What changed in this filing

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Item 1A. Risk Factors

2023-11-01 compared with 2023-08-03 · 84 added, 70 removed, 119 unchanged (56% of the section changed)

Risk Factors.

Below are material changes to the risk factors set forth under the caption “Risk Factors” in Part II, Item 1A of the Annual Report, which are incorporated herein by reference.

The risks described in the Annual Report and below are not the only ones we face.

Except as set forth below, we are not aware of any material changes to the risk factors set forth under the caption “Risk Factors” in Part II, Item 1A of the Annual Report and Part II, Item 1A of the Quarterly Report for the quarterly period ended June 30, 2023, which are incorporated herein by reference.

The risks described in the Annual Report, in the Quarterly Report for the period ended June 30, 2023, and below are not the only ones we face.

Additional risks that we currently do not know about or that we currently believe to be immaterial may also impair our business, financial condition, operating results, liquidity, and future prospects.

Risks Related to Our Indebtedness

An event of default has occurred under the indenture governing our 1.50% Convertible Senior Notes due 2025

On or about October 24, 2023, we were notified that additional interest has been accruing on the Convertible Senior Notes (“Notes”) since May 2021 pursuant to the terms of the indenture, as a result of our failure to timely remove the restrictive legends on the Notes and switch the Notes to an unrestricted CUSIP.

This additional interest continues to accrue at a rate of 0.50% per annum on the outstanding principal amount of the Notes, and as of November 1, 2023 amounts to approximately $3.2 million in the aggregate.

The overdue unpaid interest itself accrues interest at a rate of 2.50% per annum.

We have deposited the full amount for these payments with the trustee for the Notes and are coordinating with the trustee for the payments to be completed as soon as reasonably practicable in the fourth quarter of 2023.

However, the failure to pay these overdue amounts constitutes an event of default under the indenture, and the trustee or the holders of at least 25% of the outstanding principal amount of Notes can elect to declare all outstanding amounts under the Notes immediately due and payable while this event of default is continuing.

Early repayment of the Notes would likely significantly impact our liquidity and financial condition, which could have a material adverse effect on our business.

In addition, we cannot access funds under our $50.0 million Line of Credit due to the event of default under the indenture governing the Notes.

Risks Related to Legal and Intellectual Property

We are the subject of a putative securities class action lawsuit, and additional securities litigation may be brought against us in the future.

On September 8, 2023, a purported stockholder of the Company filed a putative securities class action complaint (captioned Lowe v.

Tandem Diabetes Care, Inc., et al, Case No.

23-cv-1657) in the United States District Court for the Southern District of California against us and certain of our current executive officers.

The complaint generally alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, by failing to properly account for and disclose the full impact that COVID-19, inflation, and the sales of competitors’ products were having on our sales and revenue.

The complaint seeks unspecified monetary damages and other relief.

It is possible that additional lawsuits will be filed, or allegations made by stockholders, with respect to these same or other matters and also naming us and/or our officers and directors as defendants.

Although we intend to vigorously defend against this claim, there is no guarantee that we will prevail.

Accordingly, we are unable to determine the ultimate outcome of this lawsuit or determine the amount or range of potential losses associated with the lawsuit.

While we carry liability insurance, there is no assurance that any losses we incur in connection with the current lawsuit or any future lawsuit will be covered or that coverage, if any, will be sufficient.

In addition, the current lawsuit and similar future litigation could result in substantial costs and a diversion of management’s attention and resources, which could harm our business.

Risks Related to Our Business and Industry

Competitive products, therapeutic techniques, or other technological developments and breakthroughs for the monitoring, treatment or prevention of diabetes may render our products obsolete or less desirable.

Our ability to grow our business and achieve our strategic objectives will depend, among other things, on our ability to develop and commercialize products for the treatment of diabetes that offer distinct features and functionality, are easy-to-use, provide superior treatment outcomes, receive adequate coverage and reimbursement from third-party payors, and are otherwise more appealing than available alternatives.

Our primary competitors, as well as a number of other companies and medical researchers are pursuing new delivery devices, delivery technologies, therapeutic techniques, sensing technologies, treatment techniques, procedures, drugs and other therapies for the monitoring, treatment and prevention of diabetes.

Any breakthroughs in diabetes monitoring, treatment or prevention could reduce the potential market for our products or render our products obsolete altogether, which would significantly reduce our sales or cause our sales to grow at a slower rate than we currently expect.

In addition, even the perception that new products may be introduced, or that technological or treatment advancements could occur, could cause consumers to delay the purchase of our products.

Because the insulin-dependent diabetes market is large and growing, we anticipate companies will continue to dedicate significant resources to developing competitive products and technologies.

The introduction by competitors of products that are or claim to be superior to our products may create market confusion that may make it difficult to differentiate the benefits of our products over competitive products.

In addition, some of our competitors employ aggressive pricing strategies, including the use of discounts, rebates, low-cost product upgrades or other financial incentives that could adversely affect sales of our products.

If a competitor develops a product that competes with or is perceived to be superior to our products, or if competitors continue to utilize strategies that place downward pressure on pricing within our industry, our sales may decline, our operating margins could be reduced and we may fail to meet our financial projections, which would materially and adversely affect our business, financial condition and operating results.

Moreover, we have designed our hardware products to resemble modern consumer electronic devices to address certain embarrassment and functionality concerns consumers have raised with respect to traditional pumps.

Similarly, our newer mobile software applications are being designed to incorporate features and functions that are common to other consumer-oriented applications.

These consumer industries are themselves highly competitive, and characterized by continuous new product introductions, rapid developments in technology, and subjective and changing consumer preferences.

If, in the future, consumers cease to view our products as contemporary or convenient as compared to then-existing consumer technology, our products may become less desirable.

Governments outside the United States tend to impose strict price controls, reimbursement approval and rebate policies, which may adversely affect our ability to generate revenue.

In some countries, particularly EU countries and EFTA member states, the pricing, reimbursement and rebates of health products is subject to governmental control, and in such countries, there can be considerable pressure by governments and other stakeholders on prices, as well as reimbursement and rebates.

If reimbursement of our products is unavailable or limited in scope or amount or if pricing or rebates are set at unsatisfactory levels in any such country, our prospects for generating revenue outside of the United States, if any, could be adversely affected and our business could be harmed.

For example, in August 2023, a rebate agreement with the French Comité économique des produits de santé (CEPS) for sales of our t:slim X2 with Control-IQ pump in France went into effect.

The rebate agreement with CEPS provides for specified reimbursements and requires specified rebates be paid, and we are currently in the process of determining the impact and allocation of such reimbursements and rebates under the agreement.

While we currently cannot estimate the amount of such reimbursements and rebates that will be allocable to us, we may ultimately determine that we need to pay all or a portion of the rebates.

Any such rebates that we are required to pay could adversely affect our ability to generate revenue from sales of t:slim X2 with Control-IQ in France.

Risks Related to Privacy and Security

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We rely on such systems to effectively store, process and transmit confidential, personal, or other sensitive data, including health information, proprietary sales and marketing data, accounting and financial information, manufacturing and quality records, inventory management data, product development tasks, research and development data, customer service and technical support information.

These systems and the underlying data are vulnerable to damage or interruption from a number of causes, including earthquakes, fires, floods and other natural disasters, terrorist attacks, attacks by computer viruses or hackers, malware, ransomware or other destructive software, cyber-attacks, social-engineering attacks, malicious code, denial-of-service attacks, credential harvesting, supply chain attacks, power losses, and computer system, data network failures, and other similar threats.

These systems and the underlying data are vulnerable to damage or interruption from a number of causes, including earthquakes, fires, floods and other natural disasters, terrorist attacks, attacks by computer viruses or hackers, malware, ransomware or other destructive software, cyber-attacks, social-engineering attacks (including phishing and deep fakes, which may be increasingly more difficult to identify as fake), malicious code, denial-of-service attacks, credential harvesting, supply chain attacks, power losses, and computer system, data network failures, and other similar threats.

Cyber-attacks, malicious internet-based activity, online and offline fraud, and other similar activities are prevalent and continue to rise, are increasingly difficult to detect, and come from a variety of sources, including traditional computer “hackers,” threat actors, “hacktivists,” organized criminal threat actors, personnel (such as through theft or misuse), sophisticated nation states, and nation-state-supported actors.

Some actors now engage and are expected to continue to engage in cyber-attacks, including without limitation nation-state actors for geopolitical reasons and in conjunction with military conflicts and defense activities.

Threat actors may continue to develop and use more sophisticated tools and techniques (including AI) that are specifically designed to circumvent security controls, evade detection, and obfuscate forensic evidence, making it more difficult for us to identify, investigate and recover from incidents.

Notably, severe ransomware attacks are becoming increasingly prevalent and can lead to significant interruptions in our operations, loss of sensitive data and income, reputational harm, and diversion of funds.

Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments.

Additionally, to offer our products to our customers and operate our business, we use a number of products and services, such as IT networks and systems, including those we own and operate as well as others provided by third-party providers.

Our ability to provide our products could be interrupted if these systems were impacted by a ransomware or other cyber-attack.

Should any of the risks described herein occur, it could also result in the loss, theft, misuse, unauthorized disclosure, or unauthorized access of such sensitive information, which could lead to significant reputational or competitive harm, litigation involving us or our business partners, regulatory proceedings, or substantial liabilities, fines, penalties or expenses.

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In addition to experiencing a security incident, third parties may gather, collect, or infer sensitive information about us from public sources, data brokers, or other means that reveals competitively sensitive details about our organization and could be used to undermine our competitive advantage or market position.

The failure of our or our service providers’ information technology systems or our pumps’ software or other mobile or cloud applications to perform as we anticipate, or our failure to effectively identify, investigate and mitigate potential threats through ongoing maintenance and enhancement of software applications, information technology systems and privacy policies and controls, could disrupt our entire operation or adversely affect our software products.

For example, we market our Tandem Device Updater as having the unique capability to deploy software updates to our pumps, which may allow customers remote access to new and enhanced features.

The failure of our Tandem Device Updater to provide software updates as we anticipate, including as a result of our inability to secure and maintain necessary regulatory approvals, the inability of our pumps to properly receive software updates, errors or viruses embedded within the software being transmitted, or the failure of our customers to properly use the system to complete the update, could result in decreased sales, increased warranty costs, and harm to our reputation, any of which could have a material adverse effect on our business, financial condition and operating results.

Our sensitive information could be leaked, disclosed, or revealed as a result of or in connection with our employee’s, personnel’s, or vendor’s use of generative artificial intelligence (“AI”) or machine learning (“ML”) technologies (collectively, “AI/ML” technologies).

Any sensitive information (including confidential, competitive, proprietary, or personal data) that we input into a third-party generative AI platform could be leaked or disclosed to others, including if sensitive information is used to train the third parties’ AI model.

Additionally, where AI/ML technologies ingests personal data and makes connections using such data, those technologies may reveal other personal or sensitive information generated by the model.

Moreover, AI models may create flawed, incomplete, or inaccurate outputs, some of which may appear correct.

This may happen if the inputs that the model relied on were inaccurate, incomplete or flawed (including if a bad actor “poisons” the AI with bad inputs or logic), or if the logic of the AI is flawed (a so-called “hallucination”).

We may use AI/ML outputs to make certain decisions.

Due to these potential inaccuracies or flaws, the model could be biased and could lead us to make decisions that could bias certain individuals (or classes of individuals), and adversely impact their rights, employment, and ability to obtain certain pricing, products, services, or benefits.

If such AI-based outputs are deemed to be biased, we could face adverse consequences, including exposure to reputational and competitive harm, customer loss, and legal liability.

We may be subject to stringent and evolving U.S.

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Our actual or perceived failure to comply with such obligations could lead to regulatory investigations or actions;

litigation (including class claims);

litigation (including class claims) and mass arbitration demands;

fines and penalties;

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TCPA violations can result in significant financial penalties, including penalties or criminal fines imposed by the Federal Communications Commission or fines of up to $1,500 per violation imposed through private litigation or by state authorities.

As another example, the California Consumer Privacy Act of 2018 (CCPA), as amended by the California Privacy Rights Act of 2020 (CPRA), applies to personal information of consumers, business representatives, and employees who are California residents, and requires businesses to provide specific disclosures in privacy notices and honor requests of such individuals to exercise certain privacy rights.

As another example, the California Consumer Privacy Act of 2018 (CCPA), as amended by the California Privacy Rights Act of 2020 (CPRA) (collectively, “CCPA”), applies to personal information of consumers, business representatives, and employees who are California residents, and requires businesses to provide specific disclosures in privacy notices and honor requests of such individuals to exercise certain privacy rights.

The CCPA provides for administrative fines of up to $7,500 per violation and allows private litigants affected by certain data breaches to recover significant statutory damages.

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Other states, such as Virginia and Colorado, have also passed comprehensive privacy laws, and similar laws are being considered in several other states, as well as at the federal and local levels.

These state laws and the CCPA provide individuals with certain rights over their personal information, including the right to access, correct, or delete certain personal information, and opt-out of certain data processing activities, such as targeted advertising, profiling, and automated decision-making.

The exercise of these rights may impact our business and ability to provide our products and services.

While these states, like the CCPA, also exempt some data processed in the context of clinical trials, these developments further complicate compliance efforts, and increase legal risk and compliance costs for us, the third parties upon whom we rely, and our customers.

Outside the United States, an increasing number of laws, regulations, and industry standards govern data privacy and security.

For example, the European Union’s General Data Protection Regulation (“EU GDPR”), the United Kingdom’s GDPR (“UK GDPR”), and Canada’s Personal Information and Electronic Documents Act (PIPEDA) or the applicable provincial alternatives, impose strict requirements for processing personal data.

For example, the European Union’s General Data Protection Regulation (“EU GDPR”), the United Kingdom’s GDPR (“UK GDPR”), and Canada’s Personal Information Protection and Electronic Documents Act (“PIPEDA”) or the applicable provincial alternatives, impose strict requirements for processing personal data.

For example, under the EU GDPR, companies may face temporary or definitive bans on data processing and other corrective actions;

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or private litigation related to processing of personal data brought by classes of data subjects or consumer protection organizations authorized at law to represent their interests.

In Canada, the Personal Information Protection and Electronic Documents Act (“PIPEDA”) and various related provincial laws, as well as Canada’s Anti-Spam Legislation (“CASL”), may apply to our operations.

In Canada, PIPEDA and various related provincial laws, as well as Canada’s Anti-Spam Legislation (“CASL”), may apply to our operations.

Additionally, regulators are increasingly scrutinizing companies that process children’s data.

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Some of these obligations have wide ranging applications, including for services that do not intentionally target child users (defined in some circumstances as a user under the age of 18 years old).

These laws may be subject to legal challenges and changing interpretations, which may further complicate our efforts to comply with these laws.

Our employees and personnel use generative AI technologies to perform their work, and the disclosure and use of personal information in generative AI technologies is subject to various privacy laws and other privacy obligations.

Governments have passed and are likely to pass additional laws regulating generative AI.

Our use of this technology could result in additional compliance costs, regulatory investigations and actions, and consumer lawsuits.

If we are unable to use generative AI, it could make our business less efficient and result in competitive disadvantages.

The development and use of generative AI/ML technologies present various privacy and security risks that may impact our business.

AI/ML are subject to privacy and data security laws, as well as increasing regulation and scrutiny.

Several jurisdictions around the globe, including Europe and certain U.S.

states, have proposed or enacted laws governing AI/ML.

For example, European regulators have proposed a stringent AI regulation, and we expect other jurisdictions will adopt similar laws.

Additionally, certain privacy laws extend rights to consumers (such as the right to delete certain personal data) and regulate automated decision making, which may be incompatible with our use of AI/ML.

These obligations may make it harder for us to conduct our business using AI/ML, lead to regulatory fines or penalties, require us to change our business practices, retrain our AI/ML, or prevent or limit our use of AI/ML.

For example, the FTC has required other companies to turn over (or disgorge) valuable insights or trainings generated through the use of AI/ML where they allege the company has violated privacy and consumer protection laws.

If we cannot use AI/ML or that use is restricted, our business may be less efficient, or we may be at a competitive disadvantage.

We may be subject to new laws governing the privacy of consumer health data.

For example, Washington’s My Health My Data Act (“MHMD”) broadly defines consumer health data, places restrictions on processing such data (including imposing stringent requirements for consent), provides consumers certain rights with respect to their health data, and creates a private right of action to allow individuals to sue for violations of the law.

Other states are considering and may adopt similar laws.

In the ordinary course of business, we may transfer personal data from Europe and other jurisdictions to the United States or other countries.

Europe and other jurisdictions have enacted laws requiring data to be localized or limiting the transfer of personal data to other countries.

In particular, the European Economic Area (EEA) and the UK have significantly restricted the transfer of personal data to the United States and other countries whose privacy laws it believes are inadequate.

Other jurisdictions may adopt similarly stringent interpretations of their data localization and cross-border data transfer laws.

Although there are currently various mechanisms that may be used to transfer personal data from the EEA and UK to the United States in compliance with law, such as the EEA and UK’s standard contractual clauses, these mechanisms are subject to legal challenges, and there is no assurance that we can satisfy or rely on these measures to lawfully transfer personal data to the United States.

Although there are currently various mechanisms that may be used to transfer personal data from the EEA and UK to the United States in compliance with law, such as the EEA and UK’s standard contractual clauses, the UK’s International Data Transfer Agreement / Addendum, and the EU-U.S.

Data Privacy Framework and the UK extension thereto (which allows for transfers for relevant organizations based in the United States who self-certify compliance and participate in the Framework), these mechanisms are subject to legal challenges, and there is no assurance that we can satisfy or rely on these measures to lawfully transfer personal data to the United States.

If there is no lawful manner for us to transfer personal data from the EEA, the UK or other jurisdictions to the United States, or if the requirements for a legally-compliant transfer are too onerous, we could face significant adverse consequences, including the interruption or degradation of our operations, the need to relocate part of or all of our business or data processing activities to other jurisdictions at significant expense, increased exposure to regulatory actions, substantial fines and penalties, the inability to transfer data and work with partners, vendors and other third parties, and injunctions against our processing or transferring of personal data necessary to operate our business.

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Moreover, despite our efforts, our personnel or third parties on whom we rely may fail to comply with such obligations, which could negatively impact our business operations.

In addition, a shift in consumers’ data privacy expectations or other social, economic or political developments could impact the regulatory enforcement of these obligations, which could increase the cost of and complicate our compliance with applicable obligations.

If we or the third parties on which we rely fail, or are perceived to have failed to address or comply with applicable data privacy and security obligations, we could face significant consequences, including but not limited to:

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or substantial changes to our business model or operations.

Risks Related to Our Regulatory Environment

New products or modifications to our existing products may require new 510(k) clearances, PMAs or certifications, or may require us to cease marketing or recall the modified products until clearances, certifications or approvals are obtained.

Any modification to a 510(k)-cleared device that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use, design, or manufacture, requires a new 510(k) clearance or, possibly, a PMA.

The FDA requires every manufacturer to make this determination in the first instance, but the FDA may review any manufacturer’s decision.

The FDA may not agree with our decisions regarding whether new clearances or approvals are necessary for changes that we have made to our products.

If the FDA disagrees with our determination and requires us to submit new 510(k) notifications or PMAs for modifications to our previously cleared or approved products, for which we concluded that new clearances or approvals were not necessary, we may be required to cease marketing or to recall the modified product until we obtain clearance or approval, and we may be subject to significant regulatory fines or penalties.

Further, the FDA’s ongoing review of and potential changes to the 510(k) program may make it more difficult for us to modify our previously cleared products, either by imposing stricter requirements on when a new 510(k) for a modification to a previously cleared product must be submitted, or by applying more onerous review criteria to such submissions.

For those medical devices sold in the EU and for which we have obtained a CE Certificate of Conformity by a Notified Body, we must notify our Notified Body if significant changes are made to the products or if there are substantial changes to our quality assurance systems affecting those products.

Obtaining variation of existing CE Certificates of Conformity or a new CE Certificate of Conformity can be a time-consuming process, and delays in obtaining required future clearances, certifications or approvals would adversely affect our ability to introduce new or enhanced products in a timely manner, which in turn would harm our future growth.

A recall or suspension of our products, or the discovery of serious safety issues with our products, could have a significant negative impact on us.

The FDA and equivalent foreign regulatory authorities have the authority to require the recall or suspension, either temporarily or permanently, of commercialized products in the event of material deficiencies or defects in quality systems, product design or manufacture or in the event that a product poses an unacceptable risk to health.

Regulatory authorities have broad discretion to require the recall or suspension of a product or to require that manufacturers alert customers of safety risks, and may do so even in circumstances where we do not believe our product poses an unacceptable risk to health.

In addition, manufacturers may, under their own initiative, recall a product or suspend sales if any material deficiency in a product is found or alert customers of unanticipated safety risks.

A government-mandated or voluntary recall or suspension by us, one of our distributors or any of our other third-party suppliers could occur as a result of an unacceptable risk to health, component failures, manufacturing errors, design or labeling defects or other deficiencies and issues.

Recalls, suspensions or other notices relating to any products that we distribute would divert managerial and financial resources, and have an adverse effect on our reputation, financial condition and operating results.

Further, under the FDA’s Medical Device Reporting regulations and equivalent regulations and requirements in other geographies, we are required to maintain appropriate quality systems and report incidents in which our product may have caused or contributed to serious injury or death in which our product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to serious injury or death.

Repeated product malfunctions may result in a voluntary or involuntary product recall or suspension of product sales, which could divert managerial and financial resources, impair our ability to manufacture our products in a cost-effective and timely manner and have an adverse effect on our reputation, financial condition and operating results.

We have initiated product recalls in the past, and our risk of future product recalls may increase as we launch new products or offer new software updates for existing products.

Any adverse event involving any products that we distribute could result in future voluntary corrective actions, such as recalls or customer notifications, or regulatory authority action, which could include inspection, mandatory recall or other enforcement action.

For example, the Australian Therapeutic Goods Administration (TGA) temporarily suspended our pump product sales in Australia starting November 24, 2020, however sales of pump-related supplies were allowed to continue.

Effective April 1, 2021, following discussions with the TGA, the temporary suspension was lifted for our t:slim X2 with Basal-IQ technology, subject to certain post-market surveillance obligations and other conditions.

We discontinued sales of earlier generation products in Australia and we started offering our Control-IQ technology in Australia.

There can be no assurance that the TGA will not reimpose the suspension of our pump product sales or impose other regulatory restrictions in the future.

In addition, other regulatory authorities may take similar actions against us, and any regulatory challenges we encounter could have a negative impact on our product sales and harm our reputation.

Any corrective actions we take in response to this action or future matters with the TGA or other regulatory authorities, whether voluntary or involuntary, will require the dedication of our time and capital, may distract management from operating our business, may harm our reputation and financial results or could result in additional regulatory scrutiny in other geographies.

In addition, we may be required to conduct costly post-market testing and surveillance to monitor the safety or effectiveness of our products in the EU.

We must comply with medical device reporting requirements, including the reporting of adverse events and malfunctions related to our products.

Later discovery of previously unknown problems with our products, including unanticipated adverse events or adverse events of unanticipated severity or frequency, manufacturing problems, or failure to comply with regulatory requirements may result in changes to labeling, restrictions on such products or manufacturing processes, withdrawal of the products from the market, voluntary or mandatory recalls, a requirement to repair, replace or refund the cost of any medical device we manufacture or distribute, fines, suspension, variation or withdrawal of CE Certificates of Conformity, product seizures, injunctions or the imposition of civil or criminal penalties that would adversely affect our business, operating results and prospects.

Legislative or regulatory healthcare reforms, or other regulatory reforms, may result in downward pressure on the price of and decrease reimbursement for our products, and uncertainty regarding the healthcare regulatory environment could have a material adverse effect on our business.

The sales of our products depend in part on the availability of coverage and reimbursement from third-party payors such as government health administration authorities, private health insurers, health maintenance organizations and other healthcare-related organizations.

Both the federal and state governments in the United States continue to propose and pass new legislation and regulations designed to, among other things, expand healthcare coverage to more individuals, contain or reduce the cost of healthcare, and improve the quality of healthcare outcomes.

For example, the Affordable Care Act has substantially changed the way healthcare is financed by both governmental and private insurers and encourages improvements in the quality of healthcare items and services.

In the future, additional changes could be made to governmental healthcare programs that could significantly impact the success of our products.

This legislation and regulation may result in decreased reimbursement for medical devices, which may create additional pressure to reduce the prices charged for medical devices.

Reduced reimbursement rates could significantly decrease our revenue, which in turn would place significant downward pressure on our gross margins and impede our ability to become profitable.

We cannot predict which, if any, additional healthcare reform proposals will be adopted, when they may be adopted or what impact they may have on the existing regulatory environment, or our ability to operate our business.

Any of these factors could have a material adverse effect on our operating results and financial condition.

In the EU, the MDR became applicable on May 26, 2021, repealing and replacing both the MDD and Directive 90/385/EEC on active implantable medical devices.

The MDR establishes transitional provisions.

However, the changes to the regulatory system implemented in the EU by the MDR include stricter requirements for clinical evidence and pre-market assessment of safety and performance, new classifications to indicate risk levels, requirements for third party testing by Notified Bodies, tightened and streamlined quality management system assessment procedures and additional requirements for the quality management system, additional requirements for traceability of products and transparency as well a refined responsibility of economic operators.

We are also required to provide clinical data in the form of a clinical evaluation report.

Fulfillment of the obligations imposed by the MDR may cause us to incur substantial costs.

We may be unable to fulfil these obligations, or our Notified Body may consider that we have not adequately demonstrated compliance with our related obligations to merit a CE Certificate of Conformity on the basis of the MDR.

Moreover, in the EU, some EU Member States may, after a medical device is CE marked, require the completion of additional studies that compare the cost-effectiveness of a particular medical device candidate to currently available therapies.

This Health Technology Assessment, or HTA process, which is currently governed by the national laws of the individual EU Member States, is the procedure according to which the assessment of the public health impact, therapeutic impact and the economic and societal impact of use of a given medical device in the national healthcare systems of the individual country is conducted.

The outcome of HTA regarding specific medical device will often influence the pricing and reimbursement status granted to these products by the competent authorities of individual EU Member States.

In December 2021, Regulation No 2021/2282 on HTA, amending Directive 2011/24/EU, was adopted in the EU.

This Regulation, which entered into force in January 2022 and will apply as of January 2025, is intended to boost cooperation among EU Member States in assessing health technologies and providing the basis for cooperation at EU level for joint clinical assessments in these areas.

If we are unable to obtain or maintain favorable pricing and reimbursement status in EU Member States for our medical devices or medical devices that we may successfully develop and for which we may obtain certification, any anticipated revenue from and growth prospects for those products in the EU could be negatively affected.

In addition, the exit of the UK from the EU, commonly referred to as “Brexit” could lead to regulatory divergence between the EU and the UK.

On May 26, 2021, the MDR became applicable in the EU.

However, the MDR is not applicable in the UK.

In the UK, medical devices are governed by the Medical Devices Regulations 2002 (SI 2002 No 618, as amended) (UK MDR 2002) which, for the time being, retains a regulatory framework similar to the framework set out by the MDD.

The government plans to introduce new legislation governing medical devices with an aim for core aspects of the future regime for medical devices to apply from July 1, 2025.

New legislation is also anticipated later in 2023 to bring into force strengthened post-market surveillance requirements ahead of the wider future regulatory regime.

These post-market surveillance requirements are expected to apply from mid-2024.

Should the UK or Great Britain further diverge from the EU from a regulatory perspective, tariffs could be put into place in the future.

We could therefore, both now and in the future, face significant additional expenses to operate our business, which could significantly and materially harm or delay our ability to generate revenue or achieve profitability of our business.

Any further changes in international trade, tariff and import/export regulations as a result of Brexit or otherwise may impose unexpected duty costs or other non-tariff barriers on us.

These developments, or the perception that any of them could occur, may significantly reduce global trade and, in particular, trade between the EU and the UK.

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