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What changed in ARTIVION, INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of ARTIVION, INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+361 added−409 removedSource: 10-K (2025-02-28) vs 10-K (2024-02-23)

Top changes in ARTIVION, INC.'s 2024 10-K

361 paragraphs added · 409 removed · 272 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

89 edited+22 added−17 removed184 unchanged
Biggest changeThe main patent for BioGlue expired in mid-2012 in the US and expired in mid-2013 in the majority of the rest of the world. Although the patents for BioGlue have expired, this technology is still protected by trade secrets and manufacturing know-how, as well as the time and expense to obtain regulatory approvals.
Biggest changeAlthough the patents for BioGlue have expired, this technology is still protected by trade secrets and manufacturing know-how, as well as the time and expense to obtain regulatory approvals. 22 Table of Contents We have confidentiality agreements with our employees, our consultants, and our third-party vendors to maintain the confidentiality of trade secrets and proprietary information.
As of September 2023 the Swiss government (Swissmedic) declared Class III and IIb devices with a valid CE Mark issued under the MDD can remain on the Swiss market until December 31, 2027 so long as the manufacturer maintains a QMS in compliance with EU MDR and has a formal application with a notified body for an MDR CE Mark by May 26, 2024.
As of September 2023 the Swiss government (Swissmedic) declared that Class III and IIb devices with a valid CE Mark issued under the MDD can remain on the Swiss market until December 31, 2027 so long as the manufacturer maintains a QMS in compliance with EU MDR and has a formal application with a notified body for an MDR CE Mark by May 26, 2024.
NEXUS DUO is a low profile, custom made aortic arch system designed to treat a range of aortic arch pathologies including chronic dissection, aortic aneurysm, penetrating aortic ulcer, as well as intramural hematoma. Unlike the NEXUS off-the-shelf device, NEXUS DUO includes a secondary branch designed to minimize surgical preparation for patients undergoing endovascular repair of the aortic arch.
NEXUS DUO is a low profile, custom made aortic arch system designed to treat a range of aortic arch pathologies including chronic dissection, aortic aneurysm, penetrating aortic ulcer, as well as intramural hematoma. Unlike the NEXUS ONE off-the-shelf device, NEXUS DUO includes a secondary branch designed to minimize surgical preparation for patients undergoing endovascular repair of the aortic arch.
Endospan holds a CE Mark for NEXUS which is the only endovascular stent graft system approved for the repair of both aneurysms and dissections in the aortic arch and markets the NEXUS DUO as a custom-made alternative for flexible aortic arch repair.
Endospan holds a CE Mark for NEXUS ONE which is the only endovascular stent graft system approved for the repair of both aneurysms and dissections in the aortic arch and markets the NEXUS DUO as a custom-made alternative for flexible aortic arch repair.
Abdominal stent grafts include our E-xtra Design Engineering (including Artivex TM ), E-nside TM , E-tegra TM , E-ventus TM BX, and E-liac TM products. Surgical sealants include our BioGlue ® Surgical Adhesive products (“BioGlue”).
Abdominal stent grafts include our E-xtra Design Engineering (including Artivex TM ), E-nside TM , E-tegra TM , E-ventus TM BX, Tuva™ BX, and E-liac TM products. Surgical sealants include our BioGlue ® Surgical Adhesive products (“BioGlue”).
We sell the E-vita Open Plus, E-vita Open NEO, and AMDS as well as distribute the NEXUS Products to treat these conditions impacting the aortic arch and thoracic aorta. Other Disease States – Peripheral Vascular Disease and End Stage Renal Disease Patients with peripheral vascular disease can experience reduced blood flow, usually in the arms and legs.
We sell the E-vita Open Plus, E-vita Open NEO, and AMDS as well as distribute the NEXUS family of products to treat these conditions impacting the aortic arch and thoracic aorta. Other Disease States – Peripheral Vascular Disease and End Stage Renal Disease Patients with peripheral vascular disease can experience reduced blood flow, usually in the arms and legs.
The following products are, or we believe would be, upon approval, classified as Class III medical devices: BioGlue, On-X heart valves, On-X AAP, PerClot, E-vita Open Plus, E-vita Open NEO, E-vita Thoracic 3G, E-tegra, E-liac, E-nside, the NEXUS Products, and AMDS. CryoPatch SG is classified as a Class II medical device.
The following products are, or we believe would be, upon approval, classified as Class III medical devices: BioGlue, On-X heart valves, On-X AAP, PerClot, E-vita Open Plus, E-vita Open NEO, E-vita Thoracic 3G, E-tegra, E-liac, E-nside, the NEXUS family of products, and AMDS. CryoPatch SG is classified as a Class II medical device.
AMDS indirectly competes with other manufacturers’ standard open surgical repair and hybrid procedures including aortic debranching and frozen elephant trunk technique for total arch replacement. We began selling AMDS in September 2020 following the acquisition of Ascyrus. We sell AMDS outside of the US, including in EMEA, Canada, APAC, and LATAM.
AMDS indirectly competes with other manufacturers’ standard open surgical repair and hybrid procedures including aortic debranching and frozen elephant trunk technique for total arch replacement. We began selling AMDS in September 2020 following the acquisition of Ascyrus. We sell AMDS in EMEA, Canada, APAC, and LATAM.
The limited supply of certain types or sizes of preserved tissue can result in a backlog of orders for these tissues. The amount of backlog fluctuates based on the tissues available for shipment and the surgical needs of specific cases. Our backlog of human tissue consists mostly of pediatric tissues that have limited availability.
The limited supply of certain types or sizes of preserved tissue can result in a backlog of orders for these tissues. The amount of backlog fluctuates based on the tissues available for shipment and the surgical needs of specific cases. Our backlog of human tissue consists mostly of pediatric tissues and certain sizes of adult valves that have limited availability.
We are currently transitioning our PhotoFix CE Mark to our new Notified Body, DEKRA. See Part I, Item 1A, “Risk Factors—Industry Risks—Our products and tissues are highly regulated and subject to significant quality and regulatory risks,” for a discussion of the risks related to our PhotoFix CE Mark.
We are currently transitioning our PhotoFix CE Mark to our new Notified Body, DEKRA. See Part I, Item 1A, “Risk Factors—Legal, Quality, and Regulatory Risks—Our products and tissues are highly regulated and subject to significant quality and regulatory risks,” for a discussion of the risks related to our PhotoFix CE Mark.
Recent real-world data from 510 On-X aortic heart valve patients was presented at the 2023 Annual European Association for Cardio-Thoracic Surgery Conference and showed one-year outcomes of On-X aortic heart valves at low INR (1.5-2.0) reduces risk of major bleeding by more than 84%, proving safe for patients with no significant increase in thromboembolic events and no valve thrombosis.
Recent real-world data presented at the 2023 Annual European Association for Cardio-Thoracic Surgery Conference showed one-year outcomes for 510 On-X aortic heart valve patients at low INR (1.5-2.0) reduces risk of major bleeding by more than 84%, proving safe for patients with no significant increase in thromboembolic events and no valve thrombosis.
All of these corporate governance materials are also available free of charge in print to shareholders who request them in writing to: Jean F. Holloway, General Counsel, Chief Compliance Officer, and Corporate Secretary, 1655 Roberts Blvd NW, Kennesaw, GA 30144.
All of these corporate governance materials are also available free of charge in print to stockholders who request them in writing to: Jean F. Holloway, General Counsel, Chief Compliance Officer, and Corporate Secretary, 1655 Roberts Blvd NW, Kennesaw, GA 30144.
See also Part I, Item 1A, “Risk Factors—Industry Risks—Our products and tissues are highly regulated and subject to significant quality and regulatory risks,” for a discussion of the risks related to LRQA’s decision, the MDR transition, and Brexit.
See also Part I, Item 1A, “Risk Factors—Legal, Quality, and Regulatory Risks—Our products and tissues are highly regulated and subject to significant quality and regulatory risks,” for a discussion of the risks related to LRQA’s decision, the MDR transition, and Brexit.
Concerns about the release of EtO into the environment at unsafe levels have led to various regulatory enforcement activities and legal actions against EtO facilities, resulting in closures and temporary closures, as well as proposals increasing regulations related to EtO.
Concerns about the release of EtO into the environment at unsafe levels have led to various regulatory enforcement activities and legal actions against EtO facilities, resulting in permanent and temporary closures, as well as proposals increasing regulations and increased regulations related to EtO.
We believe that we compete favorably with other entities that preserve human vascular tissues on the basis of surgeon preference, documented clinical data, technology, and customer service, particularly with respect to the capabilities of our field representatives. 14 Table of Contents Other Products PhotoFix PhotoFix is a bovine pericardial patch fixated using a dye-mediated photo-oxidation process without the use of glutaraldehyde.
We believe that we compete favorably with other entities that preserve human vascular tissues on the basis of surgeon preference, documented clinical data, technology, and customer service, particularly with respect to the capabilities of our field representatives. Other Products PhotoFix PhotoFix is a bovine pericardial patch fixated using a dye-mediated photo-oxidation process without the use of glutaraldehyde.
We believe the addition of E-nside positions us well to capture share in the European aortic stent graft market because E-xtra Design Engineering provides patient-specific solutions, and E-nside provides an off-the-shelf solution. Further, there are synergies between E-nside and our portfolio of thoracic and abdominal stent grafts. E-nside competes with products from Cook.
We believe the addition of E-nside positions us well to capture share in the European aortic stent graft market because E-xtra Design Engineering provides patient-specific solutions, and E-nside provides an off-the-shelf solution. 11 Table of Contents Further, there are synergies between E-nside and our portfolio of thoracic and abdominal stent grafts. E-nside competes with products from Cook.
Failure to seal surgical wounds effectively can result in leakage of blood in cardiac surgeries, air in lung surgeries, and cerebrospinal fluid in neurosurgeries potentially resulting in prolonged hospitalization, greater post-operative pain, higher costs, and higher mortality rates. 12 Table of Contents Sutures and staples facilitate healing by joining wound edges to allow the body to heal naturally.
Failure to seal surgical wounds effectively can result in leakage of blood in cardiac surgeries, air in lung surgeries, and cerebrospinal fluid in neurosurgeries potentially resulting in prolonged hospitalization, greater post-operative pain, higher costs, and higher mortality rates. Sutures and staples facilitate healing by joining wound edges to allow the body to heal naturally.
See Part I, Item 1A, “Risk Factors—Industry Risks—Our products and tissues are highly regulated and subject to significant quality and regulatory risks,” for a discussion of risks related to the transition to MDR .
See Part I, Item 1A, “Risk Factors—Legal, Quality, and Regulatory Risks—Our products and tissues are highly regulated and subject to significant quality and regulatory risks,” for a discussion of risks related to the transition to MDR .
We contract with third parties for transport, treatment, and disposal of biomedical waste. 20 Table of Contents Some of our products, including certain On-X products, are sterilized using ethylene oxide (“EtO”). Although we have a small-scale EtO facility in Austin, Texas, we rely primarily on large-scale EtO facilities to sterilize our products.
We contract with third parties for transport, treatment, and disposal of biomedical waste. Some of our products, including certain On-X products, are sterilized using ethylene oxide (“EtO”). Although we have a small-scale EtO facility in Austin, Texas, we rely primarily on large-scale EtO facilities to sterilize our products.
We also make available on the Corporate Governance portion of our website: (i) our Code of Conduct; (ii) our Corporate Governance Guidelines; (iii) the charter of each active committee of our Board of Directors; (iv) our Code of Ethics for Senior Financial Officers; (v) our Insider Trading Policy; (vi) our Corporate Responsibility Report (ESG); and (vii) our Foreign Corrupt Practices Act (“FCPA”) Policy.
We also make available on the Corporate Governance portion of our website: (i) our Code of Conduct; (ii) our Corporate Governance Guidelines; (iii) the charter of each active committee of our Board of Directors; (iv) our Code of Ethics for Senior Financial Officers; (v) our Corporate Responsibility Report (ESG); and (vi) our Foreign Corrupt Practices Act (“FCPA”) Policy.
The regulatory bodies of states may perform inspections of our facilities as required to ensure compliance with state laws and regulations. 19 Table of Contents International Approval Requirements Sales of medical devices and shipments of human tissues outside the US are subject to international regulatory requirements that vary widely from country to country.
The regulatory bodies of states may perform inspections of our facilities as required to ensure compliance with state laws and regulations. International Approval Requirements Sales of medical devices and shipments of human tissues outside the US are subject to international regulatory requirements that vary widely from country to country.
The addition of the NEXUS Products to our highly differentiated aortic stent graft portfolio further strengthens our position as a leader in the aortic repair market. Several other manufacturers are introducing competitive products through the custom-made device process in Europe and the early feasibility process within the US, including Cook, Gore, and Terumo.
The addition of the NEXUS family of products to our highly differentiated aortic stent graft portfolio further strengthens our position as a leader in the aortic repair market. 10 Table of Contents Several other manufacturers are introducing competitive products through the custom-made device process in Europe and the early feasibility process within the US, including Cook, Gore, and Terumo.
We have CE Marks for On-X heart valves, On-X AAP, E-vita Open Plus, E-vita Open NEO, E-tegra, E-liac, E-nside, AMDS, and other devices. In addition, E-ventus BX and NEXUS, which we distribute, have CE Marks. The Medical Device Directive (“MDD”) was the governing document for the EEA that detailed requirements for safety and risk of devices.
We have CE Marks for BioGlue, On-X heart valves, On-X AAP, E-vita Open NEO, E-tegra, E-liac, E-nside, AMDS, and other devices. In addition , E-ventus BX, Tuva BX, and NEXUS ONE, which we distribute, have CE Marks. The Medical Device Directive (“MDD”) was the governing document for the EEA that detailed requirements for safety and risk of devices.
Seasonality See Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Seasonality,” regarding seasonality of our products and services. Human Capital Overview As of December 31, 2023 we had approximately 1,500 employees. Most of our employees are located in Kennesaw, Georgia; Austin, Texas; and Hechingen, Germany.
Seasonality See Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Seasonality,” regarding seasonality of our products and services. Human Capital Overview As of December 31, 2024 we had approximately 1,600 employees. Most of our employees are located in Kennesaw, Georgia; Austin, Texas; and Hechingen, Germany.
The AMDS product is solely manufactured by a supplier in Charlotte, North Carolina, and the NEXUS Products are solely manufactured by Endospan in Herzliya, Israel.
The AMDS product is solely manufactured by a supplier in Charlotte, North Carolina, and the NEXUS family of products are solely manufactured by Endospan in Herzliya, Israel.
We have also obtained rights through license and distribution agreements for additional products and technologies, including the NEXUS Products.
We have also obtained rights through license and distribution agreements for additional products and technologies, including the NEXUS family of products.
Tissue is stored by us until it is shipped to a hospital, where the tissue is thawed and implanted immediately or held in a liquid nitrogen freezer pending implantation. 17 Table of Contents Backlog As of December 31, 2023 we did not have a significant backlog of orders related to our medical devices.
Tissue is stored by us until it is shipped to a hospital, where the tissue is thawed and implanted immediately or held in a liquid nitrogen freezer pending implantation. Backlog As of December 31, 2024 we did not have a significant backlog of orders related to our medical devices.
We plan to drive growth through: • New Products – Through product development and commercialization of new and next-generation products and services focused on aortic repair; • New Indications – Through regulatory approvals in new markets and for new products, and through approvals for expanded indications for our existing products and services; • Global Expansion – By entering new international markets, establishing new international direct sales territories, and developing our commercial infrastructure in new markets, including emerging markets, such as China and Brazil; and • Business Development – By pursuing select acquisitions, licensing, and distribution opportunities that are aligned to our objectives and complement our existing products, services, and infrastructure.
Our strategic plan is focused on four growth areas that we expect to drive our business in the future as follows: • New Products – Through product development and commercialization of new and next-generation products and services focused on aortic repair; • New Indications – Through regulatory approvals in new markets and for new products, and through approvals for expanded indications for our existing products and services; • Global Expansion – By entering new international markets, establishing new international direct sales territories, and developing our commercial infrastructure in new markets, including emerging markets, such as China and Brazil; and • Business Development – By pursuing select acquisitions, licensing, and distribution opportunities that are aligned to our objectives and complement our existing products, services, and infrastructure.
In December 2023 we launched Artivex as part of our E-xtra Design Engineering stent graft systems in EMEA. Artivex is indicated for use in both thoraco-abdominal aneurysms and dissections extending into the thoraco-abdominal aorta. We sell custom TAAA, and anticipate selling Artivex during fiscal year 2024, in EMEA and in a limited number of other countries around the world.
In December 2023 we launched Artivex as part of our E-xtra Design Engineering stent graft systems in EMEA. Artivex is indicated for use in both thoraco-abdominal aneurysms and dissections extending into the thoraco-abdominal aorta. We sell custom TAAA and Artivex in EMEA and in a limited number of other countries around the world.
The NEXUS Products also compete with other manufacturers’ standard open repair and hybrid procedures including aortic debranching, frozen elephant trunk, and thoracic endovascular aortic repair with chimneys or snorkels. 10 Table of Contents We began distribution of NEXUS in the fourth quarter of 2019 in EMEA.
The NEXUS family of products also compete with other manufacturers’ standard open repair and hybrid procedures including aortic debranching, frozen elephant trunk, and thoracic endovascular aortic repair with chimneys or snorkels. We began distribution of NEXUS ONE in the fourth quarter of 2019 in EMEA.
We obtained a CE Mark for E-nside in the fourth quarter of 2019 and began limited selling of E-nside in the second quarter of 2020.
We obtained a CE Mark for E-nside in the fourth quarter of 2019 and began limited selling of E-nside in the second quarter of 2020. We fully launched E-nside in 2021.
We have never experienced a work stoppage or interruption due to labor disputes. Our employees located in Hechingen, Germany have a Works Council, and our employees in Brazil are affiliated with a union in connection with compensation-related collective bargaining.
We have never experienced a work stoppage or interruption due to labor disputes. Our employees located in Hechingen, Germany have a Works Council, and our employees in Brazil are affiliated with a union in connection with compensation-related collective bargaining. We believe our relations with our employees worldwide and with the Works Council in Germany and union in Brazil are good.
There are currently only limited off-the-shelf products to treat aneurysms in the thoraco-abdominal aorta due to the many side branches in this anatomy where blood flow to vital organs would be obstructed by unbranched stent grafts. We have pioneered a service whereby we can manufacture a customized thoraco-abdominal stent graft in three weeks or less.
There are currently only limited off-the-shelf products to treat aneurysms in the thoraco-abdominal aorta due to the many side branches in this anatomy where blood flow to vital organs would be obstructed by unbranched stent grafts. We have pioneered a service whereby we can manufacture a customized thoraco-abdominal stent graft in approximately 22 working days.
Two other domestic tissue processors, LifeNet and LeMaitre, offer preserved vascular tissue in competition with us. There are also a number of providers of synthetic and bioprosthetic alternatives to vascular tissues preserved by us and those alternatives are available primarily in medium and large diameters. Our vascular tissues compete with products from Gore, BD, LeMaitre, and Maquet.
There are also a number of providers of synthetic and bioprosthetic alternatives to vascular tissues preserved by us and those alternatives are available primarily in medium and large diameters. Our vascular tissues compete with products from Gore, BD, LeMaitre, LifeNet, and Maquet.
Some of these competitors might obtain patent protection or approval or clearance by the US Food and Drug Administration (“FDA”) or foreign regulators sooner than we do. Some might have superior manufacturing efficiency, tissue processing capacity, and/or marketing capabilities.
Some of these competitors might obtain patent protection or approval or clearance by the FDA or foreign regulators sooner than we do. Some might have superior manufacturing efficiency, tissue processing capacity, and/or marketing capabilities.
We fully launched E-nside in 2021. 11 Table of Contents Abdominal and Peripheral Stents and Stent Grafts E-tegra TM The E-tegra is a AAA stent graft system with special stent design for secure sealing that makes difficult vascular anatomies treatable, thus expanding endovascular treatment options for infrarenal abdominal aortic aneurysms. The design of the E-tegra enables optimal fixation and sealing.
Abdominal and Peripheral Stents and Stent Grafts E-tegra TM The E-tegra is a AAA stent graft system with special stent design for secure sealing that makes difficult vascular anatomies treatable, thus expanding endovascular treatment options for infrarenal abdominal aortic aneurysms. The design of the E-tegra enables optimal fixation and sealing.
Examples include our acquisitions of JOTEC, On-X LTI, and Ascyrus Medical LLC (“Ascyrus”), and our distribution agreement and purchase option for NEXUS and NEXUS DUO (the “NEXUS Products”).
Examples include our acquisitions of JOTEC, On-X LTI, and Ascyrus Medical LLC (“Ascyrus”), and our distribution agreement and purchase option for the NEXUS family of products.
Once a PMA application has been submitted, the FDA’s review may be lengthy and may include requests for additional data, which may require us to undertake additional human clinical studies. Commercialization of the device may begin when the FDA approves the PMA.
Once a PMA application has been submitted, the FDA’s review may be lengthy and may include requests for additional data, which may require us to undertake additional human clinical studies.
See also Part I, Item 1A, “Risk Factors—Industry Risks— Reclassification by the FDA of CryoValve SGPV may make it commercially infeasible to continue processing the CryoValve SGPV.” US Federal Regulation of Human Tissue The FDA regulates human tissues pursuant to Section 361 of the Public Health Services Act, which in turn provides the regulatory framework for regulation of human cellular and tissue products.
See also Part I, Item 1A, “Risk Factors—Legal, Quality, and Regulatory Risks—Reclassification by the FDA of CryoValve SG pulmonary heart valve (“CryoValve SGPV”) as a PMA device may make it commercially infeasible to continue processing the CryoValve SGPV.” US Federal Regulation of Human Tissue The FDA regulates human tissues pursuant to Section 361 of the Public Health Services Act, which in turn provides the regulatory framework for regulation of human cellular and tissue products.
Synthetic Vascular Grafts In addition to our endovascular stent graft offerings, we have a broad line of synthetic vascular grafts that are used in open aortic and peripheral vascular surgical procedures. Our offerings include ePTFE grafts and both woven and knitted polyester grafts.
The E-liac competes with products from Gore and Cook. Synthetic Vascular Grafts In addition to our endovascular stent graft offerings, we have a broad line of synthetic vascular grafts that are used in open aortic and peripheral vascular surgical procedures. Our offerings include ePTFE grafts and both woven and knitted polyester grafts.
See Part I, Item 1A, “Risk Factors” below for a discussion of these and other risk factors. 23 Table of Contents Available Information It is our policy to make all our filings with the Securities and Exchange Commission, including, without limitation, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, available free of charge on our website, www.Artivion.com , on the day of filing.
Available Information It is our policy to make all our filings with the Securities and Exchange Commission, including, without limitation, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, available free of charge on our website, www.Artivion.com , on the day of filing.
These valves typically contain a synthetic sewing ring to facilitate surgical implantation. Patients receiving a bioprosthetic heart valve may not require long-term anticoagulation drug therapy, although some of these patients may require anticoagulation drug therapy for other heart or vascular conditions that are common in this patient population.
Patients receiving a bioprosthetic heart valve may not require long-term anticoagulation drug therapy, although some of these patients may require anticoagulation drug therapy for other heart or vascular conditions that are common in this patient population.
To the extent we identify new non-core products or additional non-core applications for our core products, we may attempt to license these products to corporate partners for further development or seek funding from outside sources to continue commercial development. We may also attempt to acquire or license additional strategically complementary products or technologies from third-parties to supplement our product lines.
To the extent we identify new non-core products or additional non-core applications for our core products, we may attempt to license these products to corporate partners for further development or seek funding from outside sources to continue commercial development.
Employee feedback is also gathered through onboarding surveys, the employee review process, spot surveys, and exit surveys. Risk Factors Our business is subject to a number of risks.
Employee Engagement We solicit employee feedback to assess employee satisfaction and engagement and to identify opportunities for development. Employee feedback is also gathered through onboarding surveys, the employee review process, spot surveys, and exit surveys. Risk Factors Our business is subject to a number of risks.
Training and Development We provide internal training and development programs to employees globally. Such programs include leadership development, office safety, ethics, and various skill-based training programs. Health and Safety Protecting the health, safety, and well-being of our employees around the world is a priority.
Such programs include leadership development, office safety, ethics, and various skill-based training programs. Health and Safety Protecting the health, safety, and well-being of our employees around the world is a priority. We continually strive to look for opportunities to provide a safer, healthier, work environment for our employees.
We believe our relations with our employees worldwide and with the Works Council in Germany and union in Brazil are good. 22 Table of Contents Employee Talent and Retention Our business and future operating results depend in significant part upon the continued contributions of our key personnel, including qualified personnel with medical device and tissue processing experience, and senior management with experience in the medical device or tissue processing space, many of whom would be difficult to replace.
Employee Talent and Retention Our business and future operating results depend in significant part upon the continued contributions of our key personnel, including qualified personnel with medical device and tissue processing experience, and senior management with experience in the medical device or tissue processing space, many of whom would be difficult to replace.
We obtained 510(k) clearance from the FDA to commercialize the CryoValve SGPV; however, these tissues are not officially classified as Class II or III medical devices. 18 Table of Contents Beginning in December 2019 and most recently in the fall 2023, the FDA indicted that it was planning to issue a proposed rule for reclassification of more than minimally manipulated (“MMM”) allograft heart valves, which could include our CryoValve SGPV, from unclassified medical devices reviewed through the 510(k) process to Class III (PMA) medical devices.
Beginning in December 2019 and most recently in the fall 2024, the FDA indicted that it was planning to issue a proposed rule for reclassification of more than minimally manipulated (“MMM”) allograft heart valves, which could include our CryoValve SGPV, from unclassified medical devices reviewed through the 510(k) process to Class III (PMA) medical devices.
Endospan is currently enrolling patients in their US pivotal trial, TRIOMPHE. E-vita Thoracic 3G The E-vita Thoracic 3G is a stent graft system that enables endovascular treatment of TAAs.
Endospan completed patient enrollment in their US pivotal trial, TRIOMPHE in the fourth quarter of 2024. E-vita Thoracic 3G The E-vita Thoracic 3G is a stent graft system that enables endovascular treatment of TAAs.
The FDCA requires all medical device manufacturers and distributors to register with the FDA annually and to provide the FDA with a list of those medical devices they distribute commercially.
Commercialization of the device may begin when the FDA approves the PMA. 18 Table of Contents The FDCA requires all medical device manufacturers and distributors to register with the FDA annually and to provide the FDA with a list of those medical devices they distribute commercially.
NOTA Regulation Our activities in preserving and transporting human hearts and certain other organs are also subject to federal regulation under the National Organ Transplant Act (“NOTA”), which makes it unlawful for any person to knowingly acquire, receive, or otherwise transfer any human organ for valuable consideration for use in human transplantation if the transfer affects interstate commerce.
Industry and the clinician community are currently working with CBER and other federal agencies and stakeholders to rescind implementation of the Guidances or to reissue them. 19 Table of Contents NOTA Regulation Our activities in preserving and transporting human hearts and certain other organs are also subject to federal regulation under the National Organ Transplant Act (“NOTA”), which makes it unlawful for any person to knowingly acquire, receive, or otherwise transfer any human organ for valuable consideration for use in human transplantation if the transfer affects interstate commerce.
Aortic arch stent grafts include our E-vita ® Open NEO, E-vita Open Plus, the Ascyrus Medical Dissection Stent (“AMDS”) hybrid prosthesis, the NEXUS ® endovascular stent graft system (“NEXUS”), the NEXUS DUO TM aortic arch stent graft (“NEXUS DUO”), and E-vita Thoracic 3G products.
Aortic arch stent grafts include our E-vita ® Open NEO, E-vita Open Plus, the Ascyrus Medical Dissection Stent (“AMDS”) hybrid prosthesis, the NEXUS ONE TM (“NEXUS ONE”), NEXUS DUO TM (“NEXUS DUO”), and NEXUS TRE TM (“NEXUS TRE”) aortic arch stent graft systems (the “NEXUS family of products”), and E-vita Thoracic 3G products.
As a result of the UK’s exit from the European Union, or “Brexit,” the UK Medicines and Healthcare Products Regulatory Agency (“MHRA”) has announced in the third quarter of 2023 that the UK government (MHRA) extended the acceptance of CE marked medical devices beyond the original date of June 2023.
We work with a number of notified bodies and the transition from the MDD to the MDR is ongoing. 20 Table of Contents As a result of the UK’s exit from the European Union, or “Brexit,” the UK Medicines and Healthcare Products Regulatory Agency (“MHRA”) announced in the third quarter of 2023 that the UK government (MHRA) extended the acceptance of CE marked medical devices beyond the original date of June 2023.
The E-vita Open NEO competes in Europe primarily on its proven stent graft technology and long-term clinical data. The CE Mark for the E-vita Open Plus expired in 2022 and the product will be discontinued when the remaining inventory is depleted. AMDS TM We acquired Ascyrus in September 2020.
The E-vita Open NEO competes in Europe primarily on its proven stent graft technology and long-term clinical data. The CE Mark for the E-vita Open Plus expired in 2022 and is only sold in limited countries including Brazil. AMDS TM We acquired Ascyrus in September 2020.
The E-ventus BX was manufactured by Bentley, who holds a CE Mark for that product and additional marketing approvals in several other countries throughout the world. The E-ventus BX competes with products from Maquet, Gore, BD, and Bentley InnoMed.
The E-ventus BX was manufactured by Bentley, who holds a CE Mark for that product and additional marketing approvals in several other countries throughout the world. The E-ventus BX competes with products from Maquet, Gore, BD, and Bentley InnoMed. We received the final production lots of E-ventus BX in May 2023 and we substantially depleted the remaining inventory during 2024.
Employees are encouraged to approach their supervisors if they believe violations of policies have occurred. Employees are also able to confidentially and anonymously report any such violations through an online form or telephone hotline hosted by a third-party provider.
Employees are encouraged to approach their supervisors if they believe violations of policies have occurred. Employees are also able to confidentially and anonymously report any such violations through an online form or telephone hotline hosted by a third-party provider. The Company has employees in almost 30 different countries representing unique cultures, ethnicities, backgrounds, experiences and viewpoints.
E-vita Open NEO is a hybrid stent graft system used in the treatment of patients with either an aneurysm or dissection in the aortic arch and in the descending thoracic aorta.
We obtained a CE Mark for E-vita Open NEO in the first quarter of 2020 and began full product launch in the fourth quarter of 2020. E-vita Open NEO is a hybrid stent graft system used in the treatment of patients with either an aneurysm or dissection in the aortic arch and in the descending thoracic aorta.
These tissues more closely resemble in structure, and simulate the performance of, the patient’s own tissue compared to non-human tissue alternatives. Our cardiac tissues are used in a variety of valve replacement and cardiac reconstruction surgeries. We believe the human tissues we distribute offer specific clinical advantages over mechanical, synthetic, and bioprosthetic alternatives.
Our cardiac tissues are used in a variety of valve replacement and cardiac reconstruction surgeries. We believe the human tissues we distribute offer specific clinical advantages over mechanical, synthetic, and bioprosthetic alternatives.
Raw materials, solution, components, subassemblies, and tissues are documented throughout manufacturing or processing to ensure traceability. We evaluate and inspect both our manufactured and distributed products to ensure conformity to product specifications. Processes are validated to review whether products manufactured meet our specifications. Each process is documented along with inspection results, including final finished product inspection and acceptance.
Raw materials, solution, components, subassemblies, and tissues are documented throughout manufacturing or processing to ensure traceability. 17 Table of Contents We evaluate and inspect both our manufactured and distributed products to ensure conformity to product specifications. Processes are validated to review whether products manufactured meet our specifications.
The first implant of the next generation NEXUS DUO, the dual branch graft system in the NEXUS product line, occurred in the fourth quarter of 2022 as a limited market release.
The first implant of the NEXUS DUO, the dual branch graft system in the NEXUS product line, occurred in the fourth quarter of 2022 as a limited market release. We began distribution of NEXUS TRE, the custom-made three branch graft, in the third quarter of 2024 as a limited market release.
The governing German competent authority, the Regierungspräsidium Tübingen, granted us an extended grace period until December 31, 2021 to transfer LRQA-issued certifications for BioGlue and PhotoFix to a new Notified Body. Although our BioGlue CE Mark has been successfully transferred to our new Notified Body, we are still in the process of transferring PhotoFix to DEKRA.
The governing German competent authority, the Regierungspräsidium Tübingen, granted us an extended grace period until December 31, 2021 to transfer LRQA-issued certifications for BioGlue and PhotoFix to a new Notified Body.
We estimate that 20% of patients who have an AAA also have an aneurysmal iliac artery, and as such, the E-liac is often used in conjunction with the E-tegra AAA device as well as one or two E-ventus BX devices.
We estimate that 20% of patients who have an AAA also have an aneurysmal iliac artery, and as such, the E-liac is often used in conjunction with the E-tegra AAA device as well as one or two E-ventus BX devices. 12 Table of Contents We hold a CE Mark for the E-liac and additional marketing approvals have been granted in several other countries throughout the world.
Under a 510(k) process, a medical device manufacturer provides the FDA with premarket notification that it intends to begin commercializing a product and demonstrates to the FDA that the product is substantially equivalent to another legally marketed predicate device.
Prior to approval, IDE's allow investigational devices to be used in clinical studies in order to collect safety and effectiveness data. Under a 510(k) process, a medical device manufacturer provides the FDA with premarket notification that it intends to begin commercializing a product and demonstrates to the FDA that the product is substantially equivalent to another legally marketed predicate device.
PerClot PerClot is an absorbable powdered hemostat, consisting of plant starch modified into ultra-hydrophilic, adhesive-forming hemostatic polymers. PerClot granules are biocompatible, absorbable polysaccharides containing no animal or human components.
Due to supply-related factors outside of our control, we abandoned the business as of June 2023. PerClot PerClot is an absorbable powdered hemostat, consisting of plant starch modified into ultra-hydrophilic, adhesive-forming hemostatic polymers. PerClot granules are biocompatible, absorbable polysaccharides containing no animal or human components.
We also entered into a securities purchase option agreement with Endospan in September 2019 which provides us the option to purchase all the outstanding securities of Endospan from Endospan’s securityholders at the time of acquisition (or the option to acquire all of Endospan’s assets) up through a certain period of time after FDA approval of NEXUS.
We also entered into a securities purchase option agreement with Endospan (“Endospan Option”) in September 2019 and subsequent amendment (“Endospan Option Amendment”) in July 2024 (as described in Part II, Item 8, Note 4 of the “Notes to Consolidated Financial Statements”) which provides us the option to purchase all the outstanding securities of Endospan from Endospan’s securityholders at the time of acquisition (or the option to acquire all of Endospan’s assets) up through a certain period of time after FDA approval of NEXUS ONE.
At the FDA’s request, we are conducting a post-approval study to collect long-term clinical data for the On-X aortic heart valve managed with reduced warfarin therapy. This study is ongoing and data collection is expected to continue through 2027. We completed our pivotal clinical trial to gain approval to commercialize PerClot for surgical indications in the US.
At the FDA’s request, we are conducting a post-approval study to collect long-term clinical data for the On-X aortic heart valve managed with reduced warfarin therapy. This study is ongoing and data collection is expected to continue through 2027. The FDA granted Breakthrough Device Designation in the third quarter of 2019 for the AMDS hybrid prosthesis.
We believe the human tissues we distribute offer specific advantages over synthetic and bioprosthesis alternatives, particularly for the treatment of infection in hemodialysis and peripheral bypass patients. Human tissue is not as susceptible to infection as synthetic alternatives and more closely simulates the performance of the patient’s own tissue and vasculature compared to non-human tissue alternatives.
We believe the human tissues we distribute offer specific advantages over synthetic and bioprosthesis alternatives, particularly for the treatment of infection in hemodialysis and peripheral bypass patients.
Our ability to fully recover all possible losses from these suppliers and contract manufacturers may have practical limitations imposed by factors like industry standard contractual terms or the financial resources of the adverse party.
Our ability to fully recover all possible losses from these suppliers and contract manufacturers may have practical limitations imposed by factors like industry standard contractual terms or the financial resources of the adverse party. 16 Table of Contents Some of the materials, supplies, and services used in our product manufacturing and tissue processing, as well as some of our products, are sourced from single- or sole-source suppliers.
Our strategies for driving growth include new product approvals and indications, global expansion, and business development. These activities will likely require additional research, new clinical studies, and/or compilation of clinical data. We are currently seeking regulatory approval for BioGlue in China.
We are in the process of developing and investigating several new products and technologies, as well as changes and enhancements to our existing products and services. Our strategies for driving growth include new product approvals and indications, global expansion, and business development. These activities will likely require additional research, new clinical studies, and/or compilation of clinical data.
Research is inherently risky, and any potential products or services under development ultimately may not be deemed safe or effective or worth commercializing for other reasons and, therefore, may not generate a return on investment for us. Our clinical research department also collects and maintains clinical data on the use and effectiveness of our products and services.
We also conduct preclinical and clinical studies at universities, medical centers, hospitals, and other third-party locations under contract with us. Research is inherently risky, and any potential products or services under development ultimately may not be deemed safe or effective or worth commercializing for other reasons and, therefore, may not generate a return on investment for us.
Records are maintained as to the consignees of products to track product performance and to facilitate product removals or corrections, if necessary. We maintain controls over our tissue processing to ensure conformity with our procedures. OPOs and tissue banks must follow our procedures related to tissue recovery practices and are subject to periodic audits to confirm compliance.
Each process is documented along with inspection results, including final finished product inspection and acceptance. Records are maintained as to the consignees of products to track product performance and to facilitate product removals or corrections, if necessary. We maintain controls over our tissue processing to ensure conformity with our procedures.
AMDS is used as a complement to, and in conjunction with, hemi-arch reconstruction without adding technical complexity to this life-saving procedure. The design of the AMDS allows for rapid deployment of the graft in the aortic arch during a standard replacement of the ascending aorta, adding on average fifteen minutes to the procedure time.
The design of the AMDS allows for rapid deployment of the graft in the aortic arch during a standard replacement of the ascending aorta, adding on average approximately five minutes for deployment with additional time for suturing to complete the standard procedure.
A multi-center study showed that, at 10 years, freedom from conduit dysfunction was significantly better in patients receiving our proprietary SynerGraft SGPV valves (83%) compared with patients receiving standard allografts (58%). 13 Table of Contents We believe that the human heart valves preserved by us compare favorably with bioprosthetic and mechanical valves for certain indications and patient populations, and that the human cardiac patches preserved by us compare favorably with xenograft small intestine submucosa (“SIS”) and glutaraldehyde fixed bovine pericardial patches due to the benefits of human tissue discussed above.
We believe that the human heart valves preserved by us compare favorably with bioprosthetic and mechanical valves for certain indications and patient populations, and that the human cardiac patches preserved by us compare favorably with xenograft small intestine submucosa (“SIS”) and glutaraldehyde fixed bovine pericardial patches due to the benefits of human tissue discussed above.
See also Part I, Item 1A, “Risk Factors – Operational Risks” for our disclosures of risks related to suppliers, sources, and availability of raw materials and tissues.
We have established operating mechanisms in place to manage this increased risk and we will continue to adjust as necessary into the future. See also Part I, Item 1A, “Risk Factors – Operational Risks” for our disclosures of risks related to suppliers, sources, and availability of raw materials and tissues.
In May 2023 we obtained FDA PMA approval to commercialize PerClot in the US, which we transferred to Baxter, and began manufacturing and supplying PerClot for Baxter, as discussed further in “Research and Development and Clinical Research” below.
In May 2023 we obtained FDA PMA approval to commercialize PerClot in the US, which we transferred to Baxter, and began manufacturing and supplying PerClot for Baxter, as discussed further in “Research and Development and Clinical Research” below. 15 Table of Contents Marketing and Distribution In the US and Canada, we market our products and preservation services primarily to physicians and sell our products through our approximately 50-person direct sales team to hospitals and other healthcare facilities.
We use this data to gain regulatory approvals to market the products and services, to inform third parties on the benefits of our products and services, and to help direct our continuing improvement efforts. In 2023, 2022, and 2021 we spent approximately $28.7 million, $38.9 million, and $35.5 million, respectively, on research and development activities on new and existing products.
Our clinical research department also collects and maintains clinical data on the use and effectiveness of our products and services. We use this data to gain regulatory approvals to market the products and services, to inform third parties on the benefits of our products and services, and to help direct our continuing improvement efforts.
In APAC and LATAM, we commercialize our products through our independent distributors and our subsidiaries through approximately 40 sales and clinical support specialists.
We provide customer service, logistics, marketing, and clinical support to cardiac, vascular, thoracic, and general surgeons throughout the EMEA region. In APAC and LATAM, we commercialize our products through our independent distributors and our subsidiaries through approximately 50 sales and clinical support specialists.
Preservation Services Cardiac Preservation Services Our proprietary preservation process involves our dissection, processing, preservation, and storage of donated human tissues until they are shipped to a hospital where they are implanted by physicians. The cardiac tissues we currently preserve include aortic and pulmonary heart valves and cardiac patches in three primary pulmonary anatomic configurations: hemi-artery, trunk, and branch.
We sell BioGlue throughout the world including North America, EMEA, APAC, and LATAM. 13 Table of Contents Preservation Services Cardiac Preservation Services Our proprietary preservation process involves our dissection, processing, preservation, and storage of donated human tissues until they are shipped to a hospital where they are implanted by physicians.
Once tissue is released for distribution, it is moved from quarantine to an implantable status.
Tissue processing records and donor information are reviewed to identify characteristics that would disqualify the tissue for processing or implantation. Once tissue is released for distribution, it is moved from quarantine to an implantable status.
Samples are taken from donated tissue for microbiological testing, and tissue must be shown to be free of certain detectable microbial contaminants before being released for distribution. Tissue processing records and donor information are reviewed to identify characteristics that would disqualify the tissue for processing or implantation.
OPOs and tissue banks must follow our procedures related to tissue recovery practices and are subject to periodic audits to confirm compliance. Samples are taken from donated tissue for microbiological testing, and tissue must be shown to be free of certain detectable microbial contaminants before being released for distribution.
Through our field representatives and our physician relations and education department, we conduct field training for surgeons regarding the surgical applications of our products and tissues. 15 Table of Contents In EMEA, we market our products through our European headquarters, based in Hechingen, Germany, as well as through several other subsidiaries based throughout Europe.
In EMEA, we market our products through our European headquarters, based in Hechingen, Germany, as well as through several other subsidiaries based throughout Europe. We employ approximately 100 direct field service representatives and distributor managers across several countries in the EMEA region.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur ability to realize the anticipated business opportunities, growth prospects, cost savings, synergies, and other benefits of these and other transactions depends on a number of factors including our ability to: • Leverage our global infrastructure to sell and cross-market the acquired products; • Drive adoption of the NEXUS Products and AMDS in the European and other markets, including our ability to manage the substantial product training, implant support, and proctoring requirements for NEXUS procedures; • Bring acquired products to the US market, including our acquired aortic stent grafts; • Harness the aortic stent graft product pipeline and our research and development capabilities; • Obtain regulatory approvals in relevant markets, including our ability to timely obtain or maintain CE Mark product certifications for pipeline and current products; • Execute on development and clinical trial timelines for acquired products; • Manage global inventories, including our ability to manage inventories for product lines with large numbers of product configurations and manage manufacturing and demand cycles to avoid excess inventory obsolescence due to shelf life expiration, particularly for processed tissues and aortic stent grafts; • Carry, service, and manage significant debt and repayment obligations; and • Manage the unforeseen risks and uncertainties related to these transactions, including any related to intellectual property rights.
Biggest changeOur ability to realize the anticipated business opportunities, growth prospects, cost savings, synergies, and other benefits of these and other transactions depends on a number of factors including our ability to: • Leverage our global infrastructure to sell and cross-market the acquired products; • Drive adoption of the NEXUS family of products and AMDS in the European and other markets, including our ability to manage the substantial product training, implant support, and proctoring requirements for NEXUS procedures; • Bring acquired products to the US market, including our acquired aortic stent grafts; • Harness the aortic stent graft product pipeline and our research and development capabilities; • Obtain regulatory approvals in relevant markets, including our ability to timely obtain or maintain CE Mark product certifications for pipeline and current products; • Execute on development and clinical trial timelines for acquired products; • Manage global inventories, including our ability to manage inventories for product lines with large numbers of product configurations and manage manufacturing and demand cycles to avoid excess inventory obsolescence due to shelf life expiration, particularly for processed tissues and aortic stent grafts; • Carry, service, and manage significant debt and repayment obligations; and • Manage the unforeseen risks and uncertainties related to these transactions, including any related to intellectual property rights. 30 Table of Contents Additionally, our ability to realize the anticipated business opportunities, growth prospects, synergies, and other benefits of our 2019 Endospan transaction depends on a number of additional factors including Endospan’s ability to: (a) comply with the Endospan Loan and other debt obligations, and avoid an event of default; (b) successfully commercialize the NEXUS family of products, raise capital and drive adoption in markets in and outside of Europe; (c) meet demand for the NEXUS family of products; (d) meet quality and regulatory requirements for the NEXUS family of products; (e) manage any intellectual property risks and uncertainties associated with the NEXUS family of products; (f) obtain FDA approval of the NEXUS family of products; (g) remain a going concern; and (h) develop the NEXUS family of products, and other product improvements to meet competitive threats and physician demand.
In connection with one or more of these transactions, we may: • Issue additional equity securities that would dilute our stockholders’ ownership interest; • Use cash we may need in the future to operate our business; 29 Table of Contents • Incur debt, including on terms that could be unfavorable to us or debt we might be unable to repay; • Structure the transaction resulting in unfavorable tax consequences, such as a stock purchase that does not permit a step-up in basis for the assets acquired; • Be unable to realize the anticipated benefits of the transaction; or • Assume material unknown liabilities associated with the acquired business.
In connection with one or more of these transactions, we may: • Issue additional equity securities that would dilute our stockholders’ ownership interest; • Use cash we may need in the future to operate our business; • Incur debt, including on terms that could be unfavorable to us or debt we might be unable to repay; 29 Table of Contents • Structure the transaction resulting in unfavorable tax consequences, such as a stock purchase that does not permit a step-up in basis for the assets acquired; • Be unable to realize the anticipated benefits of the transaction; or • Assume material unknown liabilities associated with the acquired business.
The agreements currently governing our indebtedness contain, and any instruments governing future indebtedness of ours may contain, covenants that impose significant operating and financial restrictions on us and certain of our subsidiaries, including (subject in each case to certain exceptions) restrictions or prohibitions on our and certain of our subsidiaries’ ability to, among other things: • Incur or guarantee additional debt or create liens on certain assets; • Pay dividends on or make distributions of our share capital, including repurchasing or redeeming capital stock, or make other restricted payments, including restricted junior payments; • Enter into agreements that restrict our subsidiaries’ ability to pay dividends to us, repay debt owed to us or our subsidiaries, or make loans or advances to us or our other subsidiaries; • Enter into certain transactions with our affiliates including any transaction or merger or consolidation, liquidation, winding-up, or dissolution; convey, sell, lease, exchange, transfer or otherwise dispose of all or any part of our business, assets or property; or sell, assign, or otherwise dispose of any capital stock of any subsidiary; 36 Table of Contents • Enter into certain rate swap transactions, basis swaps, credit derivative transactions, and other similar transactions, whether relating to interest rates, commodities, investments, securities, currencies, or any other relevant measure, or transactions of any kind subject to any form of master purchase agreement governed by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement; • Amend, supplement, waive, or otherwise modify our or our subsidiaries' organizational documents in a manner that would be materially adverse to the interests of the lender, or change or amend the terms of documentation regarding junior financing in a manner that would be materially adverse to the interests of the lender; • Make changes to our and our subsidiaries’ fiscal year without notice to the administrative agent; • Enter into agreements which restrict our ability to incur liens; • Engage in any line of business substantially different from that in which we are currently engaged; and • Make certain investments, including strategic acquisitions or joint ventures.
The agreements currently governing our indebtedness contain, and any instruments governing future indebtedness of ours may contain, covenants that impose significant operating and financial restrictions on us and certain of our subsidiaries, including (subject in each case to certain exceptions) restrictions or prohibitions on our and certain of our subsidiaries’ ability to, among other things: • Incur or guarantee additional debt or create liens on certain assets; • Pay dividends on or make distributions of our share capital, including repurchasing or redeeming capital stock, or make other restricted payments, including restricted junior payments; • Enter into agreements that restrict our subsidiaries’ ability to pay dividends to us, repay debt owed to us or our subsidiaries, or make loans or advances to us or our other subsidiaries; • Enter into certain transactions with our affiliates including any transaction or merger or consolidation, liquidation, winding-up, or dissolution; convey, sell, lease, exchange, transfer or otherwise dispose of all or any part of our business, assets or property; or sell, assign, or otherwise dispose of any capital stock of any subsidiary; • Enter into certain rate swap transactions, basis swaps, credit derivative transactions, and other similar transactions, whether relating to interest rates, commodities, investments, securities, currencies, or any other relevant measure, or transactions of any kind subject to any form of master purchase agreement governed by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement; • Amend, supplement, waive, or otherwise modify our or our subsidiaries' organizational documents in a manner that would be materially adverse to the interests of the lender, or change or amend the terms of documentation regarding junior financing in a manner that would be materially adverse to the interests of the lender; • Make changes to our and our subsidiaries’ fiscal year without notice to the administrative agent; • Enter into agreements which restrict our ability to incur liens; • Engage in any line of business substantially different from that in which we are currently engaged; and 36 Table of Contents • Make certain investments, including strategic acquisitions or joint ventures.
To date, sanctions and other disruptions in the Eastern European region have not materially impacted our business or ability to supply products to Russia, Belarus, Ukraine, and the region generally; however, continuation or escalation of the wars in Ukraine or the Middle East, or increased export controls or additional sanctions imposed on or by impacted countries, their allies, or related entities could adversely affect our financial performance.
To date, sanctions and other disruptions in the Eastern European region have not materially impacted our business or ability to supply products to Russia, Belarus, Ukraine, and the region generally; however, continuation or escalation of the wars in Ukraine or instability in the Middle East, or increased export controls or additional sanctions imposed on or by impacted countries, their allies, or related entities could adversely affect our financial performance.
See also Part I, Item 1A, “Risk Factors – Business and Economic Risks - We are subject to a variety of risks due to our international operations and continued global expansion.” Possible sanctions for violation of these healthcare compliance laws include fines, civil and criminal penalties, exclusion from government healthcare programs, and despite our compliance efforts, we face the risk of an enforcement activity or a finding of a violation of these laws. 35 Table of Contents We have entered into consulting and product development agreements with healthcare professionals and healthcare organizations, including some who may order our products or make decisions to use them.
See also Part I, Item 1A, “Risk Factors – Business and Economic Risks - We are subject to a variety of risks due to our international operations and continued global expansion.” Possible sanctions for violation of these healthcare compliance laws include fines, civil and criminal penalties, exclusion from government healthcare programs, and despite our compliance efforts, we face the risk of an enforcement activity or a finding of a violation of these laws. 34 Table of Contents We have entered into consulting and product development agreements with healthcare professionals and healthcare organizations, including some who may order our products or make decisions to use them.
Our financial results could be adversely affected by a number of financial adjustments required by purchase accounting such as: • We may incur additional amortization expense over the estimated useful lives of some acquired intangible assets; • We may incur additional depreciation expense as a result of recording purchased tangible assets; • We may be required to incur material charges relating to any impairment of goodwill and intangible assets; • Cost of sales may increase temporarily if acquired inventory is recorded at fair market value; • If acquisition consideration consists of earn-outs, our earnings may be affected by changes in estimates of future contingent consideration; or • Earnings may be affected by transaction and integration costs, which are expensed immediately.
Our financial results could be adversely affected by a number of financial adjustments required by purchase accounting such as: • We may incur additional amortization expense over the estimated useful lives of some acquired intangible assets; • We may incur additional depreciation expense as a result of recording purchased tangible assets; • We may be required to incur material charges relating to any impairment of goodwill and intangible assets; • Cost of sales may increase temporarily if acquired inventory is recorded at fair market value; • If acquisition consideration consists of earnouts, our earnings may be affected by changes in estimates of future contingent consideration; or • Earnings may be affected by transaction and integration costs, which are expensed immediately.
The commercialization of medical devices and processing and distribution of human tissues are highly complex and subject to significant global quality and regulatory risks and as such, we face the following risks: • Our products and tissues allegedly have caused, and may in the future cause, patient injury, which has exposed, and could in the future expose, us to liability claims that could lead to additional regulatory scrutiny; • Our manufacturing and tissue processing operations are subject to regulatory scrutiny, inspections and enforcement actions, and regulatory agencies could require us to change or modify our operations or take other action, such as issuing product recalls or holds; 31 Table of Contents • Regulatory agencies could reclassify, re-evaluate, or suspend our clearances or approvals, or fail to, or decline to, issue or reissue our clearances or approvals that are necessary to sell our products and distribute tissues; • Regulatory and quality requirements are subject to change, which could adversely affect our ability to sell our products or distribute tissues; and • Adverse publicity associated with our products, processed tissues, or our industry could lead to a decreased use of our products or tissues, increased regulatory scrutiny, or product or tissue processing liability claims.
The commercialization of medical devices and processing and distribution of human tissues are highly complex and subject to significant global quality and regulatory risks, including product recalls, and as such, we face the following risks: • Our products and tissues allegedly have caused, and may in the future cause, patient injury, which has exposed, and could in the future expose, us to product recalls and/or liability claims that could lead to additional regulatory scrutiny; • Our manufacturing and tissue processing operations are subject to regulatory scrutiny, inspections and enforcement actions, and regulatory agencies could require us to change or modify our operations or take other action, such as issuing product recalls or holds; • Regulatory agencies could reclassify, re-evaluate, or suspend our clearances or approvals, or fail to, or decline to, issue or reissue our clearances or approvals that are necessary to sell our products and distribute tissues; • Regulatory and quality requirements are subject to change, which could adversely affect our ability to sell our products or distribute tissues; and • Adverse publicity associated with our products, processed tissues, or our industry could lead to a decreased use of our products or tissues, increased regulatory scrutiny, or product or tissue processing liability claims.
Although this proposed rule change has, to our knowledge, remained on the HHS's unified regulatory agenda since 2019, no final rule has published at this time.
Although this proposed rule change has, to our knowledge, remained on the HHS's unified regulatory agenda since 2019, no final rule has been published at this time.
While our relationships with healthcare professionals and organizations are structured to comply with such laws and we conduct training sessions on these laws and codes, it is possible that enforcement authorities may view our relationships as prohibited arrangements that must be restructured or for which we would be subject to other significant civil or criminal penalties or debarment.
While our relationships with healthcare professionals, government officials, and organizations are structured to comply with such laws and we conduct training sessions on these laws and codes, it is possible that enforcement authorities may view our relationships as prohibited arrangements that must be restructured or for which we would be subject to other significant civil or criminal penalties or debarment.
The delivery systems we manufacture are comprised of several different raw materials and subassemblies. Our internal manufacturing processes include injection molding and machining of plastic parts, suturing of stent grafts, processing of Nitinol, and weaving of textiles. Our conventional polyester grafts consist of two main product components: polyester fabric and collagen coating.
The delivery systems we manufacture are comprised of several different raw materials and subassemblies. Our internal manufacturing processes include machining of plastic parts, suturing of stent grafts, processing of Nitinol, and weaving of textiles. Our conventional polyester grafts consist of two main product components: polyester fabric and collagen coating.
Our growth and profitability depends in part upon our ability to develop, and successfully introduce, new products and services, or expand upon existing indications, clearances, and approvals, requiring that we invest significant time and resources to obtain new regulatory clearances/approvals, including investment into pre- and post-market clinical studies.
Our growth and profitability depend in part upon our ability to develop, and successfully introduce, new products and services, or expand upon existing indications, clearances, and approvals, requiring that we invest significant time and resources to obtain new regulatory clearances/approvals, including investment into pre- and post-market clinical studies.
Risks Relating to Ownership of our Common Stock Our business could be negatively impacted as a result of shareholder activism. In recent years, shareholder activists have become involved in the governance, strategic direction, and operations of companies.
Risks Relating to Ownership of our Common Stock Our business could be negatively impacted as a result of stockholder activism. In recent years, stockholder activists have become involved in the governance, strategic direction, and operations of companies.
Certain aortic stent graft assemblies are manufactured for us by a contract manufacturer in Slovakia. The AMDS product is solely manufactured by a supplier in Charlotte, North Carolina, and the NEXUS Products are solely manufactured by Endospan in Herzliya, Israel.
Certain aortic stent graft assemblies are manufactured for us by a contract manufacturer in Slovakia. The AMDS product is solely manufactured by a supplier in Charlotte, North Carolina, and the NEXUS family of products are solely manufactured by Endospan in Herzliya, Israel.
Failure to timely obtain new MDSAP certifications following their expiration may impact our ability to distribute covered products in Australia, Brazil, Canada, and Japan. 32 Table of Contents Reclassification by the FDA of CryoValve SG pulmonary heart valve (“CryoValve SGPV”) may make it commercially infeasible to continue processing the CryoValve SGPV.
Failure to timely obtain new MDSAP certifications following their expiration may impact our ability to distribute covered products in Australia, Brazil, Canada, and Japan. Reclassification by the FDA of CryoValve SG pulmonary heart valve (“CryoValve SGPV”) may make it commercially infeasible to continue processing the CryoValve SGPV.
See Part I, Item 1A, “Risk Factors – Business and Economic Risks – We are subject to a variety of risks due to our international operations and continued global expansion.” Although we have yet to experience any material effects of this impact on our supply chain or operations, we face an increasing risk that upstream disruptions may occur.
See Part I, Item 1A, “Risk Factors – Business and Economic Risks – We are subject to a variety of risks due to our international operations and continued global expansion.” Although we have yet to experience any material effects of this impact on our supply chain or operations, we face the potential risk that upstream disruptions may occur.
As an example of this risk, the forecasted operating results related to NEXUS decreased, resulting in an impairment to the carrying value of the Endospan Option, and a full write-down of the value of the Endospan Loan, reflecting decreased expectations with respect to the anticipated benefits of the Endospan Transaction.
As an example of this risk, the forecasted operating results related to NEXUS ONE decreased, resulting in an impairment to the carrying value of the Endospan Option, and a full write-down of the value of our original loan to Endospan, reflecting decreased expectations with respect to the anticipated benefits of the Endospan transaction.
(a subsidiary of Becton, Dickinson and Company), Integra Life Sciences Holdings, LifeNet, Corcym, Anteris Technologies, Inc., Elutia (formerly Aziyo Biologics), Cook Medical, Gore & Associates, Terumo, LeMaitre Vascular, Inc., Maquet, Inc., Pfizer, Inc., and BioCer Entwicklungs-GmbH.
Bard (a subsidiary of Becton, Dickinson and Company), Integra Life Sciences, LifeNet, Corcym, Anteris Technologies, Elutia (formerly Aziyo Biologics), Cook Medical, Gore & Associates, Terumo, LeMaitre Vascular, Maquet, Pfizer, and BioCer Entwicklungs-GmbH.
Beginning in December 2019 and most recently in the fall 2023, the FDA indicted that it was planning to issue a proposed rule for reclassification of more than minimally manipulated (“MMM”) allograft heart valves to Class III medical devices, which could include our CryoValve SGPV.
Beginning in December 2019 and most recently in the fall of 2024, the FDA indicated that it was planning to issue a proposed rule for reclassification of more than minimally manipulated (“MMM”) allograft heart valves to Class III medical devices, which could include our CryoValve SGPV.
We rely upon a combination of sophisticated information technology systems as well as traditional recordkeeping to operate our business. In the ordinary course of business, we collect, store, and transmit confidential information (including, but not limited to, information about our business, financial information, personnel data, intellectual property, and, in some instances, patient data).
We rely upon a combination of information technology systems as well as traditional recordkeeping to operate our business. In the ordinary course of business, we collect, store, and transmit confidential information (including, but not limited to, information about our business, financial information, personnel data, intellectual property, and, in some instances, patient data and other personally identifiable information).
In addition, the organizational documents adopted in connection with our reincorporation contain provisions that restrict persons who may call shareholder meetings, allow the issuance of blank-check preferred stock without the vote of shareholders, and allow the Board of Directors to fill vacancies and fix the number of directors.
In addition, the organizational documents adopted in connection with our reincorporation contain provisions that restrict persons who may call stockholder meetings, allow the issuance of blank-check preferred stock without the vote of stockholders, and allow the Board of Directors to fill vacancies and fix the number of directors.
Our relationships with physicians, hospitals, and other healthcare providers are subject to scrutiny under various US and international bribery, anti-kickback, false claims, privacy, transparency, and similar laws, often referred to collectively as “healthcare compliance laws.” Healthcare compliance laws are broad, sometimes ambiguous, complex, and subject to change and changing interpretations.
Our relationships with physicians, hospitals, government officials, healthcare providers, and others are subject to scrutiny under various US and international bribery, anti-kickback, false claims, privacy, transparency, and similar laws, often referred to collectively as “healthcare compliance laws.” Healthcare compliance laws are broad, sometimes ambiguous, counterintuitive, complex, and subject to change and changing interpretations.
Concerns about the release of EtO into the environment at unsafe levels have led to increased activism and lobbying as well as various regulatory enforcement activities against EtO facilities, including closures and temporary closures, lawsuits against EtO service providers, and proposals increasing regulations related to EtO, including any required reduction in EtO concentration levels.
Concerns about the release of EtO into the environment at unsafe levels have led to increased activism and lobbying as well as various regulatory enforcement activities against EtO facilities, including closures and temporary closures, lawsuits against EtO service providers, and proposals increasing regulations related to EtO.
Industry Risks Our products and tissues are highly regulated and subject to significant quality and regulatory risks.
Legal, Quality, and Regulatory Risks Our products and tissues are highly regulated and subject to significant quality and regulatory risks.
The introduction of new products or services may require significant physician training or years of clinical evidence in order to gain acceptance in the medical community. Increased regulatory enforcement activities and private litigation activity relating to processes and materials used in our industry could have a material, adverse impact on us.
The introduction of new products or services may require significant physician training or years of clinical evidence in order to gain acceptance in the medical community. 33 Table of Contents Increased environmental regulations and private litigation activity relating to processes and materials used in our industry could have a material, adverse impact on us.
Any security breaches, service interruptions, or data losses could adversely affect our business operations or result in the loss of critical or sensitive confidential information or intellectual property, or in financial, legal, business, and reputational harm to us or allow third parties to gain material, inside information that they may use to trade in our securities.
Any security breaches, service interruptions, or data losses could adversely affect our business operations or result in the loss of critical or sensitive confidential information or intellectual property, or in financial, legal, business, and reputational harm to us or allow third parties to gain material, inside information that they may use to trade in our securities. 31 Table of Contents Our business could be impacted by environmental, social, and governance matters.
Our business and future growth depend on the continued use of our products for approved uses. Generally, regulators contend that, unless our products are approved or cleared by a regulatory body for alternative uses, we may not make claims about the safety or effectiveness of our products or promote them for such uses.
Generally, regulators contend that, unless our products are approved or cleared by a regulatory body for alternative uses, we may not make claims about the safety or effectiveness of our products or promote them for such uses.
Ultimately, it is difficult to predict the ultimate course of these wars and we may face business operations and supply chain disruptions as a result, including disruptions related to shortages of materials and finished goods, higher costs of materials and freight, freight delays, increased energy costs or energy shortages, travel disruptions, currency fluctuation, and disruptions to banking systems or capital markets.
Although we have not experienced any material disruption of supply from Endospan, it is difficult to predict the ultimate course of these conflicts and we may face business operations and supply chain disruptions as a result, including disruptions related to shortages of materials and finished goods, higher costs of materials and freight, freight delays, increased energy costs or energy shortages, travel disruptions, currency fluctuation, and disruptions to banking systems or capital markets.
Several of our competitors enjoy competitive advantages over us, including: • Greater financial and other resources for research and development, commercialization, acquisitions, and litigation and to weather the impacts of COVID-19 and increased workforce competition; • Greater name recognition as well as more recognizable trademarks for products similar to products that we sell; • More established record of obtaining and maintaining regulatory product clearances or approvals; • More established relationships with healthcare providers and payors; • Lower cost of goods sold or preservation costs; and • Larger direct sales forces and more established distribution networks.
Several of our competitors enjoy competitive advantages over us, including: • Greater financial and other resources for research and development, commercialization, acquisitions, and litigation and to weather the impacts of global economic downturns and workforce competition; • Greater name recognition as well as more recognizable trademarks for products similar to products that we sell; • More established record of obtaining and maintaining regulatory product clearances or approvals; 25 Table of Contents • More established relationships with healthcare providers and payors along with better positioning to minimize the impact of consolidated purchasing and other consolidation within the healthcare industry; • Lower cost of goods sold or preservation costs; and • Larger direct sales forces and more established distribution networks.
Some of our products, including certain On-X products, are sterilized using EtO. Although we have a small-scale EtO facility in Austin, Texas, we rely primarily on third-party large-scale EtO facilities to sterilize our products. In addition, some of our suppliers use, or rely upon third parties to use, EtO to sterilize some of our product components.
Some of our products, including certain On-X products, are sterilized using EtO, primarily by third-party large-scale EtO facilities. In addition, some of our suppliers use, or rely upon third parties to use, EtO to sterilize some of our product components.
Failure to meet the expectations of investors, other stakeholders, or certain governmental authorities in these areas may damage our reputation, impact employee retention, impact the willingness of our customers to do business with us, or otherwise impact our financial results and stock price. We do not anticipate paying any dividends on our common stock for the foreseeable future.
Failure to meet the expectations of investors, other stakeholders, or certain governmental authorities in these areas may damage our reputation, impact employee retention, impact the willingness of our customers to do business with us, or otherwise impact our financial results and stock price.
These provisions of Delaware law and our articles of incorporation and bylaws could prevent attempts by shareholders to remove current management, prohibit or delay mergers or other changes of control transactions, and discourage attempts by other companies to acquire us, even if such a transaction would be beneficial to our shareholders.
These provisions of Delaware law and our Certificate of Incorporation and Bylaws could prevent attempts by stockholders to remove current management, prohibit or delay mergers or other changes of control transactions, and discourage attempts by other companies to acquire us, even if such a transaction would be beneficial to our stockholders. 37 Table of Contents Item 1B. Unresolved Staff Comments.
Such involvement with us may disrupt our business and divert the attention of our management, and any perceived uncertainties as to our future direction resulting from such involvement could result in the loss of business opportunities, be exploited by our competitors, cause concern for our current or potential customers, cause significant fluctuations in stock price, or make it more difficult to attract and retain qualified personnel and business partners. 37 Table of Contents Our business could be impacted by increased shareholder emphasis on environmental, social, and governance matters or efforts by certain governmental authorities to reduce such emphasis.
Such involvement with us may disrupt our business and divert the attention of our management, and any perceived uncertainties as to our future direction resulting from such involvement could result in the loss of business opportunities, be exploited by our competitors, cause concern for our current or potential customers, cause significant fluctuations in stock price, or make it more difficult to attract and retain qualified personnel and business partners.
Our international operations subject us to a number of risks, which may vary significantly from the risks we face in our US operations, including: • Greater difficulties and costs associated with staffing at all levels, establishing and maintaining internal controls, managing foreign operations and distributor relationships, and selling directly to customers; • Broader exposure to corruption and expanded compliance obligations, including under the Foreign Corrupt Practices Act, the UK Bribery Law, local anti-corruption laws, Office of Foreign Asset Control administered sanction programs, the European Union’s General Data Protection Regulation, and other emerging corruption and data privacy regulations; • Overlapping and potentially conflicting, or unexpected changes in, international legal and regulatory requirements or reimbursement policies and programs; • Longer and more expensive collection cycles in certain countries, particularly those in which our primary customers are government-funded hospitals; • Changes in currency exchange rates, particularly fluctuations in the Euro as compared to the US Dollar and other inflationary pressures; • Potential adverse financial impact and negative erosion of our operating profit margin over time due to increasing inflationary pressures, including impact felt through our supply chain; our exposure may be increased through our limited ability to raise prices and through global expansion where business occurs with, or pricing is set directly by, government entities, or we are party to long term pricing agreements with governments or local distributors, impacting our ability to pass on rising costs; • Potential adverse tax consequences of overlapping tax structures or potential changes in domestic and international tax policy, laws, and treaties; and • Potential adverse financial and regulatory consequences resulting from Brexit. 24 Table of Contents As an example of this risk, via a Ministerial Decree of July 6, 2022, published September 15, 2022, the Italian government stated that the spending ceiling for medical devices at the national and regional levels had been exceeded, requiring medical device companies to pay back alleged overpayments the government claims companies received between 2015 and 2018.
Our international operations subject us to a number of risks, which may vary significantly from the risks we face in our US operations, including: • Greater difficulties and costs associated with staffing at all levels, establishing and maintaining internal controls, managing foreign operations and distributor relationships, and selling directly to customers; 24 Table of Contents • Broader exposure to corruption and expanded compliance obligations, including under the Foreign Corrupt Practices Act, the UK Bribery Law, local anti-corruption laws, Office of Foreign Asset Control administered sanction programs, the European Union’s General Data Protection Regulation and Corporate Sustainability Reporting Directive, and other emerging corruption, sustainability, and data privacy and cybersecurity regulations; • Overlapping, ambiguous, and potentially conflicting, or unexpected changes in, international legal and regulatory requirements or reimbursement policies and programs; • Longer and more expensive collection cycles in certain countries, particularly those in which our primary customers are government-funded hospitals; • Changes in currency exchange rates, particularly fluctuations in the Euro as compared to the US Dollar and other inflationary pressures, given sensitivity to exchange rates that we experience from our product revenue streams and account balances; • Potential exposure to adverse financial impact and negative erosion of our operating profit margin over time due to increasing inflationary pressures, including impact felt through our supply chain, and this exposure may be increased through our limited ability to raise prices and through global expansion where business occurs with, or pricing is set directly by, government entities, or we are party to long term pricing agreements with governments or local distributors, impacting our ability to pass on rising costs; • Potential adverse tax consequences of overlapping tax structures or potential changes in domestic and international tax policy, laws, and treaties; and • Potential adverse consequences from unexpected global regulatory and trade developments.
Our charges resulting from acquisitions, restructurings, and integrations may materially, adversely affect the market value of our common stock. We account for the completion of acquisitions using the purchase method of accounting.
Our charges resulting from acquisitions, divestitures, partnerships, and other business development activities may materially, adversely affect the market value of our common stock. We account for the completion of acquisitions using the purchase method of accounting.
We own trade secrets, patents, patent applications, and licenses relating to our technologies and trademarks and goodwill related to our products and services, which we believe provide us with important competitive advantages.
Some of our products and technologies are subject to significant intellectual property risks and uncertainty. We own trade secrets, patents, patent applications, and licenses relating to our technologies and trademarks and goodwill related to our products and services, which we believe provide us with important competitive advantages.
As an example of this risk, we fully impaired the value of a securities purchase option agreement with Endospan (“Endospan Option”) and fully wrote-down the value of an agreement for a secured loan from Artivion to Endospan (“Endospan Loan”), primarily driven by a decrease in forecasted operating results.
As an example of this risk, we fully impaired the value of our original securities purchase option agreement with Endospan (“Endospan Option”) in the fourth quarter of 2021 and fully wrote-down the value of our loan to Endospan in the second quarter of 2023, primarily driven by a decrease in forecasted operating results.
Although our personal data practices, policies, and procedures are intended to comply with GDPR and other data privacy laws and regulations, there can be no assurance that regulatory or enforcement authorities will view our arrangements as being in compliance with applicable laws, or that one or more of our employees or agents will not disregard the rules we have established.
Although our practices, policies, and procedures are intended to comply with relevant laws and regulations, there can be no assurance that regulatory or enforcement authorities will view our arrangements as being in compliance, or that one or more of our employees or agents will not disregard aspects of our compliance programs.
Even the successful commercialization of a new product or service in the medical industry can be characterized by slow growth and high costs associated with marketing, under-utilized production capacity, and continuing research and development and education costs, among other things.
Halting R&D efforts and clinical trials prematurely may lead to accelerated or unanticipated wind down costs. Even the successful commercialization of a new product or service in the medical industry can be characterized by slow growth and high costs associated with marketing, under-utilized production capacity, and continuing research and development and education costs, among other things.
Factors beyond our control such as supply, regulatory changes, negative publicity concerning methods of tissue recovery or disease transmission from donated tissue, or public opinion of the donor process as well as our own reputation in the industry can negatively impact the supply of tissue; 25 Table of Contents • Compete effectively, as we may be unable to capitalize on our clinical advantages or our competitors may have advantages over us in terms of cost structure, pricing, back-office automation, marketing, and sourcing; or • Mitigate sufficiently the risk that tissue can become contaminated during processing; that processed tissue cannot be end-sterilized and hence carries an inherent risk of infection or disease transmission or that our quality controls can eliminate that risk.
Factors beyond our control such as supply, regulatory changes, negative publicity concerning methods of tissue recovery or disease transmission from donated tissue, or public opinion of the donor process as well as our own reputation in the industry can negatively impact the supply of tissue; • Capitalize on our clinical advantages that we rely on as competitive strengths; or • Mitigate sufficiently the risk that tissue can become contaminated during processing; that processed tissue cannot be end-sterilized and hence carries an inherent risk of infection or disease transmission or that our quality controls can eliminate that risk.
BioGlue is a significant source of our revenues, and as such, any risk adversely affecting our BioGlue products or business would likely be material to our financial results.
We are significantly dependent on our revenues from BioGlue and are subject to a variety of related risks. BioGlue is a significant source of our revenues, and as such, any risk adversely affecting our BioGlue products or business would likely be material to our financial results.
If one of these suppliers or facilities ceases operations temporarily or permanently, for any reason including a pandemic, war, work stoppage, or climate change related event, our business could be substantially disrupted.
If one of these suppliers or facilities ceases operations temporarily or permanently, for any reason including a pandemic, war, work stoppage, cybersecurity incident, infrastructure or equipment malfunction, or a natural disaster, our business could be substantially disrupted.
Our operations and performance have been, and may continue to be, impacted by regional and global geopolitical conditions, domestic and foreign trade and monetary policies, and other factors beyond our control.
Our operations and performance have been, and may continue to be, impacted by regional and global geopolitical conditions, domestic and foreign trade and monetary policies, and other factors beyond our control, such as Russia’s war with Ukraine and instability in the Middle East.
We are subject to various US and international bribery, anti-kickback, false claims, privacy, transparency, and similar laws, any breach of which could cause a material, adverse effect on our business, financial condition, and profitability.
In addition, we or our officers could be excluded from participation in government healthcare programs such as Medicare and Medicaid. We are subject to various US and international bribery, anti-kickback, false claims, privacy, transparency, and similar laws, any breach of which could cause a material, adverse effect on our business, financial condition, and profitability.
In addition, restrictions in our credit facility limit our ability to pay future dividends. Provisions of Delaware law and anti-takeover provisions in our organizational documents may discourage or prevent a change of control, even if an acquisition would be beneficial to shareholders, which could affect our share price adversely and prevent attempts by shareholders to remove current management.
Provisions of Delaware law and anti-takeover provisions in our organizational documents may discourage or prevent a change of control, even if an acquisition would be beneficial to stockholders, which could affect our share price adversely and prevent attempts by stockholders to remove current management. Effective January 1, 2022 we reincorporated in Delaware.
The application of these laws to us, our customers, or the specific services and relationships we have with our customers is not always clear.
The impact of this uncertainty on us, our customers, or the specific services and relationships we have with our customers is not always clear.
Pre- and post-market clinical studies may also be delayed or halted due to many factors beyond our control. 33 Table of Contents If we are unable to successfully complete the development of a product, service, or application, or if we determine for any reason not to complete development or obtain regulatory approval or clearance of any product, service, or application, particularly in instances when we have expended significant capital, this could materially, adversely affect our financial performance.
If we are unable to successfully complete the development of a product, service, or application, or if we determine for any reason not to complete development or obtain regulatory approval or clearance of any product, service, or application, particularly in instances when we have expended significant capital, this could materially, adversely affect our financial performance.
Our indebtedness could adversely affect our ability to raise additional capital to fund operations and limit our ability to react to changes in the economy or our industry.
Our indebtedness could adversely affect our ability to raise additional capital to fund operations and execute our strategic plan, and limit our ability to react to changes in the economy or our industry. We may need to seek additional debt or equity financing to execute our strategic plan.
We face risks if we lose any key employees to other employers or due to severe illness, death, or retirement, if any of our key employees fail to perform adequately, or if we are unable to attract and retain skilled employees. This risk was exacerbated by the pandemic and continues to be impacted by changes in macroeconomic conditions.
We face risks if we lose any key employees to other employers or due to severe illness, death, or retirement, if any of our key employees fail to perform adequately, or if we are unable to attract and retain skilled employees.
We have limited cyber-insurance coverage that may not cover all possible events, and this insurance is subject to deductibles and coverage limitations.
We have limited cyber-insurance coverage that may not cover all possible events, or the financial expenses or losses associated with any particular event, and this insurance is subject to deductibles and coverage limitations.
Keeping up with and meeting these expectations, sometimes contradictory, may disrupt our business and divert the attention of our management, and we may be unable to make the investments in ESG programs that our competitors with greater financial resources are able to make or we may be challenged by governmental authorities if we choose to make such investments.
We may be unable to make the investments in ESG programs that our competitors with greater financial resources are able to make or we may be challenged by governmental authorities if we choose to make such investments.
Any of these factors could negatively impact our earnings per share, decrease or delay the expected accretive effect of the transaction, and negatively impact the price of our common stock.
The benefits of these transactions may not be achieved within the anticipated time frame or at all. Any of these factors could negatively impact our earnings per share, decrease or delay the expected accretive effect of the transaction, and negatively impact the price of our common stock.
We face risks based on our ability to: • Compete effectively with some of our major competitors, as they may have advantages over us in terms of cost structure, supply chain, pricing, sales force footprint, and brand recognition; • Take further market share in the mechanical heart valve market based on the FDA’s approved lower INR indication for the On-X aortic heart valve or complete the associated FDA mandated post-approval studies; • Address clinical trial data or changes in technology that may reduce the demand for mechanical heart valves, such as data regarding transcatheter aortic valve replacement, or “TAVR” devices; • Manage risks associated with less favorable contract terms for On-X products on consignment at hospitals; and • Respond adequately to enhanced international regulatory requirements or enforcement activities. 26 Table of Contents Continued fluctuation of foreign currencies relative to the US Dollar could materially, adversely affect our business.
We face risks based on our ability to: • Take further market share in the mechanical heart valve market based on the FDA’s approved lower INR indication for the On-X aortic heart valve or complete the associated FDA mandated post-approval studies; • Address clinical trial data or changes in technology that may reduce the demand for mechanical heart valves, such as data regarding transcatheter aortic valve replacement, or “TAVR” devices; • Keep up with increasing demand for our On-X products globally; • Manage risks associated with less favorable contract terms for On-X products on consignment at hospitals; and • Respond adequately to enhanced international regulatory requirements or enforcement activities.
In addition, US and foreign governmental authorities have adopted laws and regulations that restrict tissue preservation services. Any of these laws or regulations could change, including becoming more restrictive, or our interpretation of them could be challenged by governmental authorities. We are significantly dependent on our revenues from BioGlue and are subject to a variety of related risks.
In addition, US and foreign governmental authorities have adopted laws and regulations that restrict tissue preservation services and the avenues available to distribute processed tissues. Any of these laws or regulations could change, including becoming more restrictive, or our interpretation of them could be challenged by governmental authorities.
The MDR places stricter requirements on manufacturers and European Notified Bodies regarding, among other things, product classifications and pre- and post-market clinical studies for product clearances and approvals which could result in product reclassifications or the imposition of other regulatory requirements that could delay, impede, or prevent our ability to commercialize existing, improved, or new products in the European Economic Area and other markets that require CE Marking.
The MDR could result in product reclassifications or the imposition of other regulatory requirements that could delay, impede, or prevent our ability to commercialize existing, improved, or new products in the European Economic Area and other markets that require or rely on CE Marking as a basis for market authorization.
We face risks relating to aortic stent grafts based on our ability to: • Compete effectively with some of our major competitors, as they may have advantages over us in terms of cost structure, supply chain, pricing, sales force footprint, and brand recognition; • Develop innovative, high quality, and in-demand aortic repair products; • Respond adequately to enhanced regulatory requirements and enforcement activities, and particularly, our ability to obtain regulatory approvals and renewals globally; • Meet demand and manage inventory for aortic stent grafts as we seek to expand our business globally; and • Maintain a productive working relationship with our Works Council in Germany.
We face risks relating to aortic stent grafts based on our ability to: 26 Table of Contents • Develop innovative, high quality, and in-demand aortic repair products; • Respond adequately to enhanced regulatory requirements and enforcement activities, and particularly, our ability to obtain regulatory approvals and renewals globally; • Drive timely adoption of new products in our aortic stent graft portfolio; • Meet demand and manage inventory for aortic stent grafts as we seek to expand our business globally; and • Maintain a productive working relationship with our Works Council in Germany.
A significant percentage of market revenues from competitive products are generated by Baxter, Ethicon (a Johnson & Johnson Company), Medtronic, plc, Abbott Laboratories, Edwards Lifesciences Corp., C.R. Bard, Inc.
We face intense competition in virtually all of our product lines. A significant percentage of market revenues from competitive products are generated by Baxter, Ethicon (a Johnson & Johnson Company), Medtronic, Abbott Laboratories, Edwards Lifesciences, C.R.
Most recently, the European Parliament extended the MDR transition period under Regulation (EU) 2023/607 but it is still unclear whether this extension will be able to mitigate the challenges posed by the transition to the MDR.
The transition to the MDR has been fraught with difficulties and uncertainty, including delays in audits and approvals. The European Parliament has extended the MDR transition period under Regulation (EU) 2023/607 but it is still unclear whether this extension will be able to mitigate transition challenges.
Our current and future levels of indebtedness could adversely affect our ability to raise additional capital, limit our operational flexibility, and hinder our ability to react to changes in the economy or our industry.
However, we may be unable to obtain any desired additional financing on terms favorable to us, if at all. Our current and future levels of indebtedness could adversely affect our ability to raise additional capital, limit our operational flexibility, and hinder our ability to react to changes in the economy or our industry.
Fluctuations in exchange rates of Euros or other local currencies in relation to the US Dollar could materially reduce our future revenues as compared to the comparable prior periods. Should this occur, it could have a material, adverse impact on our revenues, financial condition, profitability, and cash flows.
Global inflation and currency crises could result in foreign currency controls, parallel exchange rates, or highly inflationary economies in certain countries. Fluctuations in exchange rates could materially reduce our future revenues as compared to the comparable prior periods. Should this occur, it could have a material, adverse impact on our revenues, financial condition, profitability, and cash flows.
In addition, such products and therapies like the recently introduced GLP-1 drugs, which we believe have or will have little to no actual impact on demand for our products, can lead to investor and customer confusion and impact the perceived demand for our products. We face intense competition in virtually all of our product lines.
In addition, such products and therapies like GLP-1 drugs, which we believe have or will have little to no actual impact on demand for our products, can lead to investor and customer confusion, can change investor focus, and can impact the perceived demand for our products, which may affect our stock price even if actual demand for our products is unaffected.
In addition, as a result of changes implemented during the COVID-19 pandemic, we now have remote work arrangements for some employees, and those employees may use outside technology and systems that are vulnerable to security breaches, service interruptions, data loss or malicious attacks, including by third parties.
In addition, a portion of our employees work remotely, and those employees may use outside technology and systems that are vulnerable to security breaches, service interruptions, data loss or malicious attacks, including by third parties.
Our failure to anticipate accurately any changes to, or the repeal or invalidation of all or part of the Affordable Care Act and similar or future laws and regulations, or our failure to comply with them, could create liability for us, result in adverse publicity and negatively affect our business, results of operations, and financial condition.
Our failure to anticipate accurately these changes, or our failure to comply with changes to legal and regulatory frameworks, could create liability for us, result in adverse publicity and negatively affect our business, results of operations, and financial condition.
In December 2015 our Board of Directors discontinued dividend payments on our common stock for the foreseeable future. If we do not pay cash dividends, our shareholders may receive a return on their investment in our common stock only through appreciation of shares of our common stock that they own.
If we do not pay cash dividends, our stockholders may receive a return on their investment in our common stock only through appreciation of shares of our common stock that they own. In addition, restrictions in our credit facility limit our ability to pay future dividends.
Legal, Quality, and Regulatory Risks As a medical device manufacturer and tissue services provider we are exposed to risk of product liability claims and our existing insurance coverage may be insufficient, or we may be unable to obtain insurance in the future, to cover any resulting liability.
As a medical device manufacturer and tissue services provider we are exposed to risk of product liability claims and our existing insurance coverage may be insufficient, or we may be unable to obtain insurance in the future, to cover any resulting liability. 35 Table of Contents Our products and processed tissues allegedly have caused, and may in the future cause, injury or result in other serious complications that may result in product or other liability claims from our customers or their patients.
We also may not be able to capitalize on new BioGlue approvals, including for new indications, in non-US countries; and • BioGlue contains a bovine blood protein.
We face the following risks relating to BioGlue: • We may be unable to obtain approval to commercialize BioGlue in certain non-US countries as fast as our competitors do or at all. We also may not be able to capitalize on new BioGlue approvals, including for new indications, in non-US countries; and • BioGlue contains a bovine blood protein.
Although we do not have any direct operations in Russia, Ukraine, Israel, or Gaza, the NEXUS and NEXUS DUO (the “NEXUS Products”) are solely manufactured by Endospan in Herzliya, Israel. Although we have not experienced any material disruption of supply from Endospan, the conflict in and around Israel is rapidly evolving.
Although we do not have any direct operations in Russia, Ukraine, Israel, Gaza, or Syria, the NEXUS family of products are solely manufactured by Endospan in Herzliya, Israel.
Because of our role in the healthcare industry, we are particularly susceptible to the impact public health crises have on healthcare systems globally, including impacts on system capacity and procedure volumes, shortages in healthcare staffing, and restrictions on travel and non-critical hospital access, all of which have had, may continue to have, and could have an impact on our business operations and sales, particularly through reductions in demand for certain products and services due to reduced procedure volumes, or through downstream financial impact from delays or difficulty collecting outstanding receivables.
Public health crises have, may continue to have, and could have a material, adverse impact on us. Because of our role in the healthcare industry, we are particularly susceptible to the impact public health crises have on healthcare systems globally, including impacts on system capacity and procedure volumes, shortages in healthcare staffing, and restrictions on travel and non-critical hospital access.
Some of the materials, supplies, and services used in our product manufacturing and tissue processing, as well as some of our products, are sourced from single- or sole-source suppliers.
Risks relating to the lingering effects of global supply chain disruptions may even continue after current conflicts have subsided. We are dependent on single and sole-source suppliers and single facilities. Some of the materials, supplies, and services used in our product manufacturing and tissue processing, as well as some of our products, are sourced from single- or sole-source suppliers.
Item 1A. Risk Factors. Risks Relating to Our Business Our business involves a variety of risks and uncertainties, known and unknown, including, among others, the risks discussed below. These risks should be carefully considered together with the other information provided in this Annual Report on Form 10-K and in our other filings with the SEC.
Item 1A. Risk Factors. Risks Relating to Our Business Our business involves a variety of risks and uncertainties, known and unknown, including, among others, the risks discussed below.
In addition, if we fail to realize the anticipated benefits of a transaction, we could experience an interruption or loss of momentum in our existing business activities. 30 Table of Contents We may not realize all the anticipated benefits of our corporate rebranding and it may result in unanticipated disruptions to our on-going business.
In addition, if we fail to realize the anticipated benefits of a transaction, we could experience an interruption or loss of momentum in our existing business activities. Significant disruptions of information technology systems or breaches of information security systems could adversely affect our business.
In addition, any litigation, regulatory enforcement, or government regulation regarding the use of EtO could result in financial, legal, business, and reputational harm to us. We may be subject to fines, penalties, and other sanctions if we are deemed to be promoting the use of our products for unapproved, or off-label, uses.
We may be subject to fines, penalties, and other sanctions if we are deemed to be promoting the use of our products for unapproved, or off-label, uses. Our business and future growth depend on the continued use of our products for approved uses.
This impact on healthcare system capacity may also impact our R&D pipeline by impacting timelines for R&D and clinical research projects and timelines associated with regulatory reviews for new and updated devices.
This impact on healthcare system capacity may also affect our R&D pipeline by lengthening timelines for R&D and clinical research projects and timelines associated with regulatory reviews for new and updated devices, as well as affecting our workforce. 27 Table of Contents Operational Risks We are heavily dependent on our suppliers and contract manufacturers to provide quality products.
Operational Risks We are heavily dependent on our suppliers and contract manufacturers to provide quality products. 27 Table of Contents The materials and supplies used in our product manufacturing and tissue processing are subject to regulatory requirements and oversight.
The materials and supplies used in our product manufacturing and tissue processing are subject to regulatory requirements and oversight.
The ongoing wars in Ukraine and Gaza, and the current and future sanctions imposed on Russia and others as a result may exacerbate these risks.
Our global expansion into higher-risk regions and Russia's ongoing war with Ukraine and the instability of the Middle East, and the current and future sanctions imposed on Russia and others as a result may exacerbate these risks.
Many of these factors are outside of our control and any one of them could result in increased costs, decreased revenues, and diversion of management’s time and energy. The benefits of these transactions may not be achieved within the anticipated time frame or at all.
Similarly, our ability to realize the anticipated benefits of the Baxter Transaction depends on factors beyond our control, including Baxter's performance against Baxter's originally anticipated demand. Many of these factors are outside of our control and any one of them could result in increased costs, decreased revenues, and diversion of management’s time and energy.
These laws and regulations may include new requirements for companies that receive or process an individual’s personal data (including employees), which increases our operating costs and requires significant management time and energy. Many of these laws and regulations, including the European Union’s General Data Protection Regulation (“GDPR”) also include significant penalties for noncompliance.
Many of these laws and regulations, including the European Union’s General Data Protection Regulation (“GDPR”) also include significant penalties for noncompliance.
Risks Relating to Our Indebtedness The agreements governing our indebtedness contain restrictions that limit our flexibility in operating our business.
Any resulting government enforcement activities may be costly, result in negative publicity, or subject us to significant penalties. Risks Relating to Our Indebtedness The agreements governing our indebtedness contain restrictions that limit our flexibility in operating our business.
The number of EtO facilities in the US is limited, and any permanent or temporary closures or disruption to their operations for any reason could delay, impede, or prevent our ability to commercialize our products. The per-and polyfluoroalkyl substances (“PFAS”) are used in a wide variety of consumer and industrial products, including medical devices and product packaging.
The number of EtO facilities in the US is limited, and any permanent or temporary closures or disruption to their operations for any reason could delay, impede, or prevent our ability to commercialize our products. In addition, any litigation, regulatory enforcement, or government regulation regarding the use of EtO could result in financial, legal, business, and reputational harm to us.
Investors and other key stakeholders are increasingly focusing on areas of corporate responsibility, and particularly matters related to environmental, social, and governance (“ESG”) factors.
Governments, investors, customers, employees and other stakeholders are continuing to focus on areas of corporate responsibility, and particularly matters related to environmental, social, and governance (“ESG”) factors. Stakeholders are looking to companies that demonstrate strong ESG and sustainability practices as an indicator of long-term resilience.
The majority of our foreign product revenues are denominated in Euros and, as such, are sensitive to changes in exchange rates. In addition, a portion of our dollar-denominated and euro-denominated product sales are made to customers in other countries who must convert local currencies into US Dollars or Euros in order to purchase these products.
Continued fluctuation of foreign currencies relative to the US Dollar could materially, adversely affect our business. Most of our foreign revenues are denominated in Euros, making them sensitive to exchange rate changes. Some sales are made to customers who must convert local currencies into US Dollars or Euros. We hold balances in foreign currencies affected by exchange rates.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeTo safeguard critical data and systems, ensure regulatory compliance, manage our material risks from cybersecurity threats, and address potential cybersecurity incidents, as such term is defined in Item 106(a) of Regulation S-K, we: • Monitor emerging data protection laws and adjust our processes and procedures as required or appropriate; • Provide periodic, but no less than, annual training on cybersecurity, data privacy, and data handling to all employees and contractors with access to our systems; • Conduct periodic, but no less than, annual cybersecurity management and incident response training for relevant personnel, utilizing Knowbe4 resources; • Implement regular phishing simulations and processes for reporting phishing to enhance staff awareness and responsiveness; • Mandate that both employees and service providers treat sensitive data with utmost care, enforced through policies, practices, and contracts; • Contract with independent cybersecurity providers to assist with tabletop exercises periodically to refine our response strategies to cybersecurity incidents; • Employ the NIST incident handling framework for identifying, protecting, detecting, responding to, and recovering from cybersecurity incidents; and • Maintain cybersecurity risk insurance to mitigate potential financial losses from incidents.
Biggest changeTo safeguard critical data and systems, support regulatory compliance, manage our material risks from cybersecurity threats, and identify, assess and respond to potential cybersecurity incidents, as such term is defined in Item 106(a) of Regulation S-K, we: • Monitor emerging data protection laws and adjust our processes and procedures as required or appropriate; • Utilize Endpoint Detection and Response (EDR) tools to help us prevent, detect, and respond to endpoint threats with real-time visibility across our infrastructure and devices, enterprise-wide; • Provide periodic, but no less than annual, training on cybersecurity, data privacy, and data handling to all employees and contractors with access to our systems; • Conduct periodic, but no less than, annual cybersecurity management and incident response training for relevant personnel, utilizing Knowbe4 resources; • Implement regular phishing simulations and processes for reporting phishing events and concerns to enhance staff awareness, vigilance, and responsiveness; • Mandate that both employees and service providers treat sensitive data with utmost care, enforced through policies, practices, and contracts; • Employ elements of the NIST incident handling framework for identifying, protecting, detecting, responding to, and recovering from cybersecurity incidents; and • Maintain cybersecurity risk insurance to mitigate potential financial losses from incidents.
We address cybersecurity risks related to third-party service providers by incorporating these risks into our enterprise risk management and cybersecurity-specific risk assessment programs. We conduct thorough due diligence on third parties with access to our systems or data and require them to adhere to specified cybersecurity standards and audits.
We address cybersecurity risks related to third-party service providers by incorporating these risks into our enterprise risk management and cybersecurity-specific risk assessment programs. We conduct due diligence on third parties with access to our systems or data and require them to adhere to specified cybersecurity standards and audits.
Our cybersecurity-specific risk assessment process, benchmarks our practices against standards set by the National Institute of Standards and Technology (“NIST”), International Organization for Standardization (“ISO”), and the Center for Internet Security (“CIS”), and includes expert-led penetration tests to evaluate the security of our information systems, as such term is defined in Item 106(a) of Regulation S-K.
Our cybersecurity-specific risk assessment process benchmarks our practices against standards set by the National Institute of Standards and Technology (“NIST”), International Organization for Standardization (“ISO”), and the Center for Internet Security (“CIS”), and includes penetration tests to evaluate the security of our information systems, as such term is defined in Item 106(a) of Regulation S-K.
Our cybersecurity efforts involve regular engagement with external assessors, consultants, and auditors, including periodic reviews by an independent qualified security assessor to identify areas for improvement and ensure compliance, as well as assessments and audits by our insurer and our external auditing firm.
Our cybersecurity efforts involve regular engagement with external assessors, consultants, and auditors, including periodic reviews by an independent qualified security assessor to identify areas for improvement and support compliance, as well as assessments and audits by our insurer and our external auditing firm.
We are not aware of any cybersecurity threats or cybersecurity incidents that have or would be reasonably likely to materially affect us, including our business strategy, results of operations or financial condition. This includes penalties and settlements, of which there were none.
In addition, we are not aware of any cybersecurity threats or cybersecurity incidents that have or would be reasonably likely to materially affect us, including our business strategy, results of operations or financial condition as of the date of this Annual Report on Form 10-K. This includes penalties and settlements, of which there were none.
These updates cover various cybersecurity topics, including data security posture, third-party assessment results, progress on risk mitigation goals, incident response plans, and material cybersecurity threat risks or incidents.
These updates, provided by our Chief Financial Officer and/or our global head of Information Technology, cover various cybersecurity topics, including data security posture, third-party assessment results, progress on risk mitigation goals, incident response plans, and select cybersecurity threat risks or incidents.
These risks include, among other things, operational risks; intellectual property theft; fraud; extortion; harm to employees or customers; violation of privacy or security laws and other litigation and legal risk; and reputational risks.
These risks include, among other things, operational risks; intellectual property theft; fraud; extortion; harm to employees or customers; violation of privacy or security laws and other litigation and legal risk; and reputational risks. We have established cybersecurity measures, technologies, and controls to aid in our efforts to assess, identify, and manage such material risks.
The Board and Audit Committee also have discussions with our global head of Information Technology and engage in separate meetings to consider cybersecurity risks in the context of broader corporate matters. 39 Table of Contents Our cybersecurity risk management and strategy processes are led by our global head of Information Technology who reports directly to our Chief Financial Officer.
The Board and Audit Committee also have discussions with our global head of Information Technology and engage in separate meetings to consider cybersecurity risks in the context of broader corporate matters.
This approach involves collaboration between enterprise risk professionals and subject matter experts to identify and assess material cybersecurity threat risks, their severity, and potential mitigations. We leverage various tools and services, including network monitoring, vulnerability assessments, penetration testing, and tabletop exercises, to enhance our risk identification and assessment capabilities.
We leverage various tools and services, including network monitoring, vulnerability assessments, penetration testing, and tabletop exercises, to enhance our risk identification and assessment capabilities.
The global head of Information Technology is part of our operating team and ensures that management is well-informed about preventing, mitigating, detecting, and remediating cybersecurity incidents. This role involves managing our comprehensive cybersecurity risk management and strategy processes and overseeing the operation of our incident response plan.
The global head of Information Technology is part of our operating team and is responsible for implementing our cybersecurity risk management and strategy processes and the operation of our incident response and business continuity plan.
Governance Cybersecurity is integral to our overall risk management strategy, and an area of increasing focus for our Board and management. The Audit Committee, and where applicable, the entire Board, are involved in overseeing cybersecurity risks. They receive quarterly and bi-annual updates, respectively, from management on our cybersecurity threat risk management and strategy processes.
Governance Cybersecurity is integrated with our overall risk management strategy and is an area of focus for our Board and management, with oversight at the executive level led by our Chief Financial Officer. The Audit Committee, and where applicable, other directors or the entire Board, are involved in overseeing cybersecurity risks.
We have established cybersecurity measures, technologies, and controls to aid in our efforts to assess, identify, and manage such material risks. 38 Table of Contents Our enterprise risk management framework assesses cybersecurity threats alongside other company risks as part of our overall risk assessment process.
Our enterprise risk management framework assesses cybersecurity threats alongside other company risks as part of our overall risk assessment process. This approach involves collaboration between enterprise risk professionals and subject matter experts to identify and assess material cybersecurity threat risks, their severity, and potential mitigations.
Removed
The potential impact of cybersecurity threats on our business strategy, operations, and financial condition is discussed under specific headings in our risk factor disclosures at Item 1A and in the Management’s Discussion and Analysis of Financial Condition and Results of Operations at Item 7 of this Annual Report on Form 10-K.
Added
Our information systems have been subject to cybersecurity incidents in the past, including a cyber-attack identified and disclosed during the fourth quarter of 2024 (the “Cybersecurity Incident”) that temporarily disrupted our business operations, including our ERP systems, and had an impact on manufacturing, order processing, shipping, and other corporate operations.
Removed
Our information technology and cybersecurity team has over 33 years of collective experience in information security and cybersecurity strategy, with various roles in significant organizations. Team members hold numerous degrees and certifications, including certifications as a Certified Information Security Manager, Certified Information Systems Security Professional, Certified Ethical Hacker, Certified Penetration Tester, among others.
Added
Although we are continuing to work with our insurer to recoup covered losses, we do expect to continue to incur expenses in connection with improving our global cybersecurity infrastructure and cybersecurity posture. 38 Table of Contents As of the date of this Annual Report on Form 10-K, we believe that the Cybersecurity Incident has not materially impacted the Company, our overall financial condition or results of operations, and that the incident is not reasonably likely to materially impact the Company, our financial conditions or results of operations.
Removed
In conclusion, our global head of Information Technology regularly updates the Audit Committee and the Board of Directors on cybersecurity threat risks and related matters, ensuring a proactive and informed approach to managing cybersecurity within our organization.
Added
We are seeking reimbursement of costs, expenses and losses stemming from the Cybersecurity Incident by submitting claims to our cybersecurity insurer. The timing and amount of any such reimbursements are not known at this time.
Added
As discussed in more detail in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, the Cybersecurity Incident had a $4.6 million impact on our results for the year ended December 31, 2024.
Added
To learn more about the risk and potential impact of cybersecurity threats on our business strategy, operations, and financial condition, including with respect to the Cybersecurity Incident, See Part I, Item 1A, “Risk Factors,” “Significant disruptions of information technology systems or breaches of information security systems could adversely affect our business”.
Added
They receive quarterly and bi-annual updates, respectively, on our cybersecurity threat risk management and strategy processes, and may meet more frequently in response to specific threats or incidents.
Added
Our cybersecurity risk management and strategy processes are led by our global head of Information Technology who reports directly to our Chief Financial Officer and focus on preventing, mitigating, detecting and remediating cybersecurity incidents, as well as threat risks and related matters.
Added
Management uses information provided by our global head of Information Technology, along with feedback from external experts, the Audit Committee, and our Board, as part of the cyber-specific and enterprise-wide risk management process described above. Our information technology and cybersecurity team has approximately 35 years of collective experience in information security and cybersecurity strategy, with various roles in significant organizations.
Added
Team members’ relevant degrees and certifications include but are not limited to Certified Information Security Manager, Certified Information Systems Security Professional, Certified Ethical Hacker, Certified Penetration Tester, among others.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOur primary European subsidiary, JOTEC, located in Hechingen, Germany, maintains facilities that consist of approximately 156,000 square feet of leased manufacturing, administrative, laboratory, and warehouse space where we manufacture aortic stent grafts. Our On-X facility consists of approximately 75,000 square feet of combined manufacturing, administrative, laboratory, warehouse, and office space leased in Austin, Texas.
Biggest changeOur primary European subsidiary, JOTEC, located in Hechingen, Germany, maintains facilities that consist of approximately 156,000 square feet of leased manufacturing, administrative, laboratory, and warehouse space where we manufacture aortic stent grafts. 39 Table of Contents Our On-X facility consists of approximately 75,000 square feet of combined manufacturing, administrative, laboratory, warehouse, and office space leased in Austin, Texas.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe further evaluate each legal proceeding to assess whether an estimate of possible loss or range of loss can be made. Based on current knowledge, management does not believe that there are any pending matters that potentially could have a material, adverse effect on our business, financial condition, results of operations, or cash flows.
Biggest changeWe further evaluate each legal proceeding to assess whether an estimate of possible loss or range of loss can be made. Based on current knowledge, management does not believe that there are any pending legal proceedings that will have a material, adverse effect on our business, financial condition, results of operations, or cash flows.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeMarket Price of Common Stock Our common stock is traded on the New York Stock Exchange (“NYSE”) under the symbol “AORT.” Prior to January 24, 2022 our common stock was traded on the NYSE under the symbol “CRY.” The following table sets forth, for the periods indicated, the intra-day high and low sale prices per share of common stock on the NYSE. 2023 High Low First quarter $ 15.18 $ 11.44 Second quarter 17.69 12.57 Third quarter 17.97 14.58 Fourth quarter 19.00 12.16 2022 High Low First quarter $ 22.04 $ 16.56 Second quarter 23.07 15.44 Third quarter 23.43 12.90 Fourth quarter 14.30 9.64 As of February 16, 2024 we had 175 shareholders of record.
Biggest changeThe following table sets forth, for the periods indicated, the intra-day high and low sale prices per share of common stock on the NYSE. 2024 High Low First quarter $ 21.82 $ 16.48 Second quarter 25.74 19.36 Third quarter 29.24 23.79 Fourth quarter 30.45 24.82 2023 High Low First quarter $ 15.18 $ 11.44 Second quarter 17.69 12.57 Third quarter 17.97 14.58 Fourth quarter 19.00 12.16 As of February 21, 2025 we had 157 stockholders of record.
Dividends No dividends were paid in 2023, 2022, or 2021. Issuer Purchases of Equity Securities Neither the Company nor any affiliate or other party acting on behalf of the Company repurchased any of the Company's equity securities during the three months ended December 31, 2023.
Dividends No dividends were paid in 2024, 2023, or 2022. Issuer Purchases of Equity Securities Neither the Company nor any affiliate or other party acting on behalf of the Company repurchased any of the Company's equity securities during the three months ended December 31, 2024.
Under our new Ares Credit Agreement (further described in Liquidity and Capital Resources section in Part II, Item 7 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations”), we are prohibited from repurchasing our common stock, except for the repurchase of stock from our employees or directors when tendered in payment of taxes or the exercise price of stock options, upon the satisfaction of certain requirements.
Under our Credit Facilities, we are prohibited from repurchasing our common stock, except for the repurchase of stock from our employees or directors when tendered in payment of taxes or the exercise price of stock options, upon the satisfaction of certain requirements. Item 6. [Reserved]
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities. Market Price of Common Stock Our common stock is traded on the New York Stock Exchange (“NYSE”) under the symbol “AORT”.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe following table summarizes cash flows from operating activities, investing activities, and financing activities for the periods indicated (in thousands): Year Ended December 31, 2023 2022 Cash flows provided by (used in): Operating activities $ 18,825 $ (5,153) Investing activities (502) (10,715) Financing activities 865 (1,639) Effect of exchange rate changes on cash and cash equivalents 401 1,848 Increase (decrease) in cash and cash equivalents $ 19,589 $ (15,659) Net Cash Flows from Operating Activities Net cash provided by operating activities was $18.8 million for the twelve months ended December 31, 2023, as compared to net cash used in operating activities of $5.2 million for the twelve months ended December 31, 2022.
Biggest changeAs a result, all conversions after the date of the notice will be settled by delivery of shares of our common stock using Physical Settlement in accordance with the Indenture. 50 Table of Contents Cash Flows The following table summarizes cash flows from operating activities, investing activities, and financing activities for the periods indicated (in thousands): Year Ended December 31, 2024 2023 Cash flows provided by (used in): Operating activities $ 22,236 $ 18,825 Investing activities (28,188) (502) Financing activities 2,203 865 Effect of exchange rate changes on cash and cash equivalents (1,728) 401 (Decrease) increase in cash and cash equivalents $ (5,477) $ 19,589 Operating Activities Net cash provided by operating activities increased $3.4 million during the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily due to an increase in cash collections resulting from a 10% increase in revenues, partially offset by higher personnel-related costs associated with an increase in headcount, an increase in cash paid for taxes, and higher inventory purchases and increased preservation costs related to the increase in revenues.
(“Artivion,” the “Company,” “we,” or “us”), is a leader in the manufacturing, processing, and distribution of medical devices and implantable human tissues used in cardiac and vascular surgical procedures for patients with aortic disease. We have four major product families: aortic stent grafts, surgical sealants, On-X mechanical heart valves and related surgical products, and implantable cardiac and vascular human tissues.
(“Artivion,” the “Company,” “we,” or “us”), is a leader in the manufacturing, processing, and distribution of medical devices and implantable human tissues used in cardiac and vascular surgical procedures for patients with aortic disease. We have four major product families: aortic stent grafts, On-X mechanical heart valves and related surgical products, surgical sealants, and implantable cardiac and vascular human tissues.
Deferred Preservation Costs, net Deferred preservation costs include costs of cardiac and vascular tissues available for shipment, tissues currently in active processing, and tissues held in quarantine pending release to implantable status. By federal law, human tissues cannot be bought or sold; therefore, the tissues we preserve are not held as inventory.
Deferred Preservation Costs Deferred preservation costs include costs of cardiac and vascular tissues available for shipment, tissues currently in active processing, and tissues held in quarantine pending release to implantable status. By federal law, human tissues cannot be bought or sold; therefore, the tissues we preserve are not held as inventory.
The discussion contains forward-looking statements that involve known and unknown risks and uncertainties, including those set forth under Part I, Item 1A."Risk Factors" of this Form 10-K.
The discussion contains forward-looking statements that involve known and unknown risks and uncertainties, including those set forth under Part I, Item 1A. “ Risk Factors ” of this Form 10-K.
Management's Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 23, 2023. 41 Table of Contents Overview Artivion, Inc.
Management's Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 23, 2024. 41 Table of Contents Overview Artivion, Inc.
The following discussion and analysis do not include certain items related to the year ended December 31, 2021, including year-to-year comparisons between the year ended December 31, 2022 and the year ended December 31, 2021. For a comparison of our results of operations for the fiscal years ended December 31, 2022 and December 31, 2021, see Item 7.
The following discussion and analysis do not include certain items related to the year ended December 31, 2022, including year-to-year comparisons between the year ended December 31, 2023 and the year ended December 31, 2022. For a comparison of our results of operations for the fiscal years ended December 31, 2023 and December 31, 2022, see Item 7.
Management uses constant currency revenues internally to assess the operational performance of the Company, as a component in compensation metrics, and as a basis for strategic planning. 49 Table of Contents We believe the provided non-GAAP measures are meaningful in addition to the information contained in the US GAAP presentation of financial performance.
Management uses constant currency revenues internally to assess the operational performance of the Company, as a component in compensation metrics, and as a basis for strategic planning. We believe the provided non-GAAP measures are meaningful in addition to the information contained in the US GAAP presentation of financial performance.
Fixed production overhead costs are allocated based on actual tissue processing levels, to the extent that they are within the range of the facility’s normal capacity. These costs are then allocated among the tissues processed during the period based on cost drivers, such as the number of donors or number of tissues processed.
Fixed production overhead costs are allocated based on actual tissue processing levels, to the extent that they are within the range of the facility’s normal capacity. 42 Table of Contents These costs are then allocated among the tissues processed during the period based on cost drivers, such as the number of donors or number of tissues processed.
Gain from Sale of Non-Financial Assets Gain from sale of non-financial assets for the twelve months ended December 31, 2023 consisted of the net $14.3 million received as part of the Baxter Transaction upon receipt of the PerClot PMA in May 2023.
Gain from Sale of Non-Financial Assets Gain from sale of non-financial assets for the year ended December 31, 2023 consisted of the net $14.3 million received as part of the Baxter Transaction upon receipt of the PerClot PMA in May 2023.
Surgical sealants include BioGlue Surgical Adhesive (“BioGlue”) products. In addition to these four major product families, we sell or distribute PhotoFix bovine surgical patches and CardioGenesis cardiac laser therapy (prior to our abandonment of the business as of June 30, 2023).
Surgical sealants include BioGlue Surgical Adhesive (“BioGlue”) products. In addition to these four major product families, we sell or distribute PhotoFix bovine surgical patches (“PhotoFix”) and CardioGenesis cardiac laser therapy (prior to our abandonment of that business as of June 2023).
We define constant currency revenues as revenues minus the exchange rate effect. We define exchange rate effect as the year-over-year impact of foreign currency movements using current period foreign currency rates applied to prior period transactional currency amounts.
We define exchange rate effect as the year-over-year impact of foreign currency movements using current period foreign currency rates applied to prior period transactional currency amounts.
Research and development spending for the twelve months ended December 31, 2023 was primarily focused on clinical work to gain regulatory approvals for certain aortic stent grafts, and to a lesser extent, On-X products.
Research and development spending for the year ended December 31, 2024 and 2023 was primarily focused on clinical work to gain regulatory approvals for certain aortic stent grafts, and, to a lesser extent, On-X products.
These items may have a significant effect on our future cash flows during the next twelve months. Subject to the terms of our Initial Term Loan Agreement, we may seek additional borrowing capacity or financing, pursuant to our current or any future shelf registration statement, for general corporate purposes or to fund other future cash requirements.
These items may have a significant effect on our future cash flows during the next twelve months. Subject to the terms of our credit facilities, we may seek additional borrowing capacity or financing, pursuant to our current or any future shelf registration statement, for general corporate purposes or to fund other future cash requirements.
Demand for our cardiac preservation services has traditionally been seasonal, with peak demand generally occurring in the third quarter. We believe this trend for cardiac preservation services is primarily due to the high number of surgeries scheduled during the summer months for school-aged patients.
We do not believe the demand for our On-X and other products is seasonal. Demand for our cardiac preservation services has traditionally been seasonal, with peak demand generally occurring in the third quarter. We believe this trend for cardiac preservation services is primarily due to the high number of surgeries scheduled during the summer months for school-aged patients.
Aortic stent grafts include aortic arch stent grafts, abdominal stent grafts, and synthetic vascular grafts. Aortic arch stent grafts include our E-vita Open NEO, E-vita Open Plus, AMDS, NEXUS, NEXUS DUO (the “NEXUS Products”), and E-vita Thoracic 3G products. Abdominal stent grafts include our E-xtra Design Engineering, E-nside, E-tegra, E-ventus BX, and E-liac products.
Aortic stent grafts include aortic arch stent grafts, abdominal stent grafts, and synthetic vascular grafts. Aortic arch stent grafts include our E-vita Open NEO, E-vita Open Plus, AMDS, NEXUS ONE, NEXUS DUO, and NEXUS TRE, and E-vita Thoracic 3G products. Abdominal stent grafts include our E-xtra Design Engineering, E-nside, E-tegra, E-ventus BX, Tuva™ BX, and E-liac products.
We began to manufacture and supply PerClot ® hemostatic powder during the second quarter of 2023 (as part of the Transitional Manufacturing and Supply Agreement (“TMSA”) of the Baxter Transaction, described below). For the year ended December 31, 2023 we reported annual revenues of $354.0 million, increasing 13% over the prior year.
We began to manufacture and supply PerClot ® hemostatic powder (“PerClot”) during the second quarter of 2023 (as part of the Transitional Manufacturing and Supply Agreement (“TMSA”) of the Baxter Transaction, described below). For the year ended December 31, 2024 we reported annual revenues of $388.5 million, increasing 10% over the prior year.
On May 23, 2023 the US Food and Drug Administration granted Premarket Approval (“PMA”) of PerClot for use to control bleeding in certain open and laparoscopic surgical procedures.
On May 23, 2023 the FDA granted Premarket Approval (“PMA”) of PerClot for use to control bleeding in certain open and laparoscopic surgical procedures.
Upon closing, we borrowed $190.0 million under the Initial Term Loan Facility and $30.0 million under the Revolving Credit Facility. The proceeds of the initial borrowings were used along with cash on hand to pay off our existing credit facilities, dated as of December 1, 2017, and related fees and expenses.
Upon closing, we borrowed $190.0 million under the Term Loan Facility and $30.0 million under the Revolving Credit Facility. The proceeds of the initial borrowings were used along with cash on hand to pay off our previously existing credit agreement and pay related fees and expenses.
Historically, we believe the demand for BioGlue products is seasonal, with a decline in demand generally occurring in the third quarter followed by stronger demand in the fourth quarter. We believe that this trend may be due to the summer holiday season in Europe and the US. We do not believe the demand for our other products is seasonal.
Historically, we believe the demand for surgical sealants is seasonal, with a decline in demand generally occurring in the third quarter followed by stronger demand in the fourth quarter. We believe that this trend may be due to the summer holiday season in Europe and the US.
Scheduled Contractual Obligations and Future Payments Our long-term debt obligations and interest payments include $320.5 million of scheduled principal payments and $139.0 million in anticipated interest payments primarily related to our Initial Term Loan Facility, Revolving Credit Facility, Convertible Senior Notes, and other governmental loans.
Scheduled Contractual Obligations and Future Payments Our long-term debt obligations and interest payments include $320.0 million of scheduled principal payments and $119.2 million in anticipated interest payments related to our Initial Term Loan Facility, Revolving Credit Facility, and Convertible Senior Notes.
Additionally, our sales to many distributors around the world are denominated in US Dollars, and although these sales are not directly impacted by currency exchange rates, we believe that some of our distributors may delay or reduce purchases of products in US Dollars depending on the relative price of these goods in their local currencies.
Additionally, our sales to many distributors around the world are denominated in US Dollars, and although these sales are not directly impacted by currency exchange rates, we believe that some of our distributors may delay or reduce purchases of products in US Dollars depending on the relative price of these goods in their local currencies. 44 Table of Contents Aortic Stent Grafts Aortic stent grafts include aortic arch stent grafts, abdominal stent grafts, synthetic vascular grafts, and original equipment manufacturing (“OEM”) aortic stent graft products.
Investors should consider this non-GAAP information in addition to, and not as a substitute for, financial measures prepared in accordance with US GAAP. In addition, this non-GAAP financial information may not be the same as similar measures presented by other companies.
Investors should consider this non-GAAP information in addition to, and not as a substitute for, financial measures prepared in accordance with US GAAP.
Other Other revenues are comprised of revenues from PhotoFix, PerClot (as part of the TMSA of the Baxter Transaction described below), and CardioGenesis cardiac laser therapy (prior to our abandonment of that business as of June 2023).
Other Other revenues are comprised of revenues from PhotoFix and PerClot (as part of the TMSA of the Baxter Transaction described below), and CardioGenesis cardiac laser therapy (prior to our abandonment of that business as of June 2023). 45 Table of Contents Other revenues decreased 17% for the year ended December 31, 2024, as compared to the year ended December 31, 2023.
Cost of Products and Preservation Services Cost of Products Twelve Months Ended December 31, 2023 2022 Cost of products $ 84,595 $ 72,166 Cost of products increased 17% for the twelve months ended December 31, 2023, as compared to the twelve months ended December 31, 2022.
Cost of Products and Preservation Services Cost of Products Year Ended December 31, 2024 2023 Cost of products $ 99,385 $ 84,595 Cost of products increased 17% for the year ended December 31, 2024, as compared to the year ended December 31, 2023.
Capital Expenditures Capital expenditures for the twelve months ended December 31, 2023 and 2022 were $7.4 million and $9.0 million, respectively. Capital expenditures in the twelve months ended December 31, 2023 were primarily related to routine purchases of manufacturing and tissue processing equipment, computer software, leasehold improvements needed to support our business, and computer equipment.
Capital expenditures in the year ended December 31, 2024 were primarily related to routine purchases of computer software, manufacturing and tissue processing equipment, leasehold improvements needed to support our business and computer equipment.
See the “Results of Operations” section below for additional analysis of the full year 2023 results. See Part I, Item 1, “Business,” for further discussion of our business and activities during 2023.
For the year ended December 31, 2024 we reported a net loss of $13.4 million. See the “Results of Operations” section below for additional analysis of the full year 2024 results. See Part I, Item 1, “Business,” for further discussion of our business and activities during 2024.
Gross margin as a percentage of total revenues was flat for the twelve months ended December 31, 2023, as compared to the twelve months ended December 31, 2022.
Gross margin as a percentage of total revenues decreased for the year ended December 31, 2024, as compared to the year ended December 31, 2023.
This increase was primarily due to an increase in volume of units sold, which increased revenues by 11%, and an increase in average sales prices, which increased revenues by 6%. Constant currency revenues from the sales of On-X products increased 17% for the twelve months ended December 31, 2023, as compared to the twelve months ended December 31, 2022.
Revenues from the sales of On-X products increased 13% for the year ended December 31, 2024, as compared to the year ended December 31, 2023. This increase was primarily due to an increase in the volume of units sold and, to a lesser extent, an increase in average sales prices.
We also evaluate our deferred preservation costs for costs not deemed to be recoverable, including tissues not expected to ship prior to the expiration date of their packaging.
We regularly evaluate our deferred preservation costs to determine if the costs are appropriately recorded at the lower of cost or net realizable value. We also evaluate our deferred preservation costs for costs not deemed to be recoverable, including tissues not expected to ship prior to the expiration date of their packaging.
Actual yields could differ significantly from our estimates, which could result in a change in tissues available for shipment and could increase or decrease the balance of deferred preservation costs.
Actual yields could differ significantly from our estimates, which could result in a change in tissues available for shipment and could increase or decrease the balance of deferred preservation costs. These changes could result in additional cost of preservation services expense or could increase per tissue preservation costs, which would impact gross margins on tissue preservation services in future periods.
There can be no assurance that we will be able to obtain any additional debt or equity financing at the time needed or that such financing will be available on terms that are favorable or acceptable to us. 50 Table of Contents Significant Sources and Uses of Liquidity Credit Agreement On December 1, 2017 we entered into a credit and guaranty agreement for a $255.0 million senior secured credit facility, consisting of a $225.0 million secured term loan facility (the “Term Loan Facility”) and a $30.0 million secured revolving credit facility (the "Revolving Credit Facility” and, together with the Term Loan Facility, the “Credit Agreement”).
There can be no assurance that we will be able to obtain any additional debt or equity financing at the time needed or that such financing will be available on terms that are favorable or acceptable to us. 49 Table of Contents Significant Sources and Uses of Liquidity Credit Facilities On January 18, 2024 we entered into a credit and guaranty agreement with Ares Management Credit funds (the “Ares Credit Agreement”) for $350.0 million of senior secured, interest-only, credit facilities, consisting of a $190.0 million secured term loan facility (the “Term Loan Facility”), a $100.0 million secured delayed draw term loan facility ( the “Delayed Draw Term Loan Facility” and, together with the Term Loan Facility, the “Term Loan Facilities”) and a $60.0 million “senior-priority” secured revolving credit facility with a priority claim ahead of the other secured facilities (the “Revolving Credit Facility” and, together with the Term Loan Facilities, the “Credit Facilities”).
Our operating and finance lease obligations result from the lease of land and buildings that comprise our corporate headquarters and our various manufacturing facilities, leases related to additional manufacturing, office, and warehouse space, leases on company vehicles, and leases on a variety of office equipment and other equipment.
Our operating and finance lease obligations result from the lease of land and buildings that comprise our corporate headquarters and our various manufacturing facilities; leases related to additional manufacturing, office, and warehouse space; leases on company vehicles; and leases on a variety of office and other equipment. 51 Table of Contents Capital Expenditures Capital expenditures for the year ended December 31, 2024 and 2023 were $11.2 million and $9.8 million, respectively.
Gross Margin Twelve Months Ended December 31, 2023 2022 Gross margin $ 229,176 $ 202,523 Gross margin as a percentage of total revenues 65 % 65 % Gross margin increased 13% for the twelve months ended December 31, 2023, as compared to the twelve months ended December 31, 2022.
Gross Margin Year Ended December 31, 2024 2023 Gross margin $ 248,781 $ 229,176 Gross margin as a percentage of total revenues 64 % 65 % Gross margin increased 9% for the year ended December 31, 2024, as compared to the year ended December 31, 2023.
For the twelve months ended December 31, 2023, as compared to the twelve months ended December 31, 2022, the US Dollar weakened in comparison to major currencies, resulting in revenue increases when these foreign currency denominated transactions were translated into US Dollars.
For the year ended December 31, 2024, as compared to the year ended December 31, 2023, the US Dollar weakened in comparison to major currencies, resulting in revenue increases when these foreign currency denominated transactions were translated into US Dollars. Future changes in these exchange rates could have a material, adverse effect on our revenues denominated in these currencies.
Other revenues increased 34% for the twelve months ended December 31, 2023, as compared to the twelve months ended December 31, 2022. 45 Table of Contents The increase in other revenues for the twelve months ended December 31, 2023 was primarily due to an increase in PerClot and PhotoFix product revenues, partially offset by decreased CardioGenesis revenues as a result of our abandonment of the CardioGenesis cardiac laser therapy business as of June 30, 2023.
The decrease in other revenues for the year ended December 31, 2024 was primarily due to an decrease in PerClot product revenues and, to a lesser extent, a decrease in CardioGenesis revenues as a result of our abandonment of the CardioGenesis cardiac laser therapy business as of June 30, 2023, partially offset by an increase in PhotoFix revenues due to a change in mix of units sold and an increase in average sales prices.
On-X OEM sales accounted for less than 1% of product revenues for the twelve months ended December 31, 2023 and 2022. Domestic revenues from the sales of On-X products accounted for 60% and 63% of total On-X revenues for the twelve months ended December 31, 2023 and 2022, respectively.
Domestic revenues from the sales of On-X products accounted for 61% and 60% of total On-X revenues for the year ended December 31, 2024 and 2023, respectively.
Products Revenues from products increased 13% for the twelve months ended December 31, 2023, as compared to the twelve months ended December 31, 2022. The increase was due to an increase in revenues from aortic stent grafts, On-X products, other products, and surgical sealants.
Products Revenues from products increased 11% for the year ended December 31, 2024, as compared to the year ended December 31, 2023. The increase was due to an increase in revenues from aortic stent grafts, On-X products, and surgical sealants, partially offset by a decrease in revenues from other products and certain limited impacts resulting from the Cybersecurity Incident.
Research and Development Expenses Twelve Months Ended December 31, 2023 2022 Research and development expenses $ 28,707 $ 38,879 Research and development expenses as a percentage of total revenues 8 % 12 % Research and development expenses decreased 26% for the twelve months ended December 31, 2023, as compared to the twelve months ended December 31, 2022.
Research and Development Expenses Year Ended December 31, 2024 2023 Research and development expenses $ 28,452 $ 28,707 Research and development expenses as a percentage of total revenues 7 % 8 % 47 Table of Contents Research and development expenses decreased 1% for the year ended December 31, 2024, as compared to the year ended December 31, 2023.
Seasonality Historically, we believe the demand for most of our aortic stent grafts is seasonal, with a decline in demand generally occurring in the third quarter due to the summer holiday season in Europe.
In addition, this non-GAAP financial information may not be the same as similar measures presented by other companies. 48 Table of Contents Seasonality Historically, we believe the demand for most of our aortic stent grafts is seasonal, with a decline in demand generally occurring in the third quarter due to the summer holiday season in Europe.
Constant currency revenues from the sales of surgical sealants increased 4% for the twelve months ended December 31, 2023, as compared to the twelve months ended December 31, 2022. The increase in revenues was primarily due to revenue increases in all geographies, except for revenue decreases in EMEA.
Constant currency revenues from the sales of surgical sealants increased 9% for the year ended December 31, 2024, as compared to the year ended December 31, 2023. The increase in revenues was primarily due to revenue increases in EMEA, North America, and Latin America, with the most significant increase in EMEA.
See Part II, Item 8, Note 4 - “Agreements with Endospan” of the “Notes to Consolidated Financial Statements” for further information on our agreements with Endospan.
See Part II, Item 8, Note 4 - “Agreements with Endospan” of the “Notes to Consolidated Financial Statements” for further information on our agreements with Endospan. Income Tax Expense Our effective income tax rate was an expense of 78% and 42% for the year ended December 31, 2024 and 2023, respectively.
On-X Products The On-X products include the On-X aortic and mitral heart valves and the On-X ascending aortic prosthesis (“AAP”) for heart valve replacement. Revenues from the sales of On-X products include revenues from the distribution of CarbonAid ® CO 2 diffusion catheters and from the sale of Chord-X ® ePTFE sutures for mitral chordal replacement.
Revenues from the sales of On-X products include revenues from the distribution of CarbonAid ® CO 2 diffusion catheters and from the sale of Chord-X ® ePTFE sutures for mitral chordal replacement. On-X product revenue also includes revenue generated from pyrolytic carbon coating services for OEM customers.
Results of Operations Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 (Tables in thousands) Revenues Revenues for the Twelve Months Ended December 31, Revenues as a Percentage of Total Revenues for the Twelve Months Ended December 31, 2023 2022 Percent Change 2023 2022 Products: Aortic stent grafts $ 107,469 $ 92,752 16% 31% 29% On-X 74,528 63,904 17% 21% 20% Surgical sealants 68,016 65,379 4% 19% 21% Other 11,172 8,318 34% 3% 3% Total products 261,185 230,353 13% 74% 73% Preservation services 92,819 83,436 11% 26% 27% Total $ 354,004 $ 313,789 13% 100% 100% Revenues increased 13% for the twelve months ended December 31, 2023, as compared to the twelve months ended December 31, 2022.
Results of Operations Year Ended December 31, 2024 Compared to Year Ended December 31, 2023 ($ in thousands) Revenues Revenues for the Year Ended December 31, Revenues as a Percentage of Total Revenues for the Year Ended December 31, 2024 2023 Percent Change 2024 2023 Products: Aortic stent grafts $ 123,081 $ 107,469 15% 32% 31% On-X 83,982 74,528 13% 22% 21% Surgical sealants 73,898 68,016 9% 19% 19% Other 9,269 11,172 (17)% 2% 3% Total products 290,230 261,185 11% 75% 74% Preservation services 98,307 92,819 6% 25% 26% Total $ 388,537 $ 354,004 10% 100% 100% 43 Table of Contents Revenues increased 10% for the year ended December 31, 2024, as compared to the year ended December 31, 2023.
Excluding the effects of foreign exchange, revenues increased 12% over the prior year. The increase in revenues was due to increases in revenues from aortic stent grafts, On-X products, preservation services, other products, and surgical sealants. For the year ended December 31, 2023 we reported a net loss of $30.7 million.
Excluding the effects of foreign exchange, revenues increased 9% over the prior year. The increase in revenues was due to increases in revenues from aortic stent grafts, On-X products, surgical sealants, and preservation services, partially offset by a decrease in revenues from other products and certain limited impacts resulting from the Cybersecurity Incident.
Revenues from tissue processing increased 11% for the twelve months ended December 31, 2023, as compared to the twelve months ended December 31, 2022. The increase in revenues was primarily due to an increase in average sales prices, which increased revenues by 12%, partially offset by a decrease in tissues shipped, which decreased revenues by 1%.
Revenues from tissue processing increased 6% for the year ended December 31, 2024, as compared to the year ended December 31, 2023. The increase in revenues was primarily due to an increase in average sales prices.
The increase for the twelve months ended December 31, 2023, as compared to the twelve months ended December 31, 2022 was also due to an increase in average sales prices of certain tissues, On-X products, and certain aortic stent grafts shipped and the mix and volume of certain aortic stent grafts, On-X, and surgical sealant products shipped, partially offset by an increase in the cost of all products shipped.
The increase in gross margin for the year ended December 31, 2024, as compared to the year ended December 31, 2023 was due to an increase in the volume of all products shipped as well as favorable pricing of certain aortic stent grafts, surgical sealants, On-X products, and tissues shipped during 2024.
Gross margin as a percentage of total revenues was positively impacted by favorable prices of certain tissues shipped and a favorable mix of On-X products and certain aortic stent grafts shipped, offset by an increase in the cost of products shipped during the twelve months ended December 31, 2023.
Gross margin as a percentage of total revenues was negatively impacted by an increase in the cost of certain aortic stent grafts, largely due to an idle capacity charge resulting from the fourth quarter cybersecurity incident, and other products, unfavorable geography mix of On-X products shipped, partially offset by favorable pricing of certain tissues, favorable product mix of certain aortic stent grafts, and On-X products shipped during the year ended December 31, 2024.
During the twelve months ended December 31, 2023 cash flows used in investing activities primarily included $7.4 million of cash used for capital expenditures, $5.0 million for the payment related to our agreement with Endospan, partially offset by $14.3 million of proceeds from the sale of non-financial assets.
Cash flows used in investing activities during the year ended December 31, 2023 included $9.8 million of cash used for capital expenditures and $5.0 million for the funding of loans made pursuant to the Endospan agreements, which were partially offset by $14.3 million of proceeds received as part of the Baxter transaction from the sale of non-financial assets.
Our future cash requirements are expected to include interest and principal payments under our new Initial Term Loan Facility and Convertible Senior Notes (described in “Significant Sources and Uses of Liquidity” section below), expenditures for clinical trials, research and development expenditures, general working capital needs, capital expenditures, and other corporate purposes and may include cash to fund business development activities including obligations in the agreements related to the Ascyrus transaction.
Our future cash requirements are expected to include interest payments under our credit facilities, expenditures for clinical trials, research and development expenditures, general working capital needs, capital expenditures, other corporate purposes and may include cash to fund business development activities including obligations pursuant to arrangements with Endopsan and the acquisition of Ascyrus.
The current year cash provided by financing activities was primarily due to $4.0 million of proceeds from exercise of stock options and issuances of common stock, $3.6 million of proceeds from financing insurance premiums, partially offset by $2.8 million for the repayment of debt and $2.5 million for the payments of short-term notes payable.
The current year cash provided by financing activities was primarily due to $5.7 million of proceeds from exercise of stock options and issuances of common stock and $0.7 million of net proceeds received on our new credit facilities after repaying and extinguishing all obligations on our old credit facilities, all of which were partially offset by payments of $2.5 million for debt issuance costs and $1.0 million for repayments of short-term notes payable.
The increase in revenues for the twelve months ended December 31, 2023 was due to an increase in revenues from aortic stent grafts, On-X products, preservation services, other products, and surgical sealants. Excluding the effects of foreign exchange, revenues increased 12% for the twelve months ended December 31, 2023, as compared to the twelve months ended December 31, 2022.
The increase in revenues for the year ended December 31, 2024 was due to an increase in revenues from aortic stent grafts, On-X products, surgical sealants, and preservation services, partially offset by a decrease in revenues from other products.
The initial conversion rate of the Convertible Senior Notes is 42.6203 shares per $1,000 principal amount, which is equivalent to a conversion price of approximately $23.46 per share, subject to adjustments. We use the if-converted method for assumed conversion of the Convertible Senior Notes for the diluted earnings per share calculation.
The Convertible Senior Notes may be settled in cash, stock, or a combination thereof, solely at our discretion. The initial conversion rate of the Convertible Senior Notes is 42.6203 shares per $1,000 principal amount, which is equivalent to a conversion price of approximately $23.46 per share, subject to adjustments.
Cost of products for the twelve months ended December 31, 2023 and 2022 included costs related to aortic stent grafts, On-X, surgical sealants, and other products. 46 Table of Contents The increase in cost of products for the twelve months ended December 31, 2023 was primarily due to an increase in the volume of On-X products and aortic stent grafts shipped, and an increase in the cost of aortic stent grafts, surgical sealants, and On-X products shipped, as compared to the twelve months ended December 31, 2022.
The remaining increase in cost of products as compared to the year ended December 31, 2023 was primarily due to an increase in volume of On-X and aortic stent grafts shipped and an increase of the cost of certain aortic stent grafts and other products shipped, partially offset by favorable product mix. 46 Table of Contents Cost of Preservation Services Year Ended December 31, 2024 2023 Cost of preservation services $ 40,371 $ 40,233 Cost of preservation services remained flat for the year ended December 31, 2024, as compared to the year ended December 31, 2023.
Interest Expense Interest expense was $25.3 million and $18.2 million for the twelve months ended December 31, 2023 and 2022, respectively. Interest expense for the twelve months ended December 31, 2023 and 2022 relates to interest on debt.
Interest Expense Interest expense was $34.3 million and $25.3 million for the year ended December 31, 2024 and 2023, respectively.
Other expense, net for the twelve months ended December 31, 2023 primarily included a $5.0 million expense related to a payment to Endospan for achievement of certain milestones related to the NEXUS Products, partially offset by realized and unrealized effects of foreign currency gains and losses.
Other expense, net for the year ended December 31, 2023 primarily included a $5.0 million loss associated with fair value adjustments to loans issued pursuant to our Endospan agreements, partially offset by a $2.1 million gain from realized and unrealized effects of foreign currency gains and losses.
Aortic Stent Grafts Aortic stent grafts include aortic arch stent grafts, abdominal stent grafts, synthetic vascular grafts, and original equipment manufacturing (“OEM”) aortic stent graft products. Aortic arch stent grafts include our E-vita Open NEO, E-vita Open Plus, AMDS, the NEXUS Products, and E-vita Thoracic 3G products.
Aortic arch stent grafts include our E-vita Open NEO, E-vita Open Plus, AMDS, the NEXUS family of products, and E-vita Thoracic 3G products. Abdominal stent grafts include our E-xtra Design Engineering, E-nside, E-tegra, E-ventus BX, Tuva™ BX, and E-liac products.
We have contingent payment obligations that include up to $100.0 million to be paid to the former shareholders of Ascyrus upon the achievement of certain milestones. As part of the transaction with Baxter, we may be required to pay up to $3.0 million if certain milestones are met.
As part of the transaction with Baxter, we may be required to pay up to $3.0 million if certain milestones are met. Pursuant to the Amended and Restated Loan Agreement with Endospan Ltd.
Abdominal stent grafts include our E-xtra Design Engineering, E-nside, E-tegra, E-ventus BX, and E-liac products. Aortic stent grafts are used in endovascular and open vascular surgery for the treatment of complex aortic arch, thoracic, and abdominal aortic diseases. Our aortic stent grafts are primarily distributed in international markets.
Aortic stent grafts are used in endovascular and open vascular surgery for the treatment of complex aortic arch, thoracic, and abdominal aortic diseases. Our aortic stent grafts are primarily distributed in international markets. Revenues from the sales of aortic stent grafts increased 15% for the year ended December 31, 2024, as compared to the year ended December 31, 2023.
Net loss and diluted loss per common share for the twelve months ended December 31, 2023 was primarily due to loss before income taxes, as discussed above. Non-GAAP Measures of Financial Performance To supplement our Consolidated Financial Statements presented in accordance with US GAAP, we use constant currency revenues, which is a non-GAAP financial measure.
Non-GAAP Measures of Financial Performance To supplement our Consolidated Financial Statements presented in accordance with US GAAP, we use constant currency revenues, which is a non-GAAP financial measure. We define constant currency revenues as revenues minus the exchange rate effect.
We believe this trend for vascular preservation services is primarily due to fewer vascular surgeries being scheduled during the winter holiday months.
We believe this trend for vascular preservation services is primarily due to fewer vascular surgeries being scheduled during the winter holiday months. Liquidity and Capital Resources Our primary uses of liquidity include the payment of operating expenses, capital expenditures, servicing of debt and the funding of acquisitions or other collaborative arrangements.
Convertible Senior Notes On June 18, 2020 we issued $100.0 million aggregate principal amount of 4.25% Convertible Senior Notes with a maturity date of July 1, 2025 (the “Convertible Senior Notes”). The Convertible Senior Notes may be settled in cash, stock, or a combination thereof, solely at our discretion.
See Part II, Item 8, Note 10 of the “Notes to Consolidated Financial Statements” for further discussion of our new Ares Credit Agreement. Convertible Senior Notes On June 18, 2020 we issued $100.0 million aggregate principal amount of 4.25% Convertible Senior Notes with a maturity date of July 1, 2025 (the “Convertible Senior Notes”).
This increase in revenues was primarily due to an increase in average sales prices in certain regions, which increased revenues by 3%, and an increase in the volume of milliliters sold, which increased revenues by 1%.
Revenues from the sales of surgical sealants increased 9% for the year ended December 31, 2024, as compared to the year ended December 31, 2023. This increase was primarily due to an increase in the volume of milliliters sold and, to a lesser extent, an increase in average sales prices.
The increase in revenues was partially due to improved conditions from the COVID-19 pandemic for the twelve months ended December 31, 2023, as compared to the twelve months ended December 31, 2022. Revenues for the twelve months ended December 31, 2023 increased in all geographies, with the most significant increases in North America and Asia Pacific (“APAC”).
Constant currency revenues from the sales of On-X products increased 13% for the year ended December 31, 2024, as compared to the year ended December 31, 2023. Revenues for the year ended December 31, 2024 increased in all geographies, with the most significant increase in North America.
Revenues from the sales of surgical sealants increased 4% for the twelve months ended December 31, 2023, as compared to the twelve months ended December 31, 2022.
Excluding the effects of foreign exchange, revenues increased 9% for the year ended December 31, 2024, as compared to the year ended December 31, 2023.
This increase was primarily due to a change in the mix of units sold, which increased revenues by 11%, an increase in average sales prices, which increased revenues by 3%, and the effect of foreign exchange rates, which increased revenues by 2%. 44 Table of Contents Constant currency revenues from the sales of aortic stent grafts increased 14% for the twelve months ended December 31, 2023, as compared to the twelve months ended December 31, 2022.
This increase was primarily due to a change in the volume and mix of units sold, and to a lesser extent, an increase in average sales prices, and the effect of foreign exchange rates.
Operating Expenses General, Administrative, and Marketing Expenses Twelve Months Ended December 31, 2023 2022 General, administrative, and marketing expenses $ 208,977 $ 157,443 General, administrative, and marketing expenses as a percentage of total revenues 59 % 50 % General, administrative, and marketing expenses increased 33% for the twelve months ended December 31, 2023, as compared to the twelve months ended December 31, 2022.
Operating Expenses General, Administrative, and Marketing Expenses Year Ended December 31, 2024 2023 General, administrative, and marketing expenses $ 181,455 $ 208,977 General, administrative, and marketing expenses as a percentage of total revenues 47 % 59 % General, administrative, and marketing expenses decreased 13% for the year ended December 31, 2024, as compared to the year ended December 31, 2023, which includes the impact of the Ascyrus contingent consideration fair value adjustment gain of $11.0 million and loss of $23.5 million for the year ended December 31, 2024 and 2023, respectively.
The following table reconciles revenues to constant currency revenues for the periods presented: 43 Table of Contents Revenues for the Twelve Months Ended December 31, Percent Change From Prior Year 2023 2022 US GAAP US GAAP Exchange Rate Effect Constant Currency Constant Currency Products: Aortic stent grafts $ 107,469 $ 92,752 $ 1,587 $ 94,339 14% On-X 74,528 63,904 61 63,965 17% Surgical sealants 68,016 65,379 236 65,615 4% Other 11,172 8,318 4 8,322 34% Total products 261,185 230,353 1,888 232,241 12% Preservation services 92,819 83,436 (88) 83,348 11% Total $ 354,004 $ 313,789 $ 1,800 $ 315,589 12% A detailed discussion of the changes in product revenues and preservation services revenues for the twelve months ended December 31, 2023 is presented below.
The following table reconciles revenues to constant currency revenues for the periods presented: Revenues for the Year Ended December 31, Percent Change From Prior Year 2024 2023 US GAAP US GAAP Exchange Rate Effect Constant Currency Constant Currency Products: Aortic stent grafts $ 123,081 $ 107,469 $ 1,052 $ 108,521 13% On-X 83,982 74,528 (8) 74,520 13% Surgical sealants 73,898 68,016 39 68,055 9% Other 9,269 11,172 8 11,180 (17)% Total products 290,230 261,185 1,091 262,276 11% Preservation services 98,307 92,819 (34) 92,785 6% Total $ 388,537 $ 354,004 $ 1,057 $ 355,061 9% North America 197,940 187,603 (75) 187,528 6% Europe, the Middle East, and Africa 131,518 114,814 1,838 116,652 13% Asia Pacific 37,202 33,577 — 33,577 11% Latin America 21,877 18,010 (706) 17,304 26% Total $ 388,537 $ 354,004 $ 1,057 $ 355,061 9% A detailed discussion of the changes in product revenues and preservation services revenues for the year ended December 31, 2024 is presented below.
The increase in General, administrative, and marketing expenses for the twelve months ended December 31, 2023 was primarily due to an increase in business development expenses, personnel-related expenses, travel, and marketing. 47 Table of Contents General, administrative, and marketing expenses included $25.0 million of business development expense for the twelve months ended December 31, 2023, as compared to $7.7 million of business development income for the twelve months ended December 31, 2022.
The remaining general, administrative, and marketing expenses for the year ended December 31, 2024 increased $7.0 million as a result of higher personnel-related expenses due to an increase in headcount and $2.6 million of expenses associated with the fourth quarter cybersecurity incident.
Revenues from the sales of aortic stent grafts increased 16% for the twelve months ended December 31, 2023, as compared to the twelve months ended December 31, 2022.
Constant currency revenues from the sales of aortic stent grafts increased 13% for the year ended December 31, 2024, as compared to the year ended December 31, 2023. Revenues for the year ended December 31, 2024 increased primarily in Europe, the Middle East, and Africa (collectively, “EMEA”) and, to a lesser extent, in Latin America and Asia Pacific (“APAC”).
The increase in interest expense for the twelve months ended December 31, 2023, as compared to the twelve months ended December 31, 2022, was primarily due to an increase in the interest rate on our term loan. Other Expense, Net Other expense, net was $3.1 million for both the twelve months ended December 31, 2023 and 2022.
Other Expense, Net Other expense, net was $9.9 million and $3.1 million for the year ended December 31, 2024 and 2023, respectively.
Net Cash Flows from Financing Activities Net cash provided by financing activities was $865,000 for the twelve months ended December 31, 2023, as compared to net cash used in financing activities of $1.6 million for the twelve months ended December 31, 2022.
Financing Activities Net cash provided by financing activities was $2.2 million and $0.9 million for the year ended December 31, 2024 and 2023, respectively.
Our income tax rate for the twelve months ended December 31, 2023 was primarily affected by an increase in the valuation allowance on our deferred tax assets, nondeductible executive compensation, income taxes in certain profitable foreign jurisdictions, and additional tax expense for uncertain tax positions.
The increase in the effective income tax rate for the year ended December 31, 2024 was primarily due to changes in the jurisdictional mix of our earnings and valuation allowance, higher nondeductible executive compensation, state taxes and provision to return adjustments.
We received renewal of our BioGlue CE Mark and completed our Notified Body transition late in the fourth quarter of 2022. Domestic revenues from surgical sealants accounted for 48% and 49% of total surgical sealant revenues for the twelve months ended December 31, 2023 and 2022, respectively.
The increase in revenues in EMEA for the year ended December 31, 2024 was primarily due to an increase in unit sales in direct markets. Domestic revenues from surgical sealants accounted for 47% and 48% of total surgical sealant revenues for the year ended December 31, 2024 and 2023, respectively.
The increase in cost of preservation services for the twelve months ended December 31, 2023 was primarily due to an increase in processing cost of tissues shipped, as compared to the twelve months ended December 31, 2022.
Cost of preservation services included costs for cardiac and vascular tissue preservation services. Cost of preservation services for the year ended December 31, 2024 was negatively impacted by an increase in cost of certain tissues shipped, offset by a decrease in volume of certain tissues shipped.
On or after January 1, 2025 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their notes at any time, regardless of the foregoing circumstances. We became eligible to redeem the Convertible Senior Notes beginning on July 5, 2023, following the expiration of their non-redemption period.
We use the if-converted method for assumed conversion of the Convertible Senior Notes for the diluted earnings per share calculation. We became eligible to redeem the Convertible Senior Notes beginning on July 5, 2023, following the expiration of their non-redemption period.
We have the right to prepay loans under the Ares Credit Agreement in whole or in part at any time, provided that any prepayment of loans under the Term Loan Facilities (or loans under the Revolving Credit Facility to the extent of reducing the balance of outstanding loans below $30.0 million) will be subject to a prepayment premium of 5.00% if the prepayment occurs prior to January 18, 2025 and 1.00% if the prepayment occurs thereafter and prior to January 18, 2026.
There are no scheduled repayments of principal required to be made prior to the final maturity date. We have the right to prepay loans under the Ares Credit Agreement in whole or in part at any time, subject to certain premium payment requirements. Amounts repaid in respect of loans under the Term Loan Facilities may not be reborrowed.
The increase in revenues in North America for the twelve months ended December 31, 2023 was also impacted by customer buying patterns. The increase in revenues in APAC for the twelve months ended December 31, 2023 was also impacted by distributor buying patterns.
The increase in revenues in North America for the year ended December 31, 2024 was impacted by recent gains in the market share. On-X OEM sales accounted for less than 1% of product revenues for the year ended December 31, 2024 and 2023.
Removed
These changes could result in additional cost of preservation services expense or could increase per tissue preservation costs, which would impact gross margins on tissue preservation services in future periods. 42 Table of Contents We regularly evaluate our deferred preservation costs to determine if the costs are appropriately recorded at the lower of cost or net realizable value.
Added
The revenue increase in EMEA for the year ended December 31, 2024 was primarily due to an increase in volume of higher priced products within the aortic stent graft product line in direct (to hospitals) markets. On-X Products The On-X products include the On-X aortic and mitral heart valves and the On-X ascending aortic prosthesis (“AAP”) for heart valve replacement.
Removed
Revenues for the twelve months ended December 31, 2022 were negatively impacted in certain regions by delays or cancellations of some surgical procedures as a result of reduced hospital capacity and staffing and hospital restrictions due to the COVID-19 pandemic and local labor disputes.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

0 edited+7 added−9 removed1 unchanged
Removed
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Interest Rate Risk Our interest income and interest expense are sensitive to changes in the general level of US interest rates.
Added
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Interest Rate Risk We have a significant amount of indebtedness with a mix of fixed and variable rates of interest. Floating rate debt carries interest based generally on Secured Overnight Financing Rate (“SOFR”) plus an applicable margin.
Removed
In this regard, changes in US interest rates affect the interest earned on our cash and cash equivalents of $58.9 million as of December 31, 2023, and interest paid on the outstanding balances, if any, of our variable rate Revolving Credit Facility, Term Loan Facility, and Convertible Senior Notes.
Added
Increase in interest rates could therefore significantly increase the associated interest payments that we are required to make on this debt. See Part II, Item 8, Note 10 of the “Notes to Consolidated Financial Statements” for a further discussion.
Removed
A 10% adverse change in interest rates, as compared to the rates experienced by us for the twelve months ended December 31, 2023 affecting our cash and cash equivalents, Term Loan Facility, Revolving Credit Facility, and Convertible Senior Notes would not have a material impact on our financial position, profitability, or cash flows.
Added
We have assessed our exposure to changes in interest rates by analyzing the sensitivity to our operating results assuming various changes in market interest rates.
Removed
Foreign Currency Exchange Rate Risk We have balances, such as cash, accounts receivable, accounts payable, and accruals that are denominated in foreign currencies. These foreign currency denominated balances are sensitive to changes in exchange rates.
Added
Assuming a hypothetical increase of one percentage point in interest rates on our variable rate debt portfolio, cash equivalents, and investments as of December 31, 2024, our pre-tax operating results would decrease by an estimated $2.0 million over a twelve-month period.
Removed
In this regard, changes in exchange rates could cause a change in the US Dollar equivalent of cash or funds that we will receive in payment for assets or that we would have to pay to settle liabilities. As a result, we could be required to record these changes as gains or losses on foreign currency translation.
Added
Foreign Currency Exchange Rate Risk We have exposure to foreign currency exchange rate fluctuations worldwide resulting from intercompany transactions, other cross currency obligations and certain intercompany loans.
Removed
Realized and unrealized gains and losses were a gain of $2.1 million, a loss of $3.1 million, and a loss of $5.5 million, for the years ended December 31, 2023, 2022, and 2021, respectively. 53 Table of Contents We have revenues and expenses that are denominated in foreign currencies.
Added
We manage our foreign currency exchange risk primarily by incurring, to the extent practicable, operating and financing expenses in the local currency in the countries in which we operate. We do not hedge our operating results against currency movement as they are primarily translational in nature.
Removed
These foreign currency transactions are sensitive to changes in exchange rates. In this regard, changes in exchange rates could cause a change in the US Dollar equivalent of net income from transactions conducted in other currencies. As a result, we could recognize a reduction in revenues or an increase in expenses related to a change in exchange rates.
Added
Assuming a hypothetical 10% change to the foreign currency exchange rates in effect as of December 31, 2024 on our operating results, intercompany trade, and certain intercompany loan and interest balances, our pre-tax operating results would decrease by an estimated $8.0 million over a twelve-month period. 52 Table of Contents
Removed
An additional 10% adverse change in exchange rates from the exchange rates in effect on December 31, 2023 could impact our financial position or cash flows by approximately $7.0 million.
Removed
An additional 10% adverse change in exchange rates from the weighted-average exchange rates experienced by us for the twelve months ended December 31, 2023 affecting our revenue and expense transactions denominated in foreign currencies, would not have a material impact on our financial position or profitability. 54 Table of Contents

Other AORT 10-K year-over-year comparisons