Item 1. Business
ITEM 1. BUSINESS
Overview
We are a pre-revenue, medical device company focused on the design,
development, and commercialization of innovative insulin pumps using modernized technology to increase pump adoption in the diabetes marketplace.
Through the creation of an innovative two-part patch pump, we seek to fundamentally alter the trade-offs between cost and complexity and
access to the higher standards of care that presently require considerable motivation from the patient to use the available insulin pumps.
By simplifying and streamlining the user experience from the initial introduction of the patient to our product, prescription assistance,
establishing insurance reimbursement, streamlined training and day-to-day use with strong clinical support, we seek to expand the wearable
insulin delivery device market beyond the highly motivated “super users” to expand the category into the mass market. Our
product seeks to serve both the type 1 and the rapidly growing, especially in terms of device adoption, type 2 diabetes markets for those
individuals requiring multiple daily doses of insulin. In January 2024, we submitted a 510(k) premarket notification to the United States
Food and Drug Administration, or the FDA, for our initial insulin pump product, the MODD1, and, in September 2024, we received FDA clearance
to market and sell our MODD1 pump in the United States. We are actively working to manufacture and commercialize our MODD1 product and
commence initial shipments during the quarter ending September 30, 2025. We are currently preparing a second 510(k) premarket notification
application to the FDA for an updated version of the MODD1, called the Pivot, which is a tubeless version of the product that integrates
the set into a true tubeless patch. The Pivot will provide us with cost and usability improvements and improved manufacturability, allowing
our marketing to be focused on low cost and ease of use and learnability. We believe we will submit the notification for the Pivot by
October 31, 2025, and we believe we could obtain regulatory clearance to market and launch Pivot during the three months ending March
31, 2026. We intend to replace the MODD1 with the Pivot, as soon as the required regulatory approval from the FDA is received. We also intend
to obtain Conformite Europeenne , or CE, mark clearance for both our MODD1 and Pivot products, which would allow us to market and
sell in European markets. We expect to obtain CE mark clearance in the first quarter of 2026.
Differentiation
We believe that there are a number of shortcomings and issues with
currently available insulin pumps that prevent a substantial number of people who require insulin on a daily basis from choosing an insulin
pump to treat their diabetes. We believe that, by tailoring our insulin pump to address such factors, we can expand the scope and adoption
rate of insulin pump usage by the less capable, less motivated sector of the market. We believe that to achieve broader market acceptance,
an insulin pump must be easier to learn to use, be less time-consuming to operate, more intuitive to both patients and physicians, and
meet the standards for coverage by insurance providers so that co-payments required from patients are affordable and the hurdles to insurance
coverage are significantly reduced.
Among the more prominent issues are:
● Complexity: Many existing
pumps are highly complex and require significant technical expertise to use effectively. We believe such pumps were designed for “super
users,” who have high levels of motivation and technical competence. The complexity of pumps can be daunting to less technically
inclined, less motivated users.
● Cumbersome : We believe
that a majority of existing pumps are bulky and difficult to manage, requiring a means of carrying the pump around and up to 48 inches
of tubing to the injection site to connect the catheter to a pump. The tubing and the cartridge, which holds the insulin, must be replaced
every few days. This requires users to carry spare parts and other equipment adding to the difficulty of using the pump. In
comparison, our product only requires a cartridge change every few days.
●
Cost : Costs associated with insulin pump therapy can be high and prohibitive, especially for those on fixed or limited incomes. These costs vary by pump and insurance coverage, but multi-thousand-dollar upfront payments, often with substantial co-payments in addition to possible additional co-payments on consumables, can easily place current pumps out of reach for many patients. The leading patch pump on the market today also discards all the electronics required for pumping and communication every three days, creating a higher cost architecture and significant waste. We believe the reusability of our product will provide us with a significant cost advantage in the marketplace with our reusable pumping system.
●
Outdated style : Consumer electronics devices have evolved in both form and function. Diabetes pumps have not experienced similar progress. We believe that consumers will be more receptive of products designed with the user experience in mind and that many have low tolerance for complex, difficult procedures for use and maintenance of products.
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Pump mechanism limitations : Traditional pumps generally utilize a syringe and plunger mechanism to deliver insulin. We believe this design limits the ability to reduce the size of the pump, and also potentially exposes the user to the unintended delivery of the full volume of insulin within the pump, which can cause hypoglycemia or death. We believe that the fear of adverse health events due to technical malfunctions related to traditional pump mechanism limitations deters the adoption of insulin pump therapy.
Our team has substantial knowledge of the diabetes
industry and experience in developing, obtaining marketing authorization for, and bringing insulin pumps to market. Based on this experience,
we believe that our innovative insulin pump, using a new and proprietary method of pumping insulin, can address most or all of these shortcomings.
It provides a state-of-the-art insulin pump capable of both basal (steady flow) and bolus (mealtime dosing) insulin disbursement. It also
has been designed considering a natural migration path to multi-chamber/multi-liquid pumps, potentially offering an exciting array of
new therapies to patients with diabetes and other conditions.
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Our goal is to become the leader in expanding
access to insulin pump technology to a wider portion of diabetes sufferers and provide not just care for the super users, but “diabetes
care for the rest of us.”
While our initial target market is people with Type 1 diabetes, we
believe there is a substantial opportunity to penetrate the type 2 marketplace, first through our initial MODD1 pump, and then with the
future introduction of Pivot, which would be the only 3 milliliter, tubeless removable patch pump on the market.
The MODD1 and its successor product the Pivot
are high-precision pumps that we believe represent the best choice for new pump patients because they are affordable, easy to learn and
use, and has a revolutionary design and internal technology that enable precision with low-cost manufacture and high reproducibility.
Key features include:
●
Three parts - one reusable, two disposable (the cartridge and the set) - snap together to form the working system;
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One button interface, easy to learn and use;
● Phone software for those who want to access more information
on the product;
● 90-day reusable, 3-day disposable;
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Removable system;
●
No external controller required, no charging, no battery replacement; and
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Slim profile, lighter weight.
A proprietary survey of American healthcare payors
representing 50 million covered lives (approximately one-third of total U.S. covered lives) performed for us by industry leading survey
firm ISA in 2019 has demonstrated that payors are willing to grant equivalent or preferential coverage for a product with this feature
set at launch in exchange for discounts of approximately 20%.
Diabetes Classifications and Therapies
Diabetes is typically classified as either type
1 or type 2:
●
Type 1 diabetes, or T1D, is an auto-immune condition characterized by the body’s nearly complete inability to produce insulin. It is frequently diagnosed during childhood or adolescence, although it can sometimes have onset in adulthood. Individuals with T1D require daily insulin therapy to survive.
●
Type 2 diabetes, or T2D, represents over 90% of all individuals diagnosed with diabetes and is characterized by the body’s inability to either properly utilize insulin or produce sufficient insulin. Initially, many people with T2D attempt to manage their condition with improvements in diet and exercise and/or the use of oral medications and/or injection of glucagon-like peptide-1 (GLP-1) drugs. However, as their diabetes advances, patients often progress to requiring insulin therapies such as once-daily long-acting insulin and ultimately to intensified mealtime rapid-acting insulin therapy. This represents an important portion of the diabetes market with an estimated 1.6 million individuals with T2D intensively treated with insulin currently in the United States.
Glucose, the primary source of energy for cells,
must be maintained at certain levels in the blood in order to permit optimal cell function and health. The brain works on pure glucose,
and, when sufficient glucose is available, the brain allows insulin to be released that allows the cells to absorb glucose. In people
with diabetes, blood glucose levels are not well controlled by the brain due to the shortage of insulin. Frequently, blood glucose levels
become very high, a condition known as hyperglycemia, or very low, a condition called hypoglycemia. Hyperglycemia can lead to serious
long-term complications, including blindness, kidney disease, nervous system disorders, occlusive vascular diseases, lower-limb amputation,
stroke, cardiovascular disease, and death. Hypoglycemia can lead to confusion or loss of consciousness, often requiring a visit to the
emergency room or, in certain cases, result in seizures, coma, and/or death.
All people with T1D, which is our primary market,
require daily insulin. According to the Seagrove 2023 Diabetes Blue Book, there are approximately 3.6 million potential users for insulin
pumps, split evenly between type 1 and type 2. In this Report, we refer to people with T1D and people with T2D who require mealtime insulin
as “insulin-requiring people with diabetes.”
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Currently, there are two primary therapies available
for insulin-requiring people with diabetes: multiple daily insulin injections directly into the body through syringes or insulin pens
(a type of syringe), referred to as Multiple Daily Injection, or MDI therapy, or the use of an insulin pump to deliver mealtime insulin
boluses to help with glucose absorption after carbohydrate consumption and a continuous subcutaneous insulin infusion, or CSII therapy,
into the body. Generally, CSII therapy is considered to provide a number of advantages over MDI therapy, primarily an improvement in glycemic
control, as measured by certain diabetes management tests such as hemoglobin A1c (HbA1c) measure and more recently Time in Range (TIR)
where a continuous glucose measuring device is used to calculate this test. Among other clinical benefits, a study conducted by Tandem
Diabetes Care, Inc., or Tandem, in 2021, demonstrated that insulin pump use can decrease glucose variability, reduce the number of hypoglycemia
events, and reduce the fear of hypoglycemia.
Notwithstanding these advantages, we believe the
difficulty in use resulting from the complexity and cumbersome design of available insulin pumps, as well as high and often prohibitive
costs for both the patient and insurance provider, has resulted not only in dissatisfaction among many existing pump users. We believe
the cost and complexity to the user has severely limited the adoption rate of insulin pumps by a large segment of the diabetes population
using MDI therapy, whom we refer to in this Report as “Almost Pumpers.”
We define Almost Pumpers as insulin-requiring
people with diabetes who are aware of pumps and their potential benefits but because of past experiences, pump shortcomings, cost, complexity,
and time and learning required to adopt and utilize currently available insulin pumps, continue to receive their daily insulin through
MDI therapy. We undertook one-on-one interviews with over 200 of these individuals to understand their past experiences on or considering
pumps, existing pump shortcomings, the cost and insurance challenges, complexity to learn and time and complexity to operate that drives
them to remain on MDI. With this detailed understanding, we brought a series of prototype models to them to react to, so we could refine
the design and include features that would motivate them to be able to use this technology to better care for their diabetes. Our MODD1
pump has been well received by these individuals and our clinical advisors, as applicable for this sector of the marketplace.
Our research, along with marketplace data provided
by Seagrove in 2023, estimates that 33% of Americans with T1D have an insulin pump and 28% of Americans with T1D (44% of those who currently
utilize MDI) can be classified as having an interest in pump adoption and meeting the American Diabetes Association guidelines of glucose
control if their objections to the currently available suite of products can be overcome. They do not want to closely manage their glucose
levels and incur the associated time and effort involved; however, they understand, or are advised by their clinical care team, that they
need to do more to achieve a reasonable level of glucose. They are the Almost Pumpers. We have developed what we believe to be the most
technologically advanced delivery system overcome the objections and provide motivation for this market. We believe that there are four
addressable hurdles to adoption:
●
Usability: the device needs to be easy to learn and to operate;
●
Affordability: we will focus on overcoming copay and insurance hurdles rather than leaving the “insurance journey” to the clinician and patient;
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Accessibility and Education: we will seek to engage patients to sample this new technology by supplying clinicians with free samples and simple training to allow people to see first-hand the typical barriers to adoption that have been overcome; and
●
Service and Support: where we will answer their questions and concerns during this diabetes experience.
We believe this conversion process, engaging people
to try and thereby receive the benefits of our technology will substantially increase adoption of insulin pumps among with patients with
T1D and T2D who remain reliant upon multiple daily injections. Diabetes is a disease that appears randomly throughout the world. Therefore,
we cannot segment the market by socioeconomics, education or level of care. We intend to create an insulin pump that appeals to all Almost
Pumpers.
Market
The International Diabetes Federation estimated
that, in 2021, approximately 537 million people were living with diabetes worldwide, and by 2045, this number will increase to approximately
783 million people.
An estimated 34 million people in the United States
live with diabetes. Within this group, T1D accounts for approximately 1.8 million people with the remainder being T2D. All people with
T1D require daily insulin. However, of the approximately 32.2 million people with T2D, about 1.6 million of them require MDI therapy to
manage their diabetes. This represents a large and growing market with the effects of diabetes accounting for roughly 25% of all healthcare
dollars spent annually in the United States.
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According to the National Diabetes Health Care
Provider Survey conducted by Seagrove Partners, LLC, or Seagrove, in 2021, approximately 25% of the 1.6 million highly insulin intensive
individuals with T2D have considered going “on pump.”
Insulin pumps have been shown to provide a higher
level of care for insulin-dependent people with diabetes and result in better glycemic control, fewer comorbidities, fewer trips to the
emergency room, and higher overall quality of life. They also result in lower overall costs to the healthcare system, reducing typical
expense per patient year from approximately $27,000 to $17,000.
Despite these benefits, only 1 in 3 (33%) of the
1.8 million Americans with T1D and very few of the 1.6 million T2D intensively treated with insulin currently use an insulin pump, for
a total of approximately 670,000 current users, with only a slow increase of insulin pump use. The remaining 68% of individuals with T1D
and virtually all with T2D rely on MDI therapy for glucose control. Decades of advances in technology advances have left these non-pumpers
at a significant disadvantage from a control perspective versus their “pumping” counterparts.
We have identified a large segment of the market
that we refer to as “Almost Pumpers.” Almost Pumpers are those insulin-requiring people with diabetes (T1D or T2D) who feel
that they would adopt the pump if it were less expensive, less time consuming, less technically intimidating, and if there was no separate
controller. We believe that they represent approximately 32% of the T1D market correlating to a $1.9 billion growth opportunity.
Insulin pumps on the market today require a substantial
amount of time to manage the therapy, have high out-of-pocket costs that place these technologies out of reach for a large part of the
population, and are feature-heavy with complex systems, which we believe have hampered adoption and intimidated many users. The most commonly
used insulin pumps today require extensive training and hours of daily management. The average pump user must go through 42 steps of setup
and refill process every 72 hours to “stay on track.” Our product only requires nine steps for setup and refill every 72 hours.
The current reluctance to adopt the insulin pump
has had serious consequences on the healthcare system. In the United States, people living with T1D have struggled to attain glycemic
targets. A 2019 analysis of the large T1D Exchange clinical registry found that only 21% of U.S. adults with T1D achieved the ADA A1c
goal (<7.0%). Further, according to a study published in JAMA Internal Medicine, researchers found no significant improvements in diabetes
care between 2005 and 2016, with persistent gaps in care related to socioeconomic status.
Another transition in the care of diabetes is
the measuring of glucose from finger-stick tests to continuous glucose monitoring, or CGM, sensors, which are wearable devices. These
sensors are placed under the skin and give a reading every five minutes of the user’s glucose level. While Dexcom has been a market
leader in this field, the introduction and rapid adoption of the Freestyle Libre by Abbott Labs has made CGM easier and more affordable,
expanded the product category, and doubled the market size. The Freestyle Libre product is a more affordable, easier to use and smaller
version of the popular Dexcom, Inc. (Dexcom) CGM product. Now, for the first time, there is an easy, less painful, i.e., no more finger
sticks, way for patients to have the data they need to understand more about their glucose levels and their insulin requirements. Access
to such data has motivated patients to ask their diabetes clinician how they can achieve better glycemic control and made them more comfortable
with using technology and wearables to treat their diabetes. Pumps offer a clear pathway to better control and better overall care. We
believe that the insulin pump market is ready for a similar transition as that experienced in the CGM space. Our MODD1 pump represents
a new and better offering to assist and induce a wide variety of patients to make the transition and overcome the objections to superior
control by becoming a “pumper.”
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We believe the present pump marketplace is approximately
a $1.9 billion market, comprising 33% of T1D pumpers and a small group of T2D pumpers. Seagrove surveyed clinicians, and, in its 2021
report, estimated that 28% of T1D patients and 25% of T2D patients would adopt technology that was easier to use, learn and access and
eligible for insurance reimbursement. We believe this represents a total addressable market of approximately $3 billion for us, assuming
cartridge revenue of approximately $4,100 per patient, per year.
We are dedicated to helping all people with diabetes
gain access to high quality care. We aim to help people with diabetes - especially Almost Pumpers and the historically underserved communities
- gain access to insulin pump technology by making it affordable and easy to use.
Diabetes Care is at an Inflection Point
We believe that the insulin pump market stands
at a crossroads as a confluence of events makes the timing for a new product introduction ideal.
At the same time, reimbursement for patch pumps
has been increasingly moving to a pharmacy benefits manager (PBM) model, which simplifies reimbursement and will further aid in a “frictionless
launch.” This represents a fundamental shift in the insulin pump market, making onboarding rapid and simplifying a previously complex
and time-consuming “insurance journey.”
We believe these CGM device users are increasingly
interested in adopting technology and wearables to manage their diabetes. We believe CGM device users are a natural market for a new type
of pump, if it can meet their needs and address their objections and that the conjunction of the above trends represents a unique opportunity
in the insulin pump market’s history. The CGM device provides glucose-level data, and, as necessary, the user can respond to address
any issues with a simple button push on a pump to deliver their insulin versus taking out a syringe and injecting glucose.
Diabetes technology companies understand that
we are at a turning point with new markets (T2D, T1D that are currently not using technologies). This can be seen with increased discussion
around this topic during recent national diabetes conferences, as well as an increase in marketing promotion.
All these recent changes support the high proportion
of T1D and T2D intensively treated with insulin that we consider to be Almost Pumpers, and we expect the number of Almost Pumpers to grow
in the coming years and be more reachable with appropriate marketing strategies.
Our Insulin Pump
Instead of building complex, bespoke, and difficult to manufacture
and maintain pumping and control systems, we began with the technology and the user in mind. Using proprietary methods of insulin measurement,
we were able to eschew complex mechanisms and instead built a product, our MODD1, using only parts from high volume consumer electronics
manufacturing lines, breaking the cost vs functionality curve that has existed in the insulin pump space and representing the first truly
modern insulin pump design. We consider this to be a new kind of product for a new kind of patient.
In September 2024, we received clearance from
the FDA to market and sell our MODD1 product in the United States. We plan to launch this pump in a single region during the quarter ending
September 30, 2025. We expect to submit our successor product, our Pivot pump, which is a tubeless pump product, for clearance by October
31, 2025. A good part of our focus has shifted to managing the process of preparing to move our initial production line to our manufacturing
partner, Phillips Medisize, a Molex company, a large tier-one medical device manufacturer, which will manage and operate our production
to produce products for human use. We believe that Phillips Medisize will be able to rapidly scale our production to higher volumes at
lower cost. We continue to devote substantial time and resources, including exhibiting at major diabetes conferences, to better understand
the needs and preferences of Almost Pumpers and the specific patient/provider/payor requirements to motivate change from MDI therapy.
By making the bolus delivery at meals simple, we believe we will drive improved health outcomes.
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Our Pivot product has several distinguishing features:
(1) The pump has a simple button to press to deliver insulin as the patient
requires it. The electronic pump uses a simple motor for rotating a cam to motivate the insulin into the patient along with low power
Bluetooth and near-field communication (NFC) chips to optionally allow the patient to communicate with a smart phone, tablet, or other
mobile computing device.
(2) The pump snaps together with a three-day disposable cartridge, which
the patient fills with insulin for delivery. It includes a simple coin cell, which allows it to run through the 80-hour life of the cartridge.
(3) The infusion set is built into the adhesive pad that the pump attaches
to and the needle can be safely removed and discarded by the user after application. Despite this true patch form factor, the pump is
removable by the user during the three days of wear.
The system will deliver a small continuous rate called a basal that
will provide approximately 50% of the total daily dose required, and the user will use the on-pump button to administer boluses, typically
before and after meals. The objective is to make the product simple to acquire and take home, simple to learn and most importantly, simple
to use and live with, to expand the pump market, drive adoption and, ultimately, improve clinical outcomes.
Technological Advantages
The adoption of new ultra-high volume technologies will result in far
easier manufacturing scale up, as parts sourcing and assembly processes are far easier. The MODD1 was designed from the beginning for
mass manufacturing, and we have partnered with a tier-one medical device manufacturer, Phillips Medisize, to establish processes and “lights
out” or near lights out production assembly lines whereby a minimal number of workers will be required in the production facility.
This advantage is compounded by the high availability and already optimized cost reduction in its components. When we achieve production
scale, we believe this should result in a cost of goods for MODD1, estimated on the competitors’ announced margins and sales, of
approximately 50% lower than our closest patch pump competitor.
The adoption of modern, miniaturized technologies
has led to numerous other advantages, as well. For example, our MODD1 pump is smaller in overall volume than Insulet’s popular Omnipod
product and has a lower profile to the skin. Despite this, the MODD1 holds a full 3 milliliter, or mL, (300 units) of insulin, in line
with full sized pumps such as those offered by Tandem and Medtronic, 50% more than the 2mL reservoir in the Omnipod. We believe that this
volume advantage over other patch pumps will be significant as 24% of type 1 and over 50% of the rapidly growing type 2 market require
more than 2mL of insulin every three days (the expected wear time of patch pumps).
In addition, our new pumping modality will provide
what we believe is the most even (and thus closest to the function of a healthy pancreas) delivery of basal insulin in the industry. We
intend to demonstrate the impact of our system on glycemic control in a clinical study specifically focused on improved adherence, more
bolus deliveries per day and providing the clinicians with clear data on patient use.
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The technology allows the patient to simply add
insulin and operate. The battery is included in each cartridge, and the device is operated without a controller. As a result, no charging
is required. MODD1 has also been made push-button simple to deliver insulin to appeal to a wider audience of users.
This new technology has made the MODD1 lighter
than existing offerings. Compared to the Insulet Omnipod, MODD1 weighs 20 grams (vs. 26 grams) empty and 23 grams (vs. 28 grams) fully
filled (despite carrying 50% more insulin), reductions of 23% and 18%, respectively. Also, unlike existing patch pumps, the MODD1 can
be removed from the needle and taken off and replaced later if the user desires. This avoids loss of insulin in a pump due to accidental
dislodging of the soft canula, an issue for other patch pumps with which users have expressed considerable dissatisfaction.
Our approach to the care of diabetes can be further
enhanced by leveraging the MODD1 single-pumping chamber technology and reusable pump approach to apply to dual (or more) chamber pumping
solutions. We believe that such multi-chamber pumps will be integral to the realization of high time-in-range artificial pancreas solutions
that require no human intervention because of the application of, for instance, drugs to raise glucose levels coupled with drugs to lower
glucose. They will be the next step forward from the cumbersome and awkward solutions today that require the user to announce meals, count
and input carbohydrates, and adjust delivery for exercise and sleep to prevent overdosing of insulin. Instead, if a user overdosed insulin,
the user would simply pump in a drug to release sugar stores to raise it up. We believe that a pre-filled peel and stick patch pump with
the ability to function in a fully autonomous closed loop system with a CGM device, which is measuring and transmitting glucose-level
information, represents the next generation of diabetes care. We believe that we have demonstrated our technology and have secured, and
will continue securing, intellectual property protection on our approach.
We believe this technology, especially applied
in a dual chamber capacity, will open up numerous applications outside of diabetes where medication compliance of complex therapy regimes
is difficult. Example applications would include weight loss, fertility, and simplifying the delivery of complex multi-drug cocktails,
especially those with diverse and challenging dosing schedules.
Our Solution
Our proposed pump has been designed and developed
to address the aforementioned shortcomings of the existing pump market and to appeal to: (i) the substantial group of Almost-Pumpers,
who may be interested in using an insulin pump, but have not done so because of the complexity, cost or cumbersome nature of existing
products and (ii) people who are using one of the currently available insulin pumps but are dissatisfied with such products. We believe
that, owing to our new proprietary technology, our proposed insulin pump will be the simplest and least expensive product on the market
and the easiest for providers to prescribe.
Our current pump has been built to test what we
believe to be our novel approach to insulin pumps. By providing a pump that we believe will establish industry standards in terms of technology,
simplicity to understand, ease of use and price, we believe our MODD 1 pump will offer the vast majority of benefits afforded by more
expensive and complex pumps, but it will remain accessible to a substantially greater percentage of diabetes sufferers requiring daily
insulin therapy.
We believe people generally will not use technology
that intimidates them, especially for a life-sustaining therapy. In addition, we believe that physicians are hesitant to prescribe such
technology due to the level of training and support required with the present pump product offerings. It is our belief that broadly-needed
medical products, such as is intended with our proposed pump, must be user-friendly and affordable. We believe this approach is fundamentally
different from that applied to the existing pump market today, where most pumps are continuously adding complex features appealing to
super users and leaving the other people with diabetes further behind.
Our current goal is to commercialize our MODD1pump product and successfully
obtain all required regulatory approvals for our Pivot pump product. Our long-term goal is to become a leading provider of insulin pump
therapy by focusing on both consumer and clinical needs.
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To achieve our above stated immediate and current
goals, we intend to pursue the following business strategies:
● Use of innovative proprietary
technology.
Based on the substantial experience
of Paul DiPerna, our President, Chief Financial Officer, Treasurer and Chairman of our board of directors, in engineering design and innovative
technology in the medical device industry and, in particular, with the invention, market vision and technical development of insulin pumps,
we have generated proprietary technology that has been incorporated into our proposed insulin pump. We believe this technology allowing
for a two-part, yet small enough to wear, pump product, along with simplified mechanics for pumping, has greatly assisted us in creating
a simpler, user-friendly pump. We believe the completed design, engineering and technology being incorporated into our pump will make
it substantially simpler and more affordable than those currently available. These features, together with the safety and reliability
of our proposed pump, are designed to create the next generation of insulin pumps that will feature important and well-differentiated
attributes compared to those currently available and make it available to consumers across mostly all socioeconomic groups in the United
States and around the world.
●
Use of go-to market commercialization technology.
We plan to commercialize our MODD1 product line
using a highly differentiated go-to-market strategy. Generally, current pumps are marketed by a large, direct sales force to end users
directly, and the manufacturer provides all training and support, as the current training reimbursement offered by insurance providers
is inadequate to motivate clinicians to provide such training to patients. We intend to employ a different strategy and utilize i) distributors
to target the daily insulin users who are still managed by a primary care physician and ii) a small direct sales force to directly engage
with diabetes educator practices. Specifically, our direct sales force will engage with larger diabetes educator practices, which currently
prescribe a high volume of pumps and deliver a consultative message focused on those users that indicate a desire to use a pump but have
rejected all of the currently available options. We engaged Seagrove to conduct a survey of physicians and diabetes educators, and the
resulting data suggested that approximately 25% of multiple daily injectors could be receptive to our offering. We believe that the modest
30-minute training requirement for our product, combined with the more limited feature set for our MODD1, will incentivize nurse practitioners
to identify and train new users who have not been offered pumps before. This would also allow us to offer virtual or second level training
support and not require us to be the primary training provider.
We plan to launch our MODD1 product during the
quarter ending September 30, 2025 in a single region in the United States with a select group of providers to gain user experience. By
October 31, 2025, we plan to submit a 510(k) premarket notification to the FDA for a new and improved version of the MODD1, the Pivot,
which will use our proprietary, integrated insulin-delivery set manufactured by us. We believe the new integrated insulin-delivery set
will offer improved user experience, while reducing our production costs. This new version of our product, the Pivot, is the version that
we plan to launch nationally in the United States after we receive FDA clearance, which we expect could occur sometime in the first quarter
of 2026.
We have also begun the process of obtaining Conformite
Europeenne , or CE, mark clearance for our Pivot design, which would allow us to market and sell in European markets. We expect to
obtain CE mark clearance in the first quarter of 2026. Our initial strategy to address European markets is to partner with distributors
to bring the Pivot to market in those countries that accept the CE mark and have acceptable reimbursement. We believe that the combination
of our patch pump form factor, lower cost at scale and lower training burden is well suited for European markets where there are very
few physicians or nurses available to provide training. This would allow the Pivot to gain rapid adoption in areas where pump penetration
is currently much lower than in the United States. We will target other select international markets using the same approach.
We believe the combination of these differentiated
approaches will enable us to take reasonable initial market share, while not incurring the significant overhead cost of existing commercialization
strategies employed by the incumbents, where competition for users is intense.
Manufacturing
Our pump product comprises the pump, a disposable
cartridge that holds the insulin reservoir, a baseplate that affixes the pump product to the user’s body and the infusion set, which
includes a cannula to infuse the insulin into the body. We intend to manufacture the pump, the cartridge and the baseplate and purchase
the infusion set from third parties. Prior to shipment, our pump product will be packaged with an infusion set. In connection therewith:
● We have installed automation machines in our facility that will be
capable of assembling the cartridges at a rate sufficient to supply 6,000 patients (60,000 cartridges per month), and we plan to have
this capacity moved to the Pivot product in 2026. We also have ordered production molding for more than three
times this number of users, so we can quickly scale up with demand.
● Product packaging will initially
be performed manually by our personnel, while the cartridge automation is being refined. We expect to purchase and implement packaging
automation equipment as the second phase of automation of the cartridge.
We have engaged Phillips Medisize as our manufacturing
partner, and we are in the final stages of validating our manufacturing at Phillips Medisize’s facilities. Once the validation is
complete, Phillips Medisize will then perform all manufacturing operations to ensure compliance with FDA regulations.
8
FDA Clearance
The FDA requires us to meet all applicable regulations
for insulin pumps, a subcategory of infusion pumps, which are generally considered Class II devices by the FDA. In January 2024, we submitted
a 510(k) premarket notification to the FDA for our initial insulin pump product, the MODD1, and, in September 2024, we received FDA clearance
to market and sell our MODD1 pump in the United States. We plan to submit our Pivot successor product to the FDA by October 31, 2025,
and we expect to receive FDA clearance by March 31, 2026.
Commercialization Steps
To commercialize our product, we must successfully
complete a number of material steps, including:
● Continue to ensure it
meets:
o FDA requirements for 510(k)
clearance, including taking such actions, if any, as may be required by the FDA as a condition to granting approval and providing 510(k)
clearance for our insulin pump;
o the general needs and preferences
of our Almost-Pumper target market based on our knowledge of the diabetes industry, information gathered from our soft launch and other
information available and/or obtained by us from Almost Pumpers and their caregivers; and
o the
general guidelines of third-party payors, private and public insurance companies, preferred provider organizations and other managed
care providers with particular focus on the guidelines established by the Center for Medicare and Medicaid Services, or CMS which administers
the United States Medicare program, or Medicare. To assist us in making such modifications and refinements, we have retained independent
consultants to focus on ensuring that our products and product candidates satisfy the existing coverage and reimbursement criteria of
such third-party payors.
● Transfer our manufacturing
equipment and process to Phillips Medisize prior to product launch; and
● Hire and retain appropriate
sales and marketing personnel to develop, implement and launch a promotional campaign for our insulin pump substantially focused on our
target market.
As with any medical device attempting to enter
and successfully compete with existing products in an established and competitive marketplace, we will face significant hurdles to accomplish
the above steps to commercialization including:
● Obtaining FDA 510(k) clearance
to market and sell our insulin pump to the public;
● Obtaining any other FDA-required
authorizations with regard to our product, as required by the Federal Food, Drug, and Cosmetic Act, or FDCA, which is administered
by the FDA;
● Educating
endocrinologists, physician’s assistants, nurse practitioners and nurse educators, who typically prescribe pump usage, and certified
diabetes educators and dieticians, who provide education and guidance to diabetes patients, as to what we believe to be the superior
qualities of our products. We expect to continue to exhibit at the Association of Diabetes Care & Education Specialists, or
ADCES, conference annually;
● Demonstrating
to select general practitioners, who have historically been skeptical of the heightened support inherent in insulin pumps, our product’s
ease of use and convenience;
● Ensuring that our products do, in fact, meet the needs of Almost Pumpers;
● Overcoming the historic obstacles
and reluctance of Almost Pumpers to using insulin pumps to treat their diabetes; and
● Ensuring that third-party payors agree to cover all or a substantial
portion of the purchase price and recurring costs of the use of our insulin pump products.
Looking Forward
Going forward, we expect to continue to evolve our MODD1 pump and its
capabilities and functionality both in response to patient needs and as part of our current platform roadmap.
● With future Pivot products,
we intend to seek to add phone-based control and Alternative Controller Enabled (“ACE”) and Automated Insulin Deliver (“AID”)
capability to allow integration with popular continuous glucose monitors. We believe this will expand our available market to include
many existing pumpers. The new model has the same modular design and low-cost components as MODD1 and provides a much desired breakthrough
for patients - two-factor command authentication that allows the wearer to use an application on his/her cell phone as the controller.
● AID-control functionality is being developed and will be added via
an ACE designation on the pump.
9
● Any approved AID controller
can drive insulin delivery in “auto” mode, when appropriate.
● CGM integration allows the
controller to potentially adjust basal insulin rate for meals and exercise with an approved algorithm.
● With our future Pivot product, we will seek to move to a full-featured,
multi-chamber pump optimized for high time-in-range fully autonomous close loop insulin delivery utilizing the form factor and cost advantages
of its pumping designs to create an affordable, easy to use drug delivery system to realize the aspiration of true “artificial pancreas”
systems. We envision moving to a drug prefill model, such that cartridges can be filled with insulin or other drugs and shipped cold chain
to patients, further simplifying the use process.
Competition
Today, in the United States, only three companies
are commercializing insulin pumps to T1D patients and insulin treated T2D patients and have significant market share:
● Medtronic - commercializes
the durable Minimed 770G and also offers older durable pumps (670G, 630G etc.). In 2020, they held approximately 51% of the US insulin
pump market.
● Tandem - commercializes the
durable t:slim X2 pump (with or without algorithms - Basal-IQ and Control-IQ). In 2020, they held approximately 28% of the US insulin
pump market.
● Insulet - commercializes the
disposable Omnipod patch pump with approximately 19% of the US market in 2020.
Medtronic pump and infusion set
Tandem pump and infusion set
These three insulin pump offerings are vying for the attention of the
most motivated and well insured in hope of converting them away from their reliance on MDI. We believe the t:slim X2 and Minimed 770G
pump products each receive in excess of $4,000 through durable medical equipment (DME) and daily consumable insurance coverage reimbursements.
Daily consumable reimbursement would also cover on an ongoing basis cartridge, tubing and sets for each three-day period, as well. These
products have controllers integrated into the pump, making them cumbersome and bulky, along with long (greater than 20 inch) tubing between
the pump and the cannular site. The Omnipod is the third offering; a patch pump that attaches to your body for 72 hours and uses a separate
controller to manage the insulin delivery process. Insurance coverage for Omnipod can be provided via DME but also via Pharmacy Benefit
(PB). The Omnipod patch pump is more expensive per day and less accurate than other insulin pumps, according to a Mende 2022 study. Around
33% of people living with T1D are currently using insulin pumps; of these, the vast majority are using one of these three offerings, a
statistic that has not changed significantly over the last five years.
All of these pump products require extensive training
to initiate and two to four hours per day to use and manage on an ongoing basis. We believe this level of sophistication and effort combined
with the cost and awkwardness of these products contribute to the limited uptake.
Although there are purely mechanical pumps available
to patients with a small percentage of T2D patients using the Mannkind V-Go patch pump, a fixed basal rate and a button to deliver small
boluses. This pump is simple to use, though gives little performance decision to the user (e.g., no possibility to change the basal rate,
no possibility to stop bolus doses, small reservoir, pump that needs to be changed every day, etc.). The last available patch pump is
provided by Cequr, called Simplicity, a bolus only delivery option without basal delivery or any electronic reporting. Cequr recently
disclosed it has slightly more than 6,000 users. Beta Bionics, Inc. launched its I-Let pump in October 2023 and reported approximately
15,000 users at the end of 2024. Deka Research and Development Corp. received clearance for its Sequel Twist pump in July of 2023, but,
to our knowledge, has not yet made its product available for sale.
10
Medtronic has launched a new version of its insulin
pump, the Minimed 780G, already available in some European countries with an advanced algorithm, but no obvious change in hardware. Tandem
is now selling a small, no display pump called Mobi. The Mobi has a small 2mL reservoir and is controlled by a separate unit, similar
to the current Omnipod product. Insulet has also launched the Omnipod 5, a similar patch pump to its current offering, that includes an
AID algorithm.
Approximately 79% of the people who rely upon
MDI therapy choose to not administer a shot outside of their house, which creates a poorly controlled group. Our pump products are designed
to focus upon a segment of these people and mobilize them via a simple, easy to use, affordable product.
Intellectual Property
Our success depends in part on our ability to
obtain patents and trademarks, maintain trade secret and know-how protection, enforce our proprietary rights against infringers, and operate
without infringing on the proprietary rights of third parties. Because of the length of time and expense associated with developing new
products and bringing them through the regulatory approval process, the health care industry places considerable emphasis on obtaining
patent protection and maintaining trade secret protection for new technologies, products, processes, know-how, and methods.
As of March 31, 2025, we held five U.S. utility
and two foreign patents, and we also held 20 pending applications in the United States and abroad. The patents and patent applications
cover various aspects of our technology, including our proprietary fluid movement technology and associated features of our insulin delivery
methodology. There can be no assurance that the pending patent applications will result in the issuance of patents, that patents issued
to or licensed by us will not be challenged or circumvented by competitors, or that these patents will be found to be valid or sufficiently
broad to protect our technology or provide us with a competitive advantage.
Government Regulation
Our operations are subject to comprehensive federal,
state, and local laws and regulations in the jurisdictions in which we or our research and development partners do business. The laws
and regulations governing our business and interpretations of those laws and regulations and are subject to frequent change. Our ability
to operate profitably will depend in part upon our ability, and that of our research and development partners and affiliates, to operate
in compliance with applicable laws and regulations. The laws and regulations relating to medical products and healthcare services that
apply to our business and that of our partners and affiliates continue to evolve, and we must, therefore, devote significant resources
to monitoring developments in legislation, enforcement, and regulation in such areas. As the applicable laws and regulations change, we
are likely to make conforming modifications in our business processes from time to time. We cannot provide assurance that a review of
our business by courts or regulatory authorities will not result in determinations that could adversely affect our operations or that
the regulatory environment will not change in a way that restricts our operations.
FDA Regulation
In the United States, medical devices are strictly
regulated by the FDA. Under the FDCA, a medical device is defined as “an instrument, apparatus, implement, machine, contrivance,
implant, in vitro reagent, or other similar or related article, including a component, part or accessory which is, among other things:
intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease, in
man or other animals; or intended to affect the structure or any function of the body of man or other animals, and which does not achieve
its primary intended purposes through chemical action within or on the body of man or other animals and which is not dependent upon being
metabolized for the achievement of any of its primary intended purposes.” This definition provides a clear distinction between a
medical device and other FDA regulated products such as drugs. If the primary intended use of a medical product is achieved through chemical
action or by being metabolized by the body, the product is usually a drug or biologic. If not, it is generally a medical device.
We have developed an insulin pump delivery system,
which is regulated by the FDA as a medical device under the FDCA, as implemented and enforced by the FDA. The FDA regulates the development,
testing, manufacturing, labeling, packaging, storage, installation, servicing, advertising, promotion, marketing, distribution, import,
export, and market surveillance of medical devices.
11
Device Premarket Regulatory Requirements
Before being introduced into the U.S. market,
each medical device must obtain marketing clearance or approval from the FDA through the premarket notification (or 510(k)) process, the
de novo classification process, or the premarket approval, or PMA, process, unless they are determined to be Class I devices or
to otherwise qualify for an exemption from one of these available forms of premarket review and authorization by the FDA. Under the FDCA,
medical devices are classified into one of three classes - Class I, Class II or Class III - depending on the degree of risk associated
with each medical device and the extent of control needed to provide reasonable assurance of safety and effectiveness. Classification
of a device is important because the class to which a device is assigned determines, among other things, the necessity and type of FDA
review required prior to marketing the device. Class I devices are those for which reasonable assurance of safety and effectiveness can
be maintained through adherence to general controls which include compliance with the applicable portions of the FDA’s Quality System
Regulation (the “QSR”), as well as regulations requiring facility registration and product listing, reporting of adverse medical
events, and appropriate, truthful and non-misleading labeling, advertising, and promotional materials. The Class I designation also applies
to devices for which there is insufficient information to determine that general controls are sufficient to provide reasonable assurance
of the safety and effectiveness of the device or to establish special controls to provide such assurance, but that are not life-supporting
or life-sustaining or for a use which is of substantial importance in preventing impairment of human health, and that do not present a
potential, unreasonable risk of illness or injury.
Class II devices are those for which general controls
alone are insufficient to provide reasonable assurance of safety and effectiveness and there is sufficient information to establish “special
controls.” These special controls can include performance standards, post-market surveillance requirements, patient registries and
FDA guidance documents describing device-specific special controls. While most Class I devices are exempt from the premarket notification
requirement, most Class II devices require a premarket notification prior to commercialization in the United States; however, the FDA
has the authority to exempt Class II devices from the premarket notification requirement under certain circumstances. As a result, manufacturers
of most Class II devices must submit premarket notifications to the FDA under Section 510(k) of the FDCA (21 U.S.C. § 360(k)) in
order to obtain the necessary clearance to market or commercially distribute such devices. To obtain 510(k) clearance, manufacturers must
submit to the FDA adequate information demonstrating that the proposed device is “substantially equivalent” to a “predicate
device” that is already on the market. A predicate device is a legally marketed device that is not subject to PMA, meaning, (i)
a device that was legally marketed prior to May 28, 1976 (“pre-amendments device”) and for which a PMA is not required, (ii)
a device that has been reclassified from Class III to Class II or I or (iii) a device that was found substantially equivalent through
the 510(k) process. If the FDA agrees that the device is substantially equivalent to the predicate device identified by the applicant
in a premarket notification submission, the agency will grant 510(k) clearance for the new device, permitting the applicant to commercialize
the device. Premarket notifications are subject to user fees, unless a specific exemption applies.
If there is no adequate predicate to which a manufacturer
can compare its proposed device, the proposed device is automatically classified as a Class III device. In such cases, a device manufacturer
must then fulfill the more rigorous PMA requirements or can request a risk-based classification determination for its device in accordance
with the de novo classification process.
Devices that are intended to be life sustaining
or life supporting, devices that are implantable, devices that present a potential unreasonable risk of harm or are of substantial importance
in preventing impairment of health, and devices that are not substantially equivalent to a predicate device and for which safety and effectiveness
cannot be assured solely by the general controls and special controls are placed in Class III. Such devices generally require FDA approval
through the PMA process, unless the device is a pre-amendments device not yet subject to a regulation requiring premarket approval. The
PMA process is more demanding than the 510(k) process. For a PMA, the manufacturer must demonstrate through extensive data, including
data from preclinical studies and one or more clinical trials, that the device is safe and effective for its proposed indication. The
PMA must also contain a full description of the device and its components, a full description of the methods, facilities and controls
used for manufacturing, and proposed labeling. Following receipt of a PMA submission, the FDA determines whether the application is sufficiently
complete to permit a substantive review. If the FDA accepts the application for review, it has 180 days under the FDCA to complete its
review and determine whether the proposed device can be approved for commercialization, although in practice, PMA reviews often take significantly
longer, and it can take up to several years for the FDA to issue a final decision. Before approving a PMA, the FDA generally also performs
an on-site inspection of manufacturing facilities for the product to ensure compliance with the QSR.
The de novo classification process
allows a manufacturer whose novel device is automatically classified into Class III to request down-classification of its device to Class
I or Class II, on the basis that the device presents low or moderate risk, as an alternative to following the typical Class III device
pathway requiring the submission and approval of a PMA application. The FDA has confirmed our MODD1 product qualifies as a 510(k) eligible
device and does not require a de novo classification.
Clinical trials are almost always required to
support PMAs and are sometimes required to support 510(k) and de novo classification submissions. In our case, usability
studies of our intended users are required and have been completed. All clinical investigations of devices to determine safety and effectiveness
must be conducted in accordance with the FDA’s investigational device exemption, or IDE, regulations that govern investigational
device labeling, prohibit promotion of investigational devices, and specify recordkeeping, reporting and monitoring responsibilities of
study sponsors and study investigators. If the device presents a “significant risk,” as defined by the FDA, the agency requires
the study sponsor to submit an IDE application to the FDA, which must become effective prior to commencing human clinical trials. The
IDE will automatically become effective 30 days after receipt by the FDA, unless the FDA denies the application or notifies the sponsor
that the investigation is on hold and may not begin until the sponsor provides supplemental information about the investigation that satisfies
the agency’s concerns. If the FDA determines that there are deficiencies or other concerns with an IDE that require modification
of the study, the FDA may permit a clinical trial to proceed under a conditional approval. The FDA may also notify the sponsor that the
study is approved as proposed or approved with specific requested modification. Furthermore, the agency may withdraw approval of an IDE
under certain circumstances. In addition, the study must be approved by, and conducted under the oversight of, an institutional review
board, or IRB, for each clinical site. If the device presents a non-significant risk to the patient according to criteria established
by the FDA as part of the IDE regulations, a sponsor may begin the clinical trial after obtaining approval for the trial by one or more
IRBs without separate authorization from the FDA, but must still comply with abbreviated IDE requirements, such as monitoring the investigation,
ensuring that the investigators obtain informed consent, and labeling and record-keeping requirements.
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Post-Marketing Restrictions and Enforcement
After a device is placed on the market, numerous
regulatory requirements apply. These include, but are not limited to:
● submitting and updating establishment
registration and device listings with the FDA;
● compliance with the QSR, which
requires manufacturers to follow stringent design, testing, control, documentation, record maintenance, including maintenance of complaint
and related investigation files, and other quality assurance controls during the manufacturing process;
● unannounced routine or for-cause
device facility inspections by the FDA, which may include our suppliers’ facilities; and
● labeling regulations, which
prohibit the promotion of products for uncleared or unapproved (or “off-label”) uses and impose other restrictions relating
to promotional activities;
● corrections and removal reporting
regulations, which require that manufacturers report to the FDA field corrections or removals if undertaken to reduce a risk to health
posed by a device or to remedy a violation of the FDCA that may present a risk to health; and
● post-market surveillance regulations,
which apply to certain Class II or III devices when necessary to protect the public health or to provide additional safety and effectiveness
data for the device.
In addition, under the FDA medical device reporting,
or MDR, regulations, medical device manufacturers are required to report to the FDA information that a device has or may have caused or
contributed to a death or serious injury or has malfunctioned in a way that would likely cause or contribute to death or serious injury
if the malfunction of the device or a similar device of such manufacturer were to recur. The decision to file an MDR involves a judgment
by the manufacturer. If the FDA disagrees with the manufacturer’s determination, the FDA can take enforcement action.
The MDR requirements also extend to health-care
facilities that use medical devices in providing care to patients, or “device user facilities,” which include hospitals, ambulatory
surgical facilities, nursing homes, outpatient diagnostic facilities, or outpatient treatment facilities, but not physician offices. A
device user facility must report any device-related death to both the FDA and the device manufacturer, or any device-related serious injury
to the manufacturer (or, if the manufacturer is unknown, to the FDA) within 10 days of the event. Device user facilities are not required
to report device malfunctions that would likely cause or contribute to death or serious injury if the malfunction were to recur but may
voluntarily report such malfunctions through MedWatch, the FDA’s Safety Information and Adverse Event Reporting Program.
The FDA also has the authority to require the
recall of commercialized medical device products in the event of material deficiencies or defects in design or manufacture. The authority
to require a recall must be based on an FDA finding that there is a reasonable probability that the device would cause serious adverse
health consequences or death. Manufacturers may, under their own initiative, recall a product if any distributed devices fail to meet
established specifications, are otherwise misbranded or adulterated under the FDCA, or if any other material deficiency is found. The
FDA requires that certain classifications of recalls be reported to the FDA within ten working days after the recall is initiated.
The failure to comply with applicable regulatory
requirements can result in enforcement action by the FDA, which may include any of the following sanctions:
●
warning letters, fines, injunctions or civil penalties;
●
recalls, detentions or seizures of products;
●
operating restrictions;
●
delays in the introduction of products into the market;
●
total or partial suspension of production;
●
delay or refusal of the FDA or other regulators to grant 510(k) clearance, PMA approvals, or other marketing authorization to new products;
●
withdrawals of marketing authorizations; or
●
in the most serious cases, criminal prosecution.
To ensure compliance with regulatory requirements,
medical device manufacturers are subject to market surveillance and periodic, pre-scheduled and unannounced inspections by the FDA, and
these inspections may include the manufacturing facilities of subcontractors.
13
Federal Trade Commission Regulatory Oversight
Our advertising for our products and services
will be subject to federal truth-in-advertising laws enforced by the Federal Trade Commission (the “FTC”) as well as comparable
state consumer protection laws. Under the Federal Trade Commission Act (the “FTC Act”), the FTC is empowered, among other
things, to (a) prevent unfair methods of competition and unfair or deceptive acts or practices in or affecting commerce; (b) seek monetary
redress and other relief for conduct injurious to consumers; and (c) gather and compile information and conduct investigations relating
to the organization, business, practices, and management of entities engaged in commerce. The FTC has very broad enforcement authority,
and failure to abide by the substantive requirements of the FTC Act and other consumer protection laws can result in administrative or
judicial penalties, including civil penalties, injunctions affecting the manner in which we would be able to market services or products
in the future, or criminal prosecution.
Healthcare Law and Regulation
United States
We will have to comply with various U.S. federal
and state laws, rules and regulations pertaining to healthcare fraud and abuse, including anti-kickback laws and physician self-referral
laws, rules and regulations. Violations of the fraud and abuse laws are punishable by criminal and civil sanctions, including, in some
instances, exclusion from participation in federal and state healthcare programs, including Medicare and Medicaid. These laws include
the following:
●
the federal Anti-Kickback Statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made, in whole or in part, under a federal healthcare program such as Medicare and Medicaid;
●
the federal False Claims Act imposes civil penalties, and provides for civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government;
●
the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;
●
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing regulations, also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;
●
the federal false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items or services;
●
the federal transparency requirements under the Physician Payments Sunshine Act require manufacturers of FDA-approved drugs, devices, biologics and medical supplies covered by Medicare or Medicaid to report, on an annual basis, to the Department of Health and Human Services information related to payments and other transfers of value to physicians, teaching hospitals, and certain advanced non-physician health care practitioners and physician ownership and investment interests; and
●
analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by nongovernmental third-party payors, including private insurers.
Some state laws require pharmaceutical or medical
device companies to comply with the relevant industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated
by the federal government in addition to requiring drug and device manufacturers to report information related to payments to physicians
and other health care providers or marketing expenditures.
14
State and foreign laws also govern the privacy
and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted
by HIPAA, thus complicating compliance efforts. We also may be subject to, or may in the future become subject to, U.S. federal and state,
and foreign laws and regulations imposing obligations on how we collect, use, disclose, store and process personal information. Our actual
or perceived failure to comply with such obligations could result in liability or reputational harm and could harm our business. Ensuring
compliance with such laws could also impair our efforts to maintain and expand our customer base and thereby decrease our future revenues.
The European Union approves the use of medical
devices in a very different way. They have similar regulations and requirements to adhere to, however, a Notified Body, in the form of
a private company, will represent their interests and is required to have sufficient expertise to review all applications and the company’s
internal processes to ensure the safety of the product for which approval is being requested. We have identified a Notified Body to represent
us, and we are following our FDA submission process with regard to preparing the materials and processes required to meet the regulations
and gain clearance.
European Union
EEA
In the European Economic Area, or EEA, which is
comprised of the 27 member states of the European Union plus Norway, Iceland and Liechtenstein, manufacturers of medical devices need
to comply with the Essential Requirements laid out in Annex I to the EU Medical Devices Directive (Council Directive 93/42/EEC) or with
the General Safety and Performance Requirements (GSPR) of the new EU Medical Devices Regulation (EU 2017/745). Compliance with these requirements
is a prerequisite to be able to affix the CE mark to medical devices, without which they cannot be marketed or sold in the EEA. To demonstrate
compliance with the Essential Requirements and the GSPR and obtain the right to affix the CE Mark, manufacturers of medical devices must
undergo a conformity assessment procedure, which varies according to the type of medical device and its classification. Except for low-risk
medical devices (Class I with no measuring function and which are not sterile), where the manufacturer can issue an EC Declaration of
Conformity based on a self-assessment of the conformity of its products with the Essential Requirements and the GSPR, a conformity assessment
procedure requires the intervention of a Notified Body, which is an organization designated by a competent authority of an EEA country
to conduct conformity assessments. Depending on the relevant conformity assessment procedure, the Notified Body would audit and examine
the Technical File and the quality system for the manufacture, design and final inspection of the devices. The Notified Body issues a
CE Certificate of Conformity following successful completion of a conformity assessment procedure conducted in relation to the medical
device and its manufacturer and their conformity with the Essential Requirements and GSPR. This Certificate entitles the manufacturer
to affix the CE mark to its medical devices after having prepared and signed a related EC Declaration of Conformity. As a general rule,
demonstration of conformity of medical devices and their manufacturers with the Essential Requirements and GSPR must be based, among other
things, on the evaluation of clinical data supporting the safety and performance of the products during normal conditions of use. Specifically,
a manufacturer must demonstrate that the device achieves its intended performance during normal conditions of use, that the known and
foreseeable risks, and any adverse events, are minimized and acceptable when weighed against the benefits of its intended performance,
and that any claims made about the performance and safety of the device are supported by suitable evidence.
All manufacturers placing medical devices into
the market in the EEA must comply with the EU Medical Device Vigilance System. Under this system, incidents must be reported to the relevant
authorities of the member states of the EEA, and manufacturers are required to take Field Safety Corrective Actions, or FSCAs, to reduce
a risk of death or serious deterioration in the state of health associated with the use of a medical device that is already placed on
the market. An incident is defined as any malfunction or deterioration in the characteristics and/or performance of a device, as well
as any inadequacy in the labeling or the instructions for use which, directly or indirectly, might lead to or might have led to the death
of a patient or user or of other persons or to a serious deterioration in their state of health. An FSCA may include the recall, modification,
exchange, destruction or retrofitting of the device. FSCAs must be communicated by the manufacturer or its legal representative to its
customers and/or to the end users of the device through Field Safety Notices. Where appropriate, our products commercialized in Europe
are CE marked and classified as either Class I or Class II.
15
In 2017, the European Parliament passed the Medical
Devices Regulation, which repeals and replaces the EU Medical Devices Directive. Unlike directives, which must be implemented into the
national laws of the EEA member states, the regulations would be directly applicable (i.e., without the need for adoption of EEA member
State laws implementing them) in all EEA member states and are intended to eliminate current differences in the regulation of medical
devices among EEA member States. The Medical Devices Regulation, among other things, is intended to establish a uniform, transparent,
predictable and sustainable regulatory framework across the EEA for medical devices and in vitro diagnostic devices and ensure a high
level of safety and health while supporting innovation.
The Medical Device Regulation became applicable
on May 26, 2021. Devices lawfully placed on the market pursuant to the EU Medical Devices Directive prior to May 26, 2021 may generally
continue to be made available on the market or put into service until May 26, 2026. The Medical Devices Regulation, among other things:
● strengthens the rules on placing
devices on the market and reinforces surveillance once they are available;
● establishes explicit provisions
on manufacturers’ responsibilities for the follow-up of the quality, performance and safety of devices placed on the market;
● improves the traceability of
medical devices throughout the supply chain to the end-user or patient through a unique identification number;
● sets up a central database
to provide patients, healthcare professionals and the public with comprehensive information on products available in the EU; and
● strengthens rules for the assessment
of certain high-risk devices, such as implants, which may have to undergo an additional check by experts before they are placed on the
market.
Available Information
Our annual reports on Form 10-K, quarterly reports
on Form 10-Q, current reports on Form 8-K and amendments to such reports filed or furnished pursuant to section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as well as section 16 reports on Form 3, 4, or 5, are available free of charge on our website at www.modular-medical.com.
as soon as it is reasonably practicable after they are filed or furnished with the SEC. Our Code of Business Conduct and Ethics and the
charters for the Audit Committee, Compensation Committee and Nominating and Governance Committee are also available on our website. The
Code of Business Conduct and charters are also available in print to any stockholder upon request without charge. Requests for such documents
should be directed to Modular Medical, Inc., 10740 Thornmint Road, San Diego CA 92127, Attn. CFO. Our Internet website and the information
contained on it or connected to it are not part of, or incorporated by, reference into this Report. Our filings with the SEC are also
available on the SEC’s website at http://www.sec.gov.
Corporate Information
We are a Nevada corporation, and Quasuras, Inc.,
a Delaware corporation, is our only subsidiary. Our corporate headquarters and operating facilities are located at 10740 Thornmint Road,
San Diego, CA 92127. Our telephone number is (858) 800-3500. We maintain a website at www.modular-medical.com.
Employees
As of March 31, 2025, we had 54 employees, all of whom are located
in the United States and 53 of whom are full-time, consisting of 49 in research and development and manufacturing operations and 5 in
general and administrative functions.
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