer® Inside-Out® Access Catheter System, an innovative approach to restore access and to preserve treatment options for hemodialysis patients with occluded veins, sold through our distribution agreement with Bluegrass Vascular Technologies, Inc.

(“Bluegrass Vascular”);

● Merit Wrapsody ™ Endoprosthesis, a cell-impermeable endoprosthesis which is designed to maintain long-term vessel patency in patients with obstructions in the dialysis outflow circuit (this device is not currently available for use in the United States).

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Our spine product line includes the following product portfolios:

augmentation, radiofrequency ablation, and bone biopsy systems.

vertebral augmentation, radiofrequency ablation, and bone biopsy systems.

Our primary product offerings in the vertebral augmentation and radiofrequency ablation portfolios include our:

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● Trays and Packs.

The Cultura™ swab and collection system (including vials with viral transport media) was introduced in May 2020 in response to the COVID-19 pandemic.

Demand for and revenue from the Cultura swab appear to have peaked in 2020.

Because this product was introduced to address demand for swabs used to test for COVID-19 and that demand has now significantly decreased, we have seen a significant drop in sales of this product and are no longer actively promoting it.

We provide coating services for medical tubes and wires under OEM brands in addition to many of the products identified above.

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These components consist of piezoresistive pressure sensors in various forms, including bare silicon die, die mounted on ceramic substrates, and fully calibrated components for numerous applications both inside and outside the healthcare industry.

The products in our endoscopy operating segment, Merit Endotek™, are organized in two product portfolios:

The products in our endoscopy operating segment, Merit Medical Endotek ™® , are organized in two product portfolios:

gastroenterology and pulmonary.

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neurointerventional radiology;

vascular, general and thoracic surgery;

vascular, general and

thoracic surgery;

electrophysiology;

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Traditionally, as part of our product sales and marketing efforts, we attend major medical conventions throughout the world pertaining to our target markets and invest in market development including physician training, peer-to-peer education, and patient outreach.

Due to the various restrictions imposed in response to the COVID-19 pandemic, during 2020 and 2021 most medical conventions in which we have participated were virtual meetings.

Additionally, we work closely with major healthcare facilities and physicians involving our primary target markets in the areas of training, therapy awareness programs, clinical studies and ongoing product research and development.

Due to the various restrictions imposed in response to COVID-19, during 2020 and 2021 most medical conventions in which we participated were virtual meetings;

however, many of the groups hosting those conventions resumed in-person meetings during 2022.

Additionally, we are building out digital and direct-to-customer programs to increase awareness of our products, and we work closely with major healthcare facilities and physicians involving our primary target markets in the areas of training, therapy awareness programs, clinical studies and ongoing product research and development.

In general, our target markets are characterized by rapid change resulting from technological advances and scientific discoveries.

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Our product development is focused on identifying and introducing a regular flow of profitable products that meet customer needs.

To stay abreast of customer needs, we frequently seek suggestions from health care professionals working in the fields of medicine in which we offer or develop products.

To stay abreast of customer needs, we work closely with health care professionals working in the fields of medicine in which we offer or develop products.

Suggestions for new products and product improvements may also come from engineers, marketing and sales personnel, physicians and technicians who perform clinical procedures.

When we believe that a product suggestion demonstrates a sustainable competitive advantage, meets customer needs, fits strategically and technologically with our business and has a good potential financial return, we generally assemble a “project team” comprised of individuals from our sales, marketing, engineering, manufacturing, legal and quality assurance departments.

This team works to identify the customer requirements, integrate the design, compile necessary documentation and testing, and prepare the product for market introduction.

We believe that one of our competitive strengths is our capacity to conceive, design, develop and introduce new products.

This team works to identify the customer requirements, develop the design, compile necessary documentation and testing, and prepare the product for market introduction.

We believe that one of our competitive strengths is our capacity to rapidly conceive, design, develop and introduce new products that meet customer needs.

and International Sales.

Sales of our products in the U.S.

accounted for 57%, 57% and 58% of our net sales for the years ended December 31, 2021, 2020 and 2019, respectively.

In the U.S., we have a dedicated, direct sales organization primarily focused on selling to end-user physicians, hospitals and alternate site facilities (e.g., office-based labs), major buying groups and integrated healthcare networks.

accounted for 57% of our net sales for each of the years ended December 31, 2022, 2021 and 2020, respectively.

In the U.S., we have dedicated, direct sales organizations primarily focused on selling to end-user physicians, hospitals and alternate site facilities (e.g., office-based labs), major buying groups and integrated healthcare networks.

Internationally, we employ sales representatives and contract with independent dealer organizations and custom procedure tray manufacturers to distribute our products worldwide, including territories in Europe, the Middle East, Africa, Asia, Oceania, Central and South America, Mexico and Canada.

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We maintain a distribution center and administrative office in Beijing.

We also have small sales offices in Shanghai, Guangzhou, and Hong Kong.

We sell our products through more than 500 distributors in mainland China, who are responsible for reselling our products, primarily to hospitals.

We use the “modified direct” sales approach in China, employing sales personnel throughout China who work with our distributors to promote the clinical advantages of our products to clinicians and other decision makers at hospitals.

Beginning in 2020, we experienced a significant disruption of our business throughout the world as a result of the COVID-19 pandemic, and t his disruption continued through 2021.

We are unable to calculate the full impact of the COVID-19 pandemic on our business, and we are unable to predict whether we will continue to be affected by it, but we have seen a material adverse impact on our global operations and financial condition, primarily in 2020.

However, in 2021, we saw significant growth in global sales compared to 2020 as the demand for our products increased when many of the medical procedures delayed from 2020 were performed and the restrictions put in place in response to the pandemic were generally reduced.

For further discussion of the risks and uncertainties associated with the COVID-19 pandemic, please refer to disclosure under the heading “ The COVID-19 pandemic has negatively impacted our business and operations around the world and may continue to materially and adversely impact our business, operations and financial results .” set forth in Item 1A “Risk Factors.”

Beginning in 2020, we experienced a significant disruption of our business throughout the world as a result of COVID-19, and t his disruption continued through 2021 and 2022.

We are unable to calculate the full impact of COVID-19 on our business, and we are unable to predict whether we will continue to be affected by it, but we experienced a material adverse impact on our global operations and financial condition during 2020.

In 2021, we saw growth in global sales compared to 2020 as the demand for our products increased when many of the medical procedures delayed from 2020 were performed and the restrictions put in place in response to the pandemic were generally reduced.

That trend continued during 2022, and we were able to achieve the highest annual revenue in the history of the Company.

For further discussion of the risks and uncertainties associated with COVID-19, please refer to disclosure under the heading “ The COVID-19 pandemic and related ongoing implications have negatively impacted our business and operations around the world and may continue to materially and adversely impact our business, operations and financial results .” set forth in Item 1A “Risk Factors.”

In Europe, the Middle East and Africa (“EMEA), we have both direct and modified direct sales operations.

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Marketing teams responsible for each division operate clinical education programs, often directed by leading subject matter personnel, who provide technical instruction on techniques and therapies to physicians, nurses and technologists.

We are currently conducting education programs specific to radial access, spinal intervention, surgical grafts, wire-free tumor localization and electrophysiology.

We are currently conducting education programs specific to radial access, spinal intervention, surgical grafts, wire-free tumor localization, electrophysiology, endoscopy, dialysis and embolism.

We require our international dealers to store products and sell directly to customers within defined sales territories.

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We continue to develop new products and make improvements to our existing products utilizing many different sources.

In 2021, our Chief Executive Officer and our Executive Vice President of Global Research & Development worked closely with our sales and marketing teams to incorporate feedback from physicians and clinicians in the field, which contributed to innovative new products and improvements to our existing products.

In 2022, our Chief Executive Officer and our Executive Vice President of Global Research & Development worked closely

with our sales and marketing teams to incorporate feedback from physicians and clinicians in the field, which contributed to innovative new products and improvements to our existing products.

In 2022, we completed projects that resulted in the newest additions to our product lineup:

SCOUT Mini Reflector, Temno Elite™, OneVac™ Evacuated Drainage Bottle, Siege 027 and the BlueFire Infiltration System.

Prelude Roadster ® , Sync EZ™, Safeguard Focus Cool™, and Scout BX™.

Currently, we have research and development facilities in California, Texas, Utah, Ireland, France, and Singapore.

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“Properties.”

We ship our products through distribution centers located in Virginia, Utah, Canada, Brazil, The Netherlands, United Kingdom (“UK”), South Africa, Russia, South Korea, India, New Zealand, Japan, China and Australia.

We ship our products through distribution centers located in Virginia, Utah, Canada, Brazil, The Netherlands, United Kingdom (“UK”), South Africa, South Korea, India, New Zealand, Japan, China and Australia.

The medical products industry is highly competitive.

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We compete globally in several market areas, including radiology;

diagnostic and

interventional cardiology;

diagnostic and interventional cardiology;

interventional radiology;

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and interventional gastroenterology.

The principal competitive factors in the markets in which our products are sold are quality, price, value, product features, customer service, breadth of line, and customer relationships.

We believe our products have achieved market acceptance primarily due to the quality of materials and workmanship of our products, clinical outcomes, their innovative design, our willingness to customize our products to fit customer needs, and our prompt attention to customer requests.

The principal competitive factors in the markets in which our products are sold are quality, price, product features, customer service, breadth of line, and customer relationships.

We believe our products are attractive to customers due to their innovative design, the quality of materials and workmanship, clinical performance, and our strong focus on customer needs, and our prompt attention to customer requests.

Some of our primary competitive strengths are our relative stability in the marketplace;

a comprehensive, broad line of ancillary products;

and our history of introducing a variety of new products and product line extensions to the market on a regular basis.

comprehensive, broad line of ancillary products;

manufacturing integration to secure our supply chain;

and strong cadence of new products and product line extensions that enhance our portfolio.

Our primary competitors in our peripheral intervention market are Teleflex Incorporated (“Teleflex”), Cook Medical Incorporated (“Cook Medical”), Medtronic plc (“Medtronic”), Boston Scientific Corporation (“Boston Scientific”), and Becton, Dickinson and Company (“BD”).

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Our primary competitors in our spine market are Medtronic, Stryker Corporation, and Johnson & Johnson.

Our primary competitors in our oncology market are BD, Hologic, Inc., Argon Medical Devices, Inc.

primary competitors in our oncology market are BD, Hologic, Inc., Argon Medical Devices, Inc.

and Cook Medical.

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Where there are exceptions, the temporary unavailability of those raw materials has not historically had a material adverse effect on our financial results;

however, current fluctuations and uncertainties in supply chain, transportation logistics, and freight expenses could result in disruptions in our operations and materially impact our financial results.

however, fluctuations and uncertainties in supply chain, transportation logistics, and freight expenses that we have experienced during the past several years have challenged our operating capabilities and could result in disruptions in our operations and materially impact our financial results.

For further discussion of the risks and uncertainties associated with recent disruptions in supply chain and logistics, please refer to disclosure under the heading “ Termination or interruption of our supply relationships and increases in labor costs and the prices of our component parts, finished products, third-party services and raw materials, particularly petroleum-based products, is negatively impacting our business and could have a further adverse effect on our business, operations or financial condition.

” set forth in Item 1A “Risk Factors.”

Proprietary Rights and Litigation

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and international patents and patent applications.

This number decreased in 2021 because we abandoned certain patents that were expected to expire before we could obtain regulatory approval and commercialize the related products.

As a result, we were able to avoid paying the significant annuities and maintenance and prosecution fees required to keep those patents alive.

Additionally, we hold exclusive and non-exclusive licenses to a variety of third-party technologies covered by patents and patent applications.

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and foreign trademark registrations and trademark applications.

We increased our trademark applications in 2021 in an effort to protect our trademark rights in jurisdictions outside the U.S.

There is substantial litigation regarding patents and other intellectual property rights in the medical device industry.

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and (viii) report or disclose certain events and physician payments.

We recently completed our first reporting year under the CIA and are in the process of implementing certain recommendations made by the independent review organization.

We recently completed our second reporting period under the CIA and continue to implement compliance program enhancements.

Our failure to comply with our obligations under the CIA could result in monetary penalties and our exclusion from participation in federal health care programs.

The foregoing description of the CIA is qualified in their entirety by the full terms of the CIA, which is attached as Exhibit 10.46 hereto and incorporated herein by reference.

The foregoing description of the CIA is qualified in its entirety by the full terms of the CIA, which is attached as Exhibit 10.44 hereto and incorporated herein by reference.

Regulatory Approvals .

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In particular, in May 2017, the EU adopted Regulation (EU) 2017/745 (“MDR”), which replaced Council Directive 93/92/EEC (“MDD”) as of May 26, 2021.

Under transitional provisions, medical devices with notified body certificates issued under the MDD prior to May 26, 2021 may continue to be placed on the market for the remaining validity of the certificate or until May 26, 2024, whichever is first.

After the expiry of any applicable transitional period, only devices that have been CE marked under the MDR may be placed on the market in the EU.

We are preparing to comply with these new regulations before the transitional period expires.

Under transitional provisions, medical devices with notified body certificates issued under MDD prior to May 26, 2021 may continue to be placed on the market for the remaining validity of the certificate or until May 26, 2024, whichever is first.

After the expiry of any applicable transitional period, only devices that have been CE marked under MDR may be placed on the market in the EU.

On January 6, 2023, the EU Commission proposed a draft amendment to the MDR which would extend the transitional period, thus allowing for additional time to transition to the new requirements of the MDR.

At time of publication, the amendment had not been through the entire legislative process, leaving some uncertainty as to whether or not it would be approved.

We are preparing to comply with these new regulations under the MDR before the transitional period expires.

However, there will be products that we will instead choose to discontinue or postpone introduction in the EU.

This decision will depend on a number of factors, including changing business strategies, timing and cost of obtaining MDR certification, availability of necessary data and the capacity of notified bodies.

The MDR includes increasingly stringent requirements in multiple areas, such as pre-

market clinical evidence, review of high-risk devices, labeling and post-market surveillance.

Under the MDR, pre-market clinical data will now be required to obtain CE Mark approval for high-risk, new and modified medical devices.

MDR includes increasingly stringent requirements in multiple areas, such as pre-market clinical evidence, review of high-risk devices, labeling and post-market surveillance.

Under MDR, pre-market clinical data will now be required to obtain CE Mark approval for high-risk, new and modified medical devices.

and global counter-part regulatory approval processes for medical devices are expensive, uncertain and lengthy.

There can be no assurance that we will be able to obtain necessary regulatory approvals for any product on a timely basis or at all.

Delays in receipt of or failure to receive such approvals, the loss of previously received approvals, or the failure to comply with existing or future regulatory requirements could have a material adverse effect on our business, financial condition or results of operations.

In May 2020, we received the CE mark for the Merit Wrapsody Endoprosthesis, and we are pursuing regulatory approval in the U.S.

Delays in receiving of or failure to receive such approvals, the loss of previously received approvals, or the failure to comply with existing or future regulatory requirements could have a material adverse effect on our business, financial condition or results of operations.

In May 2020, we received the CE mark for the Merit Wrapsody Cell-Impermeable Endoprosthesis, and we are pursuing regulatory approval in the U.S.

and elsewhere.

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Any article that appears to be in violation of the FDCA may be refused admission and a notice of detention and hearing may be issued.

If the FDA ultimately refuses admission, the CBP may issue a notice for redelivery and assess

liquidated damages for up to three times the value of the lot.

If the FDA ultimately refuses admission, the CBP may issue a notice for redelivery and assess liquidated damages for up to three times the value of the lot.

Additionally, the laws of the U.S.

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Bribery Act and other foreign anti-corruption laws.

The FCPA prohibits offering, paying, or promising to pay

anything of value to foreign officials for the purpose of obtaining or maintaining an improper business advantage.

The FCPA prohibits offering, paying, or promising to pay anything of value to foreign officials for the purpose of obtaining or maintaining an improper business advantage.

The FCPA also requires that we maintain fair and accurate books and records and devise and maintain an adequate system of internal accounting controls.

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Transparency Laws.

Physician Payment Sunshine Act, and similar state laws, also include annual reporting and disclosure requirements for device manufacturers aimed at increasing the transparency of the interactions between device manufacturers and healthcare providers.

Reports submitted under these new requirements are placed in a public database.

Physician Payment Sunshine Act, and similar state laws, include annual reporting and disclosure requirements for device manufacturers aimed at increasing the transparency of the interactions between device manufacturers and healthcare providers.

Reports submitted under these requirements are placed in a public database.

Several other jurisdictions outside the U.S.

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Privacy and Security.

The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), the Health Information Technology for Economic and Clinical Health Act (the “HITECH Act”), and accompanying rules, require certain entities, referred to as “covered entities” (including most healthcare providers and health plans), to comply with established standards, including standards regarding the privacy and security of protected health information (“PHI”).

Many state laws also regulate the use and disclosure of health information and require notification in the event of a breach of such information.

The EU has adopted a single EU privacy regulation, the General Data Protection Regulation (“GDPR”).

The GDPR can have an extraterritorial scope and, in particular, applies to the processing of personal data in the context of the activities of an establishment of a company (controller or a processor) in the EU, regardless of whether the processing takes place in the EU or not.

In addition, it applies to the processing of personal data of data subjects who are in the EU by a controller or processor not established in the EU, where the processing activities are related to:

(a) the offering of goods or services, irrespective of whether a payment of the data subject is required, to such data subjects in the EU;

or (b) the monitoring of their behavior as far as their behavior takes place within the EU.

The GDPR provides for a harmonization of the data protection regulations throughout the EU.

It imposes a strict data protection compliance regime with severe penalties of up to the greater of 4% of the total worldwide annual turnover of the preceding financial year or €20 million (whichever is higher) and includes new rights such as the “portability” of personal data.

Although the GDPR applies across the EU without a need for local implementing legislation, it contains a number of opener clauses enabling the EU Member States to provide for additional legislation.

In addition, local data protection authorities still have the ability to interpret the GDPR, which has the potential to create inconsistencies on a country-by-country basis.

We have implemented changes to our business practices to comply with the GDPR.

As a consequence of Brexit, the GDPR no longer directly applies in the UK.

However, the UK Data Protection Act 2018 remains in force, which incorporates the GDPR into UK legislation with some minor amendments to take account of the UK's departure from the EU.

Thus, we remain subject to the applicable provisions of the GDPR in the UK.

The People’s Republic of China has introduced a comprehensive personal information protection regime by establishing a unified, cross-sector legislation, as the EU does with the GDPR.

This legislation, called the Personal Information Protection Law (“PIPL”), went into effect on November 1, 2021, and has many aspects that are similar to the GDPR.

The PIPL sets rules for the processing activities such as collection, use, sharing, transfer, and disclosure of personal information in China.

It also applies to the personal information processing activities outside of China if relevant business operators (a) aim at providing products or services to individuals in China;

Due to Merit’s global presence, we are impacted by the privacy and data security requirements at the international, federal, state and regional level, as well as on an industry specific basis.

More privacy and data security laws and regulations are being adopted and enforced, with increasingly significant fines and financial penalties for violations in the jurisdictions in which we conduct our operations.

Compliance with these evolving and complex data privacy and cybersecurity laws and regulations has resulted in, and will likely continue to result in new compliance challenges and increased costs.

Our business relies on the secure electronic transmission, storage and hosting of personal and sensitive personal information, including protected health information, financial information, intellectual property and other sensitive information related to our customers and workforce.

Internationally, Merit is impacted by a number of stringent privacy regimes, such as the General Data Protection Regulation (“GDPR”) in the EU and the Personal Information Protection Law (“PIPL”) in China, GDPR applies uniformly across the EU and includes, among other things, a requirement for prompt notice of data breaches to the owner of the personal data and to supervisory authorities in certain circumstances, and the imposition of significant fines for non-compliance.

GDPR also requires companies based outside of the EU but processing personal data of individuals residing in the EU to comply with EU privacy and data protection rules.

Non-compliance could result in the imposition of significant fines, penalties, and/or orders to stop non-compliant activities.

GDPR provides for a harmonization of the data protection regulations throughout the EU.

It imposes a strict data protection compliance regime with severe penalties and includes rights such as the “portability” of personal data and the right of erasure of personal data for the data subject.

Although GDPR applies across the EU without a need for local implementing legislation, it contains a number of opener clauses enabling the EU member states to provide for additional legislation.

In addition, local data protection authorities still have the ability to interpret GDPR, which has the potential to create inconsistencies on a country-by-country basis.

As a consequence of Brexit, GDPR no longer directly applies in the United Kingdom.

However, the UK has adopted its own UK General Data Protection Regulation (“UKGDPR”).

This regulation came into effect on January 1, 2021 and is generally similar to GDPR, while at the same time accommodating applicable laws in the UK.

The People’s Republic of China has introduced a comprehensive personal information protection regime by establishing a unified, cross-sector legislation, as the EU does with GDPR.

This legislation, called PIPL, went into effect on November 1, 2021, and has many aspects that are similar to GDPR.

The PIPL sets rules for personal information processing activities such as collection, use, sharing, transfer, and disclosure of personal information in China.

It also applies to personal information processing activities outside of China if relevant business operators (a) aim at providing products or services to individuals in China;

or (b) engage in analyzing and evaluating the behavior of individuals in China.

Among others, the PIPL requires companies as personal information processors (which can be viewed as equivalent to data controllers under the GDPR) to obtain informed consents from the data subjects for the processing activities of their personal information, and separate consents under certain circumstances such as cross-border transfer of personal information.

The PIPL also requires storage of personal information locally in China if the company is certified as a critical information infrastructure operator (“CIIO”) or processing personal information exceeding a certain volume threshold.

Among other provisions, the PIPL requires companies identified as personal information processors (which can be viewed as equivalent to data controllers under GDPR) to obtain informed consents from the data subjects for the processing activities of their personal information, and separate consents under certain circumstances such as cross-border transfer of personal information.

The PIPL also requires storage of personal information locally in China if the company is certified as a critical information infrastructure operator or processing personal information exceeding a certain volume threshold.

Further, the PIPL grants statutory rights to data subjects, such as the right to information, the right to withdraw consents, the right of data portability, and the right to refuse automated decision-making.

In addition, the PIPL also imposes a number of new administrative requirements on the personal information processors, including, among others, designating a data protection officer if certain conditions are met, signing data processing agreements with entrusted processors (which can be viewed as equivalent to data processors under the GDPR), preparing data breach notices, conducting a personal information impact assessment as required, and obtaining regulatory approval for certain cross-border data transfer activities.

Violations of the PIPL may incur severe penalties, including a fine of up to RMB 50 million or 5% of the company's annual turnover in the preceding year, revocation of the company’s license to do business in China, and personal liabilities for company executives.

As the PIPL is new and relevant implementation rules are to be finalized

and released, we are in the process of implementing changes to our business practices to comply with the PIPL while monitoring further developments in the law.

We post on our websites our privacy notices, policies and practices regarding the collection, use and disclosure of user data.

In addition, the PIPL also imposes a number of new administrative requirements on the personal information processors, including, among others, designating a data protection officer if certain conditions are met, signing data processing agreements with entrusted processors (which can be viewed as equivalent to data processors under GDPR), preparing data breach notices, conducting a personal information impact assessment as required, and obtaining regulatory approval for certain cross-border data transfer activities.

Violations of the PIPL may incur severe penalties, revocation of the company’s license to do business in China, and personal liabilities for company executives.

As the PIPL is new and relevant implementation rules are to be finalized and released, we are in the process of implementing changes to our business practices to comply with the PIPL while monitoring further developments in the law.

In the U.S., the collection, maintenance, protection, use, transmission, disclosure and disposal of certain personal information and the security of medical devices are regulated at the U.S.

federal and state, international and industry levels.

federal and state laws protect the confidentiality of certain patient health information, including patient medical records (“PHI”), and restrict the use and disclosure of patient health information by healthcare providers.

“Privacy” and

“Security” Rules under the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), as amended, and the Health Information Technology for Economic and Clinical Health Act (the “HITECH Act”), govern the use, disclosure, and security of protected health information by “Covered Entities” (which are healthcare providers, health plans and healthcare clearinghouses), and by their “Business Associates” (which is anyone that performs a service on behalf of a Covered Entity involving the use or disclosure of PHI and is not a member of the Covered Entity’s workforce).

Regulations under these laws establish standards, including standards regarding the privacy and security of PHI and breach notification requirements.

Department of Health and Human Services (through the Office of Civil Rights) has direct enforcement authority against Covered Entities and Business Associates with respect to both the Security and Privacy Rules, including both civil and criminal liability.

Although Merit is a healthcare provider, Merit is not a Business Associate under the HIPAA/HITECH Act.

Our risk is therefore significantly reduced because we do not create, receive, maintain, have access to, use, disclose or transmit PHI.

Many state laws also regulate the use and protection of PHI by healthcare providers and may require notification in the event of a breach of such information.

Merit may be subject to these laws in certain instances.

With the advent of digital technology, artificial intelligence, social media, and the speed at which information moves, the protection and security of data has become an increasingly important public, media and legislative concern.

As a result, and in addition to the U.S.

federal regulation of PHI, a number of states have also adopted laws and regulations that may affect our privacy and data security practices for other kinds of personally identifiable information, such as state laws that govern the use, disclosure and protection of personal information and sensitive personal information (such as social security numbers).

State consumer protection laws may also establish privacy and security standard for the storage, use and management of personally identifiable information, including information related to consumers or employees (which include job applicants, employees, owners, officers, directors, and medical staff members of Merit).

As of December 31 2022, five U.S.

states had enacted comprehensive data privacy laws.

In general, these state laws (California, Colorado, Connecticut, Utah and Virginia) give residents the right to obtain their personal information from companies, request to have their personal information deleted, and opt out of having that information sold to third parties.

The state laws also compel companies to post clear privacy policies that detail the types of personal information they collect about consumers, with whom they share this data, and how consumers can control their personal data.

We post on our websites our privacy notices, policies and practices regarding the collection, use and disclosure of user data, as well as providing our privacy policies to our employees (including job applicants) by linking to the Merit privacy policy (posted on the Merit website) from our Employee Handbook and our job application board.

Any failure, or perceived failure, by us to comply with our posted privacy notices or policies or with any applicable regulatory requirements or orders, or privacy, data protection, information security or consumer protection-related privacy laws and regulations in one or more jurisdictions could result in proceedings or actions against us by governmental entities or others, including class action privacy litigation in certain jurisdictions, subject us to significant fines, penalties, judgments and negative publicity, require us to change our business practices, increase the costs and complexity of compliance, and adversely affect our business.

Data protection, privacy and information security have become the subject of increasing public, media and legislative concern.

For example, California’s Consumer Protection Act went into effect on January 1, 2020, giving consumers the right to demand certain information and actions from companies who collect personal information.

This enhanced scrutiny and legal requirements could result in costly compliance efforts and potentially result in fines, harm to reputation, or other consequences.

California’s Consumer Protection Act (“CCPA”) went into effect on January 1, 2020, giving consumers the right to (i) prevent businesses from sharing their personal information, (ii) correct inaccurate personal information, and (iii) restrict companies from utilizing sensitive data and personal information.

The California Privacy Rights Act (“CPRA”), which went into effect on January 1, 2023, amended the CCPA to include job applicants, employees, owners, officers, directors, and medical staff members of a business (collectively “employees”), give consumers even more control over their data, and increase the maximum penalties for violations against consumers who are less than 16 years old.

The CPRA also prevents companies from keeping personal data longer than necessary.

The addition of employees to the protections afforded by the CCPA can cause business concerns because we also have legal requirements to retain certain employee data, such as confidential disciplinary files, as well as legal document retention requirements.

Virginia’s Consumer Data Protection Act, which also went into effect on January 1, 2023, sets forth regulations regarding how we can control and process data, giving consumers the right to access, delete, and correct their data, as well as opt-out of personal data processing for advertising purposes.

The Colorado Privacy Act and the Connecticut Personal Data Privacy and Online Monitoring law, both of which establish standards for how companies control and process consumer personal data, are both scheduled to take effect July 1, 2023.

The Utah Consumer Privacy Act, which is scheduled to take effect on December 31, 2023, gives consumers the right to know what type of data businesses collect about them, how their data is being used and whether or not businesses intend to sell their data to third parties.

All five of these state laws let consumers access and delete their personal data that the business has collected on them and opt out of data collection.

Because privacy and data security laws and regulations continue to expand, differ from jurisdiction to jurisdiction, and are subject to evolving (and at times inconsistent) governmental interpretation, compliance with these laws and regulations may require significant additional cost expenditures or changes in products or business that increase competition or reduce revenue.

Noncompliance with such laws or regulations could result in the imposition of fines, penalties, or orders to stop noncompliant activities, as well as harm to reputation, or other consequences.

If our customers were to reduce their use of our products and services as a result of these concerns, our business could be materially harmed.

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companies to defer the employer’s portion of social security taxes between March 27, 2020 and December 31, 2020 and pay such taxes in two installments in 2021 and 2022.

As permitted by the CARES Act we have deferred payment of the employer’s portion of social security payroll tax payments and made a payment equal to one half of the deferred amount during the year ended December 31, 2021.

As permitted by the CARES Act we deferred payment of the employer’s portion of social security payroll tax payments and made a payment equal to one half of the deferred amount during each of the years ended December 31, 2021 and 2022.

Our worldwide sales have not historically reflected a significant degree of seasonality;

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Sustainability

In recent years, the sustainability of our business has become a key focus of our management team.

Under the oversight of our Board of Directors, we have created a cross-functional Corporate Sustainability Council that is driving long-term Environment, Social and Governance (“ESG”) goals across our enterprise.

Under the oversight of our Board of Directors and management team, we continue to make sustainability a key focus of our business.

We have a cross-functional Corporate Sustainability Council that is driving long-term Environment, Social and Governance (“ESG”) goals across our enterprise.

These efforts have included proactive actions to address both risks and opportunities related to our sustainability program, as we strive for continued growth and profitability.

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Consequently, many of our used products will likely end up in a medical waste disposal facility at the end of their usefulness.

We continue to look for opportunities to deliver sustainable, long-term growth of our business.

Our sustainability practices are an integral component of our business strategy, and our sustainability activities are reviewed and approved by senior management and our Board of Directors.

By assessing our sustainability opportunities, w e have developed areas of focus where we are positioned to make a positive impact.

These include programs designed to reduce waste, improve efficiency, reduce greenhouse gas emissions, and protect the environment.

We continually look for opportunities to deliver sustainable, long-term growth of our business.

Our sustainability practices are an integral component of our business strategy.

We have identified our sustainability opportunities, and have developed areas of focus where we are positioned to make a positive impact.

These include programs designed to reduce waste, improve efficiencies, reduce greenhouse gas emissions, and protect the environment.

Our sustainability values in action include:

• achievement of ISO 14001 certification at eight of our largest manufacturing facilities with a continued goal of achieving this certification at all our manufacturing and major distribution facilities (ISO 14001 is the international standard that specifies requirements for an effective environmental management system);

• achievement of ISO 45001 certification at five of our eight largest manufacturing facilities, and our goal is to achieve this certification at all our manufacturing facilities in 2023 (ISO 45001 is the international standard that specifies requirements for an effective safety management system);

• achievement of ISO 50001 certification at our Galway and Singapore facilities, and our goal is to achieve ISO 50001 certification at all our manufacturing facilities by the end of 2023 (ISO 50001 is the international standard that specifies requirements for an effective energy management system);

• achievement of ISO 14001 certification at all of our largest manufacturing facilities (seven in scope) with the goal of continual improvement of our environmental management system (ISO 14001 is the international standard that specifies requirements for an effective environmental management system);

• achievement of ISO 45001 certification at all of our largest manufacturing facilities (seven in scope) with the goal of continual improvement to our occupational health and safety management system (ISO 45001 is the international standard that specifies requirements for an effective safety management system);

• achievement of ISO 50001 certification at five of our largest manufacturing facilities (seven in scope), and our goal is to achieve ISO 50001 certification at all our in scope manufacturing facilities by the end of 2024 (ISO 50001 is the international standard that specifies requirements for an effective energy management system);

• establishment and support of employee gardens that promote pollination and provide farm-to-table nutrition for our employees at our headquarters in South Jordan, Utah;

• transition to re-usable pallets and methods to move products in bulk containers, reducing intra-company shipping materials;

• transition to re-usable pallets and methods to move products in reusable bulk containers, reducing intra-company shipping materials;

• reduction in water consumption at our water-stressed location in South Jordan, Utah by investing in campus-wide xeriscaping and water recirculation systems within our most water intensive operations;

• reduction in packaging materials by implementing product family packaging reviews to consolidate shipments by better understanding our customers’ purchasing practices—these reviews often allow us to increase quantities per box, eliminate the usage of intermediate packaging, reducing film thickness and use original product packaging where possible;

• transition from paper work orders to electronic work orders through our internally designed eWorq program—at full completion, this project will save millions of pieces of paper and thousands of plastic sleeves annually—currently we are working to implement this program at our largest manufacturing facilities in South Jordan, Utah and Tijuana, Mexico during 2022, with plans to continue the roll-out to other sites thereafter;

• expansion of recycling programs where our employees recycle materials, including food waste, paper, cardboard, food and beverage containers, scrap metal, and pallets, and re-use of our plastic scrap waste leftover from our manufacturing process of our molded parts;

• transition from paper work orders to electronic work orders through our internally designed eWorq program—at full completion, this project will save millions of pieces of paper and thousands of plastic sleeves annually—currently we are working to implement this program at our largest manufacturing facilities in South Jordan, Utah and Tijuana, Mexico, with plans to continue the roll-out to other sites thereafter;

• recycling programs where our employees recycle materials, including food waste, paper, plastic, cardboard, food waste and beverage containers, scrap metal, and pallets, and re-use of our plastic scrap waste leftover from the manufacturing process of our molded parts;

• placement of free car charging stations for employees who have transitioned to electric vehicles;

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• operation of an environmental tracking system at our world-wide facilities to facilitate monthly reporting and accountability for energy, water, waste, recycling, and scope 1 and 2 greenhouse gas emissions metrics—this system supports our 2030 operational sustainability goals;

• engaged in a comprehensive materiality assessment to better align ESG expectations from our internal and external stakeholders.

To learn more about our sustainability programs and accomplishments, you may visit www.merit.com/about/corporate-sustainability/;

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Our goal is to create a diverse and inclusive global culture that reflects the diversity of the customers we serve and encourages an environment where employees feel welcomed, respected, and valued.

With this goal in mind, in late 2020 the Company hired its first Chief Human Resources Officer who, in part, has been charged with working with our leadership team to strengthen and enhance our diversity and inclusion efforts company wide.

With this goal in mind, our Chief Human Resources Officer has been charged with working with our leadership team to strengthen and enhance our diversity and inclusion efforts company wide.

We are committed to providing equal opportunity in all aspects of employment.

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We communicate frequently with our employees through a variety of communication methods, including video and written communications, town hall meetings, and our company intranet, and we acknowledge individual contributions to Merit by celebrating milestones of service in five-year increments.

As a result of the COVID-19 pandemic, we strengthened our communication platforms.

Our employee communications during the pandemic have kept our employees informed on critical priorities, important actions being taken by management in response to the pandemic, and continued efforts to protect employee health, safety and well-being.

In addition, the human resource team expanded with the hiring of a Senior Director of Internal Communications, to specifically focus on improving employee communications.

Since 2021 we have substantially strengthened our employee communications capabilities through the addition of dedicated internal resources and programs aimed at doing even more to communicate with and engage our workforce.

In partnership with the Gallup organization, in 2022 we launched our first ever global employee engagement survey.

This survey provided us with many insights into the engagement of our employees from which we have been able to develop action plans at the team and company level in order to further strengthen employee engagement.

Compensation and Benefits.

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That is why we provide all our employees with competitive benefit packages and strive to provide the most cost-effective medical benefits and wellness programs.

As a result of our focus on competitive health and wellness benefits, we have achieved our seventh consecutive year of zero health care plan cost increases for our U.S.

As a result of our focus on competitive health and wellness benefits, we have achieved our eighth consecutive year of zero health care plan cost increases for our U.S.

employees who participate in our group healthcare plans.

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Talent Development.

In 2021, we hired our first ever Vice President of Global HR Operations to focus on global programs around employee performance, development and engagement.

In 2021, we hired our first ever Director of Global Talent Management who continues to be focused on building and strengthening global programs around strategic talent management, employee performance, development and engagement.

To improve employee performance, we have begun building out a global performance management program which will be officially launched in 2023 alongside our new human resources information system.

Employee development programs are being executed at different regional and local levels with a focus on management and leadership development.

We have also invested time and resources to strengthen employee engagement.

For example, we have partnered with Gallup, a global research and worldwide leader on the topic of engagement, to support efforts in understanding our employee sentiment worldwide.

To accomplish this, we are developing a program for surveying employees on a regular basis and creating manager action plans based on the feedback of those surveys.

Employee development programs are also being executed at different regional and local levels with a focus on management and leadership development.

Our employees are actively involved in their communities and supporting causes.

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Areas that our employees have supported in recent years include Breast Cancer Awareness Month, Heart Health Month, children’s charities and supporting those in need.

In 2021, we resumed our support of humanitarian missions and medical education conferences, albeit in a limited fashion considering restrictions imposed in light of the COVID-19 pandemic.

We were able to partner with the Heineman-Robicsek Medical Outreach group to provide critical products to support its medical mission to Belize.

As the world continues to move forward considering the new normal presented by the COVID-

19 pandemic, we are anxious to resume our historical volume of support for bringing healthcare to underserved areas of the globe.

In 2022, we continued our support of humanitarian missions through Merit product donations in Haiti, Kenya, Honduras, Nicaragua, and Tanzania.

Merit also conducts and/or participates in medical education conferences around the globe.

Wellness is at the foundation of creating a positive employee experience.

At our company headquarters in Utah, we have an onsite medical clinic available for our employees and their families where we provide preventative and general medical care.

The clinic also currently provides employees with COVID-19 vaccination shots, boosters, and testing.

In addition, we have a Chief Wellness Officer dedicated to designing programs and initiatives that support the physical, emotional, and mental health of our employees.

This year, we launched a wellness committee and created a “Get Healthy” wellness program available to all sites across the globe.

Programs include providing health information from health and nutrition experts, newsletters with wellness and nutrition tips, and activities promoting health and wellbeing such as walking groups.

Some programs include suicide prevention awareness, on-site diabetes screenings, immunizations, lifestyle modification to prevent diseases, tobacco cessation, breast cancer awareness, and our Smart Choice meal program designed by our onsite nutritionist and chef to provide free heart healthy meals to employees in our Utah headquarters.

We have a monthly wellness committee meeting and create a “Get Healthy” wellness program available to all sites across the globe.

Programs include providing health information from medical and nutrition experts, newsletters with wellness and dietary tips, and activities promoting health and wellbeing such as walking groups and fitness challenges.

Some programs include suicide prevention awareness, on-site diabetes screenings, mental health awareness, lifestyle modification to prevent diseases, tobacco cessation, breast cancer awareness, and our Smart Choice meal program designed by our onsite nutritionist and chef to provide free heart healthy meals to employees in our Utah headquarters.

COVID-19 Response;

Health and Safety.

During the COVID-19 pandemic, the majority of our manufacturing employees have continued to work from our facilities, where we have adopted health screening, implemented social distancing and personal protective equipment requirements, enhanced food service, cleaning and sanitation procedures, and modified workspaces to reduce the potential for disease transmission, and implemented a COVID-19 vaccine mandate for our U.S.

Most employees who do not require access to our facility to perform their work have been working from home during the pandemic, without a significant impact to productivity.

During the COVID-19 pandemic, the majority of our manufacturing employees continued to work from our facilities, where we adopted health screening, implemented social distancing and personal protective equipment requirements, enhanced food service, cleaning and sanitation procedures, and modified workspaces to reduce the potential for disease transmission, and implemented a COVID-19 vaccine mandate for our U.S.

During 2022 most employees who do not require access to our facility to perform their work continued to work remotely, without a significant impact to productivity.

Information Security

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We have established controls and procedures to escalate enterprise-level issues, including cybersecurity matters, to the appropriate management levels within our organization and our Board of Directors, or members or committees thereof, as appropriate.

Our Board of Directors is responsible for enterprise risk management, including our approach to managing cybersecurity risk, and has delegated oversight responsibility to its Audit Committee.

Our Board of Directors is responsible for enterprise risk management, including our approach to managing cybersecurity risk, and has delegated oversight responsibility of information security risks to its Audit Committee.

The Audit Committee regularly reviews information security risks and receives reports from our Chief Technology Officer and other members of the Company’s management regarding those risks.

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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