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Item 1. Business

2022-03-01 compared with 2021-03-05 · 224 added, 211 removed, 394 unchanged (52% of the section changed)

We are a medical technology company focused on the development and commercialization of a long-term, implantable continuous glucose monitoring, or CGM, system to improve the lives of people with diabetes by enhancing their ability to manage their disease with relative ease and accuracy.

Our Eversense and Eversense XL CGM systems are designed to continually and accurately measure glucose levels in people with diabetes via an under-the-skin sensor, a removable and rechargeable smart transmitter, and a convenient app for real-time diabetes monitoring and management for a period of up to 90 and 180 days, respectively, as compared to seven to 14 days for non-implantable CGM systems.

We are a medical technology company focused on the development and manufacturing of glucose monitoring products designed to transform lives in the global diabetes community with differentiated, long term implantable glucose management technology.

Our Eversense, Eversense XL and Eversense E3 continuous glucose monitoring, or CGM systems are designed to continually and accurately measure glucose levels in people with diabetes via an under-the-skin sensor, a removable and rechargeable smart transmitter, and a convenient app for real-time diabetes monitoring and management for a period of up to six months, as compared to seven to 14 days for non-implantable CGM systems.

We believe that Eversense provides a more convenient method of CGM by providing longer duration, superior accuracy, wireless communication, on-body vibratory alerts, gentle-on-the-skin adhesive patch, data sharing capability, and a removable smart transmitter.

The original Eversense CGM system received a CE mark in June 2016, which marked the first approval for the product to be sold within the European Economic Area.

Subsequently, the extended life Eversense XL CGM system received its CE mark in September 2017 and is currently available in select markets in Europe, the Middle East, and Africa, or EMEA.

We affixed the CE mark to the original Eversense CGM system in June 2016, which marked the first certification for the product to be sold within the European Economic Area, or EEA.

Subsequently, we affixed the CE mark to the extended life Eversense XL CGM system in September 2017 which is currently available in select markets in Europe and the Middle East.

In June 2018, the U.S.

Food and Drug Administration, or FDA, approved the Eversense CGM system and it is currently available throughout the United States.

Food and Drug Administration, or FDA, approved the Eversense CGM system.

In June 2019, we received FDA approval for the non-adjunctive indication (dosing claim) for the Eversense system.

With this approval and the availability of a new app in December 2019, the Eversense system can now be used as a therapeutic CGM in the United States to replace fingerstick blood glucose measurement to make treatment decisions, including insulin dosing.

Our focus on the development and approval of the extended life Eversense 180-day product for the U.S.

market is ongoing.

On September 30, 2019, we completed enrollment of the PROMISE trial and had our last patient complete their 180-day visit during the first quarter of 2020.

The 181 participants in the trial had the Eversense sensor inserted subcutaneously at eight sites across the United States where the safety and efficacy of the system was evaluated over a 180-day period.

In the trial, we observed performance matching that of the current Eversense 90-day product available in the United States, with a mean absolute relative difference, or MARD, of 8.5%-9.6%.

This result was achieved with reduced calibration, down to one per day, while also doubling the sensor life to 180 days.

Following the results of the PROMISE trial, on September 30, 2020, a Premarket Approval, or PMA, supplement application to extend the wearable life of the Eversense CGM System to 180 days was submitted to the FDA.

If approved by the FDA, this new product would approximately double sensor duration of Eversense in the United States, reducing by half the number of insertion and removal procedures required, and would provide more than 12 times longer sensor duration than other CGM systems available in the United States.

Following the submission of the PMA, we have received communication from the FDA advising us that the reallocation of agency resources to address Emergency Use Authorization (EUA) applications for products related to the COVID-19 public health emergency is affecting marketing application reviews, including the Eversense 180-day product.

Based on a February 19, 2021 communication, we understand that the FDA expects to assign a reviewer, and that our PMA will be placed under review no later than April 15, 2021.

Based on the passage of time and this new expectation from the FDA, we are anticipating approval no earlier than the second half of the year and note that the timing to completion and outcome of such a review is uncertain.

If we receive a positive decision and product approval, we expect to begin transitioning patients in the United States to the new 180-day Eversense product shortly thereafter.

Further reallocation of agency resources, shelter-in-place orders and other impacts from the COVID-19 pandemic are difficult to predict and could alter or delay the timing of response by the FDA regarding our submission .

In February 2022, the extended life Eversense E3 CGM system was approved by the FDA and we expect Ascensia Diabetes Care Holdings AG, or Ascensia, to begin commercializing Eversense E3 in the United States in the second quarter of 2022.

On February 26, 2020, we announced that the FDA approved a subgroup of PROMISE trial participants to continue for a total of 365 days to gather feasibility data on the safety and accuracy of a 365-day sensor.

This sub-set of 30 participants were left undisturbed for 365-days with the goal of measuring accuracy and longevity over the full 365 days.

Following information gathered from this sub-set and continued development efforts, and pending developments at the FDA relating to the ongoing COVID-19 pandemic, in the second half of 2021 we plan to seek Investigational Device Exemption, or IDE, from the FDA to explore the 365 day sensor in a clinical trial.

If the IDE is approved in a timely manner, we would target to begin enrollment of a clinical trial, which we also intend to include a pediatric population, in the first half of 2022.

In April 2020, we announced that we received regulatory approval in Europe such that the Eversense XL is no longer contraindicated for MRI, which means the sensor does not need to be removed from under the skin during MRI scanning.

We had previously obtained this indication for Eversense in the United States in 2019.

This MRI approval is a first for the CGM category as all other sensors are required to be removed during an MRI scan.

Following information gathered from this sub-set and continued development efforts and pending developments at the FDA relating to the ongoing COVID-19 pandemic, in the first half of 2022 we plan to seek Investigational Device Exemption, or IDE, from the FDA to explore the 365 day sensor in a clinical trial.

If the IDE is approved in a timely manner, we would target to begin enrollment of a clinical trial, which we also intend to include a pediatric population, in the second half of 2022.

During 2020, we initiated a new commercialization strategy and collaboration to bring our product to market.

As described in detail below, in August 2020, we entered into a collaboration and commercialization agreement with Ascensia Diabetes Care Holdings AG, or Ascensia, pursuant to which we granted Ascensia the exclusive right to distribute our 90-day Eversense continuous glucose monitoring system and our 180-day Eversense continuous glucose monitoring system worldwide, with certain initial exceptions.

While Ascensia is responsible for sales, marketing, market access, patient and provider onboarding and first level customer support, we remain responsible for product development and manufacturing, including regulatory submissions, approvals and registrations and second level customer support.

As described in detail below, in August 2020, we entered into a collaboration and commercialization agreement, or Commercialization Agreement, with Ascensia pursuant to which we granted Ascensia the exclusive right to distribute

our 90-day Eversense CGM system and our 180-day Eversense CGM system worldwide, with certain initial exceptions.

While Ascensia is responsible for sales, marketing, market access, patient and provider onboarding and first level customer support, we remain responsible for product development and manufacturing, including regulatory submissions, approvals, conformity assessment and requests for CE Certificates of Conformity and registrations and second level customer support.

2021 and Significant Recent Developments

Eversense E3 CGM System Regulatory Approval

In February 2022, the U.S.

Food and Drug Administration (“FDA”) approved the Eversense E3 CGM system for marketing and sale in the U.S.

As described in this report, Ascensia has the exclusive right to distribute the Company’s 90-day Eversense CGM system and the six-month Eversense E3 system worldwide for people with diabetes, with certain initial exceptions.

The Company and Ascensia have been designing the go-to-market strategy for the U.S.

six-month product, and the Company expects that Ascensia will begin commercializing Eversense E3 in the U.S.

in the second quarter of 2022.

As with any new product, the success of the commercial launch of the Eversense E3 product in the U.S.

will be subject to significant uncertainty and risks, and will require time to ramp up.

Key areas of strategic focus in the U.S.

commercial launch of the six month product where performance will impact the success of the launch will be:

(1) growing the installed base of users, (2) increasing patient awareness of Eversense above current levels in order to expand the population of Eversense users, through driving sales and marketing efforts on the Eversense E3 system, (3) increasing awareness and adoption of Eversense by healthcare providers, including high volume CGM prescribers, through expanded targeted marketing efforts, (4) educating patients and prescribers regarding the six-month product and its benefits relative to the 90-day product, (5) continuing to grow the base of the authorized inserters through geographically targeted efforts so that potential users locating a qualified inserter of Eversense is not an impediment to adoption, (6) timely establishing and maintaining favorable payor coverage for the product, including transitioning commercial payors from 90-day coverage to six month coverage, and (7) Ascensia’s continued organizational development of its U.S.

sales and marketing capabilities relative to CGM.

The Company and Ascensia are also developing plans for the roll-out of the Eversense E3 next generation six-month product in Europe, which, subject to receipt of regulatory approval or certification, including CE Certificates of Conformity and affixing the CE mark for the EEA, is expected to offer reduced calibration requirements from the Eversense XL six-month product currently marketed in Europe.

The roll-out of this next generation product in Europe is similarly subject to uncertainties and potential delays, including regulatory approval and certification and launch timing, and European revenues are dependent, among other things, on success of the following:

(1) Ascensia’s continued organizational development of its European sales and marketing capabilities relative to CGM, and (2) more effective tender participation, particularly in Italian markets which favor an integrated offering.

and European commercialization plans are being designed with a goal of minimizing the impact to patients, providers, and ongoing sales of Eversense CGM systems.

On January 30, 2020, the World Health Organization, or the WHO, announced a global health emergency because of a new strain of coronavirus, or COVID-19, and the risks to the international community as the virus spreads globally.

On March 11, 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally.

In response to the pandemic, many states and jurisdictions issued stay-at-home orders and other measures aimed at slowing the spread of the coronavirus.

In response to the pandemic, many states and jurisdictions have issued stay-at-home orders and other measures aimed at slowing the spread of the coronavirus.

The state of Maryland, where we are headquartered, has been affected by COVID-19.

The Governor of Maryland issued an order closing all non-essential businesses, which took effect on March 23, 2020.

Although the state of Maryland is gradually undergoing a phased reopening plan, substantially all of our workforce is still working from home either all or substantially all of the time.

Additionally, because our sensor requires an in-clinic procedure, we saw a reduction in access to clinics and sensor insertions during the initial outbreak.

During the latter half of 2020, several new order requests from our distributors led to adjustments to concession allowances previously provided to some of our customers in the United States to reflect actual product usage.

While these trends are promising, insertion volumes are still below pre-COVID-19 levels.

Additionally, the COVID-19 pandemic infection rates in the United States are still high, vaccine distribution has only just begun, and it is difficult to predict the longevity and severity COVID-19 will have on our business.

Beginning with the initial outbreak and through 2021 substantially all of our workforce is still working from home either all or substantially all of the time.

Additionally, because our sensor requires an in-clinic procedure, we saw a reduction in access to clinics and sensor insertions during multiple periods during the pandemic.

The COVID-19 pandemic infection rates in the United States are still high, vaccine distribution is ongoing, and it is difficult to predict the longevity and severity COVID-19 will have on our business.

Restructuring and Transition of Commercial Strategy

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In connection with these actions, on March 26, 2020, we reduced our workforce by approximately 60%, over half of which were sales personnel.

On August 9, 2020, we entered into a collaboration and commercialization agreement with Ascensia pursuant to which we granted Ascensia the exclusive right to distribute our 90-day Eversense continuous glucose monitoring system and our 180-day Eversense continuous glucose monitoring system worldwide for people with diabetes, with the following initial exceptions:

(i) until January 31, 2021, the territory did not include countries covered by our then existing distribution agreement with Roche Diagnostics International AG and Roche Diabetes Care GmbH, which are the Europe, Middle East and Asia, excluding Scandinavia and Israel, and 17 additional countries, including Brazil, Russia, India and China, as well as select markets in the Asia Pacific and Latin American regions;

(ii) until September 13, 2021, the territory does not include countries covered by our current distribution agreement with Rubin Medical, which are

Sweden, Norway and Denmark;

and (iii) until May 31, 2022, the territory does not include Israel.

Pursuant to the Commercialization Agreement, in the United States, Ascensia began providing sales support for the 90-day Eversense product on October 1, 2020 and the parties have been planning and making arrangements for Ascensia to ramp up sales activities and more fully assume commercial responsibilities in the second quarter of 2021.

The Eversense 180-day product is planned to be marketed upon receipt of marketing approval from the FDA.

In Germany, Italy and Switzerland, Spain, Poland and the Netherlands, Ascensia assumed commercial responsibilities for Eversense XL beginning on February 1, 2021.

For Sweden and Norway, Ascensia will assume commercial responsibilities later this year.

Ascensia is entitled to receive a portion of net revenue at specified tiered percentages ranging from the mid-teens to the mid-forty’s based on levels of global net revenues.

Ascensia is obligated to achieve specified minimum annual revenue targets and meet specified levels of sales and marketing spend in order to maintain its exclusive distribution rights.

Ascensia purchases Eversense and Eversense XL from us at negotiated prices.

We remain responsible for product development and manufacturing, including regulatory submissions, approvals and registrations and second level customer support, and Ascensia is responsible for sales, marketing, market access, patient and provider onboarding and first level customer support.

We have agreed to establish a joint alliance committee and joint marketing committee, each with equal representation from each party, in order to collaborate.

As discussed further below, on August 9, 2020, we entered into the Commercialization Agreement with Ascensia pursuant to which we granted Ascensia the exclusive right to distribute our 90-day Eversense CGM system and our 180-day Eversense CGM system worldwide for people with diabetes.

Pursuant to the Commercialization Agreement, in the United States, Ascensia began providing sales support for the 90-day Eversense product on October 1, 2020 and assumed commercial responsibilities in the second quarter of 2021.

In February 2022, the extended life Eversense E3 CGM system was approved by the FDA and we expect Ascensia to begin commercializing Eversense E3 in the United States in the second quarter of 2022.

Diabetes is a chronic, life-threatening disease for which there is no known cure.

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As a result, CGMs improve glycemic control and quality of life, particularly in patients with type 1 diabetes treated with continuous subcutaneous insulin infusion or multiple daily insulin injection therapy, and support avoidance of hypoglycemia.

Historically, the FDA and other device regulators required that CGMs be labeled and marketed as "adjunctive"

Historically, the FDA and other foreign regulatory authorities required that CGMs be labeled and marketed as "adjunctive"

to test-strip measurements, with instructions that patients confirm CGM measurements with test-strip measurements using blood obtained from fingersticks prior to self-medicating.

However, given the broader clinical indications for the use of CGM systems, including real-time alerts and multi-device integration, the FDA issued the first “non-adjunctive” label in 2016.

However, given the broader clinical

indications for the use of CGM systems, including real-time alerts and multi-device integration, the FDA issued the first “non-adjunctive” label in 2016.

In June 2019, an updated Eversense CGM system received a non-adjunctive label from the FDA and can now be used as a replacement to fingerstick glucose testing for treatment decisions.

This non-adjunctive indication also enabled our pathway to access patients on Medicare.

In November 2019, the Centers for Medicare and Medicaid Services, or CMS, finalized a national payment rate for Eversense that was recently published in the calendar year 2020 Physician Fee Schedule Final Rule.

In November 2019, the Centers for Medicare and Medicaid Services, or CMS, finalized a national payment rate for Eversense that was published in the calendar year 2020 Physician Fee Schedule Final Rule.

The Eversense CGM system became the first CGM technology to be reimbursed through the Part B Medical Services benefit for Medicare beneficiaries and expands access to our product.

In December 2020, the Centers for Medicare and Medicaid Services, or CMS, released its Calendar Year 2021 Medicare Physician Fee Schedule that establishes global payment for the device cost and procedure fees for healthcare providers across the United States.

In August 2020, the Centers for Medicare and Medicaid Services, or CMS, released its Calendar Year 2021 Medicare Physician Fee Schedule that establishes global payment for the device cost and procedure fees for healthcare providers across the United States.

This includes the establishment of national payment amounts for the three CPT© Category III codes describing the insertion (CPT 0446T), removal (0447T), and removal and insertion (0048T) of an implantable interstitial glucose sensor, which describes our Eversense CGM systems, as a medical benefit, rather than as part of the Durable Medical Equipment channel that includes other CGMs.

In December 2021, CMS released its Calendar Year 2022 Medicare Physician Fee Schedule that updates global payment for the device cost and procedure fees.

We are headquartered in Germantown, Maryland.

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Commercial Strategy

We are in the process of transitioning to selling our product globally through Ascensia from selling directly to our network of distributors and strategic fulfillment partners, who provide the Eversense CGM system to healthcare providers and patients through a prescribed request and invoice insurance payors for reimbursement, as noted above in “2020 and Recent Developments”.

Historically, we have sold our product directly to our network of distributors and strategic fulfillment partners, who provide the Eversense CGM system to healthcare providers and patients through a prescribed request and invoice insurance payors for reimbursement.

As noted above, we have now transitioned to selling our product globally through Ascensia and we expect Ascensia to begin commercializing Eversense E3 in the United States in the second quarter of 2022.

Sales of the Eversense CGM system are widely dependent on the ability of patients to obtain coverage and adequate reimbursement from third-party payors or government agencies.

Ascensia plans to leverage and target regions where we have coverage decisions for patient device use and provider insertion and removal procedure payment.

In the first quarter of 2020, we temporarily suspended commercial sales and marketing of the Eversense CGM System in the United States to new patients to solely focus our resources on supporting existing users.

Ascensia is leveraging and targeting regions where we have coverage decisions for patient device use and provider insertion and removal procedure payment.

As a result of the COVID-19 pandemic, in the first quarter of 2020, we temporarily suspended commercial sales and marketing of the Eversense CGM System in the United States to new patients to solely focus our resources on supporting existing users.

In connection with these actions, on March 26, 2020, we reduced our direct sales organization that consists of sales representatives, clinical trainers, customer care, and other specialists to educate, train, and support the patient and healthcare provider in their diabetes management with CGM systems.

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In the fourth quarter of 2020, Ascensia initiated U.S.

marketing and sales activities and full transition of commercial activities is expected in the second quarter of 2021, to include full marketing, market access, sales, healthcare provider training and frontline patient and provider support responsibilities.

Ascensia has begun expanding its U.S.

commercial organization and expects its initial U.S.

staffing to be in place by the second quarter of 2021 in support of Eversense.

marketing and sales activities and full transition of commercial activities took place in the second quarter of 2021 and included full marketing, market access, sales, healthcare provider training and frontline patient and provider support responsibilities.

Addressing reimbursement and access barriers has been a top priority for us and during 2021, we reached over 200 million covered lives in the U.S.

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that provides financial assistance to eligible patients whose insurance coverage either does not yet cover Eversense, or in cases where Eversense is covered but the patient’s co-insurance is limiting their ability to adopt Eversense.

Having played an important role in our journey to obtain broader payor policy and long-term patient retention, the Eversense Bridge Program ended on December 31, 2020.We expect Ascensia, in consultation with the company, to initiate a patient assistance program in the market once full commercial responsibility is transitioned in the near future.

Having played an important role in our journey to obtain broader payor policy and long-term patient retention, the Eversense Bridge Program ended on December 31, 2020.

In 2021, Ascensia initiated to a patient assistance program to provide financial assistance to patients on Eversense.

we expect Ascensia, in consultation with us, to initiate a broad patient assistance program for patients adopting Eversense E3.

In our overseas markets, we had entered into distribution agreements that allow third-party collaborators with direct sales forces and established distribution systems to market and promote Eversense XL primarily in the EMEA.

These distribution arrangements are in the process of being replaced by our collaboration with Ascensia.

Our exclusive distribution agreement for sales in Scandinavia and our exclusive distribution agreement with Roche Diabetes Care for

sales in the rest of the EMEA, excluding Israel and Scandinavia, and in 17 additional countries, including Brazil, Russia, India, and China, as well as select markets in the Asia Pacific and Latin American regions expire in 2021, with the Roche agreement having expired January 31, 2021.

Upon conclusion of each of these agreements, Ascensia is assuming commercialization activities in select countries where Eversense XL has already launched, beginning February 1, 2021 for Germany, Italy, Switzerland, Spain, Poland, and Netherlands.

Roche will continue to support certain transition activities for approximately six months in other markets.

The transition of Rubin markets is planned to occur later in 2021.

These distribution arrangements have been replaced by our Commercialization Agreement with Ascensia.

Our exclusive distribution agreement for sales in Scandinavia with Rubin Medical and our exclusive distribution agreement with Roche Diabetes Care for sales in the rest of the EMEA, excluding Israel and Scandinavia, and in 17 additional countries, including Brazil, Russia, India, and China, as well as select markets in the Asia Pacific and Latin American regions expired in 2021.

Upon conclusion of each of these agreements, Ascensia assumed commercialization activities in select countries where Eversense XL has already launched, beginning February 1, 2021 for Germany, Italy, Switzerland, Spain, Poland, and Netherlands.

The transition of Rubin markets began in June 2021.

Our net revenues are derived from sales of the Eversense CGM system which is sold in two separate kits:

the disposable Eversense Sensor Pack which includes the sensor, insertion tool, and adhesive patches, and the durable Eversense Smart Transmitter Pack which includes the transmitter and charger.

Distribution Agreement with Roche Diabetes Care

On May 24, 2016, we entered into an exclusive distribution agreement with Roche Diagnostics International AG and Roche Diabetes Care GmbH, or collectively, Roche.

Pursuant to the agreement, as amended, we granted Roche the exclusive right to market, sell and distribute Eversense in the EMEA, excluding Scandinavia and Israel.

In addition, Roche had exclusive distribution rights in 17 additional countries, including Brazil, Russia, India and China, as well as select markets in the Asia Pacific and Latin American regions.

On December 12, 2019, we amended the distribution agreement to lower minimum volumes for 2020 and increase pricing for the remaining period of the contract.

On November 20, 2020, we amended the distribution agreement and entered into a settlement agreement to facilitate transition to Ascensia as Roche sales concluded on January 31, 2021, including final purchases and transition support activities, and Roche’s obligation to purchase certain quantities of products at certain prices under the distribution agreement have now terminated.

The distribution rights under the agreement expired January 31, 2021, subject to Roche providing certain transition and wind-down services for approximately six months in markets where ADC is not initiating distribution.

Collaboration and Commercialization Agreement with Ascensia Diabetes Care Holdings AG

On August 9, 2020, we entered into a collaboration and commercialization agreement with Ascensia Diabetes Care Holdings AG pursuant to which we have granted Ascensia the exclusive right to distribute the Company’s 90-day Eversense continuous glucose monitoring system and our 180-day Eversense continuous glucose monitoring system worldwide for use in people with diabetes, with the following initial exceptions:

until January 31, 2021, the territory did not include countries covered by our then existing distribution agreement with Roche Diagnostics International AG and Roche Diabetes Care GmbH, which are the Europe, Middle East and Asia, excluding Scandinavia and Israel, and 17 additional countries, including Brazil, Russia, India and China, as well as select markets in the Asia Pacific and Latin American regions;

(ii) until September 13, 2021, the territory does not include countries covered by our current distribution agreement with Rubin Medical, which are Sweden, Norway and Denmark;

On August 9, 2020, we entered into a Commercialization Agreement with Ascensia Diabetes Care Holdings AG pursuant to which we have granted Ascensia the exclusive right to distribute the Company’s 90-day Eversense CGM system and our 180-day Eversense CGM system worldwide for use in people with diabetes, with the following initial exceptions:

(ii) until September 13, 2021, the territory did not include countries covered by our current distribution agreement with Rubin Medical, which are Sweden, Norway and Denmark;

and (iii) until May 31, 2022, the territory does not include Israel.

Pursuant to the Commercialization Agreement, in the United States, Ascensia began providing sales support for the 90-day Eversense product on October 1, 2020 and Ascensia ramped up sales activities and assumed commercial responsibilities for the 90-day Eversense product during the second quarter of 2021.

In February 2022, the extended life Eversense E3 CGM system was approved by the FDA and we expect Ascensia to begin commercializing Eversense E3 in the United States in the second quarter of 2022.

Ascensia will receive a portion of net revenue at specified tiered percentages ranging from the mid-teens to the mid-forty’s based on levels of global net revenues.

Ascensia is obligated to achieve specified minimum annual revenue targets and meet specified levels of sales and marketing spend.

Ascensia will purchase Eversense and Eversense XL from us at prices which have been negotiated based on parameters set forth in the commercialization agreement.

We are responsible for product development and manufacturing, including regulatory submissions, approvals and registrations and second level customer support, and Ascensia is responsible for sales, marketing, market access, patient and provider onboarding and level one customer support.

Ascensia will purchase Eversense products from us at prices which have been negotiated based on parameters set forth in the commercialization agreement.

We are responsible for product development and manufacturing, including regulatory submissions, approvals, certifications and registrations and second level customer support, and Ascensia is responsible for sales, marketing, market access, patient and provider onboarding and level one customer support.

We have agreed to establish a joint alliance committee and joint marketing committee, each with equal representation from each party, in order to collaborate.

Prior Distribution Agreement with Roche Diabetes Care

On May 24, 2016, we entered into an exclusive distribution agreement with Roche Diagnostics International AG and Roche Diabetes Care GmbH, or collectively, Roche.

Pursuant to the agreement, as amended, we granted Roche the exclusive right to market, sell and distribute Eversense in the EMEA, excluding Scandinavia and Israel.

In addition, Roche had exclusive distribution rights in 17 additional countries, including Brazil, Russia, India and China, as well as select markets in the Asia Pacific and Latin American regions.

On December 12, 2019, we amended the distribution agreement to lower minimum volumes for 2020 and increase pricing for the remaining period of the contract.

support activities, and Roche’s obligation to purchase certain quantities of products at certain prices under the distribution agreement have now terminated.

Clinical Development and Regulatory Pathway

The Eversense XL CGM system received a CE mark in Europe in September 2017 and is being sold commercially in our overseas markets.

Our PRECISE II U.S.

We affixed the CE mark to the Eversense XL CGM system in the EEA in September 2017.

The Eversense XL CGM system is also being sold commercially in our overseas markets.

Our Promise U.S.

pivotal trial was completed during 2020.

We received PMA approval from the FDA for the Eversense system in June 2018 for up to 90 days and began selling commercially in the third quarter of 2018.

In September 2019, we announced the enrollment completion for the PROMISE pivotal trial to evaluate the safety and accuracy of Eversense for a period of up to 180 days in the United States.

In September 2020, we filed with the FDA a Premarket Approval, or PMA, supplement application to extend the wearable life of the Eversense CGM System to up to 180 days.

We received a Premarket Approval, or PMA, from the FDA for the Eversense E3 system in February 2022 for up to six months and we expect Ascensia to begin commercializing Eversense E3 in the United States in the second quarter of 2022.

We are also continuing to conduct a number of post-approval and feasibility studies.

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On June 21, 2018, we received PMA approval from the FDA for the Eversense system.

We are distributing the Eversense system directly in

the United States through our own direct sales and marketing organization.

We are distributing the Eversense system directly in the United States through our own direct sales and marketing organization.

We have received Category III CPT codes for the insertion and removal of the Eversense sensor.

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180-day pivotal trial.

The trial is a prospective, single-arm, multi-center trial designed to evaluate the accuracy and safety of the Eversense system up to 180 days using the methods described above for the 90-day system.

The trial is a prospective, single-arm, multi-center trial designed to evaluate the accuracy and safety of the Eversense system up to six months using the methods described above for the 90-day system.

Over 180 subjects were enrolled in eight centers across the United States.

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This result was achieved with reduced calibration, down to one per day, while also doubling the sensor life to 180 days.

Following the results of the PROMISE trial, on September 30, a Premarket Approval Application Supplement, or PMA supplement to extend the wearable life of the Eversense CGM System to 180 days was submitted to the FDA.

If approved by the FDA, this new product would double sensor duration of Eversense in the United States, reducing by half the number of insertion and removal procedures required, and would provide more than 12 times longer sensor duration than other CGM systems available in the United States.

Following the results of the PROMISE trial, on September 30, 2020 a Premarket Approval Application Supplement, or PMA supplement to extend the wearable life of the Eversense CGM System to six months was submitted to the FDA.

As described elsewhere, we received PMA approval from the FDA for the Eversense E3 CGM system in February 2022, and we expect Ascensia to begin commercializing Eversense E3 in the United States in the second quarter of 2022.

This sub-set of 30 participants who all had sensors with the modified chemistry were left undisturbed for 365 days with the goal of measuring accuracy and longevity over the full 365 days.

Following information gathered from this sub-set and continued development efforts, and pending developments at the FDA relating to the ongoing the ongoing COVID-19 pandemic, in the second half of 2021 we plan to seek Investigational Device Exemption, or IDE, from the FDA.

If the IDE is approved in a timely manner, we would target to begin enrollment of a clinical trial, in which we also intend to include a pediatric population, in the first half of 2022.

We had previously obtained this indication for Eversense in the United States in 2019.

This MRI approval is a first for the CGM category as all other sensors are required to be removed during an MRI scan.

Following information gathered from this sub-set and continued development efforts, and pending developments at the FDA relating to the ongoing the ongoing COVID-19 pandemic, in the first half of 2022 we plan to seek Investigational Device Exemption, or IDE, from the FDA.

If the IDE is approved in a timely manner, we would target to begin enrollment of a clinical trial, in which we also intend to include a pediatric population, in the second half of 2022.

Our Technology

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All of these components work together to provide sensor glucose values, trends and alerts to a user's mobile device within 20 milliseconds.

We have designed this reliable, long-term and implantable CGM system to continually and accurately measure a person's glucose levels for up to 180 days.

Eversense requires twice daily fingerstick calibrations.

We have designed this reliable, long-term and implantable CGM system to continually and accurately measure a person's glucose levels for up to six months.

Eversense requires twice daily fingerstick calibrations through day 21 and then primarily once daily fingerstick calibrations.

In June 2019, we received FDA approval for the non-adjunctive indication for the Eversense system.

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Exceptional accuracy particularly in the low glucose range throughout the sensor life.

Longest available sensor duration at 90 to 180 days.

Longest available sensor duration at up to six months.

● Convenience :

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Patient and healthcare provider hotline support 24/7.

The sensor is approved to be inserted under the skin, in the upper arm, and measures the glucose in the interstitial fluid.

The sensor is approved and CE marked to be inserted under the skin, in the upper arm, and measures the glucose in the interstitial fluid.

These glucose levels are then communicated wirelessly to the smart transmitter.

We have designed the sensor to last up to 180 days, as compared to other currently available CGM sensors labeled for use for between seven and 14 days.

We have designed the sensor to last up to six months, as compared to other currently available CGM sensors labeled for use for between seven and 14 days.

The sensor consists of an optical system, known as a micro-fluorometer, encased in a rigid, translucent polymer capsule, which is 3.3 mm in diameter and 15 mm in length.

The capsule is coated with a glucose-indicating hydrogel that is bound to the surface of the capsule through polymerization.

This hydrogel is energized, or excited, by a light-emitting

diode, or LED, contained in the optical system of the sensor, causing the hydrogel to fluoresce, or glow.

The capsule is coated with a glucose-indicating hydrogel that

is bound to the surface of the capsule through polymerization.

This hydrogel is energized, or excited, by a light-emitting diode, or LED, contained in the optical system of the sensor, causing the hydrogel to fluoresce, or glow.

Two photodiodes within the optical system of the sensor measure the degree of fluorescence of the hydrogel, which is proportional to the level of glucose present in the interstitial fluid.

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We expect these product development initiatives to include system modifications and next generation enhancements that we believe will further increase the convenience and appeal of our products to the diabetes community.

We are focusing our future development efforts on enhancing current product offerings by reducing the twice daily calibrations to once a day calibration, and further progressing to once per week calibration.

We are focusing our future development efforts on enhancing current product offerings by reducing the once or twice daily calibrations towards a once per week calibration.

Our next generation sensor under feasibility testing now is designed to extend the sensor duration even longer at up to 365 days.

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We are in the early commercialization stages of Eversense and are focused on driving awareness and adoption of our CGM system amongst intensively managed patients and their healthcare providers.

Building strong adoption with

an implantable device requires a strong network of healthcare providers trained on the Eversense sensor placement procedure.

As described above, we are party to a commercialization agreement with Ascensia, pursuant to which we have granted Ascensia the exclusive right to distribute our 90-day Eversense CGM system and our six-month Eversense CGM system worldwide for use in people with diabetes, with certain exceptions.

In February 2022, the extended life Eversense E3 CGM system was approved by the FDA and we expect Ascensia to begin commercializing Eversense E3 in the United States in the second quarter of 2022.

In anticipation of the launch, we and Ascensia have been designing the go-to-market strategy for the U.S.

six-month product.

As a result of our strategic partnership, Ascensia is responsible for sales, marketing, market access, patient and provider onboarding and level one customer support.

We have established a joint alliance committee and joint marketing committee, each with equal representation from each party, in order to collaborate.

Building strong adoption with an implantable device requires a strong network of healthcare providers trained on the Eversense sensor placement procedure.

In the first few quarters of our commercial launch, our focus was ensuring the Endocrinology providers obtained the necessary training needed to support their diabetes patients.

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We intend to continue educating healthcare providers and people with diabetes on the advantages of Eversense compared to SMBG and other currently available CGM systems.

As a result of our strategic partnership, Ascensia will be responsible for sales, marketing, market access, patient and provider onboarding and level one customer support.

We have established a joint alliance committee and joint marketing committee, each with equal representation from each party, in order to collaborate.

Reimbursement

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commercial third-party payor community in efforts to establish coverage for Eversense.

To date, approximately 200 million people in the United States may have coverage and access to the Eversense via commercial or government (i.e., Medicare) payors.

To date, approximately 200 million people in the United States may have coverage and access to the Eversense 90-day product via commercial or government (i.e., Medicare) payors.

We believe that transitioning commercial payors from 90-day coverage to six-month coverage will be important for the successful commercialization of the Eversense E3 six-month CGM system.

Some commercial payors have denied coverage deeming Eversense as an “experimental and investigational” technology electing to wait for further clinical evidence, more safety data, or time in market.

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As a result, some patients and their healthcare provider may choose not to use Eversense on a widespread basis.

Our patient access programs and patient appeals support, including the Eversense Bridge Program, which was discontinued on December 31, 2020, have been key initiatives to expanding payor policy and acceptance through case by case review and eventual denial overturn and we anticipate Ascensia initiating select programs for this purpose.

Our patient access programs and patient appeals support, including the Eversense Bridge Program, which was discontinued on December 31, 2020, have been key initiatives to expanding payor policy and acceptance through case-by-case review and eventual denial overturn and Ascensia has continued similar programs

for this purpose.

This can be a long process with varying results in each case but is a prudent step to challenge payor positions of non-coverage given the strong evidence that supports CGM and Eversense.

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This ISO 13485:2016 certification includes design control requirements.

As a medical device manufacturer, the facilities of our sterilization and other critical suppliers are subject to periodic inspection by the FDA and corresponding state and foreign agencies.

As a medical device manufacturer, the facilities of our sterilization and other critical suppliers are subject to periodic inspection by the FDA and corresponding state and foreign regulatory agencies and Notified Bodies.

We believe that our quality systems and those of our suppliers are robust and achieve high product quality.

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Roche Diabetes Care, a division of Roche Diagnostics;

and Ascensia Diabetes Care Holdings AG.

and Ascensia.

We may also compete with companies who are developing real-time intermittent sensing devices, low cost transcutaneous CGM systems, fully implantable CGM devices and non-invasive CGM system to measure a user's glucose level.

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The key competitive factors affecting the success of Eversense are accuracy, duration, convenience, alert functionality, and customer support.

Many of the companies which we compete with have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do.

Mergers and acquisitions in the pharmaceutical, biotechnology and diagnostic industries may result in even more resources being concentrated among a smaller number of our competitors.

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The owners of these patents may assert that the manufacture, use, sale or offer for sale of our CGM sensors or CGM systems infringes one or more claims of their patents.

Furthermore, there may be additional patents issued to third parties of which we are presently unaware that may relate to aspects of our technology that such third parties could assert against us and materially and adversely affect our business.

Furthermore, there may be additional patents issued to third

parties of which we are presently unaware that may relate to aspects of our technology that such third parties could assert against us and materially and adversely affect our business.

In addition, because patent applications can take many years to issue, there may be patent applications that are currently pending and unknown to us, which may later result in issued patents that third parties could assert against us and materially and adversely affect our business.

Any adverse determination in litigations, post grant trial proceedings, including interference proceedings, at the Patent Office relating to intellectual property to which we are or may become a party could subject us to significant liabilities to third parties or require us to seek licenses from third parties, and result in the cancellation and/or invalidation of our intellectual property.

Furthermore, if a court finds that we have willfully infringed a third party's

intellectual property, we could be required to pay treble damages and/or attorney fees for the prevailing party, in addition to other penalties.

Furthermore, if a court finds that we have willfully infringed a third party's intellectual property, we could be required to pay treble damages and/or attorney fees for the prevailing party, in addition to other penalties.

Although intellectual property disputes in the medical device area are often settled through licensing or similar arrangements, costs associated with such arrangements can be substantial and often require ongoing royalty payments.

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Adverse determinations in a judicial or administrative proceeding or failure to obtain necessary licenses could prevent us from manufacturing and selling our products, which could have a significant adverse impact on our business.

We have no pending U.S.

trademark applications and 20 pending foreign trademark applications, as well as 14 U.S.

We have one pending U.S.

trademark applications and six pending foreign trademark applications, as well as 14 U.S.

trademark registrations and 132 foreign trademark registrations.

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Government Regulation

The Eversense system is a medical device subject to extensive and ongoing regulation by the FDA, CMS, the European Commission, and regulatory bodies in other countries.

The Eversense system is a medical device subject to extensive and ongoing regulation by the FDA, CMS, the European Union, competent authorities of the EEA countries, Notified Bodies and regulatory bodies in other countries.

Regulations cover virtually every critical aspect of a medical device company's business operation, including research activities, product development, contracting, reimbursement, medical communications, and sales and marketing.

In the United States, the Federal Food, Drug and Cosmetic Act, or FDCA, and the implementing regulations of the FDA govern product design and development, preclinical and clinical testing, premarket clearance or approval, product manufacturing, import and export, product labeling, product storage, recalls and field safety corrective actions, advertising and promotion, product sales and distribution, and post-market clinical surveillance.

Our business is subject to federal, state, local, and foreign regulations, such as ISO 13485, ISO 14971, FDA's Quality System Regulation, or QSR, contained in 21 CFR Part 820, and Directive 90/385/EEC concerning active implantable medical devices, as amended.

Our business is subject to federal, state, local, and foreign regulations and standards, such as ISO 13485, ISO 14971, FDA's Quality System Regulation, or QSR, contained in 21 CFR Part 820, Directive 90/385/EEC concerning active implantable medical devices and, Regulation 2017/745 on Medical Devices, as amended.

Regulation by the FDA

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There is a trend towards harmonization of quality system standards among the European Union, United States, Canada and various other industrialized countries.

The European Union, or EU, has adopted numerous directives and standards regulating the design, manufacture, clinical trials, labeling and adverse event reporting for medical devices.

Other countries, such as Switzerland, have voluntarily adopted laws and regulations that mirror those of the EU with respect to medical devices.

Devices that comply with the requirements of a relevant directive will be entitled to bear the CE conformity marking, indicating that the device conforms to the essential requirements of the applicable directives, or Essential Requirements, and, accordingly, can be commercially distributed throughout the EU.

To assist manufacturers in satisfying the Essential Requirements, the European standards organizations have prepared European standards applicable to medical devices.

These include harmonized international quality standards aimed at ensuring that medical devices are correctly designed and manufactured.

The method of assessing conformity varies depending on the class of the product, but normally involves a combination of self-assessment by the manufacturer and a third-party assessment by a "Notified Body."

Notified Bodies are entities licensed (‘notified’) by the individual European member states to provide independent certification of certain classes of medical device.

They apply for and are designated to carry out this function by the relevant national competent authorities, which carry out periodic assessment audits to determine whether the Notified Bodies continue to satisfy the necessary requirements.

A conformity assessment conducted by a Notified Body may consist of an audit of the medical device manufacturer's quality system and specific testing of the manufacturer's product to ensure that the medical device complies with the Essential Requirements.

Once the appropriate conformity assessment procedure has been completed, the manufacturer must draw up a written declaration of conformity and affix the CE mark to the device.

The device can then be marketed throughout the European Economic Area (being the EU, Norway, Iceland

and Liechtenstein) or EEA.

Notified Bodies perform surveillance and unannounced audits at the manufacturer and critical suppliers with respect to the devices covered by the certificates issued by them.

If non-conformities raised during the audits are not timely remedied by the manufacturer, the Notified Body may (partially or wholly) suspend or withdraw the certificate concerned.

Additional local requirements may apply on a country-by-country basis.

Outside of the European Union, regulatory approval would need to be sought on a country-by-country basis in order for us to market our products.

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.

In May 2017, the European Commission finalized and adopted the text of the Medical Device Regulation (EU) 2017/745, or the EU Medical Device Regulation, which will repeal and replace both Directive 93/42/EEC concerning medical devices and Directive 90/385/EEC concerning active implantable medical devices.

The majority of the provisions in the EU Medical Device Regulation were to apply from Spring 2020, however, the enforcement has been postponed by a year due to the COVID-19 pandemic.

The current CE certificate will continue to be in effect, while the Company works to ensure compliance with the EU Medical Device Regulation and transitions the CE certificate from current 90/385/EEC Directive to MDR.

On 26 May 2021, Regulation (EU) 2017/745 on Medical Devices, or the Medical Device Regulation, entered into application, repealing and replacing both Directive 93/42/EEC concerning medical devices, or MDD, and Directive 90/385/EEC concerning active implantable medical devices, or AIMD.

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

surveillance.

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

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

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

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

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

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

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

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

Specifically, a manufacturer must demonstrate that the device achieves its intended performance during normal conditions of use and 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 (e.g., product labeling and instructions for use) are supported by suitable evidence.

This assessment must be based on clinical data, which can be obtained from (1) clinical studies conducted on the devices being assessed, (2) scientific literature from similar devices whose equivalence with the assessed device can be demonstrated or (3) both clinical studies and scientific literature.

The conduct of clinical studies in the EEA is governed by detailed regulatory obligations.

These may include the requirement of prior authorization by the Competent Authorities of the country in which the study takes place and the requirement to obtain a positive opinion from a competent Ethics Committee.

This process can be expensive and time-consuming.

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

The Medical Device Regulation provides a transitional provision.

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

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

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

Other Regulatory Requirements

Even after a device receives clearance or approval and is placed in commercial distribution, numerous regulatory requirements apply.

These include:

Even after a device receives clearance, certification or approval and is placed in commercial distribution, numerous regulatory requirements apply.

These include, but are not limited to:

● establishment registration and device listing;

● QSR, which requires manufacturers, including third party manufacturers, to follow stringent design, testing, production, control, supplier/contractor selection, complaint handling, documentation and other quality assurance procedures during all aspects of the manufacturing process;

● MDR regulations, which require that manufacturers report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction were to recur;

● MDR regulations, which require that manufacturers report to the FDA, competent authorities of the EEA countries and Notified Bodies, and foreign regulatory authorities, when applicable, if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction were to recur;

● voluntary and mandatory device recalls addressing problems when a device is defective and could be a risk to health;

● corrections and removals reporting regulations, which require that manufacturers report to the FDA field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health.

● corrections and removals reporting regulations, which require that manufacturers report to the FDA, competent authorities of the EEA countries and Notified Bodies, and foreign regulatory authorities, when applicable, field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health.

Also, the FDA requires us to conduct Post Approval Studies (post-market surveillance studies) and establish and maintain a system for tracking our products through the chain of distribution to the patient level.

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Inspections may include the manufacturing facilities of our subcontractors.

Moreover, the FDA strictly regulates marketing, labeling, advertising and promotion of medical products.

Moreover, the FDA, competent authorities of the EEA countries and Notified Bodies, and foreign regulatory authorities, when applicable, strictly regulates marketing, labeling, advertising and promotion of medical products.

Medical products may be promoted only for the approved indications and in accordance with the provisions of the approved label, although physicians, in the practice of medicine, may prescribe approved medical products for unapproved indications.

Companies may also share truthful and not misleading information that is otherwise consistent with the labeling.

The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of

off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability.

The FDA, competent authorities of the EEA countries and Notified Bodies, and foreign regulatory authorities, when applicable, and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability.

In the United States, failure to comply with applicable regulatory requirements can result in enforcement actions by the FDA and other regulatory agencies.

These may include any of the following sanctions or consequences:

These may include, among other things, any of the following sanctions or consequences:

● warning letters or untitled letters that require corrective action;

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● criminal prosecution.

In the European Union, member states are responsible for enforcing the EU’s medical device rules and for ensuring that only compliant medical devices are placed on the market or put into service in their jurisdictions.

They have powers to suspend the marketing and use, or demand the recall, of unsafe or non-compliant devices.

They also have the power to bring enforcement action against companies or individuals for breaches of the device rules.

Non-compliance may also result in Notified Bodies revoking any certificate of conformity that they have issued for a device or the manufacturer’s quality system.

In the EEA, similar regulatory requirements apply once a device has been CE marked and placed on the EEA Market.

EEA countries are responsible for enforcing the EU’s medical device rules and for ensuring that only compliant medical devices are placed on the market or put into service in their jurisdictions.

In addition, similar actions and obligations may be imposed by the competent authorities of an EEA country, or a foreign regulatory authority.

If a Notified Body suspects or discovers any non-compliance, this may also result in Notified Bodies revoking, suspending or varying a CE Certificate of Conformity that they have issued for a device or the manufacturer’s quality system.

Our contract manufacturers, specification developers and some suppliers of components or device accessories, also are required to manufacture our products in compliance with current good manufacturing practice requirements set forth in the QSR.

The QSR requires a quality system for the design, manufacture, packaging, labeling, storage, installation and servicing of marketed devices, and it includes extensive requirements with respect to quality management and organization, device design, buildings, equipment, purchase and handling of components or services, production and process controls, packaging and labeling controls, device evaluation, distribution, installation, complaint handling, servicing, and record keeping.

The QSR requires a quality system for the design, manufacture, packaging, labeling, storage,

installation and servicing of marketed devices, and it includes extensive requirements with respect to quality management and organization, device design, buildings, equipment, purchase and handling of components or services, production and process controls, packaging and labeling controls, device evaluation, distribution, installation, complaint handling, servicing, and record keeping.

The FDA evaluates compliance with the QSR through periodic unannounced inspections that may include the manufacturing facilities of our subcontractors.

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HITECH also created four new tiers of civil monetary penalties and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys' fees and costs associated with pursuing federal civil actions.

Accordingly, state attorneys general (along with private plaintiffs) have brought civil actions seeking injunctions and damages resulting from alleged violations of HIPAA’s privacy and

security rules.

Accordingly, state attorneys general (along with private plaintiffs) have brought civil actions seeking injunctions and damages resulting from alleged violations of HIPAA’s privacy and security rules.

In addition, many state laws govern the privacy and security of health information in certain circumstances, many of which differ from HIPAA and each other in significant ways and may not have the same effect.

On April 5, 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 Devices Regulation will however only become applicable three years after publication in May 2020.

Once applicable, the new regulations will among other things:

● strengthen the rules on placing devices on the market and reinforce surveillance once they are available;

● establish explicit provisions on manufacturers' responsibilities for the follow-up of the quality, performance and safety of devices placed on the market;

● improve the traceability of medical devices throughout the supply chain to the end-user or patient through a unique identification number;

● set up a central database to provide patients, healthcare professionals and the public with comprehensive information on products available in the EU;

● strengthen 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.

These modifications may have an impact on the way we design and manufacture products and the way we conduct our business in the EEA.

In the European Union (and, specifically the European Economic Area) (EU/EEA), the General Data Protection Regulation (2016/679), or GDPR, went into effect on May 25, 2018 and replaced Directive 95/46/EC (the EU Privacy Directive).

In the EEA, the General Data Protection Regulation (2016/679), or GDPR, went into effect on May 25, 2018 and replaced Directive 95/46/EC (the EU Privacy Directive).

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

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The GDPR includes more stringent operational requirements for data processors and data controllers and creates additional rights for data subjects.

Additionally, in January 2020, the United Kingdom withdrew from the European Union, commonly referred to as “Brexit”.

The implications of Brexit and the future trading relationship between the United Kingdom and the EU are still uncertain and could lead to further legislative and regulatory changes.

In March 2017, the United Kingdom began the process to leave the EU by April 2019.

While the Data Protection Act of 2018, that “implements” and complements the GDPR has achieved Royal Assent on May 23, 2018 is now effective in the United Kingdom, it is still unclear whether transfer of data from the EEA to the United Kingdom will remain lawful under GDPR.

We may incur liabilities, expenses, costs, and other operational losses under GDPR and applicable EU Member States and the United Kingdom privacy laws in connection with any measures we take to comply with them.

Further, the exit of the United Kingdom, or UK, from the EU, often referred to as Brexit, has created uncertainty with regard to data protection regulation in the UK.

Specifically, the UK exited the EU on January 1, 2020, subject to a transition period that ended December 31, 2020.

The UK has implemented legislation similar to the GDPR, the UK GDPR, including the UK Data Protection Act, which provides for fines of up to the greater of 17.5 million British Pounds or 4% of a company’s worldwide turnover, whichever is higher.

Additionally, the relationship between the UK and the EU in relation to certain aspects of data protection law remains unclear following Brexit, including with respect to regulation of data transfers between EU Member States and the UK.

On June 28, 2021, the European Commission announced a decision of “adequacy” concluding that the UK ensures an equivalent level of data protection to the GDPR, which provides some relief regarding the legality of continued personal data flows from the EEA to the UK.

Some uncertainty remains, however, as this adequacy determination must be renewed after four years and may be modified or revoked in the interim.

We cannot fully predict how the Data Protection Act, the UK GDPR, and other UK data protection laws or regulations may develop in the medium to longer term nor the effects of divergent laws and guidance regarding how data transfers to and from the UK will be regulated.

Additionally, California recently enacted legislation, effective January 1, 2020, that has been dubbed the first “GDPR-like” law in the United States.

Known as the California Consumer Privacy Act, or CCPA, it creates new individual privacy rights for consumers (as that word is broadly defined in the law) and places increased privacy and security obligations on entities handling personal data of consumers or households.

The CCPA requires covered companies to provide new disclosures to California consumers, provide such consumers new ways to opt-out of certain sales of personal information, and allows for new causes of action for data breaches.

The CCPA requires covered

companies to provide new disclosures to California consumers, provide such consumers new ways to opt-out of certain sales of personal information, and allows for new causes of action for data breaches.

As currently written, the CCPA could impact our business activities and is an example of the type of activity in an evolving regulatory environment related to personal data and protected health information that could continue to affect our operations.

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In addition to FDA restrictions, there are numerous U.S.

federal and state laws pertaining to healthcare fraud and abuse, including anti-kickback laws and physician self-referral laws.

federal and state laws and equivalent third country laws pertaining to healthcare fraud and abuse, including anti-kickback laws and physician self-referral laws.

Our relationships with healthcare providers and other third parties are subject to scrutiny under these laws.

Violations of these laws are punishable by significant criminal, civil, and administrative sanctions, including, in some instances, imprisonment and exclusion from participation in federal and state healthcare programs, including the Medicare, Medicaid and Veterans Administration health programs.

Federal Anti-Kickback and Self-Referral Laws

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including a company that furnishes durable medical equipment, in which the physician has an ownership or investment interest or with which the physician has entered into a compensation arrangement.

Violation of the Stark Law could result in denial of payment, disgorgement of reimbursements received under a noncompliant arrangement, civil penalties, and exclusion from Medicare, Medicaid or other governmental programs.

Violation of the Stark Law could result in denial of payment, disgorgement of reimbursements received under a noncompliant arrangement, civil penalties, and exclusion from

Medicare, Medicaid or other governmental programs.

We believe that we have structured our provider arrangements to comply with current fraud and abuse law requirements.

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Many states have also adopted some form of anti-kickback and anti-referral laws and a false claims act, some of which apply regardless of source of payment and do not have the same exceptions as the federal laws.

We believe that

we are in conformance to such laws.

We believe that we are in conformance to such laws.

Nevertheless, a determination of liability under such laws could result in fines and penalties and restrictions on our ability to operate in these jurisdictions.

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Transparency laws regarding payments or other items of value provided to healthcare providers and teaching hospitals may also impact our business practices.

The federal Physician Payment Sunshine Act requires most medical device manufacturers to report annually to CMS financial arrangements, payments, or other transfers of value made by that entity to physicians (defined to include doctors, dentists, optometrists, podiatrists, and chiropractors) and teaching hospitals.

Beginning in 2022, applicable manufacturers also will be required to report information regarding payments and other transfers of value provided to physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, anesthesiologist assistants and certified nurse midwives during the previous year.

The payment information is made publicly available in a searchable format on a CMS website.

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Additionally, the 2020 federal spending package permanently eliminated, effective January 1, 2020, the PPACA-mandated medical device tax and the “Cadillac” tax on high-cost employer-sponsored health coverage and, effective January 1, 2021, also eliminated the health insurer tax.

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

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

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

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

Supreme Court is currently reviewing the case, although it is unknown when a decision will be made.

Further, it is unclear how the Supreme Court ruling, other such litigation, and the healthcare reform measures of the Biden administration will impact the PPACA.

On June 17, 2021, the U.S.

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

Thus, the ACA will remain in effect in its current form.

Prior to the U.S.

Supreme Court ruling, on January 28, 2021, President Biden issued an executive order that initiated a special enrollment period for purposes of obtaining health insurance coverage through the ACA marketplace.

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

It is possible that the ACA will be subject to judicial or Congressional challenges in the future.

It is unclear how such challenges and the healthcare reform measures of the Biden administration will impact the PPACA.

Congress and the Biden administration are considering additional health reform measures.

It is uncertain whether and how future legislation could affect prospects for our product candidates or what actions federal, state, or private payors for healthcare treatment and services may take in response to any such healthcare reform proposals or legislation.

Brexit and the Regulatory Framework in the United Kingdom

On January 31, 2020, the United Kingdom, or UK, formally withdrew from the EU, commonly referred to as “Brexit”.

The United Kingdom and the EU are currently in a transition period during which the United Kingdom and the EU are negotiating additional arrangements, including their future trading arrangement.

In December 2020, the U.K.

agreed on a trade and cooperation agreement that will apply provisionally after the end of the transition period until it is ratified by the parties to the agreement.

On December 31, 2020, the U.K.

passed legislation giving effect to the trade and cooperation agreement, with the E.U.

expected to formally adopt the agreement in early 2021.

The agreement sets out certain procedures for approval and recognition of medical products in each jurisdiction.

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

Pursuant to the formal withdrawal arrangements agreed between the United Kingdom and the European Union, the United Kingdom, or the UK, was subject to a transition period until

December 31, 2020, or the Transition Period, during which European Union rules continued to apply.

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

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

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

Among the changes that will now occur are that Great Britain (England, Scotland and Wales) will be treated as a "third country,"

a country that is not a member of the European Union and whose citizens do not enjoy the European Union right to free movement.

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

Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the UK determines which EU laws to replace or replicate and may create logistical complications with respect to the movement and delivery of our products, which undergo certain manufacturing steps in the United Kingdom.

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Several of our contract manufacturers are located in the UK.

Any of these effects of Brexit,

among others, could adversely affect our business, financial condition and operating results.

In the longer term, Brexit could materially impact the future regulatory regime which applies to medical devices and their approval in the UK.

Any of these effects of Brexit, among others, could adversely affect our business, financial condition and operating results.

Foreign Corrupt Practices Act

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UK Bribery Act and other anti-corruption laws

The UK Bribery Act 2010 and other applicable ant-corruption laws that apply in countries where we do business, generally prohibit us and our employees and intermediaries from authorizing, promising, offering, or providing, directly or indirectly, improper or prohibited payments, or anything else of value, to government officials or other persons to obtain or retain business or gain some other business advantage.

The UK Bribery Act 2010 and other applicable foreign anti-corruption laws that apply in countries where we do business, generally prohibit us and our employees and intermediaries from authorizing, promising, offering, or providing, directly or indirectly, improper or prohibited payments, or anything else of value, to government officials or other persons to obtain or retain business or gain some other business advantage.

Under the UK’s Bribery Act, we may also be liable for failing to prevent a person associated with us from committing a bribery offense.

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Employees and Human Capital Resources

As of December 31, 2020, we had 82 employees, of whom over half hold Ph.D., M.D., master’s degree or other post-graduate degree, and all of whom are located in the United States.

The majority of employees are in operations and research and development positions aligned with our corporate focus.

We believe that our future success largely depends upon our continued ability to attract and retain highly skilled and qualified employees who share in our mission to transform lives in the global diabetes community with differentiated, long-term implantable glucose monitoring technology.

As of December 31, 2021, we had 89 employees, of whom over half hold Ph.D., M.D., master’s degree or other post graduate degrees, and all of whom are located in the United States.

Most employees are in operations and research and development positions aligned with our corporate focus of developing and manufacturing glucose monitoring products.

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

We consider our relationship with our employees to be good.

We compete in the highly competitive medical technology industry.

We believe that our future success largely depends upon our continued ability to attract and retain highly skilled employees, as well as highly qualified management and technical personnel.

Employee engagement is important to us and we focus on continuously enhancing our corporate culture and individual development programs.

We have surveyed our employees around culture, engagement, work environment, communication and other topics and work to incorporate and respond to their feedback.

We expect to conduct similar survey and response efforts in the future.

We conduct frequent company calls in an effort to update all employees on what is happening in various departments to ensure our employees understand our strategic vision as well as our day-to-day objectives.

We provide our employees with market competitive pay and bonuses, opportunities for equity ownership, professional development and training programs that enable continued learning and growth and a robust employment package that seek to promote well-being across all aspects of our employees’ lives, including health care, retirement planning and paid time off.

Our equity plans include an employee stock purchase plan and restricted stock units granted under our broad-based stock incentive programs.

Through our history of technological innovation, we appreciate the importance of retention, growth and development of our employees.

We continue to be committed to an inclusive culture which values diversity, equality, opportunity, and respect.

Employee engagement is important to us, and we focus on continuously enhancing our corporate culture.

In 2021, our employees updated our core values by providing input through workshops and as a result we launched, “It Just Makes Sense,” to describe how our employees are living our corporate values.

Customer Inspired emphasizes how we put the customer first while we use our talents, passion, empathy, and hard work to build technology solutions for the unmet needs of our customers.

Game-Changing Innovation affects everything we do from how we think, design, and manufacture advanced technology that makes a difference.

Learn Fast highlights our respect for the process of discovery and supports intelligent risk-taking knowing that all outcomes are learning opportunities to iterate and improve.

Thrive Together reflects the deep respect and trust in the diversity of our backgrounds, knowledge, skills, ideas and capabilities and our belief in each other and our partners to drive success.

Get It Done represents working with a sense of urgency to go above and beyond to get the job done right through quality, compliance, and timeliness.

We continue to survey our employees around culture, engagement, work experience, communication and other topics and incorporate and respond to their feedback.

We will continue to conduct similar surveys and response efforts in the future.

We conduct frequent company calls to update all employees on what is happening in various departments to ensure our employees understand our strategic vision as well as our day-to-day objectives.

After each meeting, we hold separate open question and answer sessions that give our employees an opportunity to question or comment on anything that is on their minds.

Diversity, Equity, and Inclusion

Our success thrives on the diversity of backgrounds, knowledge, skills, ideas, and capabilities within our workforce.

We aspire to create a diverse and inclusive culture that reflects the diversity of the customers we serve and fosters an environment where all employees feel welcomed, respected, and valued.

At the end of 2021, our employee base was comprised of approximately one third female and two thirds male.

We work to support our goals of diversifying our workforce through recruiting, retention, people development, and inclusion.

Health and Safety

We are committed to the health and safety of our employees and have safety training programs that ensure our workforce know how to do their jobs safely and in compliance with laws and regulations.

We operate in modern, efficient, and safe facilities, and have minimal accident and injury rates.

In response to COVID-19, we organized an internal cross-functional task force to manage our response to the pandemic and maintain business continuity while aligning with safety protocols recommended by the World Health Organization (WHO) , the U.S.

Centers for Disease Control and Prevention (CDC), and other local health agencies.

In addition, to ensure the safety of our essential employees who work in our facilities during the pandemic, we implemented social distancing requirements and provided masks, hand sanitizer, and other personal protective equipment (PPE).

Organization Development

We are committed to attracting, developing, and retaining employees by promoting an environment to continuously develop and learn.

As part of our performance management process, all levels of employees are formally required to meet with their managers at least quarterly to receive feedback on their established objectives, identify opportunities for skill development, and discuss opportunities to support their career goals.

During 2021, the executive team spent substantial time meeting routinely for strategic, operational, and organizational planning.

Many of these meetings were focused on organization development including succession planning and the identification of high potential and high performing individuals to create development plans to ensure we foster and retain top talent.

We encourage professional certification and continuing education by reimbursement for professional certification classes, testing, maintenance and tuition reimbursement of up to $5,250 annually.

We continue to evaluate and enhance our learning delivery to meet the needs of our workforce.

Total Rewards

We provide competitive compensation and benefits to attract and retain the best people.

We engage nationally recognized compensation and benefits consulting firms to evaluate our total rewards programs and to provide benchmarking against our peers within the industry.

We provide our employees with market competitive pay and bonuses.

In 2021, we implemented a year-end market adjustment review process to ensure we maintain our competitive pay and pay equity between active employees and new hires and to align to the highly competitive labor market.

As a result of this review process, we made market adjustments to many of our employees effective January 1, 2022, to ensure pay equity between existing and new hires and to better position us to retain our valuable employees.

Annual increases and incentive compensation are based on merit and documented through our performance management process as part of our annual review procedures.

All employees are issued stock options and/or restricted stock units under our broad-based stock incentive programs.

We offer an employee stock purchase program to all employees.

Finally, we offer comprehensive benefits to all eligible employees, including health insurance, paid time off, a retirement plan with company match, health savings accounts, flexible spending accounts, life and disability coverage, voluntary accident, and critical illness.

Corporate Information

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In addition to the information contained in this Annual Report, information about us can be found on our website.

Our website and information included in or linked to our website are not part of this Annual Report.

Information contained in, or accessible through, our website is not a part of this Annual Report on Form 10-K, and the inclusion of our website address in this prospectus is only as an inactive textual reference.

Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge through our website as soon as reasonably practicable after they are electronically filed with or furnished to the Securities and Exchange Commission, or SEC.

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

What changed 10-K

Item 1. Business