What changed in this filing

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Item 1. Business

2024-02-28 compared with 2023-02-24 · 115 added, 163 removed, 458 unchanged (38% of the section changed)

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Initially, we focused our operations on injection and insert molding of plastics.

Our first product was a specialized control syringe used to inject contrast solution into a patient’s arteries for a diagnostic cardiac procedure called an

Our first product was a specialized control syringe used to inject contrast solution into a patient’s arteries for a diagnostic cardiac procedure called an angiogram.

Since that time, our products and product lines have expanded substantially, both through internal research and development projects and through strategic acquisitions.

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● maintaining a highly disciplined, customer-focused enterprise guided by strong core values to globally address unmet or underserved healthcare needs;

● creating sustainability of our business for our employees, shareholders and community.

● creating a sustainable business for our employees, shareholders and community.

We conduct our operations through a number of domestic and foreign subsidiaries and representative offices.

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

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.

In 2022, these restrictions were generally reduced, and we were able to achieve the highest annual revenue in the history of the Company.

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 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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and interventional gastroenterology.

and procedural packs at the request of our customers, and our dedication to offering facility-unique solutions in the markets we serve worldwide.

The success of our products is enhanced by the extensive experience of our management team in the healthcare industry, our experienced direct sales force and distributors, our ability to provide custom procedural solutions such as kits, trays and procedural packs at the request of our customers, and our dedication to offering facility-unique solutions in the markets we serve worldwide.

We conduct our business through two operating segments:

cardiovascular (which includes peripheral intervention, cardiac intervention, custom procedural solutions, and original equipment manufacturer (“OEM”)) and endoscopy.

cardiovascular and endoscopy.

For information relating to our operating segments and product categories, see Note 13 to our consolidated financial statements set forth in Item 8 of this report and Management’s Discussion and Analysis set forth in Item 7 of this report.

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Our cardiovascular segment includes the following product categories:

peripheral intervention, cardiac intervention, custom procedural solutions, and OEM.

peripheral intervention, cardiac intervention, custom procedural solutions, and original equipment manufacturer (“OEM”).

Peripheral Intervention

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access (peripheral), angiography, drainage, delivery systems, embolotherapy, and intervention (peripheral).

The principal product offerings in our access (peripheral) portfolio include our:

We recently expanded the renal therapies portion of our access (peripheral) portfolio, which now includes the following key products:

● HeRO® (Hemodialysis Reliable Outflow) Graft, a fully subcutaneous vascular access system, which is intended for use in maintaining long-term vascular access for chronic hemodialysis patients;

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● 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);

● Surfacer® Inside-Out® Access Catheter System that restores and preserves access in chronically occluded veins.

The products in our angiography portfolio are used to identify blockages and other disease states in the blood vessel.

The principal product offerings in our angiography portfolio include our:

● Extensive line of Merit Laureate® Hydrophilic Guide Wires, a smooth-surface guide wire designed to minimize friction and promote rapid catheter exchanges;

● Our newest offering of Merit SplashWire® hydrophilic Steerable Guide Wires, combining optimum lubricity, exceptional torque response and enhanced visibility;

● Newest offering of Merit SplashWire® hydrophilic Steerable Guide Wires, combining optimum lubricity, exceptional torque response and enhanced visibility;

● Performa® and Impress® Diagnostic Catheters, a catheter offering designed for traversing difficult to access peripheral blood vessels;

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The principal product offerings in our delivery systems portfolio include our:

● SwiftNINJA® Steerable Microcatheter, an advanced microcatheter with a 180-degree articulating tip, sold through our exclusive worldwide distribution agreement (excluding Japan) with SB-Kawasumi Laboratories, Inc.;

● SwiftNINJA® Steerable Microcatheter, an advanced microcatheter with a 180-degree articulating tip;

● Merit Maestro® and Merit Pursue™ Microcatheters, small microcatheters designed for pushability and trackability through small and tortuous vessels;

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● Dynamis AV™ PTA Dilatation Catheter, a line of balloon catheters that facilitates the opening of blockages located in the arteriovenous system of dialysis patients;

● Q50X™, Q50® and Q50® Plus Stent Graft Balloon Catheters, a line of catheters that treat abdominal and thoracic endovascular aortic repair procedures and reinterventions;

● Q50X™ and Q50® Stent Graft Balloon Catheters, a line of catheters that treat abdominal and thoracic endovascular aortic repair procedures and reinterventions;

● Fountain® Infusion System and Mistique® Infusion Catheters, a line of catheters that treat arterial and hemodialysis graft occlusions and deep vein thrombosis;

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● StabiliT® MX Vertebral Augmentation System, which uses our inflation devices to deliver bone cement.

The bone biopsy systems portfolio contains a full offering of manual bone biopsy products, including our Madison™, Huntington™, Kensington™, Preston™ and Westbrook™ biopsy products.

The bone biopsy systems portfolio comprises a full offering of manual bone biopsy products, including our Madison™, Huntington™, Kensington™, Preston™ and Westbrook™ biopsy products.

Merit Oncology

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● Achieve®, Temno® and Tru-Cut® Soft Tissue Biopsy Devices;

● BioSentry® biopsy tract sealant system;

● SAVI® Brachytherapy, a precise, targeted approach to accelerated partial breast irradiation with lower toxicities and reduced treatment duration.

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● HeartSpan® Steerable and Fixed Curve Sheath Introducer, featuring a neutral position indicator and tactile click to help physicians identify curve orientation with an expanded product line that includes fixed curve shapes;

● SafeGuard Focus TM and Focus Cool TM compression devices, used to protect closed surgical sites in the immediate postoperative period.

The product offerings in our fluid management portfolio include manifolds, control syringes and tubing.

The principal product offerings in our hemostasis portfolio include our Prelude SYNC EVO™ and PreludeSYNC Distal™ Radial Compression devices, designed to reduce and stop blood flow after radial access procedures, and the SafeGuard® Pressure Assisted Device which provides hemostasis after femoral procedures.

The principal products we offer in our hemodynamic monitoring portfolio include the Meritrans DTXPLUS® disposable transducer, SAFEDRAW® closed arterial sampling system and related accessories.

The principal product offerings in our hemostasis portfolio include our Prelude SYNC EVO™, PreludeSYNC Distal™, PreludeSYNC EZ TM Radial Compression devices (designed to reduce and stop blood flow after radial access procedures), and the SafeGuard® Pressure Assisted Device which provides hemostasis after femoral procedures.

The principal product offerings in our intervention (cardiac) portfolio include a full line of inflation devices and hemostasis valves, including the BasixCompak™, basixTOUCH™, Blue Diamond™ and DiamondTouch™ inflation devices and the PhD™ Hemostasis Valve, the latest addition to our hemostasis valve portfolio.

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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 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.

Additionally, we are developing 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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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.

Suggestions for new products and product improvements may also come from engineers, marketing and sales personnel, and 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.

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Sales of our products in the U.S.

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

accounted for 58%, 57% and 57% of our net sales for the years ended December 31, 2023, 2022 and 2021, 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.

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market is China, which represented 12% of our net sales in 2023 and reported net sales of $147.3 million, $149.3 million, and $138.2 million for the years ended December 31, 2023, 2022 and 2021, respectively.

We maintain a distribution center and administrative office in Beijing.

We maintain a distribution center and administrative office in Beijing and sales offices in a few major cities in China.

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 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 2019, China announced a volume-based procurement (“VBP”) policy applicable to medical device manufacturers that is designed to reduce the price of medical devices sold in China.

We began experiencing the impact of the VBP policy in 2022 and 2023 in the form of decreased sales prices and purchase volumes.

We expect to continue to experience negative impacts from the VBP policy in 2024.

For further discussion of the risks and uncertainties associated with the VBP policy, please refer to disclosure under the heading “ Regulations and trade policies implemented by foreign governments to reduce the costs of healthcare or promote business in their countries have caused, and are likely to continue to cause our sales to decline in such countries” 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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Our research and development operations have been central to our historical growth, and we believe they will be critical to our continued growth.

In recent years, our commitment to innovation led to the introduction of several new products, improvements to our existing products and expansion of our product lines, as well as enhancements and new equipment in our research and development facilities.

In recent years, our commitment to innovation has led to the introduction of several new products, improvements to our existing products and expansion of our product lines, as well as enhancements and new equipment in our research and development facilities.

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

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 2023, 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 2023, we completed projects that resulted in the newest additions to our product lineup:

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.

BIG60 Alpha™ Inflation Device, Radial Length Merit Maestro® Microcatheters, Prelude Roadster® Guide Sheath Line Extensions, and the Micro ACE™ Advanced Micro-Access System, a novel addition to our Micro-Access lineup.

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

Manufacturing

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(“Merit Sensors”) develops and markets silicon pressure sensors to a range of enterprises and presently supplies the sensors we use in our digital inflation devices and blood pressure sensors.

Given the specialization of our manufacturing personnel and processes in our Utah and Ireland facilities, we possess the capability to strategically shift the manufacture of more technologically advanced products to those facilities and use the manufacturing capacity of our other facilities for more commoditized products.

The actual determination of manufacturing location will be based upon multiple factors, including technological capabilities, market demand, acquisition and integration activities and economic and competitive conditions.

We currently produce and package all of our embolic products.

Manufacturing of our embolic products includes the synthesis and processing of raw materials and third-party manufactured compounds.

We have specialized manufacturing personnel at most of our nine global manufacturing facilities.

Consequently, we possess the capability to flexibly locate or shift the manufacture of products to the facilities providing the most strategic advantages.

The determination of manufacturing location is based upon multiple factors, including facility technological capabilities, market demand, acquisition and integration activities and economic and competitive conditions.

We currently produce and package all of our embolotherapy products.

Manufacturing of our embolotherapy products includes the synthesis and processing of raw materials and third-party manufactured compounds.

We have packaging and manufacturing facilities located in Texas, Virginia, Utah, Mexico, Brazil, Ireland, France, The Netherlands, and Singapore.

“Properties.”

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.

Many of our competitors are much larger than us and have access to greater resources.

Many of our competitors are much larger than we are and have access to greater resources.

We also compete with smaller companies that sell single or limited numbers of products in specific product lines or geographies.

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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;

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

As a company, some of our primary competitive strengths are our relative stability in the marketplace;

comprehensive, broad line of ancillary products;

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

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

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

and Cook Medical.

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

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

We recently completed our third 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.

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These agencies enforce laws and regulations that control the design, development, testing, clinical trials, manufacturing, labeling, storage, advertising, marketing, distribution, and post-market surveillance of our medical products.

The time required to obtain approval by the FDA and other foreign governmental agencies can be lengthy and the requirements may differ.

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 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.

The time required to obtain approval by the FDA and foreign governmental agencies can be lengthy and the requirements may differ.

In particular, in May 2017, the European Union (E.U.) 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, for which we intend to seek approval under the MDR and which meet certain other requirements, may continue to be placed on the E.U.

market until December 31, 2027 or December 31, 2028 depending on risk classification.

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

For medical devices with notified body certificates issued under the MDD prior to May 26, 2021 for which we do not intend to seek approval under the MDR, these devices may continue to be placed on the E.U.

market only until May 26, 2024.

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.

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

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.

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.

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

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

and foreign 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 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.

Delays in, 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, results of operations or prospects.

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.

We are conducting a large, multinational pivotal human clinical trial of the Wrapsody Endoprosthesis, which is required for us to obtain approval from the FDA and some international regulatory agencies.

We are conducting a large, multinational pivotal human clinical trial of the Wrapsody Endoprosthesis, which is required for us to obtain approval from the FDA and some foreign regulatory agencies.

Human clinical trials of a medical device are often required for regulatory clearance or approval for devices and are expensive, time-consuming and uncertain.

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The Federal Food, Drug and Cosmetic Act (“FDCA”) and its counterpart non-U.S.

laws require us to comply with quality system regulations (“QSR”) pertaining to all aspects of our product design and manufacturing processes, including requirements for packaging, labeling, record keeping, personnel training, supplier controls, design controls, complaint handling, corrective and preventive actions and internal quality system auditing.

The FDA and foreign regulators enforce these requirements through periodic inspections of medical device manufacturers.

laws require us to comply with quality system regulations (“QSR”) pertaining to all aspects of our product design, purchasing and supplier controls, manufacturing, distribution, servicing, complaint handling, corrective and preventive action and internal quality system audits.

The FDA, Notified Bodies, and foreign regulators enforce these requirements through periodic inspections of medical device manufacturers.

These requirements are complex, technical and require substantial resources to remain compliant.

Our failure or the failure of our suppliers to maintain compliance with these requirements could result in the shutdown of our manufacturing operations or the recall of our products, or could restrict our ability to obtain new product approvals or certificates from the FDA that are necessary for export of our products to foreign countries.

Our failure or the failure of our suppliers to maintain compliance with these requirements could result in the shutdown of our manufacturing operations or the recall of our products, or could restrict our ability to obtain new product approvals or certificates from regulatory authorities, such as the FDA, that are necessary for import and export of our products.

Any of these results could have a material adverse effect on our business.

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In addition, under the federal Lanham Act and similar state laws, competitors and others can initiate litigation relating to advertising claims.

Import Requirements.

To import a medical device into the U.S., the importer must file an entry notice and bond with the U.S.

Bureau of Customs and Border Protection (“CBP”).

All devices are subject to FDA examination before release from the CBP.

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.

Additionally, the laws of the U.S.

Import and Export Requirements.

Our operations are global and are subject to complex federal and foreign laws relating to the import and export of medical devices.

Among other requirements, the laws of the U.S.

require imported articles to have their labels accurately marked with the appropriate country of origin, the violation of which may result in confiscation, fines and penalties.

Export Requirements.

Products for export are subject to foreign countries’ import requirements and the exporting requirements of the exporting countries’ regulating bodies, as applicable.

International sales of medical devices manufactured in the U.S.

that are not approved or cleared by the FDA for use in the U.S., or are banned or deviate from lawful performance standards, are subject to FDA export requirements and we may not be able to export such products.

Foreign countries often require, among other things, an FDA certificate for products for export, also called a Certificate to Foreign Government.

To obtain this certificate from the FDA, the device manufacturer must apply to the FDA.

The FDA certifies that the product has been granted clearance or approval in the U.S.

and that the manufacturing facilities were in compliance with the QSR at the time of the last FDA inspection.

Additionally, the export of our products is subject to restrictions due to trade and economic sanctions imposed by the U.S., the EU and other governments and organizations.

Departments of Justice, Commerce, State and Treasury and other federal agencies and authorities have a broad range of civil and criminal penalties they may seek to impose against corporations and individuals for violations of economic sanctions laws, export control laws, and other federal statutes and regulations, including those established by the Office of Foreign Assets Control (“OFAC”).

Under these laws and regulations, as well as other export control laws, customs laws, sanctions laws and other laws governing our operations, various government agencies may require export licenses and may seek to impose modifications to business practices, including cessation of business activities in sanctioned countries or with sanctioned persons or entities.

Additionally, the export of our products is subject to restrictions due to trade and economic sanctions imposed by the U.S., the E.U.

and other governments and organizations.

With the U.S.

and other countries exploring export sanctions in response to military exercises and escalating tensions in certain parts of the world, any such export restrictions may affect the company’s business in certain regions of the world.

and other countries imposing export sanctions on certain countries and actors in response to escalating tensions in certain parts of the world, any such export restrictions may affect the company’s business in certain regions of the world, including the requirement to obtain specific export licenses to enable the continuation of Merit’s business in those regions.

Additional Post-Market Requirements.

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We are also subject to regulations that require manufacturers to report to the FDA, or an equivalent foreign regulatory body, any incident in which their device may have caused or contributed to a death or serious injury, or has malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction of the device or a similar device were to recur.

Our obligation to report a complaint is triggered on the date on which we become aware of an adverse event and the nature of the event.

The FDA also regularly inspects companies to determine compliance with the QSRs and other post-market requirements.

Please refer to our discussion of the risks and uncertainties associated with these post-market requirements under the heading “ Our products may cause or contribute to adverse medical events that we are required to report to the FDA or other governmental authorities, and if we fail to do so, we may be subject to sanctions that may materially harm our business.

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

Please refer to our discussion of the risks and uncertainties associated with these post-market requirements under the heading “ The FDA regulatory clearance process is expensive, time-consuming and uncertain, and the failure to obtain and maintain required regulatory clearances and approvals could prevent us from commercializing our products.” set forth in Item 1A “Risk Factors.”

Reimbursement.

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These CSR laws and regulations may impose additional processes and supplier management systems and have led certain key customers to impose additional requirements on medical device companies, including audits, as a prerequisite to selling products to such customers, which could result in increased costs for our products, the termination or suspension of certain suppliers, and reductions in our margins and profitability.

Environmental Regulation.

We are subject to various environmental laws, directives and regulations both in the U.S.

and internationally.

Our operations involve the use of substances regulated under environmental laws, primarily in the manufacturing and sterilization process.

We believe our policies and practices comply, in all material respects, with applicable environmental laws and regulations.

We strive to continuously improve our environmental metrics with a goal of reducing pollution, minimizing depletion of natural resources and reducing our overall environmental footprint.

Specifically, we are working to optimize energy and resource usage, ultimately reducing greenhouse gas emissions, water use and waste.

Privacy and Security.

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.

Due to Merit’s global presence, we are impacted by the privacy and data security requirements of U.S.

and foreign governments, those of various regional, provincial, state and local governments, as well those targeted towards our specific industry.

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.

Compliance with these evolving and complex data privacy and cybersecurity laws and regulations has resulted 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.

Internationally, Merit is impacted by a number of stringent privacy regimes, such as the General Data Protection Regulation (“GDPR”) in the E.U.

and the Personal Information Protection Law (“PIPL”) in China.

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 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 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.

In the U.S., data privacy is regulated at the federal and state 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.

“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.

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.

Additionally, several U.S.

states have enacted comprehensive data privacy laws.

In general, these laws 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.

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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.

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.

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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.

As noted above, we are also subject to the possibility of security and privacy breaches, which themselves may result in a violation of these privacy laws.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law.

The $2.2 trillion economic stimulus bill contains numerous tax law changes.

The CARES Act esta blished a program with provisions to allow U.S.

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 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.

We are also subject to the possibility of security and privacy breaches, which themselves may result in a violation of these privacy laws.

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

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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.

We have identified 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 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);

• achievement of ISO 14001 certification at seven facilities including six manufacturing facilities (seven in scope) and one large distribution facility (one in scope), with the goal of achieving ISO 14001certification at our seventh in scope facility by the end of 2024.

(ISO 14001 is the international standard that specifies requirements for an effective environmental management system);

• achievement of ISO 50001 certification at five manufacturing facilities (six in scope) with the goal of achieving of ISO 50001 certification at our sixth in scope manufacturing facility by the end of 2025 (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;

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• 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, 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;

• 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, our eWorq program is in place at three of our largest manufacturing sites and in 2023 we eliminated 2,569,710 pages of paper.

We plan to continue implementing this program at our manufacturing facilities globally to eliminate as much paper as we can within our operations;

• recycling programs where our employees recycle materials, including food waste, paper, plastic, cardboard, 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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however, the information on this website is not, and will not be deemed, a part of this report or incorporated into any other filings we make with the SEC.

Human Capital Management

As of December 31, 2023, we had 6,950 employees located in approximately 40 different countries in a variety of different roles.

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We invest in our people and cultivate a company culture committed to supporting a diverse and inclusive workforce.

Diversity and Inclusion.

Diversity, Equity and Inclusion.

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.

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

We repeated this employee engagement survey in 2023.

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.

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Because our mission is to create innovative medical devices that improve lives, we aim to hire and develop employees who want to build something special through hard work, team effort, and commitment.

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 eighth consecutive year of zero health care plan cost increases for our U.S.

That is why we provide all our employees with competitive total rewards 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 ninth consecutive year of zero health care plan cost increases for our U.S.

employees who participate in our group healthcare plans.

Our benefits include competitive pay, annual incentive awards and bonus opportunities, healthcare and retirement benefits, an Employee Stock Purchase Plan, paid time off and sick leave, paid parental leave, flexible work schedules, remote working opportunities, and a wellness program.

Our total rewards package include competitive pay, annual incentive awards and bonus opportunities, healthcare and retirement benefits, an Employee Stock Purchase Plan, paid time off and sick leave, paid parental leave, flexible work schedules, remote working opportunities, and a wellness program.

Talent Development.

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.

To improve employee performance, we have begun building out a global performance management program which will be officially launched in 2024 using our recently-launched human resources information system.

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

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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.

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.

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

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;

Some programs include suicide prevention awareness, on-site diabetes screenings, mental health awareness, lifestyle modification to prevent diseases, tobacco cessation and breast cancer awareness.

Additionally, we continue to offer our Smart Choice meal program designed by our onsite dietician and culinary team to provide a free healthy meal option to employees in our Utah headquarters.

Health and Safety.

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

We maintain strong cybersecurity systems to guard against unauthorized access, malicious software, corruption of data, disruption of our networks and systems and unauthorized release of confidential information.

We employ an experienced and dedicated information security team, follow industry best practices, and work with our employees globally to create awareness and mitigate cyber risk.

On an ongoing basis, we assess risks and implement procedures and practices designed to improve the security, confidentiality, integrity and availability of our systems.

We voluntarily engage third-party security auditors to test our systems and controls at least annually against the most widely recognized security standards and regulations.

We have developed and continue to implement a continuing cyber awareness training program which is designed to increase awareness of cybersecurity threats throughout our company and reduce the risk of human error.

We conduct periodic phishing testing on all our employees with e-mail access and emphasize information security in training events and programs we host throughout the year .

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 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.

Under our framework, cybersecurity issues are analyzed by subject matter experts for potential financial, operational, and reputational risks, based on, among other factors, the nature of the matter and breadth of impact.

Matters determined to present potential material impacts to the Company’s financial results, operations, and/or reputation are immediately reported by management to our Board of Directors or its Audit Committee, as appropriate, in accordance with our escalation framework.

In addition, we have established procedures to ensure that management responsible for overseeing the effectiveness of disclosure controls is informed in a timely manner of known cybersecurity risks and incidents that may materially impact our operations and that timely public disclosure is made as appropriate.

We maintain cyber insurance coverage that may, subject to policy terms, conditions and limitations, cover certain aspects of cybersecurity risks;

however, such insurance coverage may be unavailable or insufficient to cover all losses or all types of claims that may arise in the continually evolving area of cyber risk.

During the last three years, we have not experienced a material security breach and, as a result, we have not incurred any material expenses from such a breach.

Furthermore, during such time, we have not been penalized or paid any amount under any information security breach settlement.

Ensuring our employees’ safety is a top priority.

We strive to foster a safety-oriented culture, and we maintain an occupational health and safety management system that covers all our employees and contractors.

By minimizing risks at our production facilities and implementing training to enhance awareness of hazards, we are able to promote safe practices that can preserve the health of our employees.

We maintain high standards for workplace safety, and our orientation for employees includes training about safe procedures.

Our programs and policies are in compliance with applicable local, regional, and federal laws, including U.S.

Occupational Safety and Health Administration requirements.

We have obtained ISO 45001 certification at six manufacturing facilities (seven in scope) and one distribution facility (one in scope).

This is a globally recognized standard for employee occupational health and safety, established by the International Standards Organization, which provides a voluntary framework to identify key occupational health and safety aspects associated with our business helping to deliver continuous improvement.

We plan to achieve this certification at our seventh in scope facility by the end of 2024.

We also have formal plans in place to protect our employee’s safety in the event of an emergency and maintain emergency action plans that employees receive training on annually.

Our emergency action plans describe procedures that employees should follow when faced with a variety of unexpected health and safety events.

As part of this initiative, we train certain employees to use automated external defibrillators, provide first aid, and perform cardiopulmonary resuscitation (CPR).

In addition, we conduct periodic health and safety audits of our facilities to monitor the effectiveness of our programs and drive continual improvement in our overall safety performance.

Recent Developments

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What changed 10-K

Item 1. Business