What changed in this filing

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Item 1A. Risk Factors

2020-08-07 compared with 2020-05-06 · 4 added, 177 removed, 1 unchanged (99% of the section changed)

Investing in our common stock involves a high degree of risk.

For a detailed discussion of the risks that affect our business, please refer to

the section titled Item 1A.

Risk Factors in our 2019 Form 10-K and the additional risks below.

The COVID-19 pandemic may also have the effect of heightening

many of the other risks described in the section titled Item 1A.

Risk Factors in our 2019 Form 10-K, such as risks related to our need to raise additional funding, fluctuation of our quarterly

financial results, our ability to continue to educate surgeons, transplant centers and private payors, our manufacturing facilities, our information technology infrastructure, our foreign operations, and our ability to obtain and maintain regulatory

approvals and qualifications.

Risks Related to Our Business and Industry

The outbreak of the novel strain of coronavirus (COVID-19) impacts our business, financial

condition, operating results, cash flows and prospects.

In December 2019, a novel strain of coronavirus (COVID-19) emerged in Wuhan, Hubei Province, China.

Less than four months later, in March 2020, the World Health Organization declared COVID-19 a pandemic.

While initially the

outbreak was largely concentrated in China and caused significant disruptions to its economy, the virus has now spread to many other countries and regions, and every state within the United States, including Massachusetts, where our primary offices

and manufacturing facility are located.

The rapid spread of the virus has led to the implementation of various responses, including

government-imposed quarantines, including shelter-in-place mandates, sweeping restrictions on travel, mandatory shutdowns for

non-essential businesses, requirements regarding social distancing, and other public health safety measures, as well as reported adverse impacts on healthcare resources, facilities and providers across the

United States and in other countries.

Impacts to our business as a result of COVID-19 include the

temporary disruption of transplant procedures at many of the organ transplant centers who purchase OCS products;

disruptions to our manufacturing operations and supply chain caused by facility closures, reductions in operating hours, staggered

shifts and other social distancing efforts;

labor shortages;

decreased productivity and unavailability of materials or components;

restrictions on or delays of our clinical trials and studies;

limitations on our employees and customers

ability to travel;

and delays in product installations, trainings or shipments to and from affected countries and within the United States.

In response to the pandemic, healthcare providers have, and may need to further, reallocate resources, such

as physicians, staff, hospital beds and intensive care unit facilities, as they prioritize limited resources and personnel capacity to focus on the treatment of patients with COVID-19 and implement limitations

on access to hospitals and other medical institutions due to concerns about the potential spread of COVID-19 in such settings.

These actions significantly delay the provision of other medical care such as

organ transplantation and reduce the number of transplant procedures that are performed, which negatively impacts our revenue and clinical trial activities.

These measures and challenges may continue for the duration of the COVID-19 pandemic, which is highly uncertain, and may significantly reduce our revenue and cash flows while the pandemic continues.

An adverse impact on the volume and availability of transplant procedures impacts our clinical trials and enrollment in our post-approval

studies, and the COVID-19 pandemic has impacted operations at the FDA and other health authorities, resulting in delays of reviews and approvals, including with respect to our OCS Heart PMA application, and

may affect other potential PMA applications.

Additionally, to protect the health of our employees and their families, and our

communities, and in accordance with direction from state and local government authorities, we have restricted access to our facilities to personnel and third parties who must perform critical activities that must be completed on-site, limited the number of such personnel that can be present at our facilities at any one time, and requested that most of our personnel work remotely.

As a result, our sales and clinical adoption team is

operating at reduced capacity and restricted in visiting many transplant centers in person.

Customer delays or reductions in capital expenditures and operating budgets also have a negative impact on our product sales.

In addition, we have

temporarily reduced the manufacturing and distribution of our OCS products at our facility in Andover, Massachusetts.

In the event that governmental authorities were to further modify current restrictions, our employees conducting manufacturing

activities may not be able to access our manufacturing facilities, and our core activities may be significantly limited or curtailed, possibly for an extended period of time.

We also may be faced with limitations in employee resources that would

otherwise be focused on our commercial, manufacturing or clinical activities, including because of sickness of employees or their families or the desire of employees to avoid contact with large groups of people.

The COVID-19 pandemic has also impacted, and may

continue to impact, our third party suppliers, including through the effects of facility closures, reductions in operating hours, staggered shifts and other social distancing efforts, labor shortages, decreased productivity and unavailability of

materials or components.

While we maintain an inventory of finished products and raw materials used in our OCS products, a prolonged pandemic could lead to shortages in the raw materials necessary to manufacture our products.

The extent to which COVID-19 impacts our operations and those of our third-party partners will depend

on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the pandemic, additional or modified government actions, new information which may emerge concerning the severity and incidence of COVID-19 and actions to contain the virus or treat its impact.

In particular, the speed of the continued spread of COVID-19 globally, and the magnitude of interventions

to contain the spread of the virus, such as government-imposed quarantines, including shelter-in-place mandates, sweeping restrictions on travel, mandatory shutdowns for

non-essential businesses, requirements regarding social distancing, and other public safety measures, will determine the impact of the pandemic on our business, financial condition, operating results, cash

flows and prospects.

If we experience a prolonged disruption in our manufacturing, supply chains, clinical trial or commercial operations, or if demand for our products is significantly reduced as a result of the

COVID-19 pandemic, we would expect to experience a material adverse impact on our business, financial condition, results of operations and prospects.

Additionally, the extent and duration of the impact of the COVID-19 pandemic on our stock price and on

those of other companies in our industry is highly uncertain and may make us look less attractive to investors and, as a result, there may be a less active trading market for our common stock, our stock price may be more volatile, and our ability to

raise capital could be impaired, which could in the future negatively affect our liquidity and financial position.

Risks Related to Government

If we fail to adequately respond to FDA follow-up inquiries or to obtain or

maintain necessary FDA approval for each use of the OCS, or if such approval is delayed, or if we fail to maintain the CE Mark in the European Union, we will not be able to commercially sell and market the OCS.

The OCS products are medical devices subject to extensive regulation in the United States by the FDA and other federal, state and local

The FDA regulates the design, development, testing, manufacturing, labeling, selling, promoting, distributing, importing, exporting and shipping of the OCS.

We have obtained PMA approval for the OCS Lung for both the preservation of

donor lungs currently utilized for transplantation and donor lungs that are currently unutilized for transplantation, but the OCS has not yet attained PMA approval for preservation of heart and liver donor organs.

In the European Union, we have the

right to affix a CE Mark for the sale of the OCS Lung, OCS Heart and OCS Liver for lung, heart and liver transplants, respectively.

Our notified body, BSI is based in the Netherlands and issues the certificates that allow CE marking of the OCS

In the United States, before we can market the OCS products for each organ, we must first receive PMA approval from the FDA.

This process can be expensive and lengthy and entail significant costs.

The process of obtaining PMA approval requires significant clinical trial data.

It generally takes one year, or even longer, from the time the PMA application is submitted to

the FDA until an FDA action date.

The COVID-19 pandemic time periods may result in extension of timelines.

Despite the time, effort and cost involved in this process, the FDA might not approve the OCS products

for use in preservation of donor hearts, livers, or other organs.

Furthermore, unforeseen requirements or delays in obtaining clearances

or approvals from the FDA for any future products could result in unexpected and significant costs for us and consume managements time and other resources.

The FDA could ask us to supplement our submissions, collect additional non-clinical data, conduct additional clinical trials or engage in other costly and time-consuming actions, or it could simply deny our PMA application or, if we were to seek any 510(k) clearance for a product,

issue a not substantially equivalent determination for a 510(k) device.

For example, in 2015, we voluntarily withdrew our original PMA application for the OCS Heart in an effort to expand our data to include OCS Heart EXPAND Trial results as well as

to supplement our OCS Heart PROCEED II Trial results with long-term follow-up data that was not collected as part of the original trial protocol.

In addition, even if we obtain PMA approval, the approval could

be withdrawn or other restrictions imposed if post- market data demonstrate safety issues or inadequate performance.

For 510(k) cleared devices, FDA can use its enforcement authorities to require removal of a device from the market in case of safety

We are currently investigating the safety and effectiveness of the OCS in multiple

investigational device exemption, or IDE, investigations.

Specifically, we recently completed enrollment in a pivotal trial under IDEs that investigate the safety and effectiveness of the OCS Liver for the preservation of donor livers that are

currently utilized and currently unutilized for transplantation.

Further, we received IDE approval for the Continued Access Protocol for this trial.

We also received IDE approval for a study of OCS Liver for certain donor livers that are donated

after circulatory death that have extended warm ischemia time or older donor age.

In addition, we completed an IDE pivotal trial of the OCS Heart for donor hearts that are currently unutilized for transplantation and received IDE approval for the

Continued Access Protocol for this trial.

We also received IDE approval for a study of OCS Heart for donor hearts that are donated after circulatory death.

We intend to use data from the clinical trials we are conducting or have finished conducting

under IDEs to support our applications for PMA approvals for the OCS Heart and OCS Liver.

As is typical to the PMA review process, during

the course of its initial PMA review and in most cases within 90 calendar days of the companys PMA filing date, the FDA communicates issues that it has identified and views as deficiencies through a substantive interaction, which in most cases

That letter is technically referred to as a major deficiency letter, and it provides the applicant with an opportunity to address the FDAs questions.

After completing its review of a PMA application, the FDA will take

one of the following actions:

an approval, an approvable letter, a not approvable letter, or, in rare instances, a denial.

We have received a major deficiency letter for each PMA application that we have submitted to the FDA and we

believe our responses have been thorough and comprehensive.

Regarding the OCS Heart PMA currently under review, the FDA has communicated that it will convene an advisory committee of experts from outside the FDA to review and evaluate our OCS Heart

PMA application and provide recommendations to the FDA as to the safety, effectiveness, risk and benefit of the device.

It is not uncommon for the FDA to seek advice from an outside expert panel when considering an application for a novel

The FDA ultimately decides whether to approve or disapprove the PMA application and may or may not follow the advisory committees recommendation.

Although the FDA had scheduled an advisory committee meeting regarding our OCS

Heart PMA application in the second quarter of 2020, due to the COVID-19 pandemic the advisory committee meeting has been postponed and we currently anticipate that an advisory committee for our OCS Heart PMA

application will be convened in the second half of 2020.

The panel may provide unfavorable recommendations to the FDA with regard to the PMA application, and the FDA may follow such recommendations.

Even if the panel recommendations are favorable,

the FDA could determine that the data from our clinical trials does not support PMA approval or claims we wish to make, or the FDA could require us to gather significant additional clinical data or conduct additional

non-clinical testing.

The approval process involving the OCS for each organ is subject to many of

the same risks and uncertainties.

If we are not able to obtain the necessary regulatory approvals for the OCS, or approvals or clearances for future products on a timely basis or at all, our financial condition and results of operations would

suffer, possibly materially, and our business might fail.

Even if the FDA grants PMA approval for the OCS Heart and OCS Liver for preservation of donor hearts and livers for transplantation, respectively, the claims approved by the FDA may be

significantly narrower than those we are seeking.

We have CE Marks for each of the OCS Heart, the OCS Lung, and the OCS Liver, which were

renewed in September 2017.

These CE Marks are valid for five years, so they will expire in September 2022.

In order to be able to continue to use the CE Mark in the same manner after May 2021, we will have to meet the conditions set out in the

transitional provisions in the Medical Devices Regulation (Regulation 2017/745), or the Medical Devices Regulation.

Before expiry of these certificates, we will need to apply for their re-certification under

the new Medical Devices Regulation.

We might not be able to continue to use the CE Mark for any current use of the OCS.

we are not able to obtain re-certification of our products for their

we are not able to do so in time before the certificates expire;

our technical files for our products do not meet the new (and more stringent) requirements under the Medical

Devices Regulation;

any variation in the uses for which the CE Mark has been affixed to the OCS requires us to perform further

research or to modify the technical documentation required to affix the CE mark, our revenues and operating results could be adversely affected and our reputation could be harmed.

Healthcare policy changes, including recently enacted or potential future legislation reforming the U.S.

healthcare system, could harm

our business, financial condition and results of operations.

In the United States, there have been and continue to be a number of

legislative initiatives to contain healthcare costs.

For example, the Affordable Care Act, which was enacted in 2010:

established a new Patient-Centered Outcomes Research Institute to oversee and identify priorities in comparative

clinical effectiveness research in an effort to coordinate and develop such research;

implemented payment system reforms, including a national pilot program on payment bundling to encourage

hospitals, physicians and other providers to improve the coordination, quality and efficiency of certain healthcare services through bundled payment models;

expanded the eligibility criteria for Medicaid programs.

We do not yet know the full impact that the Affordable Care Act, and more recent measures impacting the healthcare system, will have on our

The taxes imposed by the Affordable Care Act may result in decreased profits to us, lower reimbursement by payors to hospitals and transplant centers, and/or reduced medical procedure volumes, all of which may have a material adverse

effect on our business, financial condition and results of operations.

The Trump Administration and the U.S.

Congress may take further action regarding the Affordable Care Act, including, but not limited to, repeal or replacement.

Most recently, the

Tax Cuts and Jobs Acts was enacted which, among other things, removes penalties for not complying with the individual mandate to carry health insurance.

Additionally, all or a portion of the Affordable Care Act and related subsequent legislation may

be modified, repealed or otherwise invalidated through judicial challenge, which could result in lower numbers of insured individuals, reduced coverage for insured individuals and adversely affect our business.

In addition, other legislative changes have been proposed and adopted since the Affordable Care Act was enacted.

The Budget Control Act of

2011, for example, reduced Medicare payments to providers by 2% per fiscal year, and will remain in effect through 2030 (except for the period from May 1, 2020 through December 31, 2020, when no reduction will occur) unless additional Congressional

action is taken.

The American Taxpayer Relief Act of 2012 also reduced Medicare payments to several providers, including hospitals, and increased the statute of limitations period for the government to recover overpayments to providers from three to

The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), repealed the formula by which Medicare made annual payment adjustments to physicians and replaced the former formula with fixed annual updates and a new system

of incentive payments that are based on various performance measures and physicians participation in alternative payment models such as accountable care organizations, which took effect in 2019.

It is unclear what effect new quality and

payment programs, such as MACRA, may have on our business, financial condition, results of operations or cash flows.

We expect additional

state and federal healthcare policies and reform measures to be adopted in the future, including following the 2020 presidential election, any of which could limit reimbursement for healthcare products and services or otherwise result in reduced

demand for the OCS or additional pricing pressure and have a material adverse effect on our industry generally and on our customers.

Any changes of, or uncertainty with respect to, future reimbursement to hospitals and transplant centers could

affect demand for the OCS, which in turn could have a material adverse effect on our business, financial condition and results of operations.

For a detailed discussion of the risks that affect our business, please refer to the section titled “Item 1A.

Risk Factors” in each of our 2019 Form 10-K and our Quarterly Report on Form 10-Q for the quarterly period ended March 30, 2020 (“2020 Q1 Form 10-Q”).

The COVID-19 pandemic may also have the effect of heightening many of the other risks described in the section titled “Item 1A.

Risk Factors” in each of our 2019 Form 10-K and 2020 Q1 Form 10-Q, such as risks related to our need to raise additional funding, fluctuation of our quarterly financial results, our ability to continue to educate surgeons, transplant centers and private payors, our manufacturing facilities, our information technology infrastructure, our foreign operations, and our ability to obtain and maintain regulatory approvals and qualifications.

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-Q

Item 1A. Risk Factors