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What changed in GLOBUS MEDICAL INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of GLOBUS MEDICAL INC's 2022 and 2023 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 2023 report.

+435 added−299 removedSource: 10-K (2024-02-21) vs 10-K (2023-02-21)

Top changes in GLOBUS MEDICAL INC's 2023 10-K

435 paragraphs added · 299 removed · 256 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

86 edited+102 added−14 removed48 unchanged
Biggest changeIn particular, we rely on patent, trademark, copyright, trade secret and other intellectual property laws and also utilize nondisclosure agreements and other measures to protect our rights. 7 Table of Contents As of December 31, 2022, we owned 1,527 issued U.S. patents (1,493 utility patents; 34 design patents) and had applications pending for 518 U.S. patents (516 utility patents; 2 design patents), and we owned 967 issued foreign patents and had applications pending for 517 foreign patents.
Biggest changeIntellectual Property We protect our proprietary rights through a variety of methods. In particular, we rely on patent, trademark, copyright, trade secret and other intellectual property laws and also utilize nondisclosure agreements and other measures to protect our rights.
Sales and Marketing Commercial Compliance Federal anti-kickback laws and regulations prohibit, among other things, persons from knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, in exchange for, or to induce either the referral of an individual, or the purchase, order or recommendation of, any good or service paid for under federal healthcare programs such as the Medicare and Medicaid programs.
Sales and Marketing Commercial Compliance Federal anti-kickback laws and regulations prohibit, among other things, persons from knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, in exchange for, to induce or to reward either the referral of an individual, or the purchase, order or recommendation of, any good or service paid for under federal healthcare programs such as the Medicare and Medicaid programs.
Item 1. Business Overview Globus Medical, Inc. (together, as applicable, with its consolidated subsidiaries, “Globus,” “we,” “us” or “our”), headquartered in Audubon, Pennsylvania, is a medical device company that develops and commercializes healthcare solutions whose mission is to improve the quality of life of patients with musculoskeletal disorders.
Item 1. Business Overview Globus Medical, Inc. (together, as applicable, with its consolidated subsidiaries, “Globus,” the “Company,” “we,” “us” or “our”), headquartered in Audubon, Pennsylvania, is a medical device company that develops and commercializes healthcare solutions whose mission is to improve the quality of life of patients with musculoskeletal disorders.
Reimbursement is dynamic and is contingent on coding for given services or procedures, coverage by third-party payors, and adequate payment for the services or procedures. Physicians, hospital outpatient departments, and Ambulatory Surgery Centers (“ASC”) use Current Procedural Terminology (“CPT ® ”) codes to bill for services and procedures, which are established by the American Medical Association (“AMA”).
Reimbursement is dynamic and is contingent on coding for given services or procedures, coverage by third-party payors, and adequate payment for the services or procedures. Physicians, hospital outpatient departments, and ambulatory surgery centers use Current Procedural Terminology (“CPT ® ”) codes to bill for services and procedures which are established by the American Medical Association (“AMA”).
Specialty societies such as the North American Spine Society, the American Association of Neurological Surgeons, and the American Academy of Orthopedic Surgeons provide advice to the AMA CPT ® Editorial Panel for developing codes. The availability of existing codes to bill for services and procedures may impact the adoption of technology.
Specialty societies such as the North American Spine Society (“NASS”), the American Association of Neurological Surgeons, and the American Academy of Orthopedic Surgeons provide advice to the AMA CPT ® Editorial Panel for developing codes. The availability of existing codes to bill for services and procedures may impact the adoption of technology.
We make our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act available free of charge through a link on the Investors section of our website located at http://www.globusmedical.com (under “SEC Filings”) as soon as reasonably practicable after they are filed with or furnished to the SEC. ‎ 12 Table of Contents
We make our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act available free of charge through a link on the Investors section of our website located at http://www.globusmedical.com (under “SEC Filings”) as soon as reasonably practicable after they are filed with or furnished to the SEC. ‎ 19 Table of Contents
The Centers for Medicare and Medicaid Services (“CMS”) and the National Center for Health Statistics are jointly responsible for overseeing changes and modifications to International Classification of Diseases, Clinical Modification/Procedure Coding System (“ICD-10-CM/PCS”) procedure codes used by all providers including physicians and facilities for reporting patient diagnosis(es) (ICD-10-CM codes) and hospitals for reporting inpatient procedures (ICD-10-PCS codes).
The Centers for Medicare and Medicaid Services (“CMS”) and the National Center for Health Statistics are jointly responsible for overseeing changes and modifications to International Classification of Diseases, Clinical Modification/Procedure Coding System (“ICD-10-CM/PCS”) procedure codes used by all providers including physicians and facilities for reporting patient diagnosis(es) (“ICD-10-CM codes”) and hospitals for reporting inpatient procedures (“ICD-10-PCS codes”).
Musculoskeletal Solutions Our Musculoskeletal Solutions consist primarily of implantable devices, biologics, accessories, and unique surgical instruments used in an expansive range of spinal, orthopedic and neurosurgical procedures. Musculoskeletal disorders are a leading driver of healthcare costs worldwide. Disorders range in severity from mild pain and loss of feeling to extreme pain and paralysis.
Musculoskeletal Solutions Our Musculoskeletal Solutions consist primarily of implantable devices, biologics, accessories, unique surgical instruments, and neuromonitoring services, used in an expansive range of spinal, orthopedic and neurosurgical procedures. Musculoskeletal disorders are a leading driver of healthcare costs worldwide. Disorders range in severity from mild pain and loss of feeling to extreme pain and paralysis.
In 2017, we acquired KB Medical SA, developer of a computer-assisted robotic guidance system, and in 2018 we acquired Nemaris Inc., a privately held company that markets and develops Surgimap ® , a leading surgical planning software platform, to further bolster our efforts to advance surgical procedures through Enabling Technologies.
In 2017, we acquired KB Medical SA, developer of a computer-assisted robotic guidance system, and in 2018 we acquired Nemaris Inc., a company that markets and develops Surgimap ® , a leading surgical planning software platform, to further bolster our efforts to advance surgical procedures through Enabling Technologies.
The procurement and transplantation of allograft bone tissue is subject to U.S. federal law pursuant to the National Organ Transplant Act (“NOTA”), a criminal statute which prohibits the purchase and sale of human organs used in human transplantation, 9 Table of Contents including bone and related tissue, for “valuable consideration.” NOTA permits reasonable payments associated with the removal, transportation, processing, preservation, quality control, implantation and storage of human bone tissue.
The procurement and transplantation of allograft bone tissue is subject to U.S. federal law pursuant to the National Organ Transplant Act (“NOTA”), a criminal statute which prohibits the purchase and sale of human organs used in human transplantation, including bone and related tissue, for “valuable consideration.” NOTA permits reasonable payments associated with the removal, transportation, processing, preservation, quality control, implantation and storage of human bone tissue.
We believe the advantages of pre-planning implant position and viewing implants or instruments relative to patient anatomy during surgery are self-evident, and also create significant secondary gains such as eliminating radiation exposure altogether. Product Development and Research We believe in bringing products to market quickly by reducing the time from product conception to launch.
We believe the advantages of pre-planning implant position and viewing implants or instruments relative to patient anatomy during surgery are self-evident, and also create significant secondary gains such as eliminating radiation exposure altogether. 7 Table of Contents Product Development and Research We believe in bringing products to market quickly by reducing the time from product conception to launch.
However, it is possible that material environmental costs or liabilities may arise in the future. Human Capital We believe our employees are our most valuable asset and are critical to our success as an organization.
However, it is possible that material environmental costs or liabilities may arise in the future. Human Capital Workforce Overview We believe our employees are our most valuable asset and are critical to our success as an organization.
Because of the predominance of government-administered healthcare systems in many jurisdictions around the world, many of our customer relationships outside of the U.S. are with governmental entities and are therefore potentially subject to such laws.
Because of the predominance of government-owned or-administered healthcare systems in many jurisdictions around the world, many of our customer relationships outside of the U.S. are with governmental entities and are therefore potentially subject to such laws.
Third-Party Coverage and Reimbursement We expect that sales volumes and prices of our Musculoskeletal Solutions products including spinal implant, orthopedic trauma, hip and knee arthroplasty, regenerative biologics, and advanced technology products may grow to be more dependent on the availability of coverage and reimbursement from third-party payors, such as state and federal programs including Medicare, Medicaid and Worker’s Compensation as well as private insurance plans including Blue Cross Blue Shield plans and commercial insurers.
Third-Party Coverage and Reimbursement We expect that sales volumes and prices of our Musculoskeletal Solutions products including spinal implant, orthopedic trauma, hip and knee arthroplasty, regenerative biologics, advanced technology products and IONM services may grow to be more dependent on the availability of coverage and reimbursement from third-party payors, such as state and federal programs including Medicare, Medicaid and workers’ compensation as well as private insurance plans including Blue Cross Blue Shield plans and commercial insurers.
Foreign Corrupt Practices Act (“FCPA”) and similar anti-bribery laws in non-U.S. jurisdictions, such as the United Kingdom’s Bribery Act, generally prohibit companies and their intermediaries from making improper payments to non-U.S. government officials and (in the case of the Bribery Act) private sector decision makers for the purpose of obtaining or retaining business.
Foreign Corrupt Practices Act (“FCPA”) and similar anti-bribery laws in non-U.S. jurisdictions, such as the UK’s Bribery Act, generally prohibit companies and their intermediaries from making improper payments to non-U.S. government officials and (in the case of the Bribery Act) private sector decision makers for the purpose of obtaining or retaining business.
Also, in 2018, we acquired Nemaris Inc., a privately held company that developed and marketed Surgimap ® , a leading surgical planning software platform. Surgimap ® ’s intuitive, patient-specific surgical planning and cloud-based infrastructure includes predictive algorithms and visual guides that enable healthcare professionals to plan and simulate surgical treatment of complex deformities.
Also, in 2018, we acquired Nemaris Inc., the company that developed and marketed Surgimap ® , a leading surgical planning software platform. Surgimap ® ’s intuitive, patient-specific surgical planning and cloud-based infrastructure includes predictive algorithms and visual guides that enable healthcare professionals to plan and simulate surgical treatment of complex deformities.
As the portion of the U.S. population over the age of 65 and eligible for Medicare continues to grow, we may be more vulnerable to coverage and reimbursement limitations imposed by CMS. National and local coverage policy decisions are subject to unforeseeable change and have the potential to impact physician behavior.
As the portion of the U.S. population over the age of 65 and eligible for Medicare continues to grow, we may be more vulnerable to coverage 10 Table of Contents and reimbursement limitations imposed by CMS. National and local coverage policy decisions are subject to unforeseeable change and have the potential to impact physician behavior.
In 2019, we acquired substantially all of the assets of StelKast, Inc., a privately held company that designs, manufactures and distributes orthopedic implants for knee and hip replacement surgeries. During the second quarter of 2020, the Company acquired Synoste Oy (“Synoste”), a Finnish engineering company that specializes in the research and development of a limb lengthening system.
In 2019, we acquired substantially all of the assets of StelKast, Inc., a company that designs, manufactures and distributes orthopedic implants for knee and hip replacement surgeries. During the second quarter of 2020, the Company acquired Synoste Oy, a Finnish engineering company that specializes in the research and development of a limb lengthening system.
Product Categories While we group our products into two categories, Musculoskeletal Solutions and Enabling Technologies, they are not limited to a particular technology, platform or surgical approach.
Product & Service Categories While we group our products and services into two categories, Musculoskeletal Solutions and Enabling Technologies, they are not limited to a particular technology, platform or surgical approach.
Additionally, the majority of states in which we market our products have similar anti-kickback, false claims, anti-fee splitting and physician self-referral laws, which may apply to items or services reimbursed by any third-party payor, including commercial insurers, and violations may result in substantial civil and criminal penalties. The U.S.
Additionally, the majority of states in which we market our products have similar anti-kickback, false claims, anti-fee splitting and physician self-referral laws, which may apply to items or services reimbursed by any third-party payor, including commercial insurers, and violations may result in substantial civil and criminal sanctions.
We launched 8 new products in 2022, have a range of new products in various stages of development, and expect to continue to regularly launch new products. Increase the size, scope and productivity of our exclusive U.S. sales force .
We have a range of new products in various stages of development and expect to continue to regularly launch new products. Increase the size, scope and productivity of our exclusive U.S. sales force .
The FDA regulates human tissue products as Human Cells and Cellular and Tissue Based Products (“HCT/Ps”). Certain HCT/Ps are regulated solely under Section 361 of the Public Health Service Act and are referred to as “Section 361 HCT/Ps,” while other HCT/Ps are subject to the FDA’s regulatory requirements for medical devices or biologics.
The FDA regulates human tissue products as Human Cells and Cellular and Tissue-Based Products (“HCT/Ps”). Certain HCT/Ps are regulated solely under Section 361 of the Public Health Service Act and are referred to as “Section 361 HCT/Ps,” while other HCT/Ps are subject to the FDA’s regulatory requirements for medical devices or biologics under 21 CFR Parts 1270 and 1271.
These representatives have the responsibility to confirm that all of the items 6 Table of Contents needed in the surgery are available and are provided sterile or are capable of being sterilized at the hospital.
These representatives have the responsibility to confirm that all of the items needed in the surgery are available and are provided sterile or are capable of being sterilized at the hospital.
The letter described observed non-conformities to regulations for human cells, tissues, and cellular and tissue-based products relating to one allograft tissue product processed by Human Biologics of Texas and sold to end users. We take the matters identified in the warning letter seriously and are working diligently to address the FDA’s observations.
The letter described observed non-conformities to regulations for human cells, tissues, and cellular and tissue-based products relating to one allograft tissue product processed by Human Biologics of Texas and sold to end users. We took the matters identified in the warning letter seriously and worked diligently to address the FDA’s observations.
Medicare may establish National Coverage Determinations (NCDs) or Medicare Administrative Contractors (MACs) may establish Local Coverage Determinations (LCDs) that provide coverage information and determine whether services are reasonable and necessary.
Medicare may establish National Coverage Determinations or Medicare Administrative Contractors may establish Local Coverage Determinations that provide coverage information and determine whether services are reasonable and necessary.
We believe there is significant opportunity to strengthen our position in the U.S. market by increasing the size of our sales force and continuing to add direct and distributor sales representatives in the future. During the year ended December 31, 2022, international sales accounted for approximately 14.8% of our total sales.
We believe there is significant opportunity to strengthen our position in the U.S. market by increasing the size of our sales force and continuing to add direct and distributor sales representatives in the future. During the year ended December 31, 2023, international sales accounted for approximately 18.4% of our total sales.
The FDA periodically inspects tissue processors to determine compliance with these requirements. Entities that provide us with allograft bone tissue are responsible for performing donor recovery, donor screening and donor testing and our compliance with those aspects of the CGTP regulations that regulate those functions are dependent upon the actions of these independent entities.
The FDA and other state and regional agencies periodically inspect tissue processors to determine compliance with these requirements. Entities that provide us with allograft bone tissue are responsible for performing donor recovery, donor screening and donor testing and our compliance with those aspects of the CGTP regulations that regulate those functions are dependent upon the actions of these independent entities.
Our implant sales representatives are present in the operating room during most surgeries in the United States and in many, but not all, of the other countries in which our products are sold.
Our implant sales representatives are present in the operating room during most surgeries in the U.S. and in many, but not all, of the other countries in which our products are sold.
Globus is an engineering-driven company with a history of rapidly developing and commercializing advanced products and procedures to address treatment challenges. With over 230 product launches across 54 countries worldwide, we offer a comprehensive portfolio of innovative and differentiated technologies that are used to treat a variety of musculoskeletal conditions.
Globus is an engineering-driven company with a history of rapidly developing and commercializing advanced products and procedures to address treatment challenges. With over 10 product launches in 2023 and operations across 64 countries worldwide, we offer a comprehensive portfolio of innovative and differentiated technologies that are used to treat a variety of musculoskeletal conditions.
Failure to comply with applicable regulatory requirements can result in enforcement action by the FDA, which may include any of the following sanctions: untitled letters or warning letters; fines, injunctions and civil penalties; recall or seizure of our products; operating restrictions, partial suspension or total shutdown of production; refusing our request for 510(k) or de novo clearance or PMA of new products; withdrawing 510(k) clearance or PMAs that are already granted; refusal to grant export approval of our products; and criminal prosecution.
Failure to comply with applicable regulatory requirements can result in enforcement action by the FDA, which may include any of the following sanctions: untitled letters or formal warning letters; fines, injunctions and civil penalties; recall or seizure of our products; 13 Table of Contents operating restrictions, partial suspension or total shutdown of production; refusing our request for review of 510(k), de novo, or PMA of new products; withdrawal of 510(k) clearance(s), de novo grant(s), or PMA approval(s) that are already issued; refusal to grant export approval of our products; and criminal prosecution.
Our talent related initiatives, including employee recruitment and development, diversity and inclusion and compensation and benefit programs, are focused on building and retaining the world-class and talented staff that is needed to meet our goals. As of December 31, 2022, we had over 2,600 employees, including sales and marketing, product development, general administrative and accounting, both domestically and internationally.
Our talent-related initiatives, including employee recruitment and development, compensation and benefit programs, are focused on building and retaining the world-class and talented staff that is needed to meet our goals. As of December 31, 2023, we had over 5,000 employees worldwide , including sales and marketing, product development, general administrative and accounting, both domestically and internationally.
Accordingly, we have made significant investments in our product development and research capabilities. Sales and Marketing We market and sell our products primarily through our exclusive global sales force. As of December 31, 2022, we had a direct or distributor sales presence in the United States and in 53 other countries.
Accordingly, we have made significant investments in our product development and research capabilities. Sales and Marketing We market and sell our products primarily through our exclusive global sales force. As of December 31, 2023, we had a direct or distributor sales presence in the U.S. and in 64 other countries.
We responded to the FDA’s warning letter on November 20, 2018, provided periodic updates to FDA on our progress, and notified FDA of actions completed to resolve the observations. As of December 31, 2022, this warning letter remains open.
We responded to the FDA’s warning letter on November 20, 2018, provided periodic updates to the FDA on our progress, and notified the FDA of actions completed to resolve the observations. As of December 31, 2023, this warning letter has been resolved.
We believe there is significant opportunity for us to further penetrate existing markets, and to enter new markets, by increasing the size and geographic scope of our exclusive U.S. sales force for musculoskeletal solutions.
We believe there is significant opportunity for us to further penetrate existing markets, and to enter new markets, by increasing the size and geographic scope of our exclusive U.S. sales force for Musculoskeletal Solutions. Through the Merger with NuVasive, we have significantly grown our global sales force.
Some low risk devices are exempt from this requirement. Devices deemed by the FDA to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices, and devices deemed not substantially equivalent to a previously cleared 510(k) devices are placed in Class III, which typically requires approval of a PMA application.
Devices deemed by the FDA to pose the greatest risk to patients, such as life-sustaining, life-supporting or implantable devices, and devices deemed not substantially equivalent to a previously cleared 510(k) devices are designated as Class III, which typically requires approval of a PMA application.
We are subject to unannounced device inspections by the FDA’s Office of Regulatory Affairs, Office of Compliance, Center for Devices and Radiological Health, and Center for Biologics Evaluation and Research, as well as other regulatory agencies overseeing the implementation and adherence of applicable state and federal tissue licensing regulations. These inspections may include our suppliers’ facilities.
We are subject to both announced and unannounced inspections (device and tissue) by the FDA’s Office of Regulatory Affairs, Office of Compliance, Center for Devices and Radiological Health, Center for Biologics Evaluation and Research, and American Association of Tissue Banks, as well as other regulatory agencies overseeing the implementation and adherence of applicable state and federal tissue licensing regulations.
Since 2003 we have introduced over 230 products designed for the treatment of musculoskeletal disorders. Given our robust product portfolio of unique and differentiated products, as well as the numerous disruptive products in various stages of development, we believe we are well positioned for growth in the musculoskeletal markets we operate in.
Given our robust product portfolio of unique and differentiated products, as well as the numerous disruptive products in various stages of development, we believe we are well positioned for growth in the musculoskeletal markets we operate in.
On October 31, 2018, we received a warning letter from the FDA resulting from an inspection of the facilities of our subsidiary Human Biologics of Texas, located in San Antonio, Texas, in April 2018.
These inspections may include our manufacturing, suppliers’ and sub-contractors’ facilities. On October 31, 2018, we received a warning letter from the FDA resulting from an inspection of the facilities of our subsidiary Human Biologics of Texas, located in San Antonio, Texas, in April 2018.
There can be no assurance that third-party coverage and reimbursement will be available or adequate, or that future legislation, regulation, coding or coverage and reimbursement policies of third-party payors will not adversely affect the demand for our products or our ability to sell these products on a profitable basis. 8 Table of Contents Government Regulation Our business is subject to extensive federal, state, local and foreign regulations.
There can be no assurance that third-party coverage and reimbursement will be available or adequate, or that future legislation, regulation, coding or coverage and reimbursement policies of third-party payors will not adversely affect the demand for our products or our ability to sell these products on a profitable basis.
However, it is possible that governmental entities or other third parties, including Relators (whistleblowers) who can file complaints on behalf of the government and on their own behalf under the federal civil False Claims Act (“FCA”), could interpret these laws differently and assert otherwise. We discuss below the statutes and regulations that are most relevant to our business. U.S.
However, it is possible that governmental entities or other third parties, including Relators (whistleblowers) who can file complaints on behalf of the government and on their own behalf under the federal False Claims Act (“FCA”), could interpret these laws and our efforts to comply with them differently and assert otherwise.
Relators are incentivized to pursue claims against manufacturers and providers by the potential to share in any monetary recoveries by the government in litigation or as part of a settlement, which can be significant. Pursuant to FDA regulations, we can only market our products for cleared or approved uses.
Relators are incentivized to pursue claims against manufacturers and providers by the potential to share in any monetary recoveries by the government in litigation or as part of a settlement, which can be significant.
This includes traditional fusion implants such as pedicle screw and rod systems, plating systems, intervertebral spacers and corpectomy devices. We believe we pioneered innovative expandable solutions for interbody fusion, corpectomy and interspinous fixation that allow intraoperative customization of our devices to the patient’s anatomy, eliminating sequential trialing and potentially saving surgical time.
We believe we pioneered innovative expandable solutions for interbody fusion, corpectomy and interspinous fixation that allow intraoperative customization of our devices to the patient’s anatomy, eliminating sequential trialing and potentially saving surgical time.
We expect to increase the number of our direct and distributor sales representatives in the U.S., to expand into new geographic territories and to deepen our penetration in existing territories. We will also continue to provide our sales representatives with specialized development programs designed to improve their productivity. Continue to expand into international markets .
We expect to continue to increase the number of our direct and distributor sales representatives in the U.S., to expand into new geographic territories and to deepen our penetration in existing territories.
Our relationship with our suppliers enables significant interaction between our design engineers and project managers and the suppliers’ engineers and schedulers to work through issues arising during the entire product development cycle.
We have focused on developing a strong supplier base as part of our manufacturing strategy. Our relationship with our suppliers enables significant interaction between our design engineers and project managers and the suppliers’ engineers and schedulers to work through issues arising during the entire product development cycle.
As of December 31, 2022, we had an existing direct or distributor sales presence in 53 countries outside the United States. We expect to continue to increase our international presence through the commercialization of additional musculoskeletal solutions products in current markets and through the expansion of our international sales force in current and new markets. Pursue strategic acquisitions .
We expect to continue to increase our international presence through the commercialization of additional Musculoskeletal Solutions products in current markets and through the expansion of our international sales force in current and new markets. Pursue strategic acquisitions .
State anti-kickback laws have similar prohibitions. In addition, federal false claims laws prohibit any person from knowingly presenting, or causing to be presented, a false or fraudulent claim for payment to the federal government, or knowingly making, or causing to be made, a false statement to get a false claim paid.
Federal false claims laws prohibit any person from knowingly presenting, or causing to be presented, a false or fraudulent claim for payment to the federal government; knowingly making, or causing to be made, a false statement to get a false claim paid; or knowingly avoiding, decreasing or concealing an obligation to pay money to the federal government.
We are subject to unannounced device inspections by the Notified Body (an organization accredited by a Member State of the EEA to conduct conformity assessments), as well as other regulatory agencies overseeing the implementation and adherence of applicable regulations. These inspections may include our suppliers’ facilities.
These data protection regulations create a range of compliance obligations and authorize substantial fines for non-compliance. We are subject to announced and unannounced device inspections by Notified Bodies (an organization accredited by a Member State of the EEA to conduct conformity assessments), as well as other regulatory agencies overseeing the implementation and adherence of applicable regulations.
Over 13 different implants have been marketed to date, including modular hip stems and acetabular cups for total hip arthroplasty as well as posterior stabilizing and cruciate retaining knee arthroplasty implants. 5 Table of Contents Enabling Technologies Our Enabling Technologies are comprised of imaging, navigation and robotics (“INR”) solutions for assisted surgery which are advanced computer-assisted intelligent systems designed to enhance a surgeon’s capabilities, and ultimately improve patient care and reduce radiation exposure for all involved, by streamlining surgical procedures to be safer, less invasive, and more accurate.
Enabling Technologies Our Enabling Technologies are comprised of imaging, navigation and robotics (“INR”) solutions for assisted surgery which are advanced computer-assisted intelligent systems designed to enhance a surgeon’s capabilities, and ultimately improve patient care and reduce radiation exposure for all involved, by streamlining surgical procedures to be safer, less invasive, and more accurate.
Violations of the federal Anti-Kickback Statute and off-label promotion have been pursued by the Department of Justice (“DOJ”) and the Department of Health and Human Services (“HHS”) as violations of the civil False Claims Act (“FCA”). Lawsuits under the FCA often are initiated by Relators on behalf of the government.
Violations of the federal Anti-Kickback Statute and off-label promotion have been pursued by the Department of Justice (“DOJ”) and the Department of Health and Human Services (“HHS”) as violations of the federal civil False Claims Act (“FCA”). Intent to deceive is not required to establish liability under the civil False Claims Act.
Compliance with these requirements entitles us to affix the CE conformity mark to our medical devices, without which they cannot be commercialized in the EEA.
In the EEA, our devices are required to comply with the essential requirements of the EU Medical Device Directive (Council Directive 93/42/EEC) (“MDD”). Compliance with these requirements entitles us to affix the CE conformity mark to our medical devices, without which medical devices cannot be commercialized in the EEA.
We believe that the overall escalating cost of medical products and services has led to, and will continue to lead to, increased pressures on the healthcare industry to reduce the costs of products and services.
The percentage of individuals covered by managed care programs is expected to grow in the U.S. over the next decade. We believe that the overall escalating cost of medical products and services has led to, and will continue to lead to, increased pressures on the healthcare industry to reduce the costs of products and services.
During the fourth quarter of 2021, the Company acquired Capstone Surgical 4 Table of Contents Technologies, LLC. (“Capstone”), a privately held company that engages in the business of creating advanced drill and robotic surgery platforms.
During the fourth quarter of 2021, the Company acquired Capstone Surgical Technologies, LLC., a company that engages in the business of creating advanced drill and robotic surgery platforms. During the fourth quarter of 2022, the Company acquired the membership interests of Harvest Biologics LLC, which engages in the business of selling systems that produce autologous biologics.
We are subject to the filing requirements of the Exchange Act. Therefore, we file annual reports, periodic reports, proxy statements and other information with the SEC. The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically.
The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically.
Most devices that are CE marked under the MDD may continue to be marketed in the EU under certain conditions until May 2027, at which point these products 10 Table of Contents must comply with the new regulation.
Most devices that are CE-marked under the MDD may continue to be marketed in the EU under certain conditions until December 2027 for Class III and IIb devices; 2028 for Class II and class I devices which require involvement of a Notified Body in the conformity assessment, at which time these products must comply with the new regulation.
For novel Class III devices that were not previously formally classified by the FDA and that present low to moderate risk, a risk-based classification determination can be requested in accordance with the de novo request process, under which the FDA may determine that the product can be appropriately regulated as a Class I or II device. 510(k) pre-market notifications, de novo requests, and PMAs are subject to the payment of user fees, paid at the time of submission for FDA review.
For novel/unclassified devices not previously formally classified by the FDA with no legally marketed predicate which present low to moderate risk, a risk-based classification determination can be requested in accordance with the de novo classification request process, under which the FDA may determine that the product can be appropriately regulated as a Class I or II device and “granted” authorization for commercialization within the U.S.
Following the expiration of the transitional provisions of the MDD relating to the CE mark (extended to May 2027), all medical device companies manufacturing and/or marketing products in the EEA, including Globus, will be required to comply with requirements of the Medical Devices Regulation EU 2017/745 (“MDR”), which are generally stricter and include increasing technical documentation requirements and altering the classification of some products.
Following the expiration of the transitional provisions of the MDD relating to the CE mark (extended to December 2027), all medical device companies intending to manufacture and/or market products in the EEA after May 2024, including Globus Medical, NuVasive and NuVasive Specialized Orthopedics), will be required to comply with requirements of the MDR EU 2017/745, which increased technical documentation requirements, imparted more labeling obligations of higher risk devices, and altered the classification of some of our products.
FDA Enforcement The FDA enforces these requirements by inspection and market surveillance.
FDA Enforcement The FDA enforces these requirements (for both medical device and human tissue products) by inspection and routine market surveillance.
We believe our team-oriented and highly integrated development approach, active surgeon input, and demonstrated performance position us to maintain a rapid rate of new product launches.
We believe our team-oriented and highly integrated development approach, active surgeon input, and demonstrated performance position us to maintain a rapid rate of new product launches. We launched 10 new products in 2023, in addition to assuming NuVasive’s portfolio of products, which include the X360 portfolio, the C360 portfolio featuring the Simplify Cervical Disc, and the P360 portfolio.
Section 361 HCT/Ps do not require 510(k) clearance, PMA approval, or other premarket approvals from the FDA before marketing. Tissue banks that handle HCT/Ps must register their establishments with the FDA, list their HCT/P products with the FDA, and comply with FDA donor eligibility and screening requirements, current Good Tissue Practice (“CGTP”), product labeling, and post-market reporting requirements for HCT/Ps.
Tissue banks that handle HCT/Ps must register their establishments with the FDA, list their HCT/P products with the FDA, and comply with FDA donor eligibility and screening requirements, current Good Tissue Practice (“CGTP”), Cellular- and Tissue-Based Product Establishments , product labeling, and postmarket reporting requirements for HCT/Ps.
Of our implant and instrument products that are not manufactured in-house, a majority are generally manufactured through a network of third-party suppliers. Our suppliers use high precision, computer-aided manufacturing equipment to manufacture our products. We have focused on developing a strong supplier base as part of our manufacturing strategy.
The ExcelsiusGPS ® robotic guidance and navigation system and Excelsius3D™ imaging system are assembled in our facility in Methuen, Massachusetts. Of our implant and instrument products that are not manufactured in-house, a majority are generally manufactured through a network of third-party suppliers. Our suppliers use high precision, computer-aided manufacturing equipment to manufacture our products.
When conservative therapies are not indicated, or fail to provide adequate quality of life improvements, surgical interventions may be used. Surgical treatments for musculoskeletal disorders can be instrumented, which include the use of implants, or non-instrumented, which forego the use of hardware but may include biologics.
When conservative therapies are not indicated, or fail to provide adequate quality of life improvements, surgical interventions may be used.
Food and Drug Administration Regulation Our products are medical devices and human tissue products subject to extensive regulation by the FDA and other federal, state, local and foreign regulatory bodies.
Government Regulation Our business is subject to extensive federal, state, local and foreign laws and regulations. These laws and regulations and their interpretations are subject to change. Our products are medical devices and human tissue products subject to extensive regulation by the FDA and other regulatory bodies both inside and outside of the U.S.
Some state Medicaid programs may not reimburse an adequate amount for the procedures performed with our products, if any payment is made at all. In addition, state-level worker’s compensation coverage and reimbursement vary from state to state. Payment by Medicare and other third-party payors may not be adequate to cover the cost of medical devices used in musculoskeletal procedures.
Third-party payors are increasingly challenging the prices charged for a wide range of medical products and services. For federal/state programs, such as Medicaid, coverage and reimbursement differ from state to state. Some state Medicaid programs may not reimburse an adequate amount for the procedures performed with our products, if any payment is made at all.
We will continue to provide the appropriate and compliant resources to patients, physicians, hospitals, and insurers in order to promote the best patient care, provide clarity regarding coverage and reimbursement policies, and work to reverse any non-coverage policies. For federal/state programs, such as Medicaid, coverage and reimbursement differ from state to state.
We will continue to provide the appropriate and compliant resources to patients, physicians, hospitals, and insurers in order to promote the best patient care, provide clarity regarding coverage and reimbursement policies, and work to reverse any non-coverage policies. However, certain third party payors, large and small, may have policies significantly limiting coverage of, products or services that we offer.
Additionally, in the EEA the procurement, testing, processing, preservation, storage and distribution of human tissues and cells is subject to the requirements of the laws of individual EEA Member States implementing Directive 2004/23/EC, Directive 2006/17/EC and Directive 2006/86/EC.
MDD compliant products intended to be placed on the market after May 2024 must meet certain conditions and be under contract with an MDR accredited Notified Body and in compliance with Transitional Provisions. 14 Table of Contents Additionally, in the EEA the procurement, testing, processing, preservation, storage and distribution of human tissues and cells is subject to the requirements of the laws of individual EEA Member States implementing Directive 2004/23/EC, Directive 2006/17/EC and Directive 2006/86/EC.
Our issued patents expired or will expire between March 2015 and December 2042. Our trademark portfolio contains 304 registered trademarks and 122 pending trademarks. Our portfolio includes domestic and foreign trademarks with associated logos and tag lines.
Our trademark portfolio contains 732 registered trademarks and 196 pending trademarks. Our portfolio includes domestic and foreign trademarks with associated logos and tag lines.
We compete in the marketplace to recruit and retain qualified scientific, management, and sales personnel, as well as in acquiring technologies and technology licenses complementary to our products or advantageous to our business. Manufacturing and Supply We have greatly expanded our dedicated in-house manufacturing capabilities.
They may also develop and patent processes or products earlier than we can, or obtain regulatory clearance or approvals for competing products more rapidly than we can. We compete in the marketplace to recruit and retain qualified scientific, management, and sales personnel, as well as in acquiring technologies and technology licenses complementary to our products or advantageous to our business.
At any time, these or other market participants may develop alternative treatments, products or procedures for the treatment of musculoskeletal disorders that compete directly or indirectly with our products. They may also develop and patent processes or products earlier than we can, or obtain regulatory clearance or approvals for competing products more rapidly than we can.
Alphatec Holdings, Orthofix, Integra LifeSciences , ZimVie and other smaller public and private companies are also competitors of ours. At any time, these or other market participants may develop alternative treatments, products or procedures for the treatment of musculoskeletal disorders that compete directly or indirectly with our products.
All of our suppliers that provide us with implants are ISO-13485 certified, meaning they meet the International Organization for Standardization (“ISO”) requirements for the manufacture of medical devices. Our quality assurance group conducts periodic audits to ensure continued compliance with our standards.
Supplier performance is maintained and managed through a supplier qualification, performance management and corrective action program intended to ensure that all of our product requirements are met or exceeded. All of our suppliers that provide us with implants are ISO-13485 certified, meaning they meet the International Organization for Standardization (“ISO”) requirements for the manufacture of medical devices.
Many other countries, such as Australia, India, New Zealand, Pakistan and Sri Lanka, accept CE or FDA clearance or approval. Other countries, such as Brazil, Canada and Japan, require separate regulatory filings. In the EEA, our devices are required to comply with the essential requirements of the EU Medical Device Directive (Council Directive 93/42/EEC) (“MDD”).
The EU/European Economic Area (“EEA”) requires a CE mark in order to place medical devices “in market”. Many other countries, such as Australia, India, New Zealand, Pakistan and Sri Lanka, accept CE or FDA authorizations (clearance, approval or grant). Other countries, such as Brazil, Canada, Switzerland and Japan, require separate region-specific regulatory filings.
Our principal executive offices are located at 2560 General Armistead Avenue, Audubon, Pennsylvania 19403, and our telephone number at that location is (610) 930-1800. Our corporate website address is http://www.globusmedical.com . The information contained in or accessible through our website or contained on other websites is not deemed to be part of this Annual Report on Form 10-K.
Our corporate website address is http://www.globusmedical.com . The information contained in or accessible through our website or contained on other websites is not deemed to be part of this Annual Report on Form 10-K. We are subject to the filing requirements of the Exchange Act. Therefore, we file annual reports, periodic reports, proxy statements and other information with the SEC.
The time required to obtain approval by a foreign country may be longer or shorter than that required for FDA clearance or approval, and the requirements may differ. The European Union/European Economic Area (“EEA”) requires a CE mark in order to market medical devices.
In order to market our products in other countries, we must obtain regulatory approvals and comply with extensive country-specific device safety and quality regulations. The time required to obtain approval by a foreign country may be longer or shorter than that required for FDA clearance, approval or grant, and the requirements may differ.
Our employees are not subject to a collective bargaining agreement except in a single market outside the U.S., and we consider our relationship with our employees to be good. Information We were incorporated in Delaware in March 2003.
Our employees are not subject to a collective bargaining agreement except in a single market outside the U.S., and we consider our relationship with our employees to be good. 17 Table of Contents Compensation and Benefits We offer competitive benefit packages, supporting our employees as they help create a leading, global musculoskeletal technology company.
Both federal and state governmental agencies continue to subject the healthcare industry to intense regulatory scrutiny, including heightened civil and criminal enforcement efforts. We believe that we have structured our business operations and relationships with our customers to comply with all applicable legal requirements.
We believe that we have structured our business operations and relationships with our customers to comply with all applicable legal requirements.
Additionally, more musculoskeletal procedures are being performed in the hospital outpatient and ASC settings, in part due to innovation. Reimbursement levels in the hospital outpatient and ASC settings are typically lower than for the hospital inpatient setting and may not be adequate to cover the cost of innovative and novel medical devices.
In addition, state-level workers’ compensation coverage and reimbursement vary from state to state. Payment by Medicare and other third-party payors may not be adequate to cover the cost of medical devices used in musculoskeletal procedures. Additionally, more musculoskeletal procedures are being performed in the hospital outpatient and ambulatory surgery center settings, in part due to innovation.
FDA’s Pre-Market Clearance and Approval Requirements for Medical Devices Unless an exemption applies, each medical device we wish to commercially distribute in the United States requires either 510(k) clearance, pre-market approval (“PMA”), or grant of a de novo classification request from the FDA. The FDA classifies medical devices into one of three classes.
FDA Premarket Clearance and Approval Requirements for Medical Devices Unless an exemption applies (as is usually the case with instruments not intended for implantation), each medical device we wish to introduce within interstate commerce in the U.S. requires pre-authorization by the FDA either via 510(k) clearance, premarket approval (“PMA”), grant of a de novo classification request grant or, in less frequent occasions, via Humanitarian Device Exemption (“HDE”) approval.
The FDA can also impose restrictions on the sale, distribution or use of devices at the time of their clearance or approval, or subsequent to marketing. Human Cell, Tissue and Cellular and Tissue Based Products We currently distribute a number of products processed from human tissue, some of which are manufactured by third-party suppliers.
The FDA can also impose restrictions on the sale, distribution or use of devices at the time of their clearance, approval or grant, or subsequent to marketing.
Although we manage our business globally within one operating segment, we separate our products into two major categories: Musculoskeletal Solutions and Enabling Technologies.
Although we manage our business globally within one reportable segment, we separate our products and services into two major categories: Musculoskeletal Solutions and Enabling Technologies. NuVasive Merger On September 1, 2023, pursuant to that certain merger agreement (the “Merger Agreement”) with NuVasive, Inc. (“NuVasive”) and Zebra Merger Sub Inc.
We regularly evaluate possible acquisitions and strategic relationships and believe that our resources and experience make us an attractive acquirer or partner. The Globus Solution We believe that our focus on actively listening and responding to the needs of our customers with high quality solutions separates us from our industry peers.
The Globus Solution We believe that our focus on actively listening and responding to the needs of our customers with high quality solutions separates us from our industry peers. Since 2003 we have introduced many products, including 10 products in 2023, designed for the treatment of musculoskeletal disorders.
With every shipment of inventory that we receive, our suppliers provide a certificate of compliance with our quality control standards. Our receiving group also performs inspections, packaging and labeling on site at our headquarters facility. We work closely with our suppliers to ensure that our inventory needs are met while maintaining high quality and reliability.
Under our existing contracts with third-party manufacturers, we reserve the right to inspect and assure conformance of each product and product component to our specifications. With every shipment of inventory that we receive, our suppliers provide a certificate of compliance with our quality control standards. Our receiving group also performs inspections, packaging and labeling at one of our facilities.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisks Related to our Financial Results and Need for Financing We will need to generate significant sales to remain profitable We may be unable to grow our revenue or earnings as anticipated, which may have a material adverse effect on our results of operations. Our quarterly and annual operating results may fluctuate significantly.
Biggest changeRisks Related to our Financial Results and Need for Financing We will need to generate significant sales to remain profitable We may be unable to grow our revenue or earnings as anticipated, which may have a material adverse effect on our results of operations. Our quarterly and annual operating results may fluctuate significantly. We have a significant amount of outstanding indebtedness, and our financial condition and results of operations could be adversely affected if we do not effectively manage our liabilities. The availability of funding under existing credit arrangements may be limited, and our cash and cash equivalents are subject to volatility. Our future capital needs are uncertain and we may need to raise funds in the future, and such funds may not be available on acceptable terms or at all. Our existing revolving credit facility contains restrictive covenants that may limit our operating flexibility.
Risks Related to the Ownership of our Class A Common Stock Because of their significant stock ownership, our executive officers, and our directors and principal stockholders will be able to exert control over us and our significant corporate decisions. We are a “controlled company” within the meaning of the New York Stock Exchange Rules. Our Board is authorized to issue and designate shares of our preferred stock in additional series without stockholder approval. Anti-takeover provisions in our organizational documents and Delaware law may discourage or prevent a change of control. 14 Table of Contents General Risk Factors If we do not successfully implement our business strategy, our business and results of operations will be adversely affected If we fail to properly manage our anticipated growth, our business could suffer. Fluctuations in insurance cost and availability could adversely affect our profitability or our risk management profile. We are exposed to the credit risk of some of our customers, which could result in material losses. The widespread outbreak of a communicable disease, or any other public health crisis, could adversely affect our financial condition and results of operations.
Risks Related to the Ownership of our Class A Common Stock Because of their significant stock ownership, our executive officers, and our directors and principal stockholders will be able to exert control over us and our significant corporate decisions. We are a “controlled company” within the meaning of the New York Stock Exchange Rules. Our Board is authorized to issue and designate shares of our preferred stock in additional series without stockholder approval. Anti-takeover provisions in our organizational documents and Delaware law may discourage or prevent a change of control. 21 Table of Contents General Risk Factors If we do not successfully implement our business strategy, our business and results of operations will be adversely affected If we fail to properly manage our anticipated growth, our business could suffer. Fluctuations in insurance cost and availability could adversely affect our profitability or our risk management profile. We are exposed to the credit risk of some of our customers, which could result in material losses. The widespread outbreak of a communicable disease, or any other public health crisis, could adversely affect our financial condition and results of operations.
The FDA could disagree with our determination that our human tissue products are Section 361 HCT/Ps and could determine that these products are biologics requiring a biological license application approval or medical devices requiring 510(k) or de novo clearance or PMA approval, or New Drug Application (“NDA”) approval.
The FDA could disagree with our determination that our human tissue products are Section 361 HCT/Ps and could determine that these products are biologics requiring a biological license application approval or medical devices requiring 510(k) or de novo clearance or PMA approval, or New Drug Application approval.
We and our distributor sales representatives might be subject to claims for failing to comply with U.S. federal, state, local and foreign fraud and abuse laws, including anti-kickback laws and other anti-referral laws. There are numerous U.S. federal and state laws pertaining to healthcare fraud and abuse, including anti-kickback laws and physician self-referral laws.
We and our distributor sales representatives might be subject to claims for failing to comply with U.S. federal, state, local and foreign fraud and abuse laws, including anti-kickback laws and other anti-referral laws. There are numerous U.S. federal and state laws pertaining to healthcare fraud and abuse, including anti-kickback laws. False claims laws and physician self-referral laws.
Risks Related to our International Operations We may fail to obtain or maintain foreign regulatory approvals to market our products in other countries. We are subject to risks associated with our non-U.S. operations. Our results of operations could suffer if we are unable to manage our planned international expansion effectively. We are subject to risks arising from currency exchange rate fluctuations on our international transactions and translation of local currency results into United States dollars, which could adversely affect our profitability.
Risks Related to our International Operations We may fail to obtain or maintain foreign regulatory approvals to market our products in other countries. We are subject to risks associated with our non-U.S. operations. Our results of operations could suffer if we are unable to manage our planned international expansion effectively. We are subject to risks arising from currency exchange rate fluctuations on our international transactions and translation of local currency results into U.S. dollars, which could adversely affect our profitability.
In addition to the sanctions described above, any state or federal regulatory review or FCA lawsuit, regardless of the outcome, would be costly and time-consuming and could have a material adverse effect on our business, financial condition and results of operations. 27 Table of Contents Risks Related to our International Operations We may fail to obtain or maintain foreign regulatory approvals to market our products in other countries.
In addition to the sanctions described above, any state or federal regulatory review or FCA lawsuit, regardless of the outcome, would be costly and time-consuming and could have a material adverse effect on our business, financial condition and results of operations. 35 Table of Contents Risks Related to our International Operations We may fail to obtain or maintain foreign regulatory approvals to market our products in other countries.
Additionally, if an investigation were initiated involving us and we decided to settle that investigation with the DOJ or other law enforcement agencies, we may be forced to agree to additional onerous and expensive compliance and reporting requirements for a period of years as part of a consent decree or corporate integrity agreement.
Additionally, if an investigation were initiated involving us and we decided to settle that investigation with the DOJ or other law enforcement agencies, we may be forced to agree to additional onerous and expensive compliance and reporting requirements for a period of years as part of a consent decree, requirement for a corporate monitor or corporate integrity agreement.
Though members of our sales force generally enter into noncompetition agreements that restrict their ability to compete with us, most of the members of our executive management team are not subject to such agreements. Accordingly, the adverse effect resulting from the loss of certain executives could be compounded by our inability to prevent them from competing with us.
Though members of our sales force generally enter into non-compete agreements that restrict their ability to compete with us, most of the members of our executive management team are not subject to such agreements. Accordingly, the adverse effect resulting from the loss of certain executives could be compounded by our inability to prevent them from competing with us.
In addition, if the FDA disagrees with our determination that a product we currently market is subject to an exemption from pre-market review, the FDA may require us to submit a 510(k), de novo , or PMA and may require us to cease distribution of the product and/or recall the product unless and until we obtain 510(k) or de novo clearance or PMA.
In addition, if the FDA disagrees with our determination that a product we currently market is subject to an exemption from premarket review, the FDA may require us to submit a 510(k), de novo , or PMA and may require us to cease distribution of the product and/or recall the product unless and until we obtain 510(k) or de novo clearance or PMA.
The sale and shipment of our products across international borders, as well as the purchase of components and products from international sources, subject us to 28 Table of Contents extensive U.S. and foreign governmental trade, import and export and customs regulations and laws. Compliance with these regulations and laws is costly and exposes us to penalties for non-compliance.
The sale and shipment of our products across international borders, as well as the purchase of components and products from international sources, subject us to extensive U.S. and foreign governmental trade, import and export and customs regulations and laws. Compliance with these regulations 36 Table of Contents and laws is costly and exposes us to penalties for non-compliance.
In that event, our reputation could be damaged and adoption of the products would be impaired. Although our policy is to refrain from statements that could be considered off-label promotion of our products, the FDA, or another regulatory agency or a Relator under the FCA could disagree and conclude that we have engaged in off-label promotion.
In that event, our reputation could be damaged and adoption of the products would be impaired. Although our policy is to refrain from statements that could be considered off-label promotion of our products, the FDA, or another regulatory agency or a Relator under the FCA could disagree and allege that we have engaged in off-label promotion.
Due to differences between foreign and U.S. patent laws, our patented intellectual property rights may not receive the same degree of protection in foreign countries as they would in the United States. Even if patents are granted outside the United States, effective enforcement in those countries may not be available.
Due to differences between foreign and U.S. patent laws, our patented intellectual property rights may not receive the same degree of protection in foreign countries as they would in the U.S. Even if patents are granted outside the U.S. , effective enforcement in those countries may not be available.
The FDA can delay, limit or deny clearance or approval of a device for many reasons, including: we may not be able to demonstrate to the FDA’s satisfaction that our products are safe and effective for their intended uses; 22 Table of Contents the data from our pre-clinical studies and clinical trials may be insufficient to support clearance or approval, where required; and the manufacturing process or facilities we use may not meet applicable requirements.
The FDA can delay, limit or deny clearance or approval of a device for many reasons, including: we may not be able to demonstrate to the FDA’s satisfaction that our products are safe and effective for their intended uses; the data from our pre-clinical studies and clinical trials may be insufficient to support clearance or approval, where required; and the manufacturing process or facilities we use may not meet applicable requirements.
Risks Related to Our Business and Our Industry To be commercially successful, we must convince surgeons and hospitals that our products are an attractive alternative to our competitors’ products and to existing surgical treatments of musculoskeletal disorders. Pricing pressure from our competitors and our customers may impact our ability to sell our products profitably. If our customers are unable to obtain adequate coverage and reimbursement for their purchases of our products, we may not be able to sell them profitably. If we are unable to maintain and expand our network of direct sales representatives and independent distributors, we may not be able to generate anticipated sales. Our sales and operating results may be negatively affected and we may not grow if we are unable to compete successfully. We are dependent on a limited number of third-party suppliers, and the loss of any of these suppliers, or their inability to provide us with an adequate supply of products or materials in a timely manner could harm our business. The proliferation of physician-owned distributorships (“PODs”) could result in increased pricing pressure on our products or harm our ability to sell our products to physicians. Our business could suffer if we lose the services of key members of our senior management, advisors or personnel. The safety and efficacy of our products is not yet supported by long-term clinical data. If we do not enhance our product offerings and introduce new products, we may be unable to effectively compete. We are subject to risks arising from our acquisitions of or investments in new or complementary businesses, products or technologies. We are required to maintain high levels of inventory, which may be costly. We rely on information technology systems and network infrastructure to operate and manage our business, which may be subject to a breach, cyber-attack or other disruption. We are subject to data privacy laws and our failure to comply with them could subject us to substantial liabilities. If we experience significant disruptions in our information technology systems, our business, results of operations and financial condition could be adversely affected. Consolidation in the healthcare industry could lead to demands for price concessions or to the exclusion of some suppliers from certain of our markets, which could have an adverse effect on our business. If our Enabling Technologies products require significant amounts of service after sale or we receive a significant number of warranty claims, our costs may increase. We experience long and variable capital sales cycles for our Enabling Technologies products. 13 Table of Contents Risks Related to our Legal and Regulatory Environment Our medical device products and operations are subject to extensive governmental regulation both in the United States and abroad. Modifications to our products may require new 510(k) or de novo clearances, PMAs or PMA supplements. Our HCT/P products are subject to extensive government regulation. We and our suppliers are subject to the FDA’s good manufacturing practice regulations and similar international regulations. We may be subject to a recall of our products or the discovery of serious safety issues with our products. We may be subject to enforcement action if we engage in the off-label promotion of our products. Governmental regulation and limited sources and suppliers could restrict our procurement and use of tissue. Negative publicity concerning methods of tissue recovery and screening of donor tissue could reduce demand for our regenerative biologics products and impact the supply of available donor tissue. We are subject to environmental laws and regulations that can impose significant costs and expose us to potential financial liabilities. We or our suppliers may be the subject of claims for non-compliance with FDA regulations in connection with the processing, manufacturing or distribution of regenerative biologics implants and products. We and our distributor sales representatives might be subject to claims for failing to comply with U.S. federal, state, local and foreign fraud and abuse laws.
Risks Related to Our Business and Our Industry To be commercially successful, we must convince surgeons and hospitals that our products are an attractive alternative to our competitors’ products and to existing surgical treatments of musculoskeletal disorders. Pricing pressure from our competitors and our customers may impact our ability to sell our products profitably. If our customers are unable to obtain adequate coverage and reimbursement for their purchases of our products, we may not be able to sell them profitably. If we are unable to maintain and expand our network of direct sales representatives and independent distributors, we may not be able to generate anticipated sales. Our sales and operating results may be negatively affected and we may not grow if we are unable to compete successfully. We are dependent on a limited number of third-party suppliers, and the loss of any of these suppliers, or their inability to provide us with an adequate supply of products or materials in a timely manner could harm our business. The proliferation of physician-owned distributorships (“PODs”) could result in increased pricing pressure on our products or harm our ability to sell our products to physicians. Our business could suffer if we lose the services of key members of our senior management, advisors or personnel. The safety and efficacy of our products is not yet supported by long-term clinical data. If we do not enhance our product offerings and introduce new products, we may be unable to effectively compete. We are subject to risks arising from our acquisitions of or investments in new or complementary businesses, products or technologies. We are required to maintain high levels of inventory, which may be costly. We rely on information technology systems and network infrastructure to operate and manage our business, which may be subject to a breach, cyber-attack or other disruption. We are subject to data privacy laws and our failure to comply with them could subject us to substantial liabilities. If we experience significant disruptions in our information technology systems, our business, results of operations and financial condition could be adversely affected. Consolidation in the healthcare industry could lead to demands for price concessions or to the exclusion of some suppliers from certain of our markets, which could have an adverse effect on our business. If our Enabling Technologies products require significant amounts of service after sale or we receive a significant number of warranty claims, our costs may increase. We experience long and variable capital sales cycles for our Enabling Technologies products. Certain contractual counterparties may seek to modify contractual relationships with the Company, which could have an adverse effect on the Company’s business and operations. The Company may be exposed to increased litigation, which could have an adverse effect on the Company’s business and operations . Our IONM business exposes us to risks inherent with the sale of services. 20 Table of Contents Risks Related to our Legal and Regulatory Environment Our medical device products and operations are subject to extensive governmental regulation both in the U.S. and abroad. Modifications to our products may require new 510(k) or de novo clearances, PMAs or PMA supplements. Our HCT/P products are subject to extensive government regulation. We and our suppliers are subject to the FDA’s good manufacturing practice regulations and similar international regulations. We may be subject to a recall of our products or the discovery of serious safety issues with our products. We may be subject to enforcement action if we engage in the off-label promotion of our products. Governmental regulation and limited sources and suppliers could restrict our procurement and use of tissue. Negative publicity concerning methods of tissue recovery and screening of donor tissue could reduce demand for our regenerative biologics products and impact the supply of available donor tissue. We are subject to environmental laws and regulations that can impose significant costs and expose us to potential financial liabilities. We or our suppliers may be the subject of claims for non-compliance with FDA regulations in connection with the processing, manufacturing or distribution of regenerative biologics implants and products. We and our distributor sales representatives might be subject to claims for failing to comply with U.S. federal, state, local and foreign fraud and abuse laws.
The FDA’s 510(k) clearance process usually takes from three to 12 months, but may last longer. The FDA’s goal is to review de novo classification requests within 150 FDA review days, but presently, the current average review period is about eight months.
The FDA’s 510(k) clearance process usually takes from three to twelve months, but may last longer. The FDA’s goal is to review de novo classification requests within 150 FDA review days, but presently, the current average review period is about eight months.
Examples of laws that may affect our ability to operate include: the Federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under federal healthcare programs such as the Medicare and Medicaid programs; 26 Table of Contents federal false claims laws which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment to Medicare, Medicaid, or other government payors that are false or fraudulent; the federal Health Insurance Portability and Accountability Act of 1996, which created federal criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters; the Federal Trade Commission Act and similar laws regulating advertisement and consumer protections; the FCPA, which prohibits corrupt payments, gifts or transfers of value to foreign officials; the Physician Payment Sunshine Act, which requires medical device companies to report ownership and investment interests by physicians and members of their immediate family as well as certain payments and other transfers of value, including gifts and other benefits, provided to physicians and certain other healthcare professionals licensed in the U.S. and to teaching hospitals; and foreign and U.S. state law and code equivalents of each of the above federal laws, such as anti-kickback and false claims laws and disclosure of transfers of value and gift bans with respect to healthcare professionals, some of which may apply to items or services reimbursed by any third-party payor, including commercial insurers.
Examples of laws that may affect our ability to operate include: the Federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, in exchange for, to induce or to reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under federal healthcare programs such as the Medicare and Medicaid programs; federal false claims laws which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment to Medicare, Medicaid, or other government payors that are false or fraudulent; HIPAA, which created federal criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters; the Federal Trade Commission Act and similar laws regulating advertisement and consumer protections; the FCPA, which prohibits corrupt payments, gifts or transfers of value to foreign officials; the Physician Payment Sunshine Act, which requires medical device companies to report ownership and investment interests by physicians and members of their immediate family as well as certain payments and other transfers of value, including gifts 34 Table of Contents and other benefits, provided to physicians and certain other healthcare professionals licensed in the U.S. and to teaching hospitals; and foreign and U.S. state law and code equivalents of each of the above federal laws, such as anti-kickback and false claims laws and disclosure of transfers of value and gift bans with respect to healthcare professionals, some of which may apply to items or services reimbursed by any third-party payor, including commercial insurers.
In order to market our Musculoskeletal Solutions products effectively, we often must maintain implant sets consisting 19 Table of Contents of the full range of product sizes. For each surgery, fewer than all of the components of the set are used, and therefore certain portions of the set, like uncommon sizes, may become obsolete before they can be used.
In order to market our Musculoskeletal Solutions products effectively, we often must maintain implant sets consisting of the full range of product sizes. For each surgery, fewer than all of the components of the set are used, and therefore certain portions of the set, like uncommon sizes, may become obsolete before they can be used.
In addition, due to seasonal changes in mortality rates, some scarce tissues used in our regenerative biologics products are at 25 Table of Contents times in particularly short supply. We cannot be certain that our current supply of human tissue and allograft implants, plus any additional source that we identify in the future, will be sufficient to meet our needs.
In addition, due to seasonal changes in mortality rates, some scarce tissues used in our regenerative biologics products are at times in particularly short supply. We cannot be certain that our current supply of human tissue and allograft implants, plus any additional source that we identify in the future, will be sufficient to meet our needs.
EU CE markings for medical devices will continue to be recognized in Great Britain until June 30, 2024, and certificates issued for medical devices by EU-recognized Notified Bodies will continue to be valid for the Great Britain market until June 30, 2024 and the EU no longer recognizes UK Notified Bodies.
EU CE markings for medical devices will continue to be recognized in Great Britain until June 30, 2028, and certificates issued for medical devices by EU-recognized Notified Bodies will continue to be valid for the Great Britain market until June 30, 2028 and the EU no longer recognizes UK Notified Bodies.
If we are unable to do so, our sales or margins could decrease, thereby harming our business. We are dependent on a limited number of third-party suppliers, and the loss of any of these suppliers, or their inability to provide us with an adequate supply of products or materials in a timely manner, could harm our business.
If we are unable to do so, our sales or margins could decrease, thereby harming our business. 24 Table of Contents We are dependent on a limited number of third-party suppliers, and the loss of any of these suppliers, or their inability to provide us with an adequate supply of products or materials in a timely manner, could harm our business.
The Notified Body will then assess the changes and verify whether they affect the products’ conformity. If the assessment is not favorable, it could prevent us from selling that product in the EEA, which could adversely impact our business and results of operations. In addition, on January 1, 2021 the UK left the European Union.
The Notified Body will then assess the changes and verify whether they affect the products’ conformity. If the assessment is not favorable, it could prevent us from selling that product in the EEA, which could adversely impact our business and results of operations. In addition, on January 1, 2021 the UK left the EU.
The cost of, or lack of, available credit or equity financing could impact our ability to develop sufficient liquidity to maintain or grow our company, which in turn may adversely affect our business, results of operations or financial condition. We also manage cash and cash equivalents and short-term investments through various institutions.
The cost of, or lack of, available credit or equity financing could 38 Table of Contents impact our ability to develop sufficient liquidity to maintain or grow our company, which in turn may adversely affect our business, results of operations or financial condition. We also manage cash and cash equivalents and short-term investments through various institutions.
As a result of this accounting policy, we may experience variability in our results of operations if damages for which we are found liable exceed the amounts we have accrued. 32 Table of Contents In addition, we generally indemnify our customers and distributors with respect to infringement by our products of the proprietary rights of third parties.
As a result of this accounting policy, we may experience variability in our results of operations if damages for which we are found liable exceed the amounts we have accrued. In addition, we generally indemnify our customers and distributors with respect to infringement by our products of the proprietary rights of third parties.
The existence of these provisions could negatively affect the price of our Class A common stock and limit opportunities for you to realize value in a corporate transaction. 34 Table of Contents General Risk Factors If we do not successfully implement our business strategy, our business and results of operations will be adversely affected.
The existence of these provisions could negatively affect the price of our Class A common stock and limit opportunities for you to realize value in a corporate transaction. General Risk Factors If we do not successfully implement our business strategy, our business and results of operations will be adversely affected.
We have entered into confidentiality agreements and intellectual property assignment agreements with our officers, employees, consultants and advisors regarding our intellectual property and proprietary technology. In the event of unauthorized use or disclosure or other breaches of such agreements, we may not be provided with meaningful protection for our trade secrets or other proprietary information.
We have entered into 39 Table of Contents confidentiality agreements and intellectual property assignment agreements with our officers, employees, consultants and advisors regarding our intellectual property and proprietary technology. In the event of unauthorized use or disclosure or other breaches of such agreements, we may not be provided with meaningful protection for our trade secrets or other proprietary information.
Furthermore, the healthcare industry in the United States has experienced a trend toward cost containment as government and private insurers seek to control rising healthcare costs by imposing lower payment rates and negotiating reduced contract rates with service providers. Third-party payors, including public and private payors, may develop negative coverage policies impacting our Musculoskeletal Solutions products.
Furthermore, the healthcare industry in the U.S. has experienced a trend toward cost containment as government and private insurers seek to control rising healthcare costs by imposing lower payment rates and negotiating reduced contract rates with service providers. Third-party payors, including public and private payors, may develop negative coverage policies impacting our Musculoskeletal Solutions products.
Failure to comply with GDPR requirements could result in penalties of up to €20 million or 4% of worldwide revenue, whichever is greater, for serious 20 Table of Contents violations.
Failure to comply with GDPR requirements could result in penalties of up to €20 million or 4% of worldwide revenue, whichever is greater, for serious violations.
Any failure to comply with applicable legal and regulatory obligations in the United States or abroad could adversely affect us in a variety of ways that include, but are not limited to, significant criminal, civil and administrative penalties, including imprisonment of individuals, fines and penalties, denial of export privileges, seizure of shipments and restrictions on certain business activities.
Any failure to comply with applicable legal and regulatory obligations in the U.S. or abroad could adversely affect us in a variety of ways that include, but are not limited to, significant criminal, civil and administrative penalties, including imprisonment of individuals, fines and penalties, denial of export privileges, seizure of shipments and restrictions on certain business activities.
In the United States, the procurement and transplantation of allograft bone tissue is subject to federal law pursuant to the NOTA, a criminal statute which prohibits the purchase and sale of human organs used in human transplantation, including bone and related tissue, for “valuable consideration.” NOTA permits reasonable payments associated with the removal, transportation, processing, preservation, quality control, implantation and storage of human bone tissue.
In the U.S., the procurement and transplantation of allograft bone tissue is subject to federal law pursuant to the NOTA, a criminal statute which prohibits the purchase and sale of human organs used in human transplantation, including bone and related tissue, for “valuable consideration.” NOTA permits reasonable payments associated with the removal, transportation, processing, preservation, quality control, implantation and storage of human bone tissue.
Because of the predominance of government-sponsored healthcare systems around the world, many of our customer relationships outside of the United States are with governmental entities and are therefore subject to such anti-bribery laws. Our internal control policies and procedures may not always protect us from reckless or criminal acts committed by our employees or agents.
Because of the predominance of government-sponsored healthcare systems around the world, many of our customer relationships outside of the U.S. are with governmental entities and are therefore subject to such anti-bribery laws. Our internal control policies and procedures may not always protect us from reckless or criminal acts committed by our employees or agents.
Failure to manage these and other risks may have a material adverse effect on our operations in any particular country and on our business as a whole. We are subject to risks arising from currency exchange rate fluctuations on our international transactions and translation of local currency results into United States dollars, which could adversely affect our profitability.
Failure to manage these and other risks may have a material adverse effect on our operations in any particular country and on our business as a whole. We are subject to risks arising from currency exchange rate fluctuations on our international transactions and translation of local currency results into U.S. dollars, which could adversely affect our profitability.
Many of our current and potential competitors are major medical device companies that have substantially greater financial, technical and marketing resources than we do, and they may succeed in developing products that would render our products obsolete or noncompetitive.
Many of our current and potential competitors are major medical device companies that have substantially greater financial, technical and marketing resources than we do, and they may succeed in developing products that would render our products obsolete or non-competitive.
As is the case in the United States, the applicable regulatory body may change its clearance and approval policies, adopt additional regulations or revise existing regulations, or take other actions which may prevent or delay approval or clearance of our products under development or impact our ability to modify our currently approved or cleared products on a timely basis.
As is the case in the U.S., the applicable regulatory body may change its clearance and approval policies, adopt additional regulations or revise existing regulations, or take other actions which may prevent or delay approval or clearance of our products under development or impact our ability to modify our currently approved or cleared products on a timely basis.
The process of obtaining regulatory clearances through the 510(k) process, de novo classification, or approvals through the PMA process to market a medical device in the United States or internationally can be costly and time-consuming, and we may not be able to obtain these clearances, grants of de novo classification, or approvals on a timely basis, if at all.
The process of obtaining regulatory clearances through the 510(k) process, de novo classification, or approvals through the PMA process to market a medical device in the U.S. or internationally can be costly and time-consuming, and we may not be able to obtain these clearances, grants of de novo classification, or approvals on a timely basis, if at all.
Our competitors in both the United States and abroad, many of which have substantially greater resources and have made substantial investments in competing technologies, may have applied for or obtained or may in the future apply for and obtain, patents that will prevent, limit or otherwise interfere with our ability to make and sell our products.
Our competitors in both the U.S. and abroad, many of which have substantially greater resources and have made substantial investments in competing technologies, may have applied for or obtained or may in the future apply for and obtain, patents that will prevent, limit or otherwise interfere with our ability to make and sell our products.
Given the nature of our business, we also may maintain personally identifiable information (“PII”) or access to protected health information (“PHI”). Specifically, we rely on our information technology systems to effectively manage sales and marketing, accounting and financial functions, inventory management, engineering and product development tasks, and our research and development data.
Given the nature of our business, we also may maintain personally identifiable information (“PII”) or access to PHI. Specifically, we rely on our information technology systems to effectively manage sales and marketing, accounting and financial functions, inventory management, engineering and product development tasks, and our research and development data.
Furthermore, we are subject to the export controls and economic embargo rules and regulations of the United States, including, but not limited to, the Export Administration Regulations and trade sanctions against embargoed countries, which are administered by the Office of Foreign Assets Control within the Department of the Treasury, as well as the laws and regulations administered by the Department of Commerce.
Furthermore, we are subject to the export controls and economic embargo rules and regulations of the U.S. , including, but not limited to, the Export Administration Regulations and trade sanctions against embargoed countries, which are administered by the Office of Foreign Assets Control within the Department of the Treasury, as well as the laws and regulations administered by the Department of Commerce.
It is also possible that, if we obtain new FDA regulatory clearances or approvals, the clearances or approvals may contain limitations on the indicated uses or may prohibit certain uses which may impact the marketability of the product.
It is also possible that, if we obtain new FDA regulatory clearances 30 Table of Contents or approvals, the clearances or approvals may contain limitations on the indicated uses or may prohibit certain uses which may impact the marketability of the product.
Some states mandate implementation of healthcare compliance programs, impose gift bans, and/or require the tracking and reporting of gifts, compensation and other remuneration to physicians and certain other US-licensed healthcare professionals and US teaching hospitals.
Some states mandate implementation of healthcare compliance programs, impose gift bans, and/or require the tracking and reporting of gifts, compensation and other remuneration to physicians and certain other U.S. licensed healthcare professionals and U.S. teaching hospitals.
Our future success will depend largely on our ability to continue to hire, train, retain and 16 Table of Contents motivate skilled direct sales representatives and independent distributors with significant technical knowledge in various areas. New hires require training and take time to achieve full productivity.
Our future success will depend largely on our ability to continue to hire, train, retain and motivate skilled direct sales representatives and independent distributors with significant technical knowledge in various areas. New hires require training and take time to achieve full productivity.
Failure to comply with those studies in a timely manner could result in the revocation of the 510(k) clearance for the product that is subject to such a Section 522 Order and the recall or withdrawal of the product, which could prevent us from generating sales from that product in the United States.
Failure to comply with those studies in a timely manner could result in the revocation of the 510(k) clearance for the product that is subject to such a Section 522 Order and the recall or withdrawal of the product, which could prevent us from generating sales from that product in the U.S.
Any of these sanctions could have a material adverse effect on our reputation, business, results of operations and financial condition. Outside the United States, our products and operations are also often required to comply with standards set by industrial standards bodies, such as the ISO.
Any of these sanctions could have a material adverse effect on our reputation, business, results of operations and financial condition. Outside the U.S., our products and operations are also often required to comply with standards set by industrial standards bodies, such as the ISO.
Our customers’ access to adequate coverage and reimbursement for the procedures performed with our Musculoskeletal Solutions 15 Table of Contents products by government and private insurance plans is central to the acceptance of our current and future products.
Our customers’ access to adequate coverage and reimbursement for the procedures performed with our Musculoskeletal Solutions products by government and private insurance plans is central to the acceptance of our current and future products.
We may also be required to bear other costs or take other actions that may have a negative impact on our future sales and our ability to generate profits. In the EEA, we must comply with the EU Medical Device Vigilance System.
We may also be required to bear other costs or take other actions that may have a negative impact on our future sales and our ability to generate profits. 32 Table of Contents In the EEA, we must comply with the EU Medical Device Vigilance System.
Furthermore, as of December 31, 2022, we had 192,602,552 shares of Class B common stock available for issuance.
Furthermore, as of December 31, 2023, we had 192,602,552 shares of Class B common stock available for issuance.
As a result of this increased competition, as well as the challenges of third-party coverage and reimbursement practices, we believe there will be continued pricing pressure in the future.
As a result of this 22 Table of Contents increased competition, as well as the challenges of third-party coverage and reimbursement practices, we believe there will be continued pricing pressure in the future.
Similarly, we must comply with numerous international laws and regulations in order to market our products outside of the United States; see “Item 1. Business; Government Regulation; International” above for a summary of certain international laws and regulations to which we are subject.
Similarly, we must comply with numerous international laws and regulations in order to market our products outside of the U.S.; see “Item 1. Business; Government Regulation; International” above for a summary of certain international laws and regulations to which we are subject.
Unfavorable reports of improper or illegal tissue recovery practices, both in the United States and internationally, as well as incidents of improperly processed tissue leading to the transmission of disease, may broadly affect the rate of future tissue donation and market acceptance of technologies incorporating human tissue.
Unfavorable reports of improper or illegal tissue recovery practices, both in the U.S.and internationally, as well as incidents of improperly processed tissue leading to the transmission of disease, may broadly affect the rate of future tissue donation and market acceptance of technologies incorporating human tissue.
The FDA requires every manufacturer to make this determination in the first instance, but the FDA may review any manufacturer’s decision. The 23 Table of Contents FDA may not agree with our decisions regarding whether new clearances or approvals are necessary.
The FDA requires every manufacturer to make this determination in the first instance, but the FDA may review any manufacturer’s decision. The FDA may not agree with our decisions regarding whether new clearances or approvals are necessary.
Business; Government Regulation.” If we or our suppliers fail to comply with the FDA’s good manufacturing practice regulations and similar international regulations, this could impair our ability to market our products in a cost-effective and timely manner.
If we or our suppliers fail to comply with the FDA’s good manufacturing practice regulations and similar international regulations, this could impair our ability to market our products in a cost-effective and timely manner.
We and our third-party suppliers are required to comply with the FDA’s Quality System Regulation (“QSR”), which covers the methods and documentation of the design, testing, production, control, quality assurance, labeling, packaging, sterilization, storage and shipping of our products.
We and our third-party suppliers are required to comply with the FDA’s QSR, which covers the methods and documentation of the design, testing, production, control, quality assurance, labeling, packaging, sterilization, storage and shipping of our products.
We provide services in all of these areas in the United States, with the exception of removal and implantation, and receive payments for all such services. We make payments to tissue banks for their services related to recovering allograft bone tissue on our behalf.
We provide services in all of these areas in the U.S., with the exception of removal and implantation, and receive payments for all such services. We make payments to tissue banks for their services related to recovering allograft bone tissue on our behalf.
Many of the products we may seek to develop and introduce in the future will require FDA approval or clearance before commercialization in the United States, and commercialization of such products outside of the United States would likely require additional regulatory approvals and import licenses.
Many of the products we may seek to develop and introduce in the future will require FDA approval or clearance before commercialization in the U.S. , and commercialization of such products outside of the U.S. would likely require additional regulatory approvals and import licenses.
If certain of our direct sales representatives were to leave us, or if certain of our independent distributors were to cease to do business with us, our sales could be adversely affected.
If certain of our direct sales representatives were to leave us, or if certain of our independent 23 Table of Contents distributors were to cease to do business with us, our sales could be adversely affected.
Any adverse event involving our products, whether in the United States or abroad, could result in future voluntary corrective actions, such as recalls or customer notifications, or agency action, such as inspection, mandatory recall or other enforcement action.
Any adverse event involving our products, whether in the U.S. or abroad, could result in future voluntary corrective actions, such as recalls or customer notifications, or agency action, such as inspection, mandatory recall or other enforcement action.
In addition, we may have more difficulty maintaining our historical or prior rate of growth of revenues, profitability or cash flows.
In addition, we may have more difficulty maintaining our historical or prior rate of growth of revenues, profitability or cash 37 Table of Contents flows.
The FDA's 510(k) clearance process requires us to show that our proposed product is “substantially equivalent” to another 510(k)-cleared product. This process is shorter and typically requires the submission of less supporting documentation than other FDA approval processes and does not always require long-term clinical studies.
The FDA's 510(k) clearance process, and similar regulatory processes in other countries, requires us to show that our proposed product is “substantially equivalent” to another 25 Table of Contents 510(k)-cleared product. This process is shorter and typically requires the submission of less supporting documentation than other FDA approval processes and does not always require long-term clinical studies.
Paul, our Executive Chairman and his family members, controlled approximately 22.4% of our Class A and Class B common stock, representing approximately 74.3% of the voting power of our outstanding capital stock as of that date. As a result, David C.
Paul, our Executive Chairman, and his family members, controlled approximately 16.3% of our Class A and Class B common stock, representing approximately 65.8% of the voting power of our outstanding capital stock as of that date. As a result, David C.
Our dependence on such a limited number of suppliers exposes us to risks, including limited control over pricing, availability, quality and delivery schedules. Our suppliers may be impacted by equipment failure or economic, environmental, or geopolitical factors that disrupt manufacturing capacities.
We generally use a small number of suppliers for our products, materials and components. Our dependence on such a limited number of suppliers exposes us to risks, including limited control over pricing, availability, quality and delivery schedules. Our suppliers may be impacted by equipment failure or economic, environmental, or geopolitical factors that disrupt manufacturing capacities.
International operations account for approximately 14.8% of our total net sales, and we intend to continue to expand our international presence. A significant portion of our foreign revenues and expenses are generated in Japan, the Euro zone, United Kingdom and Australia.
International operations account for approximately 18.4% of our total net sales, and we intend to continue to expand our international presence. A significant portion of our foreign revenues and expenses are generated in Japan, the Euro zone, UK and Australia.
However, if a resurgence occurs and governments mandate restrictions, including restrictions on elective surgeries, we expect that it could have a material adverse impact on our revenue growth, operating profit and cash flow, lead to revised payment terms with certain of our customers, and change the effective tax rate driven by changes in the mix of earnings across the Company’s jurisdictions. ‎ 36 Table of Contents Item 1B.
If a resurgence occurs, or a new pandemic arises, and governments mandate restrictions, including restrictions on elective surgeries, we expect that it could have a material adverse impact on our revenue growth, operating profit and cash flow, leading to revised payment terms with certain of our customers, and could change the effective tax rate driven by changes in the mix of earnings across the Company’s jurisdictions.
Many jurisdictions are relaxing restrictions and resuming business operations, but a resurgence in infections or mutations of the coronavirus that causes COVID-19 could cause governments, hospitals, public institutions, or other authorities to reinstate such restrictions or impose additional restrictions.
Most jurisdictions have relaxed restrictions and resumed business operations, but a resurgence in infections or mutations of the coronavirus that causes COVID-19 could cause governments, hospitals, public institutions, or other authorities to reinstate such restrictions or impose additional restrictions.
We have experienced rapid growth since our inception and have increased our net sales to $1,022.8 million in 2022. Our ability to achieve future growth will depend upon, among other things, the success of our growth strategies, which we cannot assure 29 Table of Contents will be successful.
We have experienced rapid growth since our inception and increased our net sales to $1,568.5 million in 2023. Our ability to achieve future growth will depend upon, among other things, the success of our growth strategies, which we cannot assure will be successful.
U.S. federal and state laws, such as the Health Insurance Portability and Accountability Act of 1996, protect the confidentiality of certain patient health information, including patient medical records, and restrict the use and disclosure of patient health information.
U.S. federal and state laws, such as HIPAA, protect the confidentiality of certain patient health information, including patient medical records, and restrict the use and disclosure of patient health information.
In addition to the regulation of personal health information, a number of states have also adopted laws and regulations that may affect our privacy and data security practices for other kinds of PII, such as state laws that govern the use, disclosure and protection of sensitive personal information, such as social security numbers, or that are designed to protect credit card account data.
In addition to the regulation of personal health information, a number of states have also adopted laws and regulations that may affect our privacy and data security practices for other kinds of PII, such as state laws that govern the use, disclosure and protection of sensitive personal information, such as social security numbers, or that are designed to protect credit card account data. 27 Table of Contents State consumer protection laws may also establish privacy and security standards for use and management of PII, including information related to customers, suppliers, and care providers.
Our industry is intensely competitive, subject to rapid change and highly sensitive to the introduction of new products or other market activities of industry participants. We believe that our significant competitors are Medtronic, DePuy Synthes, Stryker, Zimmer Biomet, Smith and Nephew, and NuVasive. Orthofix, Integra LifeSciences and other smaller public and private companies are also competitors of ours.
Our industry is intensely competitive, subject to rapid change and highly sensitive to the introduction of new products or other market activities of industry participants. We believe that our significant competitors are Medtronic, DePuy Synthes, Stryker, Zimmer Biomet, and Smith and Nephew.
In the United States, all of our currently commercialized medical device products, other than SECURE ® -C have either received pre-market clearance under Section 510(k) of the FDCA or are exempt from pre-market review.
In the U.S., all of our currently commercialized medical device products, other than SECURE ® -C have either received premarket clearance under Section 510(k) of the FDCA or are exempt from PMA review.
Since most of our issued patents and pending patent applications are for the United States only, we lack 31 Table of Contents a corresponding scope of patent protection in other countries.
Since most of our issued patents and pending patent applications are for the U.S. only, we lack a corresponding scope of patent protection in other countries.
If the FDA disagrees with our determination and requires us to submit new 510(k) notifications, de novo petitions, PMAs or PMA supplements for modifications to our previously cleared products for which we have concluded that new clearances or approvals are unnecessary, we may be required to cease marketing or to recall the modified product until we obtain clearance or approval, and we may be subject to significant regulatory fines or penalties.
If the FDA disagrees with our determination and requires us to submit new 510(k) notifications, de novo petitions, PMAs or PMA supplements for modifications to our previously cleared products for which we have concluded that new clearances or approvals are unnecessary, we may be required to cease marketing or to recall the modified product until we obtain clearance or approval, and we may be subject to significant regulatory fines or penalties. 31 Table of Contents Our HCT/P products are subject to extensive government regulation and our failure to comply with these requirements could cause our business to suffer.
Additionally, to date, we have not been required to complete long-term clinical studies in connection with the sale of our products outside the United States, except our SECURE ® -C device, which was prospectively studied through seven-year postoperative clinical study as part of the Post-Market Approval (PMA) process.
Additionally, for most products launched to date, we have not been required to complete long-term clinical studies in connection with the sale of our products outside the U.S. market. Our SECURE ® -C device was prospectively studied through a seven-year postoperative clinical study as part of the Postmarket Approval process.
Any lender that is obligated to provide funding to us under any now existing or future credit agreement with us may not be able to provide funding in a timely manner, or at all, when we require it.
The availability of funding under existing credit arrangements may be limited, and our cash and cash equivalents are subject to volatility . Any lender that is obligated to provide funding to us under any now existing or future credit agreement with us may not be able to provide funding in a timely manner, or at all, when we require it.
In addition, we are subject to the provisions of Section 203 of the Delaware General Corporation Law regulating corporate takeovers, which may restrict or prohibit certain business combination transactions with stockholders owning 15% or more of our outstanding voting stock, including discouraging takeover attempts that might result in a premium over the market price for shares of our Class A common stock.
Our amended and restated certificate of incorporation and amended and restated bylaws contain other provisions that could delay or prevent a change of control of our company or changes in our Board that our stockholders might consider favorable. 42 Table of Contents In addition, we are subject to the provisions of Section 203 of the Delaware General Corporation Law regulating corporate takeovers, which may restrict or prohibit certain business combination transactions with stockholders owning 15% or more of our outstanding voting stock, including discouraging takeover attempts that might result in a premium over the market price for shares of our Class A common stock.
All of the products we currently market in the United States, other than our SECURE ® -C cervical disc, have either received pre-market clearance under Section 510(k) of the Federal Food, Drug, and Cosmetic Act (“FDCA”) or are exempt from pre-market review.
Many of our products we currently market in the U.S., have either received pre-market clearance under Section 510(k) of the Federal Food, Drug, and Cosmetic Act (“FDCA”) or are exempt from pre-market review.
We expect that market demand, government regulation, third-party coverage and reimbursement policies and societal pressures will continue to change the worldwide healthcare industry, resulting in further business consolidations and alliances among our customers, which may reduce competition, exert further downward pressure on the prices of our products and may adversely impact our business, results of operations or financial condition.
We expect that market demand, government regulation, third-party coverage and reimbursement policies and societal pressures will continue to change the worldwide healthcare industry, resulting in further business consolidations and alliances among our customers, which may reduce competition, exert further downward pressure on the prices of our products and may adversely impact our business, results of operations or financial condition. 28 Table of Contents If our Enabling Technologies products require significant amounts of service after sale or we receive a significant number of warranty claims, our costs may increase and our financial results may be adversely affected.
General Data Protection Regulation (“GDPR”) applies across the E.U., with similar requirements applying to the United Kingdom and European Economic Area countries, and includes, among other things, a requirement for prompt notice of data breaches to data subjects and supervisory authorities in certain circumstances and imposes significant fines for non-compliance.
The GDPR applies across the EU, with similar requirements applying to the UK and European Economic Area countries, and includes, among other things, a requirement for prompt notice of data breaches in certain circumstances and imposes significant fines for non-compliance.
Moreover, if future results and experience indicate that our products cause unexpected or serious complications or other unforeseen negative effects, we could be subject to mandatory product recalls, product seizures, suspension or withdrawal of FDA clearance or approval, and significant legal liability or harm to our business reputation. 18 Table of Contents If we do not enhance our existing product offerings and introduce new products through our research and development and product development efforts, we may be unable to effectively compete.
Moreover, if future results and experience indicate that our products cause unexpected or serious complications or other unforeseen negative effects, we could be subject to mandatory product recalls, product seizures, suspension or withdrawal of FDA clearance or approval, and significant legal liability or harm to our business reputation.
Based on an aggregate of 100,192,379 shares of our Class A and Class B common stock outstanding as of December 31, 2022, our executive officers and directors and their affiliates beneficially owned, in the aggregate, approximately 74.5% of the voting power of our outstanding capital stock. In 33 Table of Contents particular, as of December 31, 2022, David C.
Based on an aggregate of 136,335,662 shares of our Class A and Class B common stock outstanding as of December 31, 2023, our executive officers and directors and their affiliates beneficially owned, in the aggregate, approximately 66.1% of the voting power of our outstanding capital stock. In particular, as of December 31, 2023, David C.
Potential and completed acquisitions and strategic investments involve numerous risks, including: problems assimilating the purchased technologies, products or business operations; issues maintaining uniform standards, procedures, controls and policies; unanticipated costs associated with acquisitions; diversion of management’s attention from our core business; adverse effects on existing business relationships with suppliers and customers; risks associated with entering new markets in which we have limited or no experience; potential loss of key employees of acquired businesses; and increased legal and accounting compliance costs.
Potential and completed acquisitions and strategic investments involve numerous risks, including: problems assimilating the purchased technologies, products or business operations; issues maintaining uniform standards, procedures, controls and policies; unanticipated costs associated with acquisitions; diversion of management’s attention from our core business; adverse effects on existing business relationships with suppliers and customers; risks associated with entering new markets in which we have limited or no experience; potential loss of key employees of acquired businesses; and increased legal and accounting compliance costs. 26 Table of Contents We do not know if we will be able to identify acquisitions we deem suitable, whether we will be able to successfully complete any such acquisitions on favorable terms or at all, or whether we will be able to successfully integrate any acquired business, product or technology into our business or retain any key personnel, suppliers or distributors.
Although we have systems in place to monitor and mitigate the associated risk, there can be no assurance that such systems will be effective in reducing the credit risk relating to the sale of our Enabling Technologies products.
We may experience loss from a customer’s failure to make payments according to the contractual terms. 43 Table of Contents Although we have systems in place to monitor and mitigate the associated risk, there can be no assurance that such systems will be effective in reducing the credit risk relating to the sale of our Enabling Technologies products.
If we or our suppliers fail to comply with these requirements, we could be subject to FDA enforcement action, including, for example, warning letters, fines, injunctions, product recalls or seizures, and, in the most serious cases, criminal penalties. We received an FDA warning letter on October 31, 2018 related to observed non-conformities to the FDA’s HCT/P regulations. See “Item 1.
If we or our suppliers fail to comply with these requirements, we could be subject to FDA enforcement action, including, for example, warning letters, fines, injunctions, product recalls or seizures, and, in the most serious cases, criminal penalties.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties Our corporate headquarters are located in Audubon, Pennsylvania and owned by us. We own research and manufacturing facilities in Massachusetts, Pennsylvania and Texas, lease additional research facilities in Arizona and also own distribution centers in Heerlen, Netherlands and Brunssum, Netherlands to support our international operations.
Biggest changeItem 2. Properties Our owned corporate headquarters are located in Audubon, Pennsylvania. We have additional leased domestic administrative offices, research and training facilities in Arizona, California, Colorado, Illinois, Maryland, New Jersey North Carolina and Texas (one facility in Texas is owned). Our owned manufacturing and fulfillment facilities are located in Massachusetts, Ohio, Pennsylvania and Tennessee.
We maintain a distribution warehouse, along with sales and administrative offices in thirteen additional countries, all of which are leased.
We maintain leased distribution warehouses and administrative offices in seventeen additional countries.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeFinancial Statements and Supplementary Data; Notes to Consolidated Financial Statements; Note 16. Commitments and Contingencies” below. In addition, we are subject to legal proceedings arising in the ordinary course of business. Item 4. Mine Safety Disclosures Not applicable. ‎ 37 Table of Contents PART II
Biggest changeFinancial Statements and Supplementary Data; Notes to Consolidated Financial Statements; Note 15. Commitments and Contingencies” below. In addition, we are subject to legal proceedings arising in the ordinary course of business. Item 4. Mine Safety Disclosures Not applicable. ‎ 46 Table of Contents PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 37 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 38 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 40 Item 7A. Quantitative and Qualitative Disclosure About Market Risk 49 Item 8. Financial Statements and Supplementary Data 50
Biggest changeItem 4. Mine Safety Disclosures 46 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 47 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 49 Item 7A. Quantitative and Qualitative Disclosure About Market Risk 59 Item 8. Financial Statements and Supplementary Data 61

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest change(b) Inclusive of an immaterial amount of commission fees. Dividend Policy We have never declared or paid any cash dividends on our capital stock.
Biggest changeThe shares may be purchased through privately negotiated or open market transactions. This program has no time limit and may be suspended for periods or discontinued at any time. (b) Inclusive of an immaterial amount of commission fees. Dividend Policy We have never declared or paid any cash dividends on our capital stock.
The graph assumes an initial investment of $100 on December 31, 2017, in each of our Class A common stock, the stocks comprising the S&P 500 Index, and the stocks comprising the S&P 500 Health Care Equipment Index, including reinvestment of dividends, if any.
The graph assumes an initial investment of $100 on December 31, 2018, in each of our Class A common stock, the stocks comprising the S&P 500 Index, and the stocks comprising the S&P 500 Health Care Equipment Index, including reinvestment of dividends, if any.
We currently intend to retain future earnings, if any, for development of our business and do not anticipate that we will declare or pay cash dividends on our capital stock in the foreseeable future. ‎ 38 Table of Contents Comparative Stock Performance Graph The following graph illustrates a comparison of the total cumulative stockholder return on our Class A common stock from December 31, 2017 through December 31, 2022 to two indices: the S&P 500 Index and the S&P 500 Health Care Equipment Index.
We currently intend to retain future earnings, if any, for development of our business and do not anticipate that we will declare or pay cash dividends on our capital stock in the foreseeable future. ‎ 47 Table of Contents Comparative Stock Performance Graph The following graph illustrates a comparison of the total cumulative stockholder return on our Class A common stock from December 31, 2018 through December 31, 2023 to two indices: the S&P 500 Index and the S&P 500 Health Care Equipment Index.
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Class A Common Stock Our Class A common stock trades on The New York Stock Exchange, under the symbol “GMED.” We had approximately 36 stockholders of record as of February 17, 2023.
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Class A Common Stock Our Class A common stock trades on The New York Stock Exchange, under the symbol “GMED.” We had approximately 65 stockholders of record as of February 16, 2024.
( In thousands except for per share prices ) Period Total number of shares purchased (a) Average price paid per share (b) Total number of shares purchased as part of publicly announced plans or programs (a) Approximate dollar value of shares that may yet be purchased under the plans or programs (a) October 1, 2022 - October 31, 2022 — $ — — $ 150,801 November 1, 2022 - November 30, 2022 — — — 150,801 December 1, 2022 - December 31, 2022 — $ — — $ 150,801 Total — — (a) On March 11, 2020, our Board of Directors authorized a share repurchase program that allows for the repurchase up to $200 million of the Company’s Class A common stock.
( In thousands except for per share prices ) Period Total number of shares purchased (a) Average price paid per share (b) Total number of shares purchased as part of publicly announced plans or programs (a) Approximate dollar value of shares that may yet be purchased under the plans or programs (a) October 1, 2023 - October 31, 2023 2,829 $ 53.31 2,829 $ 350,001 November 1, 2023 - November 30, 2023 — — — 350,001 December 1, 2023 - December 31, 2023 1,500 49.85 1,500 275,239 Total 4,329 4,329 (a) On March 11, 2020, our Board of Directors authorized a share repurchase program that allows for the repurchase up to $200 million of the Company’s Class A common stock.
On March 4, 2022, our Board of Directors authorized the expansion of the share repurchase program of the Company’s Class A common stock by an additional $200 million. The shares may be purchased through privately negotiated or open market transactions. This program has no time limit and may be suspended for periods or discontinued at any time.
On March 4, 2022, our Board of Directors authorized the expansion of the share repurchase program of the Company’s Class A common stock by an additional $200 million. On September 27, 2023, the share repurchase program was expanded by authorizing the Company to repurchase an additional $350.0 million of the Company’s Class A common stock .
December 31, Company/Index 2017 2018 2019 2020 2021 2022 Globus Medical, Inc. $100 $105 $143 $159 $176 $181 S&P 500 Index $100 $96 $126 $149 $192 $157 S&P 500 Health Care Equipment $100 $116 $150 $177 $211 $171 ‎ 39 Table of Contents
December 31, Company/Index 2018 2019 2020 2021 2022 2023 Globus Medical, Inc. $100 $136 $151 $167 $172 $123 S&P 500 Index $100 $131 $156 $200 $164 $207 S&P 500 Health Care Equipment $100 $129 $152 $182 $147 $161 ‎ 48 Table of Contents
The following table provides the activity related to share repurchases for the fourth quarter of 2022.
On September 27, 2023, the share repurchase program was expanded by authorizing the Company to repurchase an additional $350.0 million of the Company’s Class A common stock. The following table provides the activity related to share repurchases for the fourth quarter of 2023.

Item 7. Management's Discussion & Analysis

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

56 edited+24 added−11 removed51 unchanged
Biggest changeFinancial Statements and Supplementary Data. ” Cash Flows The following table summarizes, for the periods indicated, cash flows from operating, investing and financing activities: Year Ended 2022-2021 2021-2020 December 31, Change Change (In thousands) 2022 2021 2020 $ $ Net cash provided by/(used in) operating activities $ 178,468 $ 276,274 $ 198,793 $ (97,806) $ 77,481 Net cash provided by/(used in) investing activities (110,362) (375,939) (117,322) 265,577 (258,617) Net cash provided by/(used in) financing activities (109,962) 54,147 (38,663) (164,109) 92,810 Effect of foreign exchange rate changes on cash (747) (810) 865 63 (1,675) Increase (decrease) in cash and cash equivalents $ (42,603) $ (46,328) $ 43,673 $ 3,725 $ (90,001) Cash Provided by Operating Activities The net cash provided by operating activities for the year ended December 31, 2022 was primarily cash flow from net income, partially offset by outflows for inventories and unfavorable changes in accounts receivable.
Biggest changeFinancial Statements and Supplementary Data. ” Cash Flows The following table summarizes, for the periods indicated, cash flows from operating, investing and financing activities: Year Ended 2023-2022 2022-2021 December 31, Change Change (In thousands) 2023 2022 2021 $ $ Net cash provided by/(used in) operating activities $ 243,499 $ 178,468 $ 276,274 $ 65,031 $ (97,806) Net cash provided by/(used in) investing activities 302,968 (110,362) (375,939) 413,330 265,577 Net cash provided by/(used in) financing activities (231,821) (109,962) 54,147 (121,859) (164,109) Effect of foreign exchange rate changes on cash 2,180 (747) (810) 2,927 63 Increase (decrease) in cash and cash equivalents $ 316,826 $ (42,603) $ (46,328) $ 359,429 $ 3,725 Cash Provided by Operating Activities The higher net cash provided by operating activities for the year ended December 31, 2023 was primarily the result of higher net income after adjusting out non-cash add-backs and non-cash expenses, such as amortization of purchase accounting related fair value step up, amortization, and stock based compensation, partially offset by unfavorable change in deferred income taxes.
We assess these assumptions on an ongoing basis as additional data impacting the assumptions is obtained. The fair value of contingent consideration is recorded in business acquisition liabilities on our consolidated balance sheets, and the changes in the fair value of contingent consideration are recognized in acquisition related costs in the consolidated statements of operations and comprehensive income.
We assess these assumptions on an ongoing basis as additional data impacting the assumptions is obtained. The fair value of contingent consideration is recorded in business acquisition liabilities on our consolidated balance sheets, and changes in the fair value of contingent consideration are recognized in acquisition-related costs in the consolidated statements of operations and comprehensive income.
These costs will increase in absolute terms as we continue to expand our product pipeline and add personnel. 41 Table of Contents Selling, General and Administrative Expenses Selling, general and administrative expenses primarily consist of salaries, benefits and other related costs, including stock-based compensation, for personnel employed in sales, marketing, finance, legal, compliance, administrative, information technology, medical education and training, quality and human resource departments.
These costs will increase in absolute terms as we continue to expand our product pipeline and add personnel. 50 Table of Contents Selling, General and Administrative Expenses Selling, general and administrative expenses primarily consist of salaries, benefits and other related costs, including stock-based compensation, for personnel employed in sales, marketing, finance, legal, compliance, administrative, information technology, medical education and training, quality and human resource departments.
Financial Statements and Supplementary Data. ” * Excludes contributions to pension and other post-employment benefit plans, uncertain tax positions, non-current tax liabilities and royalty obligations for which we cannot make a reliable estimate of the period of cash settlement. For further information, see Notes 14 , and 16 to the consolidated financial statements in “ Part II; Item 8.
Financial Statements and Supplementary Data. ” * Excludes contributions to pension and other post-employment benefit plans, uncertain tax positions, non-current tax liabilities and royalty obligations for which we cannot make a reliable estimate of the period of cash settlement. For further information, see Notes 14 , and 17 to the consolidated financial statements in “ Part II; Item 8.
(2) In connection with certain acquisitions completed in 2011 through 2022, we have certain contingent consideration obligations payable to the sellers in these transactions upon the achievement of certain regulatory and sales milestones. For further information, see Notes 3 , and 6 to the consolidated financial statements in “ Part II; Item 8.
(2) In connection with certain acquisitions completed in 2011 through 2023, we have certain contingent consideration obligations payable to the sellers in these transactions upon the achievement of certain regulatory and sales milestones. For further information, see Notes 3 , and 6 to the consolidated financial statements in “ Part II; Item 8.
Musculoskeletal Solutions Our Musculoskeletal Solutions consist primarily of implantable devices, biologics, accessories, and unique surgical instruments used in an expansive range of spinal, orthopedic and neurosurgical procedures. Musculoskeletal disorders are a leading driver of healthcare costs worldwide. Disorders range in severity from mild pain and loss of feeling to extreme pain and paralysis.
Musculoskeletal Solutions Our Musculoskeletal Solutions consist primarily of implantable devices, biologics, accessories, unique surgical instruments, and neuromonitoring services, used in an expansive range of spinal, orthopedic and neurosurgical procedures. Musculoskeletal disorders are a leading driver of healthcare costs worldwide. Disorders range in severity from mild pain and loss of feeling to extreme pain and paralysis.
However, sales of Musculoskeletal Solutions products may be influenced by summer vacation and winter holiday periods during which we have experienced fewer surgeries taking place, as well as more surgeries taking place later in the year when patients have met the deductibles under insurance plans.
However, sales of our Musculoskeletal Solutions products and services may be influenced by summer vacation and winter holiday periods during which we have experienced fewer surgeries taking place, as well as more surgeries taking place later in the year when patients have met the deductibles under insurance plans.
Our policy is to classify shipping and handling costs billed to customers as sales and the related expenses as cost of goods sold. Excess and Obsolete Inventory. Inventories are stated at the lower of cost or net realizable value. Cost is determined on a first-in, first-out basis.
Our policy is to classify shipping and handling costs billed to customers as sales and the related expenses as cost of sales. Excess and Obsolete Inventory. Inventories are stated at the lower of cost or net realizable value. Cost is determined on a first-in, first-out basis.
Contingent consideration represents contingent milestone, performance and revenue-sharing payment obligations related to acquisitions and is measured at fair value, based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The valuation of contingent consideration uses assumptions we believe would be made by a market participant.
Contingent consideration represents contingent milestone, performance or revenue-sharing payment obligations related to acquisitions and is measured at fair value, based on significant inputs that are not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The valuation of contingent consideration uses assumptions we believe would be made by a market participant.
We expect to continue to grant stock options in the future, and to the extent that we do, our actual stock-based compensation expense recognized may increase. Legal Proceedings. We are involved in a number of proceedings, legal actions, and claims.
We expect to continue to grant stock-based awards in the future, and to the extent that we do, our actual stock-based compensation expense recognized may increase. Legal Proceedings. We are involved in a number of proceedings, legal actions, and claims.
The purchase price of business acquisitions is primarily allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values on the acquisition date, with the excess recorded as goodwill. We utilize Level 3 inputs in the determination of the initial fair value.
The purchase price of business acquisitions is primarily allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values on the acquisition date, with the excess recorded as goodwill. We utilize Level 3 inputs in the determination of the initial fair value. 52 Table of Contents Goodwill and Intangible Assets.
Liquidity and Capital Resources 46 Table of Contents Our principal source of liquidity is cash flow from operating activities as well as our cash and cash equivalents and marketable securities, which we believe will provide sufficient funding for us to meet our liquidity requirements for the foreseeable future.
Liquidity and Capital Resources Our principal source of liquidity is cash flow from operating activities as well as our cash and cash equivalents and marketable securities, which we believe will provide sufficient funding for us to meet our liquidity requirements for the foreseeable future.
Sales of our Enabling Technologies products may be influenced by longer capital purchase cycles and the timing of budget approvals for major capital purchases . Components of our Results of Operations We manage our business globally within one operating segment, which is consistent with how our management reviews our business, makes investment and resource allocation decisions and assesses operating performance.
Sales of our Enabling Technologies products may be influenced by longer capital purchase cycles and the timing of budget approvals for major capital purchases. Components of our Results of Operations We manage our business globally within two operating segments, which is consistent with how our management reviews our business, makes investment and resource allocation decisions and assesses operating performance.
Furthermore, we believe as new technologies such as augmented reality and artificial intelligence are introduced, Enabling Technologies have the potential to transform the way surgery is performed and most importantly, continue to improve patient outcomes. 40 Table of Contents Geographic Information To date, the primary market for our products has been the United States, where we sell our products through a combination of direct sales representatives employed by us and distributor sales representatives employed by exclusive independent distributors, who distribute our products for a commission that is generally based on a percentage of sales.
Furthermore, we believe as new technologies such as augmented reality and artificial intelligence are introduced, Enabling Technologies have the potential to transform the way surgery is performed and most importantly, continue to improve patient outcomes. 49 Table of Contents Geographic Information To date, the primary market for our products has been the U.S. , where we sell our products through a combination of direct sales representatives employed by us and distributor sales representatives employed by exclusive independent distributors, who distribute our products for a commission that is generally based on a percentage of sales.
Our principal liquidity requirements are to fund working capital, research and development, including clinical trials, capital expenditures primarily related to investment in surgical sets required to maintain and expand our business, and potential future business or intellectual property acquisitions.
Our principal liquidity requirements are to fund working capital, research and development, including clinical trials, capital expenditures primarily related to investment in surgical sets required to maintain and expand our business, service our 2025 Notes, and potential future business or intellectual property acquisitions.
A discussion of our Results of Operations for the year ended December 31, 2021 can be found in “ Part II, Item 7.
A discussion of our Results of Operations for the year ended December 31, 2022 can be found in “ Part II, Item 7.
For purposes of disclosure, we disaggregate our revenue into two categories, Musculoskeletal Solutions and Enabling Technologies. Our Musculoskeletal Solutions products consist primarily of the implantable devices, disposables, and unique instruments used in an expansive range of spine, orthopedic trauma, hip, knee and extremity 42 Table of Contents procedures.
For purposes of disclosure, we disaggregate our revenue into two categories, Musculoskeletal Solutions and Enabling Technologies. 51 Table of Contents Our Musculoskeletal Solutions products consist primarily of the implantable devices, disposables, unique instruments, and neuromonitoring services used in an expansive range of spine, orthopedic trauma, hip, knee and extremity procedures.
We believe there is significant opportunity to strengthen our position in the U.S. market by increasing the size of our U.S. sales force and we intend to add additional direct and distributor sales representatives in the future. During the year ended December 31, 2022, international net sales accounted for approximately 14.8% of our total net sales.
We believe there is significant opportunity to strengthen our position in the U.S. market by increasing the size of our U.S. sales force and we intend to add additional direct and distributor sales representatives in the future. During the year ended December 31, 2023, international net sales accounted for approximately 18.4% of our total net sales.
Management’s Discussion and Analysis of Financial Condition and Results of Operations: Results of Operations; Year Ended December 31, 2021 Compared to the Year Ended December 31, 2020. ” on our Form 10-K filed on February 17, 2022 .
Management’s Discussion and Analysis of Financial Condition and Results of Operations: Results of Operations; Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021. ” on our Form 10-K filed on February 21, 2023 .
During the years ended December 31, 2022, 2021, or 2020 , we did not record any impairment charges related to long-lived assets. Stock-Based Compensation Expense.
During the years ended December 31, 2023, 2022, and 2021 , we did not record any impairment charges related to long-lived assets. Stock-Based Compensation Expense.
We have sold our products in approximately 53 countries other than the United States through a combination of sales representatives employed by us and exclusive international distributors.
We have sold our products in approximately 64 countries other than the U.S. through a combination of sales representatives employed by us and exclusive international distributors.
Our cost of goods sold consists primarily of costs from our in-house manufacturing, costs of products purchased from third-party suppliers, excess and obsolete inventory charges, depreciation of surgical instruments and cases, royalties, shipping, inspection and related costs incurred in making our products available for sale or use.
Substantially all of our suppliers manufacture our products in the U.S. Our cost of sales consists primarily of costs from our in-house manufacturing, costs of products purchased from third-party suppliers, excess and obsolete inventory charges, depreciation of surgical instruments and cases, royalties, shipping, inspection and related costs incurred in making our products available for sale or use.
We expect to continue to make investments in surgical sets as we launch new products, increase the size of our U.S. sales force, and expand into international markets. We may, however, require additional liquidity as we continue to execute our business strategy.
We expect to continue to make investments in surgical sets as we launch new products, increase the size of our U.S. sales force, and expand into international markets.
In these instances, we look to establish reserves. If we determine that a tax position is more likely than not of being 44 Table of Contents sustained upon audit, based solely on the technical merits of the position, we recognize the benefit.
In these instances, we look to establish reserves. If we determine that a tax position is more likely than not of being sustained upon audit, based solely on the technical merits of the position, we recognize the benefit. We measure the benefit by determining the amount that has likelihood greater than 50% of being realized upon settlement.
There were no impairments of IPR&D during the years ended December 31, 2022, 2021, or 2020. Long-Lived Assets . We periodically evaluate the recoverability of the carrying amount of long-lived assets, which include property and equipment, as well as whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be fully recoverable.
We periodically evaluate the recoverability of the carrying amount of long-lived assets, which include property and equipment, as well as whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be fully recoverable.
Management’s Discussion and Analysis of Financial Condition and Results of Operations: Results of Operations; Cash Flows. ” on our Form 10-K filed on February 17, 2022 . Recently Issued Accounting Pronouncements For further details on recently issued accounting pronouncements, please refer to “Part II; Item 8. Financial Statements and Supplementary Data; Notes to Consolidated Financial Statements; Note 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations: Results of Operations; Cash Flows. ” On our Form 10-K filed on February 21, 2023 . 57 Table of Contents Recently Issued Accounting Pronouncements For further details on recently issued accounting pronouncements, please refer to “Part II; Item 8.
In most cases, significant judgment is required to estimate the amount and timing of a loss to be recorded. We expense legal costs related to loss contingencies as incurred.
If a loss is reasonably possible but not known or probable, and can be reasonably estimated, the estimated loss or range of loss is disclosed. In most cases, significant judgment is required to estimate the amount and timing of a loss to be recorded. We expense legal costs related to loss contingencies as incurred.
Income Tax Provision We are taxed at the rates applicable within each jurisdiction. The composite income tax rate, tax provisions, deferred tax assets and deferred tax liabilities will vary according to the jurisdiction in which profits arise.
The composite income tax rate, tax provisions, deferred tax assets and deferred tax liabilities will vary according to the jurisdiction in which profits arise.
The majority of our Musculoskeletal Solutions contracts have a single performance obligation and revenue is recognized at a point in time. Our Enabling Technologies products are advanced hardware and software systems, and related technologies, that are designed to enhance a surgeon’s capabilities and streamline surgical procedures by making them less invasive, more accurate, and more reproducible to improve patient care.
Our Enabling Technologies products are advanced hardware and software systems, and related technologies, that are designed to enhance a surgeon’s capabilities and streamline surgical procedures by making them less invasive, more accurate, and more reproducible to improve patient care.
We measure the benefit by determining the amount that has likelihood greater than 50% of being realized upon settlement. We presume that all tax positions will be examined by a taxing authority with full knowledge of all relevant information. We regularly monitor our tax positions, tax assets and tax liabilities.
We presume that all tax positions will be examined by a taxing authority with full knowledge of all relevant information. We regularly monitor our tax positions, tax assets and tax liabilities.
There is no assurance that we will be able to secure such additional funding on terms acceptable to us, or at all . In August 2020, we entered into a credit agreement with Citizens Bank, N.A.
There is no assurance that we will be able to secure such additional funding on terms acceptable to us, or at all . Line of Credit In September 2023, we entered into an unsecured credit agreement with U.S. Bank National Association, as administrative agent, Citizens Bank, N.A., as syndication agent, Royal Bank of Canada, as documentation agent, U.S.
The fair value of contingent restricted stock unit (“RSU”) grants are recorded as additional paid-in capital in the consolidated balance sheet on the day of the grant due to the remote likelihood of forfeiture. Goodwill and Intangible Assets. Goodwill represents the excess purchase price over the fair values of the identifiable assets acquired less the liabilities assumed.
The fair value of contingent restricted stock unit grants (“RSUs”) are recorded as additional paid-in capital in the consolidated balance sheet on the day of the grant due to the remote likelihood of forfeiture.
Results of Operations Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021 Net Sales The following table sets forth, for the periods indicated, our net sales by geography expressed as dollar amounts and the changes in sales between the specified periods expressed in dollar amounts and as percentages: Year Ended December 31, Change (In thousands, except percentages) 2022 2021 $ % United States $ 871,939 $ 819,571 $ 52,368 6.4% International 150,904 138,531 12,373 8.9% Total net sales $ 1,022,843 $ 958,102 $ 64,741 6.8% In the United States, the increase in net sales of $52.4 million was due primarily to increased spine product sales resulting from penetration in existing territories and an increase in sales volume of enabling technologies .
Results of Operations Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022 Net Sales The following table sets forth, for the periods indicated, our net sales by geography expressed as dollar amounts and the changes in sales between the specified periods expressed in dollar amounts and as percentages: Year Ended December 31, Change (In thousands, except percentages) 2023 2022 $ % United States $ 1,279,765 $ 871,939 $ 407,826 46.8% International 288,711 150,904 137,807 91.3% Total net sales $ 1,568,476 $ 1,022,843 $ 545,633 53.3% In the U.S., the increase in net sales of $407.8 million was due primarily to the addition of NuVasive, as well as increased spine product sales, including robotic spine instruments, resulting from penetration in existing territories and an increase in sales volume of Enabling Technologies.
Cash Used in Investing Activities The cash used in investing activities for the year ended December 31, 2022 was primarily from purchases of property and equipment and the acquisition of businesses, net of cash acquired and purchases of intangible and other assets.
Cash Used in Investing Activities The higher cash provided by investing activities for the year ended December 31, 2023 was primarily from net inflows of purchases, maturities, and sales of marketable securities, partially offset by acquisition of businesses net of cash acquired and higher purchases of property and equipment.
With over 230 products on the market, we offer a comprehensive portfolio of innovative and differentiated technologies that treat a variety of musculoskeletal conditions. Although we manage our business globally within one operating segment, we separate our products into two major categories: Musculoskeletal Solutions and Enabling Technologies.
With numerous products launched since the founding of the Company, including 10 products launched on the market in 2023, we offer a comprehensive portfolio of innovative and differentiated technologies that treat a variety of musculoskeletal conditions. We separate our products and services into two major categories: Musculoskeletal Solutions and Enabling Technologies.
In some actions, the claimants seek damages, as well as other relief, including injunctions prohibiting us from engaging in certain activities, which, if granted, could require significant expenditures and/or result in lost revenues. We record a liability in the consolidated financial statements for these actions when a loss is considered probable and the amount can be reasonably estimated.
In some actions, the claimants seek damages, as well as other relief, including injunctions prohibiting us from engaging in certain activities, 53 Table of Contents which, if granted, could require significant expenditures and/or result in lost revenues.
If the reasonable estimate of a probable loss is a range, and no amount within the range is a better estimate than any other, the minimum amount of the range is accrued. If a loss is reasonably possible but not known or probable, and can be reasonably estimated, the estimated loss or range of loss is disclosed.
We record a liability in the consolidated financial statements for these actions when a loss is considered probable and the amount can be reasonably estimated. If the reasonable estimate of a probable loss is a range, and no amount within the range is a better estimate than any other, the minimum amount of the range is accrued.
We are focused on continuing to navigate the challenges presented by COVID-19 and believe we are in a strong position to continue to sustain and grow our business. Product Categories While we group our products into two categories, Musculoskeletal Solutions and Enabling Technologies, they are not limited to a particular technology, platform or surgical approach.
Product & Service Categories While we group our products and services into two categories, Musculoskeletal Solutions and Enabling Technologies, they are not limited to a particular technology, platform or surgical approach.
International net sales increased by $12.4 million, which was due primarily to increased spine product sales resulting from penetration in existing territories and sales volume of enabling technologies, partially offset by lower sales in Japan due to the transition of our sales force composition.
International net sales increased by $137.8 million, which was due primarily due to the addition of NuVasive and increased spine product sales resulting from penetration in existing territories.
Selling, General and Administrative Expenses Year Ended December 31, Change (In thousands, except percentages) 2022 2021 $ % Selling, general and administrative $ 432,117 $ 408,149 $ 23,968 5.9% Percentage of net sales 42.2% 42.6% 45 Table of Contents The increase in selling, general and administrative expenses was primarily due to an increase in commission expenses resulting from higher product sales and an increase in travel and meeting expenses.
Selling, General and Administrative Expenses Year Ended December 31, Change (In thousands, except percentages) 2023 2022 $ % Selling, general and administrative $ 643,410 $ 432,117 $ 211,293 48.9% Percentage of net sales 41.0% 42.2% The $211.3 million increase in selling, general and administrative expenses was due to the addition of NuVasive, and an increase in personnel-related expenses resulting primarily from higher product sales, and an increase in bad debt and meeting expenses.
We generally recognize INR solutions revenue when control transfers to the customer, which occurs at the time the product is shipped or delivered. Depending on the terms of the arrangement, we may also defer the recognition of a portion of the consideration as we satisfy future performance obligations related to the provision of maintenance and support.
We generally recognize INR solutions revenue when control transfers to the customer based on the terms of the arrangement, which typically occurs at the time the product is shipped or delivered .
Other Income/(expense), Net Year Ended December 31, Change (In thousands, except percentages) 2022 2021 $ % Other income, net $ 15,068 $ 8,454 $ 6,614 78.2% Percentage of net sales 1.5% 0.9% The increase in other income, net was due primarily to higher interest income from higher yields on marketable securities from external market factors and a non-recurring recovery related to damaged product during the year ended December 31, 2022.
Other Income/(expense), Net Year Ended December 31, Change (In thousands, except percentages) 2023 2022 $ % Other income, net $ 32,251 $ 15,068 $ 17,183 114.0% Percentage of net sales 2.1% 1.5% 55 Table of Contents The increase of $17.2 million in othe r income, was primarily due to foreign currency exchange gains of $14.3 million in the current year compared to $1.0 million of foreign currency losses in the prior year and an increase of $5.9 million related to higher interest income yields on marketable securities from external market factors.
Net Sales We sell implants and related disposables, primarily to hospitals, for use by surgeons to treat musculoskeletal disorders.
We have concluded that these operating segments are aggregated into one reportable segment, based on the aggregation criteria. Net Sales We sell implants and related disposables, primarily to hospitals, for use by surgeons to treat musculoskeletal disorders.
Cash Provided by Financing Activities The net cash used in financing activities for the year ended December 31, 2022 was primarily the result of the repurchase of Class A common stock, partially offset by inflows from proceeds from exercise of stock options. 47 Table of Contents A discussion of our Cash Flows for the year ended December 31, 2021 can be found in “ Part II, Item 7.
Cash Provided by Financing Activities The higher net cash used in financing activities for the year ended December 31, 2023 was primarily the result of higher repurchases of Class A common stock and lower proceeds from exercise of stock options.
Amortization of Intangibles Year Ended December 31, Change (In thousands, except percentages) 2022 2021 $ % Amortization of intangibles $ 17,735 $ 18,526 $ (791) -4.3% Percentage of net sales 1.7% 1.9% The decrease in the amortization of intangibles is primarily due to individual intangible assets reaching their full amortization .
Amortization of Intangibles Year Ended December 31, Change (In thousands, except percentages) 2023 2022 $ % Amortization of intangibles $ 51,032 $ 17,735 $ 33,297 187.7% Percentage of net sales 3.3% 1.7% The increase of $33.3 million in the amortization of intangibles is primarily due to the impact of the recognized intangibles in connection with the Merger.
Summary of Significant Accounting Policies; (v) Recently Issued Accounting Pronouncements.” ‎ 48 Table of Contents
Financial Statements and Supplementary Data; Notes to Consolidated Financial Statements; Note 2. Summary of Significant Accounting Policies; (v) Recently Issued Accounting Pronouncements.” ‎ 58 Table of Contents
IPR&D has an indefinite life and is not amortized until completion of the project at which time the IPR&D becomes an amortizable asset. If the related project is not completed in a timely manner, we may have an impairment related to the IPR&D, calculated as the excess of the asset’s carrying value over its fair value.
If the related project is not completed in a timely manner, we may have an impairment related to the IPR&D, calculated as the excess of the asset’s carrying value over its fair value. During the twelve months ended December 31, 2023, there were no impairments in goodwill, finite-lived intangible assets, or IPR&D. Long-Lived Assets .
Cost of Goods Sold While we have increased our in-house implant product manufacturing capacity and assemble our INR systems in-house, we also have products manufactured by third-party suppliers. Substantially all of our suppliers manufacture our products in the United States.
Depending on the terms of the arrangement, we may also defer the recognition of a portion of the consideration as we satisfy future performance obligations related to the provision of maintenance and support. Cost of Sales While we have increased our in-house implant product manufacturing capacity and assemble our INR systems in-house, we also have products manufactured by third-party suppliers.
Acquisition Related Costs Acquisition related costs represent: the change in fair value of business-acquisition-related contingent consideration; costs related to integrating recently acquired businesses, including but not limited to costs to exit or convert contractual obligations, severance, and information system conversion; and specific costs related to the consummation of the acquisition process such as banker fees, legal fees, and other acquisition related professional fees.
Acquisition-Related Costs Acquisition-related costs represent the change in fair value of business acquisition-related contingent consideration and specific costs related to the consummation of the acquisition process such as banker fees, legal fees and other acquisition-related professional fees. Income Tax Provision We are taxed at the rates applicable within each jurisdiction.
During the years ended December 31, 2022, 2021, and 2020, we did not record any impairment charges related to goodwill. Intangible assets consist of purchased in-process research and development (“IPR&D”), developed technology, supplier network, patents, customer relationships, re-acquired rights, and non-compete agreements.
Intangible assets consist of purchased in-process research and development (“IPR&D”), developed technology, supplier network, patents, customer relationships, re-acquired rights, and non-compete agreements. Intangible assets with finite useful lives are amortized over the period of estimated benefit using the straight-line method and estimated useful lives ranging from one to twenty-one years.
Cost of Goods Sold Year Ended December 31, Change (In thousands, except percentages) 2022 2021 $ % Cost of goods sold $ 263,725 $ 239,223 $ 24,502 10.2% Percentage of net sales 25.8% 25.0% The increase in cost of goods sold was primarily due to increased volume and product mix and unfavorable freight trends.
Cost of Sales Year Ended December 31, Change (In thousands, except percentages) 2023 2022 $ % Cost of sales $ 548,174 $ 263,725 $ 284,449 107.9% Percentage of net sales 34.9% 25.8% The increase of $284.4 million in cost of sales was primarily due to the addition of NuVasive, amortization of the inventory fair value step up, increased volume and product mix, higher write-downs of excess and obsolete inventory, and higher depreciation.
Intangible assets with finite useful lives are amortized over the period of estimated benefit using the straight-line method and estimated useful lives ranging from one to twenty-one years. Intangible assets are tested for impairment annually or whenever events or circumstances indicate that a carrying amount of an asset (asset group) may not be recoverable.
Intangible assets are tested for impairment annually or whenever events or circumstances indicate that a carrying amount of an asset (asset group) may not be recoverable. If an impairment is indicated, we measure the amount of the impairment loss as the amount by which the carrying amount exceeds the fair value of the asset.
Payments Due by Period (In thousands) Total Less than 1 Year 1-3 Years 3-5 Years More than 5 Years Operating leases $ 6,316 $ 2,653 $ 3,168 $ 348 $ 147 Purchase obligations (1) 7,629 4,629 2,500 500 — Total (2) * $ 13,945 $ 7,282 $ 5,668 $ 848 $ 147 (1) Reflects minimum annual volume commitments to purchase inventory under certain of our supplier contracts .
Payments Due by Period (In thousands) Total Less than 1 Year 1-3 Years 3-5 Years More than 5 Years Convertible Notes $ 452,531 $ 1,687 $ 450,844 $ — $ — Operating leases 144,350 18,336 28,362 23,634 74,018 Financing Leases 850 498 352 — — Contingent consideration 46,137 43,137 1,000 1,000 1,000 Purchase obligations 6,429 4,629 1,700 100 — Total (2) * $ 650,297 $ 68,287 $ 482,258 $ 24,734 $ 75,018 (1) Reflects minimum annual volume commitments to purchase inventory under certain of our supplier contracts .
Provision for Litigation Year Ended December 31, Change (In thousands, except percentages) 2022 2021 $ % Provision for litigation $ 2,341 $ 5,921 $ (3,580) -60.5% Percentage of net sales 0.2% 0.6% The provision for litigation includes accruals for potential legal settlements for the year ending December 31, 2022 and 2021.
Provision for Litigation Year Ended December 31, Change (In thousands, except percentages) 2023 2022 $ % Provision for litigation, net $ 434 $ 2,341 $ (1,907) -81.5% Percentage of net sales 0.0% 0.2% The $1.9 million decrease in provision for litigation is due to a settlement receipt, partially offset by a settlement payment for the year ended December 31, 2023 compared to 2022.
Income Tax Provision Year Ended December 31, Change (In thousands, except percentages) 2022 2021 $ % Income tax provision $ 52,850 $ 31,216 $ 21,634 69.3% Effective income tax rate 21.7% 17.3% The increase in the effective income tax rate was primarily the result of the lower effect of windfall tax benefits from stock-based compensation compared to the prior year.
Income Tax Provision Year Ended December 31, Change (In thousands, except percentages) 2023 2022 $ % Income tax provision $ 42,520 $ 52,850 $ (10,330) -19.5% Effective income tax rate 25.7% 21.7% The increase in the effective tax rate is primarily due to non-deductible compensation expenses and other non-deductible Merger-related transaction costs as a percentage of pretax earnings.
Acquisition Related Costs Year Ended December 31, Change (In thousands, except percentages) 2022 2021 $ % Acquisition related costs $ 5,959 $ 16,984 $ (11,025) -64.9% Percentage of net sales 0.6% 1.8% Acquisition related costs decreased due to lower unfavorable changes in fair value of business acquisition liabilities, driven by changes in market conditions and the achievement of certain performance conditions .
It also includes an unfavorable change in fair value of business acquisition liabilities, driven by changes in market conditions and the achievement of certain performance conditions.
Removed
We continue to monitor the evolution and impact of COVID-19 and evaluate the guidance from domestic and international authorities, including federal, state and local public health authorities regarding COVID-19, and we may need to make changes to our business based on their recommendations. In these circumstances, there may be developments outside our control requiring us to adjust our operating plan.
Added
NuVasive Merger On September 1, 2023, pursuant to that certain Merger Agreement with NuVasive and Merger Sub, Merger Sub, a wholly owned subsidiary of the Company, merged with and into NuVasive, with NuVasive surviving as a wholly owned subsidiary of the Company.
Removed
As such, the Company cannot reasonably estimate the ongoing impacts of COVID-19 on our financial condition, results of operations or cash flows in the future.
Added
Under the Merger Agreement, each share of common stock, par value $0.001 per share, of NuVasive issued and outstanding immediately prior to the effective time of the Merger (other than certain excluded shares as described in the Merger Agreement) was cancelled and converted into the right to receive 0.75 fully paid and non-assessable shares of Class A common stock of Globus, $0.001 par value per share, and the right to receive cash in lieu of fractional shares.
Removed
However, if a resurgence occurs and governments mandate restrictions, including restrictions on elective surgeries, we do expect that it may have a material adverse impact on our sales, results of operations, and cash flows, revised payment terms with certain of our customers, and a change in effective tax rate driven by changes in the mix of earnings across the Company’s jurisdictions.
Added
Neuromonitoring services use proprietary software-driven nerve detection and avoidance technology and include IONM to aid spine surgery.
Removed
Goodwill is tested for impairment at least annually. Goodwill is tested for impairment at the reporting unit level by comparing the reporting unit’s carrying amount to the fair value of the reporting unit. The fair values are estimated using an income and discounted cash flow approach.
Added
The majority of our Musculoskeletal Solutions contracts have a single performance obligation and revenue is recognized at a point in time. For our IONM services, revenue is recognized in the period the service is performed for the amount of consideration expected to be received.
Removed
We perform our annual impairment test for goodwill in the fourth quarter of each 43 Table of Contents year. We consider qualitative indicators of the fair value of a reporting unit when it is unlikely that a reporting unit has impaired goodwill.
Added
Goodwill represents the excess of purchase price over the fair values of the identifiable assets acquired less the liabilities assumed in the acquisition of a business. Goodwill is tested for impairment at least annually or whenever events or circumstances indicate that a carrying amount may be impaired. We perform our goodwill impairment analysis at the reporting unit level.
Removed
If an impairment is indicated, we measure the amount of the impairment loss as the amount by which the carrying amount exceeds the fair value of the asset. Fair value is generally determined using a discounted future cash flow analysis. There were no impairments of finite-lived intangible assets during the years ended December 31, 2022, 2021, or 2020.
Added
We perform our annual impairment analysis by either comparing a reporting unit’s estimated fair value to its carrying amount or doing a qualitative assessment of a reporting unit’s fair value from the last quantitative assessment to determine if there is potential impairment.
Removed
These increases were partially offset by lower write-downs of excess and obsolete inventory and depreciation costs.
Added
We may do a qualitative assessment when the results of the previous quantitative test indicated the reporting unit’s estimated fair value was significantly in excess of the carrying value of its net assets and we do not believe there have been significant changes in the reporting unit’s operations that would significantly decrease its estimated fair value or significantly increase its net assets.
Removed
Research and Development Expenses Year Ended December 31, Change (In thousands, except percentages) 2022 2021 $ % Research and development $ 73,015 $ 97,346 $ (24,331) -25.0% Percentage of net sales 7.1% 10.2% The decrease in research and development expenses was due primarily to $34.3 million of acquired IPR&D for the year ending December 31, 2021, which was expensed because we determined that it did not have an alternative future use.
Added
If a quantitative assessment is performed, the evaluation includes management estimates of discounted cash flow projections based on internal future projections and/or use of a market approach by looking at market values of comparable companies. We perform our annual impairment test of goodwill in the fourth quarter of each year.
Removed
The remaining change is driven by an increase in personnel related expenses due to our continued investment in product development.
Added
Fair value is generally determined using a discounted future cash flow analysis. IPR&D has an indefinite life and is not amortized until completion of the project at which time the IPR&D becomes an amortizable asset.
Removed
(the “Credit Agreement”) that provides a revolving credit facility permitting borrowings up to $125.0 million (as amended, the “Revolving Credit Facility”), and has a termination date of August 2, 2023. The Revolving Credit Facility includes up to a $25.0 million sub limit for letters of credit. As of December 31, 2022, we have not borrowed under the Revolving Credit Facility.
Added
We assumed equity-classified awards for certain NuVasive RSUs, and performance restricted stock units (“PRSUs”), as part of the Merger. These RSUs and PRSUs are measured at the grant date based on the estimated fair value of the award. The fair value of equity instruments that are expected to vest is recognized and amortized over the requisite service period.
Removed
The following table summarizes our outstanding contractual obligations as of December 31, 2022. There have been no material changes in our remaining contractual obligations since that time.
Added
The Company has granted awards with up to five year graded or cliff vesting terms (in each case, with service through the date of vesting being required).
Added
No exercise price or other monetary payment is required for receipt of the shares issued in settlement of the respective award; instead, consideration is furnished in the form of the participant’s service to the Company.
Added
These increases were partially offset by lower production variances. 54 Table of Contents Research and Development Expenses Year Ended December 31, Change (In thousands, except percentages) 2023 2022 $ % Research and development $ 124,010 $ 73,015 $ 50,995 69.8% Percentage of net sales 7.9% 7.1% The increase of $51.0 million in research and development expenses was due primarily to the addition of NuVasive and an increase in personnel-related expenses due to our continued investment in product development.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

2 edited+22 added−6 removed2 unchanged
Biggest changeGenerally, our interest rate risk with respect to these investments is limited due to yields earned. Changes in the overall level of interest rates affect the interest income generated by our cash, cash equivalents and marketable securities. Our investment policy limits the amount of credit exposure to any one issue, issuer or type of security.
Biggest changeOur policy also limits the amount of credit exposure to any one issue, issuer and type of instrument. As of December 31, 2023, we only held investments in securities classified as cash equivalents and marketable equity securities.
Foreign Exchange Risk We operate in countries outside of the United States and, therefore, we are exposed to foreign currency risk. Most of our direct sales outside of the United States are invoiced in local currencies.
Foreign Exchange Risk We operate in countries outside of the U.S. and, therefore, we are exposed to foreign currency risk. Most of our direct sales outside of the U.S. are invoiced in local currencies.
Removed
Interest Rate Risk Our exposure to interest rate risk relates primarily to our revolving credit facility and our investments in cash equivalents and marketable debt securities. At December 31, 2022, we had no debt outstanding under our revolving credit facility and therefore were not exposed to interest rate risk with respect to interest payable under that facility.
Added
Market Price Risk In order to reduce the potential equity dilution associated with our convertible notes, we entered into transactions for convertible notes hedge (the “2025 Hedge”) in connection with the issuance in March 2020 of $450.0 million principal amount of unsecured senior convertible notes with a stated interest rate of 0.375% and a maturity date of March 15, 2025 (the “2025 Notes”), entitling us to purchase our common stock.
Removed
In general, our investments in cash equivalents and marketable debt securities are governed by our investment policy, which has been approved by our Board of Directors. Our investment policy seeks to preserve the value of capital, consistent with maximizing return on our investments while maintaining adequate liquidity.
Added
Upon conversion of our convertible notes, the 2025 Hedge is expected to reduce the equity dilution if the daily volume-weighted average price per share of our common stock exceeds the strike price of the applicable hedge. We also entered into warrant transactions with the counterparties of the 2025 Hedge entitling them to acquire shares of our common stock.
Removed
To achieve our investment objectives, we maintain a portfolio of various holdings, types and maturities and invest in securities that meet or exceed our investment policy standards, focusing on high credit quality debt securities. We continue to be exposed to interest rate risk related to our cash equivalents and marketable securities.
Added
The warrant transactions could have a dilutive effect on our earnings per share to the extent that the price of our common stock during a given measurement period (the quarter or year to date period) exceeds the strike price of the warrants.
Removed
Our securities all have effective maturity dates within three years of the date of purchase and are designated as available for sale. As of December 31, 2022, we believe that a hypothetical 10% change in interest rates would not materially affect the underlying valuation of our marketable securities.
Added
See Note 11, Debt, in the Notes to Consolidated Financial Statements included in this Annual Report for further discussion.
Removed
We expect the percentage of our sales and operating expenses denominated in foreign currencies will increase in the foreseeable future as we continue to expand into international markets. When our sales or expenses are not denominated in U.S. dollars, a fluctuation in exchange rates could affect our net income.
Added
Interest Rate Risk Our exposure to interest rate risk at December 31, 2023 is related to our investment portfolio which consists of municipal bonds, corporate debt securities, commercial paper, asset-backed securities, and securities of government, federal agency, and other sovereign obligations of high quality financial institutions.
Removed
We do not currently hold derivatives to hedge our exposure to foreign currency exchange rate fluctuations; however, we may choose to hedge our exposure in the future. ‎ 49 Table of Contents
Added
Due to the short-term nature of these investments, we have assessed that there is no material exposure to interest rate risk arising from our investments. Fixed rate investments and borrowings may have their fair market value adversely impacted from changes in interest rates.
Added
Based upon our overall interest rate exposure as of December 31, 2023, a change of 10 percent in interest rates, assuming the amount of our investment portfolio and overall economic environment remains constant, would not have a material effect on interest income.
Added
The primary objective of our investment activities is to preserve the principal while at the same time maximizing yields without significantly increasing the risk. To achieve this objective, we maintain our portfolio of cash equivalents and investments in instruments that meet high credit quality standards, as specified in our investment policy. None of our investments are held for trading purposes.
Added
During the periods presented, we did not hold any investments that were in a significant unrealized loss position and no impairment charges were recorded. Realized gains and losses and interest income related to cash equivalents were immaterial during all periods presented.
Added
However, as our business in markets outside of the U.S. continues to increase, our exposure to foreign currency exchange risk related to our foreign operations will continue to grow.
Added
Fluctuations in the rate of exchange between the U.S. dollar and foreign currencies, primarily the Australian dollar, the Brazilian real, the British pound sterling, the Colombian peso, the euro, the Japanese yen, and the Singapore dollar, has had and could continue to have an adverse effect on our financial results, including our net sales, net sales growth rates, gross margins, income and losses as well as assets and liabilities.
Added
In particular, as a result of NuVasive’s acquisition of Simplify Medical, we have additional exposure to fluctuations in the Australian dollar. We established intercompany receivables and payables in Australian dollars as a result of the acquisition of Simplify Medical.
Added
We also have future contingent consideration liabilities denominated in U.S. dollars, in connection with the acquisition of Simplify Medical, which are the financial obligation of our subsidiary, NuVasive (AUST/NZ) Pty Limited , an Australian dollar denominated company.
Added
In addition, loss of financial stability within these markets could lead to delays in reimbursement or inability to remit payment due to currency controls. Specifically, we have operations in Puerto Rico, Brazil, and Argentina that have financial instability or currency controls.
Added
We translate the financial statements of our foreign subsidiaries with functional currencies other than the U.S. dollar into the U.S. dollar for consolidation using end-of-period exchange rates for assets and liabilities and average exchange rates during each reporting period for results of operations.
Added
Net gains or losses resulting from the translation of foreign financial statements and the effect of exchange rate changes on intercompany receivables and payables of a long-term investment nature are recorded as a separate component of stockholders’ equity. These adjustments will affect net income only upon sale or liquidation of the underlying investment in foreign subsidiaries.
Added
Exchange rate fluctuations resulting from the translation of all other intercompany balances between domestic 59 Table of Contents entities and our foreign subsidiaries are recorded as foreign currency transaction gains or losses and are included in other expense, net in the Consolidated Statements of Operations.
Added
For certain intercompany balances, we may enter into foreign currency forward contracts to partially offset the impact from fluctuation of the foreign currency rates. The notional amount of the outstanding foreign currency forward contracts was $10.0 million as of December 31, 2023, which were settled in January 2024.
Added
During the year ended December 31, 2023, a loss of $0.1 million was recognized in other expense, net due to the change in the fair value of the derivative instruments, and the fair value of the hedge contracts we held was de minimis on our Consolidated Balance Sheets as of December 31, 2023.
Added
The derivative instruments are recorded in other current assets or other current liabilities in the Consolidated Balance Sheets commensurate with the nature of the instrument at period end. The notional principal amounts provide one measure of the transaction volume outstanding as of period end, but do not represent the amount of our exposure to market loss.
Added
The estimates of fair value are based on applicable and commonly used pricing models using prevailing financial market information. The amounts ultimately realized upon settlement of these financial instruments, together with the gains and losses on the underlying exposures, will depend on actual market conditions during the remaining life of the instruments.
Added
The financial exposures by exchange rate fluctuations are monitored and managed by us as an integral part of our overall risk management program, which recognizes the unpredictability of financial markets and seeks to reduce potentially adverse effects on our results. ‎ 60 Table of Contents

Other GMED 10-K year-over-year comparisons