What changed in this filing

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Item 1. Business

2024-03-26 compared with 2023-03-27 · 58 added, 71 removed, 438 unchanged (23% of the section changed)

13 unchanged sentences

The opportunity to apply solutions to recognized needs results from an excellent core of practicing clinicians who introduce ideas to the Company, and key employees who are both clinical applications savvy and development engineering adept.

Domestically, UTMD’s medical devices are sold directly to clinical end-user facilities or a designated stocking distributor for a medical facility.

In addition, some of UTMD’s devices are sold through specialty distributors, national hospital distribution companies and other medical device manufacturers.

Domestically, UTMD’s medical devices are sold directly to clinician end-user facilities or a designated stocking distributor for a medical facility.

In addition, UTMD manufactures components and finished devices on a subcontract basis for other companies in the medical device business as well as other businesses.

Outside the U.S.

(OUS), devices are sold directly to end-users in Canada, the United Kingdom (UK), France, Ireland, Australia and New Zealand (NZ), and through other medical device companies and independent medical products distributors in many other countries.

(OUS), devices are sold directly to end-users in Canada, the United Kingdom (UK), France, Ireland, Australia (AUS) and New Zealand (NZ), and through other medical device companies and independent medical products distributors in other countries.

UTMD has representation globally in the major developed countries as well as many underdeveloped countries through more than 200 distributors, 114 of which purchased at least five thousand dollars in UTMD medical devices during 2023.

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In 2004, UTMD acquired Abcorp, Inc., its supplier of fetal monitoring belts.

In 2011, UTMD purchased all of the common shares of Femcare Holdings Ltd (Femcare) of the United Kingdom, and its subsidiaries including Femcare Australia Pty Ltd as a sales and distribution operation to directly serve Australia medical facilities.

The addition of Femcare provided product and distribution channel diversification and expansion.

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distribution agreement for the Filshie Clip System from CooperSurgical Inc.

In late 2020, UTMD’s Australia subsidiary incorporated a New Zealand subsidiary in order to distribute devices directly to medical facilities in New Zealand.

In late 2020, UTMD’s AUS subsidiary incorporated a NZ subsidiary in order to distribute devices directly to medical facilities in NZ.

In 2021, due to BREXIT, Utah Medical Products Ltd in Ireland began distributing devices directly to medical facilities in France in lieu of the UK.

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The use of EFM allows conservation of nursing personnel and has virtually eliminated intrapartum fetal death.

Accurate determination of contraction strength increases the safety of labor augmentation and reduces the need for Cesarean section for desultory labor.

Accurate determination of contraction strength increases the safety of labor augmentation (e.g., oxytocin dose) and reduces the need for Cesarean section for desultory labor.

Infusion of fluid through an intrauterine catheter may cushion the umbilical cord and improve oxygenation of the fetus.

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The DISPOSA-HOOD is an infant respiratory hood that is used in the NICU to administer oxygen to neonates and flush CO2 (carbon dioxide) while maintaining a neutral thermal environment (NTE) critical to proper physiologic responses.

The DISPOSA-HOOD, placed over the infant's head, incorporates a round diffusor connection specifically designed to disperse the incoming gases along the inner surfaces of the hood, rather than allowing them to blow directly on the infant's head.

The DISPOSA-HOOD, placed over the infant's head or body, incorporates a round diffusor connection specifically designed to disperse the incoming gases along the inner surfaces of the hood, rather than allowing them to blow directly on the infant's head.

The design allows more precise FIO2 (fractional inspired oxygen) control, minimizes convective heat loss from the head, provides optimum flows for elimination of CO2 by ventilation and allows for humidification.

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Specialty Loop, Ball, and Needle Electrodes;

The LETZ System (loop excision of the transformation zone) is used to excise cervical intraepithelial neoplasia (CIN) and other lower genital tract lesions related to human papilloma virus (HPV) infections.

The LETZ System (loop excision of the transformation zone) is used to excise pre-cancerous cervical intraepithelial neoplasia (CIN) and other lower genital tract lesions related to human papilloma virus (HPV) infections.

The electrosurgery procedure with hemostasis has become the standard of care for HPV cervical infection treatment, replacing cold knife scalpel, laser and cryotherapy procedural approaches because it is economical, safe, effective, quick and easy to perform, has fewer potential side effects and requires little physician training.

A major incentive for performing the LETZ procedure is that it may be performed using local anesthetic in a physician's office, eliminating the time and expense of hospital or surgical center admittance.

Most importantly clinically, in contrast to laser (tissue ablation) and cryotherapy (freezing of tissue), LETZ provides a fine tissue specimen for pathological assessment.

Most importantly clinically, in contrast to laser (tissue ablation) and cryotherapy (freezing of tissue), LETZ provides a fine tissue specimen for pathological assessment and confirmation of diseased tissue removal.

UTMD’s LETZ System includes disposable electrodes, the FINESSE® electrosurgical generators and other miscellaneous components.

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UTMD continues to augment its specialty electrodes.

For example, the Company markets a unique conization electrode for deep endocervical disease called C-LETZ®, designed by UTMD to limit the removal of healthy tissue margins that might compromise adequate cervical function.

For example, the Company markets a unique conization electrode for deep endocervical disease called C-LETZ®, designed by UTMD to limit the removal of healthy tissue that might compromise adequate cervical function.

UTMD introduced the patented DXTender® electrode attachment that prevents interference with the colposcope during LETZ.

UTMD also will continue to provide other components to augment the use of its market-leading specialty electrodes with other manufacturers’ electrosurgical generators.

After more than 20 years on the market, UTMD completed a significant redesign, and achieved certification to current EN 60601 international safety standards, for a FINESSE+ electrosurgical generator.

The FINESSE+ design includes dispersive pad contact monitoring for improved patient safety, improved circuitry for computer controlled-output that provides a precise tissue specimen for histopathology, a more efficient output stage resulting in less heat generation and longer electronic component life, an update to electronic components which reduces the number of required components and increases service life, and an easy change internal filter for integral smoke evacuation, a unique feature of FINESSE.

The FINESSE+ electrosurgical generator design includes dispersive pad contact monitoring for patient safety, specialized circuitry for computer-controlled output that provides a precise tissue specimen for histopathology, an efficient output stage resulting in minimal heat generation and long electronic component life, an electronic components design which reduces the number of required components and allows a long service life, and an easy change internal filter for integral smoke evacuation, a unique feature of FINESSE.

FILTRESSE® Evacuator;

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A traditional method for interval sterilization is with the use of bipolar cautery (electrocautery).

With this method, an electric current flows between the tips of forceps when applied to the fallopian tube.

With this method, an electrical current flows between the tips of forceps when applied to the fallopian tube.

The current then “burns” a portion of the fallopian tube shut.

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Both these older methods had a higher failure rate than the Filshie clip, are associated with more post-operative pain and have generally been abandoned in favor of other sterilization techniques.

In more recent years, hysteroscopic sterilization devices were introduced as an alternative to laparoscopic tubal ligation.

The devices were the Adiana by Hologic Inc.

and the ESSURE by Conceptus, Inc.

(acquired by Bayer AG in 2013).

Both of these transcervically implanted devices are no longer being marketed;

Adiana was stopped in 2012 and ESSURE was stopped in 2017.

Prior to Bayer ceasing the distribution of ESSURE, the device had received a substantial amount of negative publicity regarding unwanted side effects, particularly from patients using social media.

Unfortunately, because both the Filshie clip and ESSURE are surgically implanted devices designed to achieve sterilization by tubal occlusion, some readers of the media - including certain product liability attorneys - have incorrectly concluded that the negative side effects of ESSURE also apply to Filshie clips.

UTMD would like to provide clarification to stockholders why this association is incorrect.

In particular, within a few hundred thousand implanted ESSURE devices, thousands of women complained about possible autoimmune responses, allergic response to nickel and/or significant chronic pain.

These symptoms do not apply to Filshie clips as the ESSURE device and Filshie clips are substantially different in design and use.

ESSURE, with components made of nickel, had a metal coil with a tip capable of perforation.

It was hysteroscopically implanted (with some difficulty and risk of unwanted bodily injury) inside the fallopian tubes, which then caused scar tissue to grow around it over time and occlude the tubes.

Filshie clips are clamped over the tubes, laparoscopically or following a C-section, with immediate effective occlusion and almost no chance of patient injury in the course of implantation beyond the normal risks of laparoscopic surgery.

There are no nickel components in the Filshie clip.

However, a minute amount of nickel does exist in medical grade silicone and titanium, generally accepted worldwide as the most biocompatible materials for human implants.

A toxicology study by a reputable microbiology firm confirmed that the amount of nickel found in Filshie clips is significantly less than that found in normal drinking water and foods.

Orthopedic implants, for example, are routinely made of titanium in massively greater amounts.

Out of millions of Filshie clips in use, a few complaints have come from patients who suspected that they were allergic its components - including to copper, which is not in Filshie clips - but there have been no such reports from clinicians or in the clinical literature.

In addition, two more recent hysteroscopic sterilization methods, the Adiana and the Essure occlusive devices, also are no longer being sold.

Pain associated normally with any laparoscopic procedure generally resolves within 48 hours, and is not severe, nor does it become chronic unless the result of an infection.

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The obvious recourse for a person experiencing pain that she associates with an implanted device is to remove it.

ESSURE, which is difficult if not impossible to remove, requires specialized surgical technique.

In contrast, given widely available imaging and normal laparoscopic skills, Filshie clips can be removed safely, although removal is very rarely requested by patients or recommended by physicians.

A well-known and clinically-reported potential side effect of Filshie clip tubal ligation is clip migration.

Given widely available imaging and normal laparoscopic skills, Filshie clips can be removed safely, although removal is very rarely requested by patients or recommended by physicians.

A well-known and clinically-reported potential side effect of Filshie clip tubal ligation, as with any other surgical clip or implant, is subsequent clip movement, often called “migration”.

A clip-occluded fallopian tube eventually separates into two permanently closed stubs after tissue necrosis under a closed clip.

Peritoneal tissue usually encapsulates an implanted clip while still in contact with the fallopian tube.

In some cases where tissue encapsulation is slow, migration of a clip may occur after sterilization has been achieved.

In some cases where tissue encapsulation is slow, movement of a clip may occur after sterilization has been achieved.

Although the silicone lining of the clip helps prevent clip migration and reduces the risk of tubal regeneration, one clinical journal publication indicated migration occurs 6% of the time.

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Subsequently, the same law firm solicited and recruited claimants in other states.

As of the end of January 2023, there were a total of fourteen clip migration lawsuits initiated by the same law firm in twelve different states.

UTMD has filed motions to dismiss in most of those lawsuits, one of which has been granted.

A dismissal can be appealed, but as of yet hasn’t been.

Management expects others to be dismissed based on legal grounds such as lack of jurisdiction or U.S.

FDA preemption.

In lawsuits where UTMD’s early motions for dismissal have been denied, those denials will be challenged by facts presented by UTMD at a later stage.

In UTMD’s view, the current lawsuits which have not been litigated yet are without merit as UTMD believes that they are preempted by federal law.

As of the end of January 2024, there were a total of thirteen still open clip migration lawsuits initiated by the same law firm in eleven different states.

UTMD has either filed early dispositive motions to dismiss or has filed motions for summary judgement aimed at defeating cases before trial.

In UTMD’s view, the current lawsuits, all of which have not gone to trial yet, are without merit as UTMD believes that they are preempted by federal law and that plaintiffs will be unable to show that their complaints were caused by migrated clips.

FDA approved the Filshie clip for marketing in the U.S.

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LUMIN combines the strength, range of motion and versatility of the higher end reusable instruments with the lower cost and cleanliness of the inexpensive less functional disposable instruments presently on the market, while at the same time reducing the number of tools needed to move and secure the uterus.

Blood Pressure Monitoring:

Pressure Monitoring:

DELTRAN® Disposable Pressure Transducer (DPT)

4 unchanged sentences

In 2009, in conjunction with its other NICU devices, UTMD continued to configure neonatal Deltran custom kits which satisfy the special needs of conserving limited blood volume and protecting the neonate from infection.

BioPharm HP-PRT™

Over 15 years ago, on behalf of an OEM customer, UTMD was the original developer of high pressure, piezo-resistive transducer assemblies used in accurately sensing static and dynamic fluid pressures in biopharmaceutical manufacturing systems including filtration processes, chromatography processes, bioreactors, and filling operations, among other key processes in the rapidly growing biopharmaceutical industry.

Beginning in 2024, UTMD will begin offering its technology directly to biopharmaceutical manufacturing companies worldwide.

Pressure Monitoring Accessories, Components and Other Molded Parts.

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Sales to Med/Surg distributors in 2023 comprised 13% of total domestic direct sales (excluding domestic OEM sales).

In the U.S., Canada, Ireland, France, the UK, New Zealand and Australia, UTMD sells its products with the support of its own directly employed customer service and sales force, independent consultants and selective independent manufacturer representatives.

In the U.S., Canada, Ireland, France, the UK, NZ and AUS, UTMD sells its products with the support of its own directly employed customer service and sales force, independent consultants and selective independent manufacturer representatives.

Direct sales representatives focus on applications for UTMD devices where customer training and support may be important.

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In addition to its direct representatives, UTMD utilizes third party consulting clinical specialists to augment its customer training programs.

Additionally, UTMD sells component parts as well as finished devices to other companies for use with their product lines.

Additionally, UTMD sells component parts as well as finished devices to over 100 other companies for use with their product lines.

This OEM distribution channel is simply maximizing utilization of manufacturing capabilities that are otherwise needed for UTMD's primary business, and does not compete with or dilute UTMD’s direct distribution and marketing programs.

OUS, the Company and its subsidiaries distribute directly to end-user facilities in Canada, the UK, France, Ireland, New Zealand and Australia, and in 2022 sold to 206 regional distributors and OEMs (other medical device manufacturers and/or distributors) in over a hundred countries.

UTMD’s largest OEM customer represented 17% ($8.6 million) of total consolidated sales in 2023, compared to 22% ($11.6 million) in 2022 and 18% ($8.9 million) in 2021.

OUS, the Company and its subsidiaries distribute directly to end-user facilities in Canada, the UK, France, Ireland, NZ and AUS, and in 2023 sold to more than 200 regional distributors and OEMs (other medical device manufacturers and/or distributors) in over a hundred countries.

Ten percent of UTMD’s independent OUS distributors comprised 78% of UTMD’s indirect OUS sales in the years of 2021 - 2023.

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UTMD’s current product and process development projects are in the following areas:

1) augmentation and internal manufacturing of existing UTMD devices, 2) neonatal intensive care, 3) specialized procedures for the assessment and treatment of cervical/uterine disease, 4) labor and delivery procedures, and 5) product and process development for OEM customers.

Internal product development expenses are expected to remain in the range of 1-2% of sales.

1) augmentation and internal manufacturing of existing UTMD devices, 2) neonatal intensive care, 3) specialized procedures for the assessment and treatment of cervical/uterine disease, 4) labor and delivery procedures, 5) pressure sensors needed for biopharmaceutical manufacturing processes and 6) product and process development for OEM customers.

Internal product development expenses are expected to be closer to 2% of sales in 2024 as UTMD validates and qualifies its BioPharm HP-PRT devices.

EMPLOYEES AND OTHERS

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Almost all of UTMD’s internally-manufactured devices are made either in Utah or in Ireland.

At the end of 2022, the average tenure with the Company of the combined 186 full-time employees worldwide is now 13 years.

At the end of 2023, the average tenure with the Company of the combined 169 full-time employees worldwide is over 13 years.

In Utah, 20% of full-time employees have been with the Company for more than 30 years.

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PATENTS, TRADEMARKS AND TECHNOLOGY LICENSES

The Company currently owns eight unexpired U.S.

The Company currently owns seven unexpired U.S.

patents, numerous associated patents in sovereignties OUS, and is the licensee of certain other technology.

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The FDA has authority to regulate the marketing, manufacturing, labeling, packaging and distribution of medical devices in the U.S.

Requirements exist under other federal laws and under state, local and foreign statutes that apply to the manufacturing and marketing of the Company's medical devices.

Requirements exist under other federal laws and under state, local and foreign statutes that apply to the manufacturing and marketing of the Company's medical and biopharma devices.

All manufacturers of medical devices must register with the FDA and list all medical devices produced by them.

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regulatory standards including CFR Part 820, the FDA Quality System Regulation (QSR) effective in 1997, also known as cGMPs (current good manufacturing practices).

The Company’s most recent Utah FDA QSR inspection was in July 2014, which did not result in the issuance of any FDA-483 observations.

In 2019, UTMD’s manufacturing facilities in Utah were audited and certified by a recognized authorized auditing organization under the new Medical Device Single Audit Program (MDSAP).

In most circumstances, the new MDSAP eliminates the need for FDA QSR inspections.

The Company’s most recent UK FDA QSR inspection was in July 2019, which also did not result in the issuance of any FDA-483 observations.

In 1994, UTMD received certification of its quality system under the ISO9001/EN46001 standards (“ISO” stands for “International Organization of Standardization”) which it maintained until December 2003.

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In 2020, UTMD’s manufacturing facilities in Ireland and UK were audited and certified by a recognized authorized auditing organization under the MDSAP.

The MDSAP offers an “all-in-one” inspection regime to accommodate the quality system requirements of Australia, Brazil, Canada, USA and Japan.

UTMD and Femcare remain on a continuous periodic audit schedule by its independent notified body and authorized MDSAP auditing organization in order to stay current with international regulatory standards, and retain its certifications.

In 2023, UTMD’s manufacturing facility in Ireland was inspected by the FDA in conjunction with manufacturing Filshie clips in Ireland.

No FDA-483 observations were issued.

The Company’s most recent Utah FDA QSR inspection was in July 2014, which did not result in the issuance of any FDA-483 observations.

Since 2019, UTMD’s manufacturing facilities in Utah have been annually audited and certified by a recognized authorized auditing organization under the Medical Device Single Audit Program (MDSAP).

The MDSAP allows a recognized Auditing Organization to conduct a single regulatory audit of a medical device manufacturer that satisfies the relevant requirements of the regulatory authorities of Australia, Brazil, Canada, USA and Japan.

In other words, the FDA accepts MDSAP audit reports as a substitute for routine periodic FDA QSR inspections.

UTMD and Femcare have received CE Mark certifications (demonstrates proof of compliance with the European Community’s ISO standards) for all major products.

Femcare’s most recent UK FDA QSR inspection was in July 2019, which also did not result in the issuance of any FDA-483 observations.

SOURCES AND AVAILABILITY OF RAW MATERIALS

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UTMD is keenly aware that not only are OUS markets different from the U.S.

market, but also that each country has its own set of driving influences that affects the dynamics of the nature of care given and medical devices used.

market, but also that each country has its own set of driving influences that affect the dynamics of the nature of care given and medical devices used.

The Company operates four OUS facilities;

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exports) from the U.S.

to OUS customers were $4,256 in 2022, $3,994 in 2021 and $4,626 in 2020.

exports represented 21%, 22% and 28% of total OUS trade sales in 2022, 2021 and 2020, respectively.

to OUS customers were $4,516 in 2023 compared to $4,256 in 2022 and $3,994 in 2021.

exports represented 21% of total OUS trade sales in both 2023 and 2022, and 22% in 2021.

export numbers exclude Utah intercompany sales of components and finished devices to UTMD foreign subsidiaries, which then distribute Utah-made components and finished devices as part of their sales to OUS customers.

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Backlog shippable in less than 90 days was $3,650 as of January 1, 2024 compared to $5,605 as of January 1, 2023 and $4,956 as of January 1, 2022.

The decline in the beginning of 2024 backlog was due to lower orders from UTMD’s largest OEM customer.

SEASONAL ASPECTS

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PRODUCT LIABILITY RISK MANAGEMENT

The risk of product liability lawsuits is a negative factor in the medical device industry because devices are frequently used in inherently risky situations to help clinicians achieve a more positive outcome than what might otherwise be the case.

In any lawsuit against a company where an individual plaintiff claims to have suffered permanent physical injury, a possibility of a large award for damages exists whether or not a causal relationship exists.

UTMD is self-insured for product liability risk, and reserves funds against its current performance on an ongoing basis to provide for its costs of defense should any lawsuits be filed.

UTMD was named as a defendant on six product liability lawsuits over the time span of the last twenty-nine years, excluding the Filshie Clip System acquired eleven years ago.

UTMD was named as a defendant on six product liability lawsuits over the time span of the last twenty-nine years, excluding the Filshie Clip System acquired twelve years ago.

Four of the six lawsuits involved a patient injury related to operative vaginal deliveries where a UTMD VAD birthing cup or hand pump was used.

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The average annual cost of those Filshie Clip System lawsuits since 2011 up to late 2021 was $7 per year (less than $25 per lawsuit to achieve resolution).

However, in late 2021, Femcare was added as a defendant in a clip migration lawsuit in Texas, which has expanded to eleven other states with a total of fourteen lawsuits as plaintiffs’ lawyers have sought to solicit and recruit claimants in other states.

There is no basis for a claim of either a poor device design which was and remains approved by the U.S.

FDA, and has remained the same since 1996 FDA approval for more than two decades of use, or no evidence of defective clips implanted in the patients who have filed complaints, or no lack of proper disclosure to physicians who are learned intermediaries.

Filshie clips have been prescribed by knowledgeable physicians for decades, and implanted in millions of patients.

The current lawsuits are currently in the early stages of discovery and have not been litigated yet.

Although the cost of defense will be unusually high compared to UTMD’s historical average, the Company believes that the costs can be absorbed without a material impact on UTMD’s overall consolidated financial performance.

Other than Filshie Clip System claims, there have been no product liability lawsuits for any UTMD device during the last eleven years.

However, in late 2021, Femcare was added as a defendant in a clip migration lawsuit in Texas, which expanded to thirteen other states with a total of eighteen lawsuits as plaintiffs’ lawyers have sought to solicit and recruit claimants in other states.

Five lawsuits in three states have been dismissed as of January 31, 2024.

Unfortunately, social media is being used by aggressive attorneys to solicit plaintiffs using statements that have not been proven to be true.

Nevertheless, the filing of new lawsuits died down considerably in 2023.

There is no basis for a claim of either a poor device design, which was approved as safe and effective by the U.S.

FDA, and has remained FDA approved since 1996 during more than two decades of use, or no evidence to-date of any defective clips implanted in the patients who have filed complaints, or no lack of proper disclosure of side effects to physicians who are learned intermediaries.

Filshie clips have been prescribed by knowledgeable U.S.

physicians for decades, and implanted in millions of patients in the U.S.

and worldwide.

Although the cost of defense has been unusually high compared to UTMD’s historical average, and will continue to increase should cases go to trial, the Company believes that the costs can be absorbed without a material impact on UTMD’s overall consolidated financial performance.

Other than the Filshie clip claims, there have been no product liability lawsuits for any UTMD device during the last twelve years.

Except for the six non-Filshie Clip System lawsuits described above, there have been no other product liability claims filed over the last 30 years after distribution and use of over 20 million UTMD critical care and surgical finished devices.

Since 1993, during which time over one hundred million finished devices and OEM components were manufactured and distributed by UTMD and its subsidiaries, there have been no adverse judgments resulting from a claim of defect in UTMD’s or its subsidiaries’ designs or manufacture of products, or a fault in informational materials.

Although it hasn’t happened in the past 44 years, a product liability lawsuit could result in significant legal expenses and a large award against the Company.

Although it hasn’t happened in the past 45 years, a product liability lawsuit could result in a significant damages award against the Company.

In the current tort system, particularly in the U.S., meritless product liability cases do get filed where aggressive attorneys calculate that a company will find it cheaper to settle for what they consider a nominal amount in lieu of potentially substantial defense costs of discovery and going to court.

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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