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What changed in Bioventus Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Bioventus 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.

+622 added−694 removedSource: 10-K (2024-03-12) vs 10-K (2023-03-31)

Top changes in Bioventus Inc.'s 2023 10-K

622 paragraphs added · 694 removed · 466 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

159 edited+42 added−30 removed120 unchanged
Biggest changeUnlike the AKS, the Stark Law is violated if the financial arrangement does not meet an applicable exception, regardless of any intent by the parties to induce or reward referrals or the reasons for the financial relationship and the referral. 17 Table of Contents The Federal False Claims Act (“FCA”) prohibits a person from knowingly presenting, or caused to be presented, a false or fraudulent request for payment from the federal government, or from making a false statement or using a false record to have a claim approved.
Biggest changeUnlike the AKS, the Stark Law is a strict liability statute, meaning that the law has been violated if the financial arrangement does not meet an applicable exception regardless of any intent by the parties to induce or reward referrals or the reasons for the financial relationship and the referral.
The solution treats knee OA by providing temporary replacement for the diseased synovial fluid and restoring lubricity of bearing joint surfaces. Physicians administer GELSYN-3 to the affected knee joint once a week for three consecutive weeks. GELSYN-3 provides relief of knee pain and may help delay the need for total knee replacement surgery.
The solution treats knee OA by providing temporary replacement for the diseased synovial fluid and restoring the lubricity of bearing joint surfaces. Physicians administer GELSYN-3 to the affected knee joint once a week for three consecutive weeks. GELSYN-3 provides relief of knee pain and may help delay the need for total knee replacement surgery.
U.S. Regulation of Medical Devices The majority of our products are regulated by the FDA as medical devices in the United States. Unless an exemption applies, each medical device commercially distributed in the United States requires either FDA clearance of a 510(k) premarket notification, or approval of a PMA application.
U.S. Regulation of Medical Devices In the United States, the majority of our products are regulated as medical devices by the FDA. Unless an exemption applies, each medical device commercially distributed in the United States requires either FDA clearance of a 510(k) premarket notification, or approval of a PMA application.
However, to be regulated as a Section 361 HCT/P, the product must, among other things, be “minimally manipulated,” which for structural tissue products means that the manufacturing processes do not alter the original relevant characteristics of the tissue relating to the tissue’s utility for reconstruction, repair, or replacement and for cells or nonstructural tissue products, means that the manufacturing processes do not alter the relevant biological characteristics of cells or tissues.
However, to be regulated as a Section 361 HCT/P, the product must, among other things, be “minimally manipulated,” which for structural tissue products means that the manufacturing processes do not alter the original relevant characteristics of the tissue relating to the tissue’s utility for reconstruction, repair, or replacement and which for cells or nonstructural tissue products, means that the manufacturing processes do not alter the relevant biological characteristics of cells or tissues.
The FDA may require one or more post-market studies and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization, and may limit further marketing of the product based on the results of these post-marketing studies.
The FDA may require one or more post-market studies or post-market surveillance to further assess and monitor the product’s safety and effectiveness after commercialization, and may limit further marketing of the product based on the results of these post-marketing studies.
Post-market Enforcement The FDA may withdraw marketing authorizations for drugs, biologics (including Section 361 HCT/Ps) or medical devices if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market.
Post-market Enforcement The FDA may withdraw marketing authorizations for drugs, biologics (including Section 361 HCT/Ps) and/or medical devices if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market.
The new Regulation among other things: • strengthens the rules on placing devices on the market (e.g. reclassification of certain devices and wider scope than the EU Medical Devices Directive) and reinforces surveillance once they are available; • establishes explicit provisions on manufacturers’ responsibilities for the follow-up of the quality, performance and safety of devices placed on the market; • establishes explicit provisions on importers’ and distributors’ obligations and responsibilities; • imposes an obligation to identify a responsible person who is ultimately responsible for all aspects of compliance with the requirements of the new regulation; • improves the traceability of medical devices throughout the supply chain to the end-user or patient through the introduction of a unique identification number, to increase the ability of manufacturers and regulatory authorities to trace specific devices through the supply chain and to facilitate the prompt and efficient recall of medical devices that have been found to present a safety risk; • sets up a central database (Eudamed) to provide patients, healthcare professionals and the public with comprehensive information on products available in the EU; and • strengthens rules for the assessment of certain high-risk devices, such as implants, which may have to undergo a clinical evaluation consultation procedure by experts before they are placed on the market.
The new Regulation among other things: • strengthens the rules on placing devices on the market (e.g., reclassification of certain devices and wider scope than the EU Medical Devices Directive) and reinforces surveillance once they are available; • establishes explicit provisions on manufacturers’ responsibilities for the follow-up of the quality, performance and safety of devices placed on the market; • establishes explicit provisions on importers’ and distributors’ obligations and responsibilities; • imposes an obligation to identify a responsible person who is ultimately responsible for all aspects of compliance with the requirements of the new regulation; • improves the traceability of medical devices throughout the supply chain to the end-user or patient through the introduction of a unique identification number, to increase the ability of manufacturers and regulatory authorities to trace specific devices through the supply chain and to facilitate the prompt and efficient recall of medical devices that have been found to present a safety risk; • sets up a central database (Eudamed) to provide patients, healthcare professionals and the public with comprehensive information on products available in the EU; and 15 Table of Contents • strengthens rules for the assessment of certain high-risk devices, such as implants, which may have to undergo a clinical evaluation consultation procedure by experts before they are placed on the market.
Through an adaptive, learning algorithm, the L300 Go is designed to detect gait events, providing stimulation precisely when needed making it easier for users to clear their foot at different walking speeds, on stairs, ramps, and while navigating uneven terrain.
Through an adaptive, learning algorithm, L300 Go is designed to detect gait events, providing stimulation precisely when needed making it easier for users to clear their foot at different walking speeds, on stairs, ramps, and while navigating uneven terrain.
Our Pain Treatments that we own or distribute compete with products from Ferring Pharmaceutical Inc., Fidia Farmaceutici S.p.A., DePuy Orthopaedics, Inc. (Johnson & Johnson), and Sanofi S.A, OrthogenRx Inc. and for peripheral nerve stimulation specifically we compete with SPR Therapeutics, Nalu and Stimwave. Our Surgical Solution products compete with products from Medtronic, DePuy Orthopaedics, Inc.
Our Pain Treatments that we own or distribute compete with products from Ferring Pharmaceutical Inc., Fidia Farmaceutici S.p.A., DePuy Orthopaedics, Inc. (Johnson & Johnson), and Sanofi S.A, OrthogenRx Inc. (Avanos) and for peripheral nerve stimulation specifically we compete with SPR Therapeutics, Nalu and Stimwave. Our Surgical Solution products compete with products from Medtronic, DePuy Orthopaedics, Inc.
Devices deemed by the FDA to pose the greatest risks, such as life sustaining, life supporting or some implantable devices, or devices that have a new intended use, or use advanced technology that is not substantially equivalent to that of a legally marketed device, are placed into Class III.
Devices deemed by the FDA to pose the greatest risks, such as life sustaining, life supporting or some implantable devices, or devices that have a new intended use, or use advanced technology that is not substantially equivalent to that of a legally marketed device, are typically placed into Class III.
The terms of our license and assignment agreements vary in length from a specified number of years to the life of product patents or the economic life of the product. These agreements generally provide for royalty payments and termination rights in the event of a material breach.
The terms of our license agreements vary in length from a specified number of years to the life of product patents or the economic life of the product. These agreements generally provide for royalty payments and termination rights in the event of a material breach.
These include: • establishment registration and device listing with the FDA; • QSR requirements, which require manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the design and manufacturing process; • labeling and marketing regulations, which require that promotion is truthful, not misleading, fairly balanced and provide adequate directions for use and that all claims are substantiated, and also prohibit the promotion of products for unapproved or “off-label” uses and impose other restrictions on labeling; FDA guidance on off-label dissemination of information and responding to unsolicited requests for information; • clearance or approval of product modifications to 510(k)-cleared devices that could significantly affect safety or effectiveness or that would constitute a major change in intended use of one of our cleared devices; • medical device reporting regulations, which require that a manufacturer report to the FDA if a device it markets may have caused or contributed to a death or serious injury, or has malfunctioned and the device or a similar device that it markets would be likely to cause or contribute to a death or serious injury, if the malfunction were to recur; • correction, removal and recall reporting regulations, which require that manufacturers report to the FDA field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health; 12 Table of Contents • complying with requirements governing Unique Device Identifiers on devices and also requiring the submission of certain information about each device to the FDA’s Global Unique Device Identification Database; • the FDA’s recall authority, whereby the agency can order device manufacturers to recall from the market a product that is in violation of governing laws and regulations; and • post-market surveillance activities and regulations, which apply when deemed by the FDA to be necessary to protect the public health or to provide additional safety and effectiveness data for the device.
These include: • establishment registration and device listing with the FDA; • QSR requirements, which require manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the design and manufacturing process; • labeling and marketing regulations, which require that promotion is truthful, not misleading, fairly balanced and provide adequate directions for use and that all claims are substantiated, and also prohibit the promotion of products for unapproved or “off-label” uses and impose other restrictions on labeling; FDA guidance on off-label dissemination of information and responding to unsolicited requests for information; • clearance or approval of product modifications to 510(k)-cleared devices that could significantly affect safety or effectiveness or that would constitute a major change in intended use of one of our cleared devices; • medical device reporting regulations, which require that a manufacturer report to the FDA if a device it markets may have caused or contributed to a death or serious injury, or has malfunctioned and the device or a similar device that it markets would be likely to cause or contribute to a death or serious injury, if the malfunction were to recur; • correction, removal and recall reporting regulations, which require that manufacturers report to the FDA field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health; • complying with requirements governing Unique Device Identifiers on devices and also requiring the submission of certain information about each device to the FDA’s Global Unique Device Identification Database; • the FDA’s recall authority, whereby the agency can order device manufacturers to recall from the market a product that is in violation of governing laws and regulations; and • post-market surveillance activities and regulations, which apply when the FDA deems them necessary to protect the public health or to provide additional safety and effectiveness data for the device.
The U.S. patents are expected to expire between 2026 and 2037, and the foreign patents are expected to expire between 2026 and 2037. The pending patent applications, if issued, are expected to expire between 2026 and 2037, without accounting for potential patent term extensions and adjustments.
The U.S. patents are expected to expire between 2026 and 2037, and the foreign patents are expected to expire between 2026 and 2037. The pending patent applications, if issued, are expected to expire between 2032 and 2037, without accounting for potential patent term extensions and adjustments.
EXOGEN is indicated in the United States. for the non-invasive treatment of established nonunions, excluding skull and vertebra, and for accelerating the time to a healed fracture for fresh, closed, posteriorly displaced distal radius fractures and fresh, closed or Grade I open long bone fractures in skeletally mature individuals when these fractures are orthopedically managed by closed reduction and cast immobilization.
EXOGEN is indicated in the United States for the non-invasive treatment of established nonunion fractures excluding skull and vertebra fractures, and for accelerating the time to a healed fracture for fresh, closed, posteriorly displaced distal radius fractures and fresh, closed or Grade I open long bone fractures in skeletally mature individuals when these fractures are orthopedically managed by closed reduction and cast immobilization.
Developmental and clinical pipeline for Restorative Therapies Our expansive direct sales and distribution channel across our product portfolio provides us with broad and differentiated customer reach, and allows us to serve physicians spanning the orthopedic continuum, including sports medicine, total joint reconstruction, hand and upper extremities, foot and ankle, podiatric surgery, trauma, spine and neurosurgery.
Developmental and clinical pipeline for Restorative Therapies Our expansive direct sales and distribution channel across our product portfolio provides us with broad and differentiated customer reach and allows us to serve physicians spanning the orthopedic continuum, including sports medicine, total joint reconstruction, hand and upper extremity, foot and ankle, and podiatric surgery, trauma, spine and neurosurgery.
The device sponsor must then fulfill more rigorous PMA requirements, or can request a risk-based classification determination for the device in accordance with the de novo classification process, which is a route to market for novel medical devices that are low to moderate risk and are not substantially equivalent to a predicate device.
In such cases, the device sponsor must then fulfill more rigorous PMA requirements, or can request a risk-based classification determination for the device in accordance with the de novo classification process, which is a route to market for novel medical devices that are low to moderate risk and are not substantially equivalent to a predicate device.
The process required by the FDA before a drug or biologic may be marketed in the United States generally involves the following: • completion of preclinical laboratory tests and animal studies performed in accordance with the FDA’s Good Laboratory Practice requirements; • submission to the FDA of an IND, which must become effective before clinical trials may begin; • approval by an IRB or ethics committee at each clinical site before the trial is commenced; • performance of adequate and well-controlled human clinical trials to establish the safety, efficacy, purity and potency of the proposed product candidate for its intended purpose; • preparation of and submission to the FDA of a BLA for biologics or New Drug Application (NDA) for small molecule drugs after completion of all pivotal clinical trials; • satisfactory completion of an FDA Advisory Committee review, if applicable; • a determination by the FDA within 60 days of its receipt of a BLA or NDA to file the application for review; • satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which the proposed product is produced to assess compliance with cGMPs and to assure that the facilities, methods and controls are adequate to preserve the biological product’s continued safety, purity and potency, and of selected clinical investigation sites to assess compliance with Good Clinical Practices (“GCPs”); and • FDA review and approval of the BLA or NDA to permit commercial marketing of the product for particular indications for use in the United States. 13 Table of Contents Prior to beginning clinical trials of a new drug or biologic product in the United States, an IND must be submitted to the FDA.
The process required by the FDA before a drug or biologic may be marketed in the United States generally involves the following: • completion of preclinical laboratory tests and animal studies performed in accordance with the FDA’s Good Laboratory Practice requirements; • submission to the FDA of an IND, which must become effective before clinical trials may begin; • approval by an IRB or ethics committee at each clinical site before the trial is commenced; • performance of adequate and well-controlled human clinical trials to establish the safety, efficacy, purity and potency of the proposed product candidate for its intended purpose; • preparation of and submission to the FDA of a BLA for biologics or New Drug Application (NDA) for small molecule drugs after completion of all pivotal clinical trials; • satisfactory completion of an FDA Advisory Committee review, if applicable; • a determination by the FDA within 60 days of its receipt of a BLA or NDA to file the application for review; • satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which the proposed product is produced to assess compliance with cGMPs and to assure that the facilities, methods and controls are adequate to preserve the biological product’s continued safety, purity and potency, and of selected clinical investigation sites to assess compliance with Good Clinical Practices (“GCPs”); and • FDA review and approval of the BLA or NDA to permit commercial marketing of the product for particular indications for use in the United States.
A predicate device is a legally marketed device that is not subject to premarket approval, i.e., a device that was legally marketed prior to May 28, 1976 (pre-amendments device) and for which a PMA is not required, a device that has been reclassified from Class III to Class II or I, or a device that was found substantially equivalent through the 510(k) process.
A predicate device is a legally marketed device that is not subject to premarket approval, i.e., a device that was legally marketed prior to May 28, 1976 (pre-amendment device) and for which a PMA is not required, a device that has been reclassified from Class III to Class II or I, or a device that was found substantially equivalent through the 510(k) process.
The new Regulation also requires that before placing a device, other than a custom-made device, on the market, manufacturers must assign a unique identifier to the device and provide it along with other core data to the unique device identifier (“UDI”) database. These new requirements aim at ensuring better identification and traceability of the devices.
The new EU Medical Devices Regulation also requires that before placing a device, other than a custom-made device, on the market, manufacturers must assign a unique identifier to the device and provide it along with other core data to the unique device identifier (“UDI”) database. These new requirements aim at ensuring better identification and traceability of the devices.
Trademarks We own registered trademarks for Bioventus, Bioness, BITS, Bonescalpel, BoneScalpel Access, Cellxtract, Durolane, Exogen, Exponent, Gelsyn-3, LiveOn, L300 Go, Misonix, Ness, Ness L300, neXus, OsteoAMP, Osteofuse, Prohesion, PureBone, SAFHS, Signafuse, Sonastar, SonaStar Elite, StimRouter, TheraSkin, Therion and Vector Gait and Safety System in the United States.
Trademarks We own registered trademarks for Bioventus, Bioness, BITS, Bonescalpel, BoneScalpel Access, Cellxtract, Durolane, Exogen, Exponent, Gelsyn-3, LiveOn, L300 Go, Misonix, Ness, Ness L300, neXus, OsteoAMP, Osteofuse, Prohesion, PureBone, SAFHS, Signafuse, Sonastar, SonaStar Elite, StimRouter and the Vector Gait and Safety System in the United States.
The guidance also indicated that the FDA would exercise enforcement discretion, using a risk-based approach, with respect to the IND application and pre-market approval requirements for certain HCT/Ps that had been marketed without marketing authorization, including, among others, lyophilized amniotic products, for a period of 36 months from the issuance date of the guidance to allow manufacturers to pursue INDs and/or seek marketing authorizations.
The guidance also indicated that the FDA would exercise enforcement discretion, using a risk-based approach, with respect to the Investigational New Drug ("IND") application and pre-market approval requirements for certain HCT/Ps that had been marketed without marketing authorization, including, among others, lyophilized amniotic products, for a period of 36 months from the issuance date of the guidance to allow manufacturers to pursue INDs and/or seek marketing authorizations.
EXOGEN utilizes low-intensity pulsed ultrasound technology to stimulate the body’s natural bone healing process. EXOGEN is used to administer treatment in a location of convenience with an easy to use interface that tracks treatment use and promotes compliance.
EXOGEN utilizes low-intensity pulsed ultrasound technology to stimulate the body’s natural bone stimulation process. EXOGEN is used to administer treatment in a location of convenience with an easy to use interface that tracks treatment use and promotes compliance.
In addition, the study must be approved by, and conducted under the oversight of, an Institutional Review Board (“IRB”), for each clinical site. The IRB is responsible for the initial and continuing review of the IDE, and may pose additional requirements for the conduct of the study.
In addition, the study must be approved by, and conducted under the oversight of, an Institutional Review Board (“IRB”), for each clinical site. The IRB is responsible for the initial and continuing review of the IDE, and may impose additional requirements for the conduct of the study.
Failure to meet the requirements of an applicable AKS safe harbor, however, does not render an arrangement illegal. Rather, the government may evaluate such arrangements on a case-by-case basis, taking into account all facts and circumstances, including the parties’ intent and the arrangement’s potential for abuse, and may be subject to greater scrutiny by enforcement agencies.
Failure to meet the requirements of an applicable AKS exception or safe harbor, however, does not render an arrangement illegal. Rather, the government must evaluate such arrangements on a case-by-case basis, taking into account all facts and circumstances, including the parties’ intent and the arrangement’s potential for abuse, and may be subject to greater scrutiny by enforcement agencies.
Although this prohibition applies only to federal healthcare program beneficiaries, the routine waivers of copayments and deductibles offered to patients covered by commercial payers may implicate applicable state laws related to, among other things, unlawful schemes to defraud, excessive fees for services, tortious interference with patient contracts and statutory or common law fraud.
Although this prohibition applies only to federal healthcare program beneficiaries, the routine waivers of co-payments and deductibles offered to patients covered by commercial payers may implicate applicable state laws related to, among other things, unlawful schemes to defraud, excessive fees for services, tortious interference with patient contracts and statutory or common law fraud.
The U.S. patents are expected to expire between 2025 and 2029, and the foreign patent is expected to expire in 2025. We own two issued U.S. patents, ten issued foreign patents, and eight pending foreign patent applications directed to our OsteoAMP product, including foreign patents and patent applications in Europe, Asia, Canada and Australia.
We own two issued U.S. patents, ten issued foreign patents, and eight pending foreign patent applications directed to our OsteoAMP product, including foreign patents and patent applications in Europe, Asia, Canada and Australia. The issued U.S. patent is expected to expire in 2029. The issued foreign patents are expected to expire in 2029.
To demonstrate compliance with the essential requirements laid down in Annex I to the EU Medical Devices Directive, medical device manufacturers must undergo a conformity assessment procedure, which varies according to the type of medical device and its (risk) classification.
To demonstrate compliance with the essential requirements in Annex I to the EU Medical Devices Directive, medical device manufacturers must undergo a conformity assessment procedure, which varies according to the type of medical device and its (risk) classification.
Our PNS product targets peripheral nerve pain at its source without drugs and its small profile allows the system to be implanted in many locations on the body, depending on patient needs.
Our PNS product targets peripheral nerve pain at its source without the use of drugs and its small profile allows the system to be implanted in many locations on the body, depending on patient needs.
These designed to increase hand function, increase or maintain hand range of motion, reduce muscle spasms, prevent muscle loss, reeducate muscles and/or increase blood circulation. H200 Wireless is programmed by a clinician to stimulate the appropriate nerves and muscles of the forearm and hand. We believe this helps to reeducate electrical brain signals, stimulating weak or paralyzed muscles.
These are designed to increase hand function, increase or maintain hand range of motion, reduce muscle spasms, prevent muscle loss, reeducate muscles and/or increase blood circulation. H200 Wireless is programmed by a clinician to stimulate the appropriate nerves and muscles of the forearm and hand. We believe this helps to re-educate electrical brain signals, stimulating weak or paralyzed muscles.
Bioactive synthetic bone graft substitute is comprised of a mixture of calcium phosphate granules and bioglass granules suspended in a resorbable polymer carrier that facilitates handling and delivery of the granule components to fill spaces of missing bone. The unique and synergistic combination of biomaterials in SIGNAFUSE is designed to help accelerate cellular activity and kickstart osteogenesis.
Bioactive synthetic bone graft substitute is comprised of a mixture of calcium phosphate granules and bioglass granules suspended in a resorbable polymer carrier that facilitates handling and delivery of the granule components to fill spaces of missing bone. The unique and synergistic combination of biomaterials in SIGNAFUSE is designed to help accelerate cellular activity and kick-start osteogenesis.
While the neXus system can be used in many clinical applications including neurosurgery, the SonaStar Elite handpiece has been cleared for resection of tumors with varying consistencies ranging from soft to firm, including the removal of malignant and benign brain and spinal tumors. The SonaStar Elite handpiece represents the latest innovation in our neXus ultrasonic surgical pipeline.
While the neXus system can be used in many clinical applications including neurosurgery, the SonaStar Elite handpiece has been cleared for resection of tumors with varying consistencies ranging from soft to firm, including the removal of brain and spinal tumors. The SonaStar Elite handpiece represents the latest innovation in the neXus ultrasonic surgical pipeline.
The U.S. patents are expected to expire between 2033 and 2038, and the foreign patents are expected to expire between 2034 and 2036. The pending patent applications, if issued, are expected to expire between 2033 and 2038, without accounting for potential patent term extensions and adjustments.
The U.S. patents are expected to expire between 2033 and 2038, and the foreign patents are expected to expire between 2034 and 2037. The pending patent applications, if issued, are expected to expire between 2033 and 2038, without accounting for potential patent term extensions and adjustments.
Among other things, these laws and others generally (1) prohibit the provision of anything of value in exchange for the referral of patients or for the purchase, order, or recommendation of any item or service reimbursed by a federal healthcare program, (including Medicare and Medicaid); (2) require that claims for payment submitted to federal healthcare programs be truthful; and (3) require the maintenance of certain government licenses and permits.
Among other things, these laws, and others aimed at curbing FWA, generally: (1) prohibit the provision of anything of value in exchange for the referral of patients or for the purchase, order, or recommendation of any item or service reimbursed by a federal healthcare program, (including Medicare and Medicaid); (2) require that claims for payment submitted to federal healthcare programs be truthful; and (3) require the maintenance of certain government licenses and permits.
Durolane is an FDA-approved sterile, transparent and viscoelastic gel that is a single injection therapy that is indicated in the United States for the symptomatic treatment of OA in the knee in patients who have failed to respond adequately to conservative non-pharmacological therapy and simple analgesics.
Durolane is an FDA-approved, sterile, transparent and viscoelastic gel that is a single injection therapy that is indicated in the United States for the symptomatic treatment of osteoarthritis (“OA”) in the knee in patients who have failed to respond adequately to conservative non-pharmacological therapy and simple analgesics.
Durolane is also indicated for the hip, ankle and shoulder, as well as for treatment of other small orthopedic joints outside the United States. Durolane contains high levels of HA and is injected directly into the joints affected by OA to relieve pain and restore lubrication and cushioning.
Durolane is also indicated in certain markets outside the United States for the hip, ankle and shoulder, as well as for treatment of other small orthopedic joints. Durolane contains high levels of HA and is injected directly into the joints affected by OA to relieve pain and restore lubrication and cushioning.
Further, the Civil Monetary Penalties Statute authorizes the imposition of civil monetary penalties, assessments and exclusion against an individual or entity based on a variety of prohibited conduct, including, but not limited to offering remuneration to a federal healthcare program beneficiary that the individual or entity knows or should know is likely to influence the beneficiary to order or receive healthcare items or services from a particular provider.
Further, the Civil Monetary Penalties Statute authorizes the imposition of civil monetary penalties, assessments and exclusion against an individual or entity based on a variety of prohibited conduct, including, but not limited to offering remuneration to a federal healthcare program beneficiary that the individual or entity knows or should know is likely to influence the beneficiary to order or receive healthcare items or services from a particular provider (also known as “beneficiary inducements”).
Moreover, in certain cases, providers who routinely waive copayments and deductibles for Medicare and Medicaid beneficiaries can also be held liable under the AKS and civil FCA. One of the statutory exceptions to the prohibition is non-routine, unadvertised waivers of copayments or deductible amounts based on individualized determinations of financial need or exhaustion of reasonable collection efforts.
Moreover, in certain cases, providers who routinely waive co-payments and deductibles for Medicare and Medicaid beneficiaries can also be held liable under the AKS and civil FCA. One of the statutory exceptions to the beneficiary inducements prohibition is non-routine, unadvertised waivers of co-payments or deductible amounts based on individualized determinations of financial need or exhaustion of reasonable collection efforts.
Many states have similar fraud and abuse statutes or regulations that may be broader in scope and may apply regardless of payer, in addition to items and services reimbursed under Medicaid and other state programs.
Many states have similar FWA statutes or regulations that may be broader in scope and may apply regardless of payer, in addition to items and services reimbursed under Medicaid and other state programs.
If the device presents a “significant risk,” to human health, as defined by the FDA, the FDA requires the device sponsor to submit an IDE application to the FDA, which must become effective prior to commencing human clinical trials.
If the device presents a “significant risk” to human health, as defined by the FDA, the FDA requires the device sponsor to submit an IDE application to the FDA, which must become effective prior to commencing human clinical trials.
Employee and Human Capital Resources As of December 31, 2022, we had approximately 1,120 employees, none of whom were covered by collective bargaining agreements. Most of these employees are located in the United States with approximately 125 located outside the United States. We believe that our relations with our employees are generally good.
Employee and Human Capital Resources As of December 31, 2023, we had approximately 970 employees, none of whom were covered by collective bargaining agreements. Most of these employees are located in the United States with approximately 120 located outside the United States. We believe that our relations with our employees are generally good.
Several courts have interpreted the AKS’s intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal healthcare covered business, the AKS has been violated. The AKS includes statutory exceptions and regulatory safe harbors that protect certain arrangements.
Several courts have interpreted the AKS’s intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal healthcare covered business, the AKS has been violated. The AKS includes statutory exceptions and regulatory safe harbors that protect certain arrangements that would otherwise be prohibited by the statute.
We also own one issued U.S. patent, one issued foreign patent in Australia and one pending foreign application in Canada directed to our Bioness Integrated Therapy System (“BITS”). The U.S. patent is expected to expire in 2037, and the foreign patent is expected to expire in 2036.
We also own one issued U.S. patent, one issued foreign patent in Australia and one issued foreign patent in Canada directed to our Bioness Integrated Therapy System (“BITS”). The U.S. patent is expected to expire in 2037, and the foreign patents are expected to expire in 2036.
As a general rule, demonstration of conformity of medical devices and their manufacturers with the essential requirements must be based, among other things, on the evaluation of clinical data supporting the safety and performance of the products during normal conditions of use.
Generally, demonstration of conformity of medical devices and their manufacturers with the essential requirements must be based, among other things, on the evaluation of clinical data supporting the safety and performance of the products during normal conditions of use.
Our products are designed to improve bone fusion rates following spinal and other orthopedic surgeries, including trauma and reconstructive foot and ankle procedures. Our portfolio is also comprised of surgical ultrasonic systems.
Our products are designed to improve bone fusion rates following spine and other orthopedic surgeries, including trauma and reconstructive foot and ankle procedures. Our portfolio is also comprised of an ultrasonic surgical system.
The pending patent applications, if issued, are expected to expire between 2039 and 2040, without accounting for potential patent term extensions and adjustments. We also own twenty-four issued U.S. patents and four pending U.S. patent applications directed to our BoneScalpel product.
The pending patent applications, if issued, are expected to expire between 2039 and 2040, without accounting for potential patent term extensions and adjustments. We also own twenty-nine issued U.S. patents, thirty-one issued foreign patents and seven pending foreign patents directed to our BoneScalpel product.
Anti-kickback, false claims and other healthcare laws We are subject to a number of U.S. laws regulating healthcare fraud and abuse including the federal Anti-Kickback Statute and the federal Physician Self-Referral Law (known as the Stark Law), the Civil False Claims Act, and the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), as well as numerous state laws regulating healthcare and insurance.
Anti-kickback Statute, False Claims Act and other healthcare laws We are subject to a number of U.S. laws regulating healthcare fraud, waste, and abuse (“FWA”) including without limitation the federal Anti-Kickback Statute and the federal Physician Self-Referral Law (known as the Stark Law), the Civil False Claims Act, the civil prohibition on beneficiary inducements, and the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), as well as numerous state laws regulating healthcare and insurance.
Reficio DBM is indicated for use as a bone void filler and bone graft substitute for voids or gaps that are not intrinsic to the stability to the bony structure, specifically for the treatment of surgically created osseous defects or osseous defects from traumatic injury to the bone.
Reficio DBM is indicated for use as a bone void filler and bone graft substitute for voids or gaps that are not intrinsic to the stability to the bony structure, specifically for the treatment of surgically created osseous defects or osseous defects from traumatic injury to the bone. Reficio DBM can be used for extremities, posterolateral spine and pelvis.
These laws are enforced by, without limitation, CMS, other divisions of the U.S. Department of Health and Human Services (“HHS”), the U.S. Department of Justice and individual U.S. Attorney offices within the Department of Justice, as well as state and local governments.
These laws are enforced by, without limitation, CMS, other divisions of the U.S. Department of Health and Human Services (“HHS”), including without limitation the HHS Office of Inspector General (“OIG”), the U.S. Department of Justice and individual U.S. Attorney offices within the Department of Justice, as well as state and local governments.
Our portfolio of products is grouped into three verticals based on clinical use: (i) Pain Treatments, (ii) Surgical Solutions and (iii) Restorative Therapies. Pain Treatments Our joint Pain Treatment products include peripheral nerve stimulation (“PNS”) and hyaluronic acid-based (“HA”) products for knee osteoarthritis.
Our portfolio of products is grouped into three areas based on clinical use: (i) Pain Treatments, (ii) Surgical Solutions and (iii) Restorative Therapies. 1 Table of Contents Pain Treatments Our Pain Treatment products include hyaluronic acid-based (“HA”) products for knee osteoarthritis and peripheral nerve stimulation (“PNS”) devices.
Entities that are found to be in violation of HIPAA, whether as the result of a breach of unsecured protected health information (“PHI”), a complaint about privacy practices, or an audit by HHS, may be subject to significant civil, criminal, and administrative fines and penalties and/or additional reporting and oversight obligations if required to enter into a resolution agreement and corrective action plan with HHS to settle allegations of HIPAA non-compliance.
Entities that are found to be in violation of HIPAA, which may occur in connection with, among other things, a breach of unsecured protected health information (“PHI”), a complaint about privacy practices, or an audit by HHS, may be subject to significant civil, criminal, and administrative fines, penalties, and damages and/or additional reporting and oversight obligations if required to enter into a resolution agreement and corrective action plan with HHS to settle allegations of HIPAA non-compliance.
If the FDA disagrees with a manufacturer’s determination not to seek a new 510(k) or other form of marketing authorization for the modification to the 510(k)-cleared product, the FDA can require the manufacturer to cease marketing and/or request the recall of the modified device until 510(k) clearance or PMA approval is obtained or a de novo classification is granted. 11 Table of Contents The PMA process is more demanding than the 510(k) premarket notification process.
If the FDA disagrees with a manufacturer’s determination not to seek a new 510(k) or other form of marketing authorization for the modification to the 510(k)-cleared product, the FDA can require the manufacturer to cease marketing and/or request the recall of the modified device until 510(k) clearance or PMA approval is obtained or a de novo classification is granted.
We launched OSTEOAMP Flowable in 2021, which is designed to be moldable and easy to use, with a convenient, ready to use syringe. Additionally, a customized cannula-based delivery system is currently in development, which will enhance handling properties of the device further enabling use in minimally invasive surgical procedures.
We currently market OSTEOAMP in the United States. We launched OSTEOAMP Flowable in 2021, which is designed to be moldable and easy to use, with a convenient, ready to use syringe. Additionally, a customized cannula-based delivery system is currently in development, which is designed to enhance delivery of the product further enabling use in minimally invasive surgical procedures.
We manage our business through two reporting segments, U.S. and International which accounted for 89% and 11%, respectively, of our total net sales during the fiscal year ended December 31, 2022.
We manage our business through two reporting segments, U.S. and International, which accounted for 88% and 12%, respectively, of our total net sales during the fiscal year ended December 31, 2023.
Our Restorative Therapies product portfolio is also comprised of Advanced Rehabilitation devices designed to help patients regain leg or hand function due to stroke, multiple sclerosis or other central nervous system disorders. EXOGEN® is an ultrasound bone healing system for the non-invasive treatment of established nonunion fractures and certain fresh fractures.
Restorative Therapies Our Restorative Therapies product portfolio consists of an ultrasonic bone stimulation system and a portfolio of products comprised of Advanced Rehabilitation devices designed to help patients regain leg or hand function due to stroke, multiple sclerosis or other central nervous system disorders. 6 Table of Contents EXOGEN ® is an ultrasound bone stimulation system for the non-invasive treatment of established nonunion fractures and certain fresh fractures.
We also own fourteen issued U.S. patents, three pending U.S. patent applications, sixteen issued foreign patents, and nine pending foreign patent applications directed to our Vector Gait and Safety System, including foreign patents and patent applications in in Australia, Canada, Europe, and Japan.
We also own fifteen issued U.S. patents, three pending U.S. patent applications, seventeen issued foreign patents, and five pending foreign patent applications directed to our Vector Gait and Safety System, including foreign patents and patent applications in in Australia, Canada, Europe, and Japan.
Patents issuing from these applications, if any, are expected to expire in 2040, without accounting for potential patent term extensions and adjustments. We also own ten issued U.S. patents and twelve issued foreign patents in Australia, Canada, Europe, and Japan directed to our StimRouter system.
The pending patent applications, if issued, are expected to expire in 2029, without accounting for potential patent term extensions and adjustments. We also own ten issued U.S. patents and twelve issued foreign patents in Australia, Canada, Europe, and Japan directed to our StimRouter system.
However, while assignments or licenses to us generally are irrevocable, no assurance can be given that these arrangements will continue to be made available to us on terms that are acceptable to us, or at all.
However, while such rights are irrevocable, no assurance can be given that these arrangements will continue to be made available to us on financial terms that are acceptable to us, or at all.
Manufacturers are required to take FSCAs defined as any corrective action for technical or medical reasons to prevent or reduce a risk of a serious incident associated with the use of a medical device that is made available on the market.
Manufacturers are required to take FSCAs defined as any corrective action for technical or medical reasons to prevent or reduce a risk of a serious incident associated with the use of a medical device that is made available on the market. An FSCA may include the recall, modification, exchange, destruction or retrofitting of the device.
Our Restorative Therapies compete with products marketed by Orthofix Medical Inc., Zimmer Biomet Holdings, Inc., Enovis, MiMedx, Integra Life Sciences, Organogenesis, Hanger Orthopedics, XFT Medical, Rewalk Robotics, Ekso Bionics, Aretech LLC and DIH Medical.
(Johnson & Johnson), Stryker Corporation, NuVasive, Inc., Orthofix Medical Inc., Zimmer Biomet Holdings, Inc. and Globus Medical Inc., Johnson & Johnson, Integra Life Sciences, Inc., and Söering. Our Restorative Therapies compete with products marketed by Orthofix Medical Inc., Zimmer Biomet Holdings, Inc., Enovis, MiMedx, Hanger Orthopedics, XFT Medical, Rewalk Robotics, Ekso Bionics, Aretech LLC and DIH Medical.
We believe our manufacturing operations are in compliance with regulations mandated by the FDA. We are an FDA-registered medical device manufacturer. Our manufacturing facilities and processes are subject to periodic inspections and audits by various federal, state and foreign regulatory agencies.
We believe our manufacturing operations are in compliance with regulations mandated by the FDA. We are an FDA-registered medical device manufacturer. Our manufacturing facilities and processes are subject to periodic inspections and audits by various federal, state and foreign regulatory agencies. Our products include components manufactured by other companies in the United States and elsewhere.
We also own one issued U.S. patent and one pending U.S. patent application and four pending foreign patent applications directed to our TalisMann product, including foreign patent applications in Australia, Canada, Europe, Japan and one pending Patent Cooperation Treaty application. The U.S. patent is expected to expire in 2039.
We also own two issued U.S. patents and one pending U.S. patent application and four pending foreign patent applications directed to our TalisMann product, including foreign patent applications in Australia, Canada, Europe, and Japan. The U.S. patents are expected to expire between 2039 and 2040.
Organization of this Annual Report for additional information about the organizational transactions completed as part of the IPO. 20 Table of Contents Available Information Our filings with the Securities and Exchange Commission (“SEC”), including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements for Meetings of Shareholders, any registration statements, and amendments to those reports, are available free of charge on our website as soon as reasonably practicable after they are filed with, or furnished to, the SEC.
Available Information Our filings with the Securities and Exchange Commission (“SEC”), including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements for stockholder meetings, any registration statements, and amendments to those reports, are available free of charge on our website as soon as reasonably practicable after they are filed with, or furnished to, the SEC.
In a PMA, the manufacturer must demonstrate that the device is safe and effective, and the PMA must be supported by extensive data, including data from preclinical studies and human clinical trials.
The PMA process is more demanding than the 510(k) premarket notification process. In a PMA, the manufacturer must demonstrate that the device is safe and effective, and the PMA must be supported by extensive data, including data from preclinical studies and human clinical trials.
The neXus platform is driven by a proprietary digital algorithm that results in more power, efficiency, and control for the surgeon. The device incorporates technology that allows for intuitive setup and use.
The neXus platform is driven by a proprietary digital algorithm designed to provide more power, efficiency, and control for the surgeon. The device incorporates technology that allows for intuitive set-up and use.
The FCPA prohibits U.S. companies and their representatives from processing, offering, or making payments of money or anything of value to foreign officials with the intent to obtain or retain business or seek a business advantage.
Foreign Corrupt Practices Act We are subject to the Foreign Corrupt Practices Act of 1977, as amended (“FCPA”). The FCPA prohibits U.S. companies and their representatives from processing, offering, or making payments of money or anything of value to foreign officials with the intent to obtain or retain business or seek a business advantage.
The Medicare program is expected to continue to implement a new payment mechanism for certain durable medical equipment, prosthetics, orthotics, and supplies (“DMEPOS”) items via the implementation of its competitive bidding program.
The Medicare program is expected to continue to implement a new payment mechanism for certain durable medical equipment, prosthetics, orthotics, and supplies (“DMEPOS”) items via the implementation of its competitive bidding program. Bone growth therapy devices are currently exempt from this competitive bidding process.
Trice’s established and growing presence in sports medicine and orthopedics is directly aligned with our strategy of expanding our offerings. Our investment resulted in exclusive sales and distribution rights to Trice’s products outside of the U.S. and a seat on the Trice board of directors.
Trice’s established and growing presence in sports medicine and orthopedics is directly aligned with our strategy of expanding our offerings. Our investment resulted in exclusive sales and distribution rights to Trice’s products outside of the United States.
We typically acquire rights under such assignments or licenses in exchange for lump-sum payments or arrangements under which we pay a percentage of sales to the licensor.
We obtain assignments or licenses of varying durations for certain of our products from third parties. We typically acquire rights under such assignments or licenses in exchange for lump-sum payments or arrangements under which we pay a percentage of sales to the licensor.
In November 2017, the FDA released a guidance document entitled “Regulatory Considerations for Human Cells, Tissues, and Cellular and Tissue—Based Products: Minimal Manipulation and Homologous Use—Guidance for Industry and Food and Drug Administration Staff.” The guidance outlined the FDA’s position that all lyophilized amniotic products are more than minimally manipulated and would therefore require a BLA to be lawfully marketed in the United States.
Unlike Section 361 HCT/Ps, HCT/Ps regulated as “Section 351” HCT/Ps are subject to premarket review and/or approval by the FDA, as required. 12 Table of Contents In November 2017, the FDA released a guidance document entitled “Regulatory Considerations for Human Cells, Tissues, and Cellular and Tissue—Based Products: Minimal Manipulation and Homologous Use—Guidance for Industry and Food and Drug Administration Staff.” The guidance outlined the FDA’s position that all lyophilized amniotic products are more than minimally manipulated and would therefore require a BLA to be lawfully marketed in the United States.
Other potential consequences include, among other things: complete withdrawal of the product from the market, product recalls, fines, warning letters, untitled letters, clinical holds on clinical studies, refusal of the FDA to approve pending applications or supplements to approved applications, product seizures or detention, refusal to permit the import or export of products, consent decrees, corporate integrity agreements, debarment or exclusion from federal healthcare programs, the issuance of corrective information, injunctions, or the imposition of civil or criminal penalties. 14 Table of Contents In addition, the FDA closely regulates the marketing, labeling, advertising and promotion of drugs, biologics (including Section 361 HCT/Ps) and medical devices.
Other potential consequences include, among other things: complete withdrawal of the product from the market, product recalls, fines, warning letters, untitled letters, clinical holds on clinical studies, refusal of the FDA to approve pending applications or supplements to approved applications, product seizures or detention, refusal to permit the import or export of products, consent decrees, corporate integrity agreements, debarment or exclusion from federal healthcare programs, the issuance of corrective information, injunctions, or the imposition of civil or criminal penalties.
An IND is a request for authorization from the FDA to administer an investigational new drug product to humans. An IND must become effective before human clinical trials may begin.
Prior to beginning clinical trials of a new drug or biologic product in the United States, an IND must be submitted to the FDA. An IND is a request for authorization from the FDA to administer an investigational new drug product to humans. An IND must become effective before human clinical trials may begin.
Launch of the product is planned for the fourth quarter of 2023. 6 Table of Contents Developmental and clinical pipeline for Surgical Solutions (including investments) As we build the body of clinical evidence supporting our products, we continue to look for and execute on opportunities to innovate in our Surgical Solution portfolio.
Developmental and clinical pipeline for Surgical Solutions (including Investments) As we build the body of clinical evidence supporting our products, we continue to look for and execute on opportunities to innovate in our Surgical Solutions portfolio.
Private individuals also have the ability to bring actions under these false claims laws in the name of the government alleging false and fraudulent claims presented to or paid by the government (or other violations of the statutes) and to share in any amounts paid by the entity to the government in fines or settlement.
Private individuals, known as qui tam relators, also have the ability to bring actions under these false claims laws in the name of the government alleging false and fraudulent claims presented to or paid by the government (or other violations of the statutes).
INTERFACE Bioactive Bone Graft conforms to ASTM specification F1538 for 45S5 bioactive glass. INTERFACE is packed in a sterile, single use vial. We currently market INTERFACE in the United States. 4 Table of Contents OSTEOMATRIX+ is a synthetic bone graft with exceptional handling, rapid hydration and a biphasic composition for sustained performance used on the posterolateral spine, extremities and pelvis.
We currently market INTERFACE in the United States. 4 Table of Contents OSTEOMATRIX+ is a synthetic bone graft with exceptional handling, rapid hydration and a biphasic composition for sustained performance used on the posterolateral spine, extremities and pelvis.
Violation of any of these laws or any other governmental regulations that apply may result in significant penalties, including, without limitation, administrative civil and criminal penalties, damages, disgorgement, fines, additional reporting requirements and compliance oversight obligations, in the event that a corporate integrity agreement or other agreement is required to resolve allegations of noncompliance with these laws, the curtailment or restructuring of operations, exclusion from participation in government healthcare programs and/or individual imprisonment. 18 Table of Contents Foreign Corrupt Practices Act We are subject to the Foreign Corrupt Practices Act of 1977, as amended (“FCPA”).
Violation of any of these laws or any other governmental regulations that apply may result in significant penalties, including, without limitation, administrative civil and criminal penalties, damages, disgorgement, fines, additional reporting requirements and compliance oversight obligations, in the event that a corporate integrity agreement or other agreement is required to resolve allegations of noncompliance with these laws, the curtailment or restructuring of operations, exclusion from participation in government healthcare programs and/or individual imprisonment. 18 Table of Contents We also participate in state government-managed Medicaid programs as well as certain other qualifying federal and state government programs where discounts and mandatory rebates are provided to participating state and local government entities.
Our HA products are designed to work with the body’s biological processes, providing a natural lubricant into the joint, that relieve mild to moderate pain, improves mobility, and helps the patient get back to their normal activities.
Our HA products are designed to work with the body’s biological processes, providing a natural lubricant into the joint and providing relief for mild to moderate pain, improving mobility, and helping the patient return to their normal activities.
Bone growth therapy devices are currently exempt from this competitive bidding process. 19 Table of Contents Outside of the United States, the pricing of medical devices and prescription pharmaceuticals is subject to governmental control in many countries. Some countries provide that products may be marketed only after a reimbursement price has been agreed.
Outside of the United States, the pricing of medical devices and prescription pharmaceuticals is subject to governmental control in many countries. Some countries provide that products may be marketed only after a reimbursement price has been agreed.
We intend to launch product line enhancements and invest in the development of next-generation surgical solution therapies to continue to grow our market share. • Invest in research and development. We are focused on internal research and development to broaden our portfolio of Pain Treatments, Surgical Solutions and Restorative Therapies.
We intend to launch product line enhancements and invest in the development of next-generation surgical solution therapies to continue to grow our market share. • Invest in research and development.
To obtain 510(k) clearance, a manufacturer must submit a premarket notification demonstrating to the FDA’s satisfaction that the proposed device is “substantially equivalent” to another legally marketed device that itself does not require PMA approval (a predicate device).
Class III devices require approval of a premarket approval application, or PMA, evidencing safety and effectiveness of the device. 10 Table of Contents To obtain 510(k) clearance, a manufacturer must submit a premarket notification demonstrating to the FDA’s satisfaction that the proposed device is “substantially equivalent” to another legally marketed device that itself does not require PMA approval (a predicate device).
HCT/Ps Certain of our products are regulated as HCT/P. Section 361 of the PHSA authorizes the FDA to issue regulations to prevent the introduction, transmission or spread of communicable disease.
HCT/Ps Certain of our products are regulated as HCT/P, which is an acronym for human cell, tissue, and cellular and tissue-based products. Section 361 of the PHSA authorizes the FDA to issue regulations to prevent the introduction, transmission or spread of communicable disease.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeSimilar to the AKS, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation; • the federal Physician Payments Sunshine Act, which requires certain applicable manufacturers of drugs, devices, biologics and medical supplies for which payment is available under certain federal healthcare programs, to monitor and report to CMS, certain payments and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain other healthcare providers (physician assistants, nurse practitioners, clinical nurse specialists, anesthesiologist assistants, certified registered nurse anesthetists, anesthesiology assistants and certified nurse midwives) and teaching hospitals, and applicable manufacturers and group purchasing organizations, to report annually ownership and investment interests held by such physicians and their immediate family members; • federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm customers; • federal government price reporting laws; and • analogous state law equivalents of each of the above federal laws, state anti-kickback and false claims laws; state laws requiring device companies to comply with specific compliance standards, restrict payments made to healthcare providers and other potential referral sources, and report information related to payments and other transfers of value to healthcare providers or marketing expenditures; and state laws related to insurance fraud in the case of claims involving private insurers. 46 Table of Contents The risk of us being found in violation of these laws and regulations is increased by the fact that many of them have not been fully interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of interpretations.
Biggest changeSimilar to the AKS, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation; • the federal Physician Payments Sunshine Act, which requires certain applicable manufacturers of drugs, devices, biologics and medical supplies for which payment is available under certain federal healthcare programs, to monitor and report to CMS, certain payments and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain other healthcare providers (physician assistants, nurse practitioners, clinical nurse specialists, anesthesiologist assistants, certified registered nurse anesthetists, anesthesiology assistants and certified nurse midwives) and teaching hospitals, and applicable manufacturers and group purchasing organizations, to report annually ownership and investment interests held by such physicians and their immediate family members.
The FDA enforces the QSR through periodic announced or unannounced inspections of manufacturing facilities, and both we and our third-party manufacturers and suppliers are subject to such inspections. Similarly, the devices we distribute on behalf of third-party manufacturers that are regulated as Section 361 HCT/Ps must be manufactured in compliance with cGTP requirements and other related requirements.
The FDA enforces the QSR through periodic announced or unannounced inspections of manufacturing facilities, and both we and our third-party manufacturers and suppliers are subject to such inspections. Similarly, the devices we distribute on behalf of third-party manufacturers that are regulated as Section 361 HCT/Ps must be manufactured in compliance with FDA’s cGTP requirements and other related requirements.
The HHS Office for Civil Rights actively enforces HIPAA and frequently issues significant fines and penalties. HIPAA also authorizes state Attorneys General to file suit on behalf of their residents. Courts may award damages, costs and attorneys’ fees related to violations of HIPAA in such cases.
The HHS Office for Civil Rights actively enforces HIPAA and frequently issues significant fines and penalties. HIPAA also authorizes state Attorneys General to file suit on behalf of residents of their states. Courts may award damages, costs and attorneys’ fees related to violations of HIPAA in such cases.
If such banking institutions were to fail, we could lose all or a portion of amounts held in excess of such insurance limitations. The FDIC recently took control of two such banking institutions, Silicon Valley Bank (“SVB”) on March 10, 2023 and Signature Bank (“Signature Bank”) on March 12, 2023.
If such banking institutions were to fail, we could lose all or a portion of amounts held in excess of such insurance limitations. The FDIC took control of two such banking institutions, Silicon Valley Bank (“SVB”) on March 10, 2023 and Signature Bank (“Signature Bank”) on March 12, 2023.
Pricing pressure from our competitors or hospitals may affect our ability to sell our products at prices necessary to support our current business strategies. Medical device companies, healthcare systems and GPOs have intensified competitive pricing pressure as a result of industry trends and new technologies.
Pricing pressure from our competitors or hospitals may affect our ability to sell our products at prices necessary to support our current business strategies. Medical device companies, healthcare systems, IDNs and GPOs have intensified competitive pricing pressure as a result of industry trends and new technologies.
However, given that the scope, interpretation, and application of these laws and regulations are often uncertain and may be conflicting, it is possible that these obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and/or in a manner that conflicts our practices.
However, given that the scope, interpretation, and application of these laws and regulations are often uncertain and may be conflicting, it is possible that these obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and/or in a manner that conflicts with our practices.
Even if we are successful in developing additional products, the success of any new product offering or enhancements to existing products will depend on several factors, including our ability to: • properly identify and anticipate the needs of healthcare professionals and patients; • develop and introduce new products, line extensions and expanded indications in a timely manner; • distinguish our products from those of our competitors; 24 Table of Contents • avoid infringing upon the intellectual property rights of third-parties and maintain necessary intellectual property licenses from third-parties; • demonstrate, if required, the safety and efficacy of new products with data from preclinical studies and clinical trials; • obtain clearance, approval, or certification, if required, from the FDA and other regulatory agencies or notified bodies, for such new products, line extensions and expanded indications, and maintain full compliance with FDA and other regulatory requirements applicable to new devices or products or modifications of existing devices or products; • provide adequate training to potential users of our products; • market acceptance of our newly developed or acquired products or therapies; • receive adequate coverage and reimbursement for our products; and • maintain an effective and dedicated sales and marketing team.
Even if we are successful in developing additional products, the success of any new product offering or enhancements to existing products will depend on several factors, including our ability to: • properly identify and anticipate the needs of healthcare professionals and patients; • develop and introduce new products, line extensions and expanded indications in a timely manner; • distinguish our products from those of our competitors; • avoid infringing upon the intellectual property rights of third parties and maintain necessary intellectual property licenses from third parties; • demonstrate, if required, the safety and efficacy of new products with data from preclinical studies and clinical trials; • obtain clearance, approval, or certification, if required, from the FDA and other regulatory agencies or notified bodies, for such new products, line extensions and expanded indications, and maintain full compliance with FDA and other regulatory requirements applicable to new devices or products or modifications of existing devices or products; • provide adequate training to potential users of our products; • market acceptance of our newly developed or acquired products or therapies; • receive adequate coverage and reimbursement for our products; and • maintain an effective and dedicated sales and marketing team.
We are subject to diverse laws and regulations relating to privacy and data security, including, in the United States, HIPAA and, in the EU, the GDPR. New privacy rules are being enacted in the United States, particularly at the state level and globally, and existing ones are being updated and strengthened.
We are subject to diverse laws and regulations relating to privacy and data security, including, in the United States, HIPAA and, in the EU, the GDPR. New privacy laws and regulations are being enacted in the United States, particularly at the state level, and globally, and existing ones are being updated and strengthened.
Among other things, the ACA: • increased the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program; 44 Table of Contents • created a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected; • extended manufacturers’ Medicaid rebate liability to individuals enrolled in Medicaid managed care organizations; • expanded eligibility criteria for Medicaid programs; • established a new Patient-Centered Outcomes Research Institute to oversee and identify priorities in comparative clinical effectiveness research in an effort to coordinate and develop such research; and • implemented payment system reforms including a national pilot program on payment bundling to encourage hospitals, physicians and other providers to improve the coordination, quality and efficiency of certain healthcare services through bundled payment models.
Among other things, the ACA: • increased the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program; • created a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected; • extended manufacturers’ Medicaid rebate liability to individuals enrolled in Medicaid managed care organizations; • expanded eligibility criteria for Medicaid programs; • established a new Patient-Centered Outcomes Research Institute to oversee and identify priorities in comparative clinical effectiveness research in an effort to coordinate and develop such research; and • implemented payment system reforms including a national pilot program on payment bundling to encourage hospitals, physicians and other providers to improve the coordination, quality and efficiency of certain healthcare services through bundled payment models.
Further, new injectable therapies or oral medications may become available that help manage OA joint pain in a more convenient and/or cost effective manner than our HA viscosupplementation therapies.
Further, new injectable therapies or oral medications may become available that help manage OA pain in a more convenient and/or cost effective manner than our HA viscosupplementation therapies.
After settlement discussions with the Office of the United States Attorney in the Middle District of North Carolina (“USAO”) and OIG, on February 22, 2021, we entered into a formal settlement agreement, which included releases from associated False Claims Act liability and further Civil Monetary Penalties that are customary in self-disclosures of this type, and agreed to pay $3.6 million.
After settlement discussions with the Office of the United States Attorney in the Middle District of North Carolina (“USAO”) and OIG, on February 22, 2021, we entered into a formal settlement agreement, which included releases from associated False Claims Act liability and further Civil Monetary Penalties that are customary in self-disclosures of this type, and agreed to pay $3.6 million in resolution of this matter.
In addition, our indebtedness could have significant consequences on our financial position, including: • requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of funding growth, working capital, capital expenditures, investments or other cash requirements; • reducing our flexibility to adjust to changing business conditions or obtain additional financing; • exposing us to the risk of increased interest rates as certain of our borrowings, including borrowings under our term loan, are at variable rates, making it more difficult for us to make payments on our indebtedness; • restricting us from making strategic acquisitions or causing us to make non-strategic divestitures; and • limiting our ability to obtain additional financing for working capital, capital expenditures, debt service requirements and general corporate or other purposes.
In addition, our indebtedness could have significant consequences on our financial position, including: • requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of funding growth, working capital, capital expenditures, investments or other cash requirements; • reducing our flexibility to adjust to changing business conditions or obtain additional financing; • exposing us to the risk of increased interest rates as certain of our borrowings, including borrowings under our term loan, are at variable rates, making it more difficult for us to make payments on our indebtedness; • restricting us from making strategic acquisitions or causing us to make non-strategic divestitures; and 23 Table of Contents • limiting our ability to obtain additional financing for working capital, capital expenditures, debt service requirements and general corporate or other purposes.
If we identify any material weaknesses in our internal controls over financial reporting or are unable to comply with the requirements of Section 404 in a timely manner or assert that our internal controls over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal controls over financial reporting once we are no longer an emerging growth company, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our Class A common stock could be adversely affected, and we could become subject to investigations by the stock exchange on which our securities are listed, the SEC or other regulatory authorities, which could require additional financial and management resources.
If we identify any material weaknesses in our internal controls over financial reporting or are unable to comply with the requirements of Section 404 in a timely manner, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal controls over financial reporting once we are no longer an emerging growth company, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our Class A common stock could be adversely affected, and we could become subject to investigations by the stock exchange on which our securities are listed, the SEC or other regulatory authorities, which could require additional financial and management resources.
Some of our competitors have several competitive advantages over us, including: • greater financial, human and other resources for product research and development, sales and marketing and litigation; • significantly greater name recognition; • control of intellectual property and more expansive portfolios of intellectual property rights, which could impact future products under development; • greater experience in obtaining and maintaining regulatory clearances, approvals or certifications for products and product enhancements; • established relationships with hospitals and other healthcare providers, physicians, suppliers, customers and third-party payers; • additional lines of products, and the ability to bundle products to offer greater incentives to gain a competitive advantage; and • more established sales, marketing and worldwide distribution networks.
Some of our competitors have several competitive advantages over us, including: • greater financial, human and other resources for product research and development, sales and marketing and litigation; • significantly greater name recognition; • control of intellectual property and more expansive portfolios of intellectual property rights, which could impact future products under development; 30 Table of Contents • greater experience in obtaining and maintaining regulatory clearances, approvals or certifications for products and product enhancements; • established relationships with hospitals and other healthcare providers, physicians, suppliers, customers and third-party payers; • additional lines of products, and the ability to bundle products to offer greater incentives to gain a competitive advantage; and • more established sales, marketing and worldwide distribution networks.
Though we are required to disclose changes made in our internal controls and procedures on a quarterly basis and assess our internal control over financial reporting pursuant to Section 404, our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 until we are no longer an emerging growth company pursuant to the provisions of the JOBS Act.
Though we are required to disclose changes made in our internal controls and procedures on a quarterly basis and assess internal controls over financial reporting on an annual basis, our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404 until we are no longer an emerging growth company pursuant to the provisions of the JOBS Act.
The FDA and other U.S. and foreign governmental agencies and authorities regulate and oversee, among other things: • design, development and manufacturing; • testing, labeling, content and language of instructions for use and storage; • clinical trials; • product safety; • marketing, sales and distribution; • premarket clearance, approval and certification; • conformity assessment procedures; • record-keeping procedures; • advertising and promotion; • recalls and other field safety corrective actions; • post market surveillance, including reporting of deaths or serious injuries and malfunctions that, if they were to recur, could lead to death or serious injury; • post market studies; and • product import and export.
The FDA and other U.S. and foreign governmental agencies and authorities regulate and oversee, among other things: • design, development and manufacturing; • testing, labeling, content and language of instructions for use and storage; • clinical trials; • product safety; • marketing, sales and distribution; • premarket clearance, approval and certification; • conformity assessment procedures; • record-keeping procedures; • advertising and promotion; 38 Table of Contents • recalls and other field safety corrective actions; • post market surveillance, including reporting of deaths or serious injuries and malfunctions that, if they were to recur, could lead to death or serious injury; • post market studies; and • product import and export.
Legislative and regulatory reforms intended to reduce the costs of prescription drugs and medical devices are also ongoing in the United States and abroad. It is unclear what effect new quality and payment programs, such as MACRA, may have on our business, financial condition, results of operations or cash flows.
Legislative and regulatory reforms and executive actions intended to reduce the costs of prescription drugs and medical devices are also ongoing in the United States and abroad. It is unclear what effect new quality and payment programs, such as MACRA, may have on our business, financial condition, results of operations or cash flows.
The following examples are illustrative: • others may be able to develop and/or practice technology that is similar to our technology or aspects of our technology, but that are not covered by the claims of the patents that we own or control, assuming such patents have issued or do issue; • we or our licensors or any future strategic partners might not have been the first to conceive or reduce to practice the inventions covered by the issued patent or pending patent application that we own or have exclusively licensed; • we or our licensors or any future strategic partners might not have been the first to file patent applications covering certain of our inventions; • others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights; • our pending patent applications may not lead to issued patents; • issued patents that we own or exclusively license may not provide us with any competitive advantage, or may be held invalid or unenforceable, as a result of legal challenges by our competitors; • our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; • third-parties performing manufacturing or testing for us using our products or technologies could use the intellectual property of others without obtaining a proper license; • parties may assert an ownership interest in our intellectual property and, if successful, such disputes may preclude us from exercising exclusive rights over that intellectual property; • we may not develop or in-license additional proprietary technologies that are patentable; • we may not be able to obtain and maintain necessary licenses on commercially reasonable terms, or at all; and • the patents of others may adversely affect our business.
The following examples are illustrative: • others may be able to develop and/or practice technology that is similar to our technology or aspects of our technology, but that are not covered by the claims of the patents that we own or control, assuming such patents have issued or do issue; 60 Table of Contents • we, the inventors of any in-licensed patent rights, or any future strategic partners might not have been the first to conceive or reduce to practice the inventions covered by the issued patent or pending patent application that we own or have exclusively licensed; • we, the investors of any in-licensed patent rights, or any future strategic partners might not have been the first to file patent applications covering certain of our inventions; • others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights; • our pending patent applications may not lead to issued patents; • issued patents that we own or exclusively license may not provide us with any competitive advantage, or may be held invalid or unenforceable, as a result of legal challenges by our competitors; • our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; • third parties performing manufacturing or testing for us using our products or technologies could use the intellectual property of others without obtaining a proper license; • parties may assert an ownership interest in our intellectual property and, if successful, such disputes may preclude us from exercising exclusive rights over that intellectual property; • we may not develop or in-license additional proprietary technologies that are patentable; • we may not be able to obtain and maintain necessary licenses on commercially reasonable terms, or at all; and • the patents of others may adversely affect our business.
Office of Foreign Assets Controls, and U.S. anti-money laundering regulations, as well as disadvantages of competing against companies from countries that are not subject to these regulatory regimes; • training of third-parties on our products and the procedures in which they are used; • reduced protection for and greater difficulty enforcing our intellectual property rights; • unexpected changes in tariffs, trade barriers and regulatory requirements, export licensing requirements or other restrictive actions by foreign governments; • difficulty in staffing and managing widespread operations, including compliance with tax, employment, immigration and labor laws for employees living or traveling abroad; • foreign taxes, including withholding of payroll taxes; • workforce uncertainty in countries where labor unrest is more common than in the United States; • exposure to liability under a variety of local, national and multinational laws and regulations in multiple jurisdictions, including data privacy laws, healthcare and pharmaceutical laws, antitrust and competition laws, anti-bribery and anti-corruption laws and international trade laws; • international regulators and third-party payers requiring additional clinical studies prior to approving or allowing reimbursement for our products; • complexities associated with managing multiple payer reimbursement regimes, government payers or patient self-pay systems; • production shortages resulting from any events affecting material supply or manufacturing capabilities abroad; and • business interruptions resulting from geopolitical actions, including war and terrorism, global pandemics or natural disasters including earthquakes, hurricanes, floods and fires.
Office of Foreign Assets Controls, and U.S. anti-money laundering regulations, as well as disadvantages of competing against companies from countries that are not subject to these regulatory regimes; • training of third parties on our products and the procedures in which they are used; • reduced protection for and greater difficulty enforcing our intellectual property rights; • unexpected changes in tariffs, trade barriers and regulatory requirements, export licensing requirements or other restrictive actions by foreign governments; • difficulty in staffing and managing widespread operations, including compliance with tax, employment, immigration and labor laws for employees living or traveling abroad; • foreign taxes, including withholding of payroll taxes; • workforce uncertainty in countries where labor unrest is more common than in the United States; • exposure to liability under a variety of local, national and multinational laws and regulations in multiple jurisdictions, including data privacy laws, healthcare and pharmaceutical laws, antitrust and competition laws, anti-bribery and anti-corruption laws and international trade laws; • international regulators and third-party payers requiring additional clinical studies prior to approving or allowing reimbursement for our products; • complexities associated with managing multiple payer reimbursement regimes, government payers or patient self-pay systems; • production shortages resulting from any events affecting material supply or manufacturing capabilities abroad; and • business interruptions resulting from geopolitical actions, including war and terrorism (including the current conflicts between Russia and Ukraine and between Israel and Hamas), global pandemics or natural disasters including earthquakes, hurricanes, floods and fires.
For example, technical documentation for certain of our products requiring recertification, such as our single injection HA treatment Durolane®, and EXOGEN Bone Healing System have been submitted to our notified body. While we are actively engaged with our notified body to renew the CE marks for these and our other products, CE mark renewals for these products are still pending.
For example, technical documentation for certain of our products requiring recertification, such as our single injection HA treatment Durolane®, and EXOGEN Bone Stimulation System have been submitted to our notified body. While we are actively engaged with our notified body to renew the CE marks for these and our other products, CE mark renewals for these products are still pending.
Internal or external parties have and will continue to attempt to circumvent our security systems, and we expect that we may in the future continue to experience, among other things, external attacks on our network, and attempts to gain unauthorized access to sensitive and confidential information, such as reconnaissance probes, denial of service attempts, malware attacks, malicious software attacks and phishing attacks, such as an external phishing incident that occurred in January 2023, targeting an employee with plausible-sounding prompts to send information to Company leadership.
Internal or external parties have and will continue to attempt to circumvent our security systems and those of our vendors and service providers, and we expect that we may in the future continue to experience, among other things, external attacks on our network, and attempts to gain unauthorized access to sensitive and confidential information, such as reconnaissance probes, denial of service attempts, malware attacks, malicious software attacks and phishing attacks, such as an external phishing incident that occurred in January 2023, targeting an employee with plausible-sounding prompts to send information to Company leadership.
In addition, regardless of merit or eventual outcome, product liability claims may result in: • costs of litigation; • distraction of management’s attention from our primary business; • the inability to commercialize existing or new products; • decreased demand for our products or, if cleared or approved, products in development; • damage to our business reputation; • product recalls or withdrawals from the market; • withdrawal of clinical trial participants; • substantial monetary awards to patients or other claimants; and • loss of net sales.
In addition, regardless of merit or eventual outcome, product liability claims may result in: • costs of litigation; • distraction of management’s attention from our primary business; • the inability to commercialize existing or new products; • decreased demand for our products or, if cleared or approved, products in development; 32 Table of Contents • damage to our business reputation; • product recalls or withdrawals from the market; • withdrawal of clinical trial participants; • substantial monetary awards to patients or other claimants; and • loss of net sales.
Despite the privacy and security measures we have in place to comply with applicable laws, regulations and contractual requirements, our facilities and systems, and those of our third-party vendors and service providers, are vulnerable to privacy and security incidents including, but not limited to, computer hacking, breaches, acts of vandalism or theft, computer viruses and other malware, including ransomware or other forms of cyber-attack, misplaced or lost data, programming and/or human errors or other similar events.
Despite the privacy and security measures we have in place to comply with applicable laws, regulations and contractual requirements, our facilities and systems, and those of our third-party vendors and service providers, are vulnerable to privacy and security incidents including, but not limited to, computer hacking, breaches, acts of vandalism or theft, computer viruses and other malware, including ransomware and other forms of cyberattacks, misplaced or lost data, programming and/or human errors, and other similar events.
Purchasing decisions are gradually shifting to hospitals, IDNs and other hospital groups, with surgeons and other physicians increasingly acting only as “employees.” Changes in the purchasing behavior of hospitals or the amount third-party payers are willing to reimburse our customers for procedures using our products, including those as a result of healthcare reform initiatives, could create additional pricing pressure on us.
Purchasing decisions are gradually shifting to hospitals, IDNs and other hospital groups, with surgeons and other physicians increasingly acting only as “employees.” Changes in the purchasing behavior of hospitals or the amount that third-party payers are willing to reimburse our customers for procedures using our products, including as result of healthcare reform initiatives, could create additional pricing pressure on us.
Both in our capacity as a pharmaceutical and medical device manufacturer and/or as a supplier of covered items and services to federal health care program beneficiaries, with respect to which items and services we submit claims for reimbursement from such programs, we are subject to healthcare fraud and abuse regulation and enforcement by federal, state and foreign governments, which could adversely impact our business, results of operations and financial condition.
In our capacity as a pharmaceutical and medical device manufacturer, as a supplier of covered items and services to federal health care program beneficiaries, and with respect to items and services for which we submit claims for reimbursement from such programs, we are subject to healthcare fraud, waste and abuse regulation and enforcement by federal, state and foreign governments, which could adversely impact our business, results of operations and financial condition.
Additionally, when evaluating our internal controls over financial reporting, we may identify material weaknesses that we may not be able to remediate in time to meet the applicable deadline imposed upon us for compliance with the requirements of Section 404.
Additionally, when evaluating our financial controls, we may identify material weaknesses in our internal controls that we may not be able to remediate in time to meet the applicable deadline imposed upon us for compliance with the requirements of Section 404.
Risks related to our business We are currently subject to securities class action litigation and may be subject to similar or other litigation in the future, which will require significant management time and attention, result in significant legal expenses and may result in unfavorable outcomes, which may have a material adverse effect on our business, operating results and financial condition, and negatively affect the price of our common stock.
Risks related to our business We are currently subject to securities class action litigation and derivative shareholder lawsuits and may be subject to similar or other litigation in the future, which will require significant management time and attention, result in significant legal expenses and may result in unfavorable outcomes, which may have a material adverse effect on our business, operating results and financial condition, and negatively affect the price of our common stock.
In addition, we do not carry any “key person” insurance policies that could offset potential loss of service under applicable circumstances. Competition for experienced employees in the medical device industry can be intense. To attract, retain and motivate qualified employees, we may utilize equity-based incentive awards such as employee stock options.
In addition, we do not carry any “key person” insurance policies that could offset potential loss of service under applicable circumstances. 31 Table of Contents Competition for experienced employees in the medical device industry can be intense. To attract, retain and motivate qualified employees, we may utilize equity-based incentive awards such as employee stock options.
Any inability to access or delay in accessing these funds could adversely affect our business and financial position . 22 Table of Contents We might require additional capital to fund our financial and operating obligations and support business growth.
Any inability to access or delay in accessing these funds could adversely affect our business and financial position . 24 Table of Contents We might require additional capital to fund our financial and operating obligations and support business growth.
Accordingly, our future results could be harmed by a variety of factors, including: • economic weakness, including inflation, or political instability in particular foreign economies and markets; • foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doing business in another country; • customers in some foreign countries potentially having longer payment cycles; • exposure of our foreign operations to liability under U.S. laws and regulations, including the U.S.
Accordingly, our future results could be harmed by a variety of factors associated with international sales and operations, including: • economic weakness, including inflation, or political instability in particular foreign economies and markets; • foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doing business in another country; • customers in some foreign countries potentially having longer payment cycles; • exposure of our foreign operations to liability under U.S. laws and regulations, including the U.S.
If the value of such equity incentive awards does not appreciate as measured by the performance of the price of our Class A common stock, as seen in current market conditions, and ceases to be viewed as a valuable benefit, our ability to attract, retain and motivate our employees could be adversely impacted, which could adversely affect our business, results of operations and financial condition and/or require us to increase the amount we expend on cash and other forms of compensation.
If the value of such equity incentive awards does not appreciate as measured by the performance of the price of our Class A common stock, as seen in current market conditions, such awards may cease to be viewed as valuable and our ability to attract, retain and motivate our employees could be adversely impacted, which could adversely affect our business, results of operations and financial condition and/or require us to increase the amount we expend on cash and other forms of compensation.
In addition, the approval of a biologic product biosimilar to one of our products could have a material adverse impact on our business as it may be significantly less costly to bring to market and may be priced significantly lower than our products. 57 Table of Contents Intellectual property rights do not necessarily address all potential threats to our business.
In addition, the approval of a biologic product biosimilar to one of our products could have a material adverse impact on our business as it may be significantly less costly to bring to market and may be priced significantly lower than our products. Intellectual property rights do not necessarily address all potential threats to our business.
In the United States, HIPAA, as amended, and regulations implemented thereunder (collectively referred to as “HIPAA”) imposes, among other things, certain standards relating to the privacy, security, transmission and breach reporting of individually identifiable health information on certain healthcare providers, health plans, and healthcare clearinghouses, known as covered entities, as well as their business associates that perform certain services that involve creating, receiving, maintaining or transmitting protected health information (“PHI”) for or on behalf of such covered entities, and their covered subcontractors.
In the United States, HIPAA, as amended, and regulations implemented thereunder (collectively referred to as “HIPAA”) imposes, among other things, certain standards relating to the privacy, security, transmission and breach reporting of protected health information (“PHI”) on certain healthcare providers, health plans, and healthcare clearinghouses, known as covered entities, as well as their business associates that perform certain services that generally involve creating, receiving, maintaining or transmitting PHI for or on behalf of such covered entities, and their covered subcontractors.
If we have to cease marketing and/or have to recall any of our Surgical Solutions products our net sales would decrease, which would adversely affect our business, results of operations and financial condition. 40 Table of Contents HCT/Ps that do not meet the criteria of Section 361 are regulated under Section 351 of the PHSA.
If we have to cease marketing and/or have to recall any of our Surgical Solutions products our net sales would decrease, which would adversely affect our business, results of operations and financial condition. HCT/Ps that do not meet the criteria of Section 361 are regulated under Section 351 of the PHSA.
In addition, our third-parties are not our employees, and except for remedies available to us under our agreements with them, we cannot control whether or not they devote sufficient time and resources to our on-going clinical, nonclinical and preclinical programs. Switching or adding additional third-parties involves additional cost and requires management time and focus.
In addition, our third-party contractors are not our employees, and except for remedies available to us under our agreements with them, we cannot control whether or not they devote sufficient time and resources to our on-going clinical, nonclinical and preclinical programs. Switching or adding additional third-party contractors involves additional cost and requires management time and focus.
As a result, our patent portfolio may not provide us with sufficient rights to exclude others from commercializing product candidates similar or identical to ours. 53 Table of Contents Trademarks We rely on our trademarks as one means to distinguish our products from the products of our competitors, and have registered or applied to register many of these trademarks.
As a result, our patent portfolio may not provide us with sufficient rights to exclude others from commercializing product candidates similar or identical to ours. Trademarks We rely on our trademarks as one means to distinguish our products from the products of our competitors, and have registered or applied to register many of these trademarks.
We cannot predict which products from any of our businesses may ultimately be affected or whether or when the competitive bidding process may be extended to our businesses. 26 Table of Contents CMS periodically reviews medical study literature to determine how the literature addresses certain procedures and therapies in the Medicare population.
We cannot predict which products from any of our businesses may ultimately be affected or whether or when the competitive bidding process may be extended to our businesses. CMS periodically reviews medical study literature to determine how the literature addresses certain procedures and therapies in the Medicare population.
Patients may also not participate in our clinical trials if they choose to participate in contemporaneous clinical trials of competitive products. In addition, patients participating in clinical trials may die before completion of the trial or suffer adverse medical events unrelated to investigational products. Clinical failure can occur at any stage of testing.
Patients may also not participate in our clinical trials if they choose to participate in contemporaneous clinical trials of competitive products. In addition, patients participating in clinical trials may die before completion of the trial or suffer adverse medical events unrelated to investigational products. 43 Table of Contents Clinical failure can occur at any stage of testing.
Product liability claims could divert management’s attention from our core business, be expensive to defend and result in sizeable damage awards against us that may not be covered by insurance. Further, our promotional materials and training methods must comply with FDA and other applicable laws and regulations, including the prohibition of the promotion of off-label use.
Product liability and related claims could divert management’s attention from our core business, be expensive to defend and result in sizeable damage awards against us that may not be covered by insurance. 44 Table of Contents Further, our promotional materials and training methods must comply with FDA and other applicable laws and regulations, including the prohibition of the promotion of off-label use.
Any such claim could also force use to do one or more of the following: • incur substantial monetary liability for infringement or other violations of intellectual property rights, which we may have to pay if a court decides that the product, service, or technology at issue infringes or violates the third-party’s rights, and if the court finds that the infringement was willful, we could be ordered to pay treble damages and the third-party’s attorneys’ fees; • pay substantial damages to our customers or end users to discontinue use or replace infringing technology with non-infringing technology; • stop manufacturing, offering for sale, selling, using, importing, exporting or licensing the product or technology incorporating the allegedly infringing technology or stop incorporating the allegedly infringing technology into such product, service, or technology; • obtain from the owner of the infringed intellectual property right a license, which may require us to pay substantial upfront fees or royalties to sell or use the relevant technology and which may not be available on commercially reasonable terms, or at all; • redesign our products, services, and technology so they do not infringe or violate the third-party’s intellectual property rights, which may not be possible or may require substantial monetary expenditures and time; • enter into cross-licenses with our competitors, which could weaken our overall intellectual property position; • lose the opportunity to license our technology to others or to collect royalty payments based upon successful protection and assertion of our intellectual property against others; • find alternative suppliers for non-infringing products and technologies, which could be costly and create significant delay; or • relinquish rights associated with one or more of our patent claims, if our claims are held invalid or otherwise unenforceable. 56 Table of Contents Some of our competitors may be able to sustain the costs of complex intellectual property litigation more effectively than we can.
Any such claim could also force use to do one or more of the following: • incur substantial monetary liability for infringement or other violations of intellectual property rights, which we may have to pay if a court decides that the product, service, or technology at issue infringes or violates the third-party’s rights, and if the court finds that the infringement was willful, we could be ordered to pay treble damages and the third-party’s attorneys’ fees; • pay substantial damages to our customers or end users to discontinue use or replace infringing technology with non-infringing technology; • stop manufacturing, offering for sale, selling, using, importing, exporting or licensing the product or technology incorporating the allegedly infringing technology or stop incorporating the allegedly infringing technology into such product, service, or technology; • obtain from the owner of the infringed intellectual property right a license, which may require us to pay substantial upfront fees or royalties to sell or use the relevant technology and which may not be available on commercially reasonable terms, or at all; • redesign our products, services, and technology so they do not infringe or violate the third-party’s intellectual property rights, which may not be possible or may require substantial monetary expenditures and time; • enter into cross-licenses with our competitors, which could weaken our overall intellectual property position; • lose the opportunity to license our technology to others or to collect royalty payments based upon successful protection and assertion of our intellectual property against others; • find alternative suppliers for non-infringing products and technologies, which could be costly and create significant delay; or • relinquish rights associated with one or more of our patent claims, if our claims are held invalid or otherwise unenforceable.
The success of certain Surgical and Wound solution products depends on our suppliers continuing to have access to donated human cadaveric tissue, as well as the maintenance of high standards in their processing methodology. The supply of such donors can fluctuate over time.
The success of certain Surgical products depends on our suppliers continuing to have access to donated human cadaveric tissue, as well as the maintenance of high standards in their processing methodology. The supply of such donors can fluctuate over time.
The PMA process is typically required for products that are deemed to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices. Both the PMA approval and the 510(k) clearance process can be expensive, lengthy and uncertain. The FDA’s 510(k) clearance process usually takes from three to twelve months, but can last longer.
The PMA process is typically required for products that are deemed to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices. 40 Table of Contents Both the PMA approval and the 510(k) clearance process can be expensive, lengthy and uncertain. The FDA’s 510(k) clearance process usually takes from three to twelve months, but can last longer.
Our competitors or other patent holders may assert that our products and/or the methods employed in our products are covered by their patents or that we are infringing, misappropriating, or misusing their trademark, copyright, trade secret, and/or other proprietary rights. 55 Table of Contents If our products or methods are found to infringe, we could be prevented from manufacturing or marketing our products.
Our competitors or other patent holders may assert that our products and/or the methods employed in our products are covered by their patents or that we are infringing, misappropriating, or misusing their trademark, copyright, trade secret, and/or other proprietary rights. If our products or methods are found to infringe, we could be prevented from manufacturing or marketing our products.
Risk Factors—Risks related to government regulation—Regulatory reforms, such as the EU Medical Devices Regulation, could limit our ability to market and distribute our products after clearance, approval or certification is obtained and make it more difficult or costly for us to obtain regulatory clearance, approval or certification of any future products, which could adversely affect our competitive position and materially affect our business and financial results.
Regulatory reforms, such as the EU Medical Devices Regulation, could limit our ability to market and distribute our products after clearance, approval or certification is obtained and make it more difficult or costly for us to obtain regulatory clearance, approval or certification of any future products, which could adversely affect our competitive position and materially affect our business and financial results.
See Part I, Item 1A Risk Factors—Risks related to government regulation—We are subject to federal, state and foreign laws and regulations relating to our healthcare business, and could face substantial penalties if we are determined not to have fully complied with such laws, which would adversely affect our business, results of operations and financial condition.
Risk Factors—Risks related to government regulation—We are subject to federal, state and foreign laws and regulations relating to our healthcare business, and could face substantial penalties if we are determined not to have fully complied with such laws, which would adversely affect our business, results of operations and financial condition.
We maintain the majority of our cash and cash equivalents in accounts at banking institutions in the United States that we believe are of high quality. Cash held in these accounts often exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limits.
We maintain our cash at financial institutions, often in balances that exceed federally insured limits. We maintain the majority of our cash and cash equivalents in accounts at banking institutions in the United States that we believe are of high quality. Cash held in these accounts often exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limits.
Refer to risk factor— In certain cases, payments under the TRA to the Continuing LLC Owners may be accelerated or significantly exceed the actual benefits we realize in respect of tax attributes subject to the TRA . 59 Table of Contents In certain cases, payments under the TRA to the Continuing LLC Owner may be accelerated or significantly exceed the actual benefits we realize in respect of the tax attributes subject to the TRA.
Refer to risk factor— In certain cases, payments under the TRA to the Continuing LLC Owners may be accelerated or significantly exceed the actual benefits we realize in respect of tax attributes subject to the TRA .
The gel is manufactured by a third-party supplier, and we have discontinued the use of that suppliers’ gel and have replaced that gel with that of another manufacturer. We have identified the affected lots and have notified patients to discard gel bottles from those lots.
The gel was manufactured by a third-party supplier, and we have discontinued the use of that suppliers’ gel and have replaced that gel with that of another manufacturer and notified patients to discard gel bottles from affected lots.
We cannot assure you that our third-party service providers with access to our or our customers’, suppliers’, trial patients’, and employees’ personally identifiable and other sensitive or confidential information in relation to which we are responsible will not breach contractual obligations imposed by us, or that they will not experience data security breaches, cyber-attacks or other incidents negatively impacting the privacy or security of sensitive or confidential information or our service providers’ ability to provide services to us, which could have a corresponding effect on our business including putting us in breach of our obligations under privacy laws and regulations and/or which could in turn adversely affect our business, results of operations and financial condition.
Additionally, the costs incurred to remediate any data security or privacy incident could be substantial. 35 Table of Contents We cannot assure you that our third-party service providers or service providers with access to our or our customers’, suppliers’, trial patients’, and employees’ personally identifiable and other sensitive or confidential information in relation to which we are responsible will not breach contractual obligations imposed by us, or that they will not experience data security breaches, cyber-attacks or other incidents negatively impacting the privacy or security of sensitive or confidential information or our service providers’ ability to provide services to us, which could have a corresponding effect on our business including putting us in breach of our obligations under privacy laws and regulations and/or which could in turn adversely affect our business, results of operations and financial condition.
We cannot be certain that our current suppliers who rely on allograft bone, skin and amniotic tissue, plus any additional sources that our suppliers identify in the future, will be sufficient to meet our product needs.
We cannot be certain that our current suppliers who rely on allograft bone, plus any additional sources that our suppliers identify in the future, will be sufficient to meet our product needs.
We do not control the intellectual property rights covering these technologies and any loss of our rights to these technologies or the rights licensed to us could prevent us from selling our products, which could adversely impact our business, results of operations and financial condition.
We depend on certain technologies that are licensed to us. We do not control the intellectual property rights covering these technologies and any loss of our rights to these technologies or the rights licensed to us could prevent us from selling our products, which could adversely impact our business, results of operations and financial condition.
If we or our licensors fail to maintain the patents and patent applications covering our products or procedures, we may not be able to stop a competitor from marketing products that are the same as or similar to our products, which would adversely affect our business, results of operations and financial condition.
If we or the owners of any patent rights licensed to us fail to maintain the patents and patent applications covering our products or procedures, we may not be able to stop a competitor from marketing products that are the same as or similar to our products, which would adversely affect our business, results of operations and financial condition.
These factors include: a. our operating performance and the operating performance of similar companies; b. the overall performance of the equity markets; c. any major change in our management; d. changes in laws or regulations relating to our products; e. announcements by us or our competitors of acquisitions, business plans, or commercial relationships; f. threatened or actual litigation; g. publication of research reports or news stories about us, our competitors, or our industry, or positive or negative recommendations; h. general political and economic conditions.
These factors include: • our operating performance and the operating performance of similar companies; • the overall performance of the equity markets; • any major change in our management; • changes in laws or regulations relating to our products; • announcements by us or our competitors of acquisitions, business plans, or commercial relationships; • threatened or actual litigation; • publication of research reports or news stories about us, our competitors, or our industry, or positive or negative recommendations; • general political and economic conditions.
In those cases, we cannot be certain that our licensor will elect to enforce these patents to the extent that we would choose to do so, or in a way that will ensure that we retain the rights we currently have under our license.
In those cases, we cannot be certain that our licensor or other ultimate owner of such patents will elect to enforce these patents to the extent that we would choose to do so, or in a way that will ensure that we retain the rights we currently have under our license.
We are required to comply with the SEC’s rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act, which require management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of internal controls over financial reporting.
We are required to comply with the SEC’s rules implementing Sections 302, 404 and 906 of the Sarbanes-Oxley Act of 2002, which require management to certify financial and other information in our quarterly and annual reports, provide quarterly and annual management reports on the effectiveness of disclosure controls and procedures, and provide annual management reports on the effectiveness of internal controls over financial reporting.
Department of Health and Human Services (“OIG”) to resolve potential liabilities associated with a self-disclosure we made to the OIG in November 2018 regarding violations of certain Medicare claim submission requirements.
Department of Health and Human Services (“OIG”) to resolve potential liabilities associated with a self-disclosure we made to the OIG in November 2018 regarding violations of certain Medicare claim submission requirements. See Part I, Item 1A.
Misappropriation or unauthorized disclosure of our trade secrets could impair our competitive position and may adversely affect our business, results of operations and financial condition. Additionally, if the steps taken to maintain our trade secrets are deemed inadequate, we may have insufficient recourse against third-parties for misappropriating the trade secret. We depend on certain technologies that are licensed to us.
Misappropriation or unauthorized disclosure of our trade secrets could impair our competitive position and may adversely affect our business, results of operations and financial condition. Additionally, if the steps taken to maintain our trade secrets are deemed inadequate, we may have insufficient recourse against third parties for misappropriating the trade secret.
We receive, collect, process, use and store a large amount of information, including personally identifiable information, protected health information and other sensitive and confidential information. This data is often accessed by us through transmissions over public and private networks, including the Internet.
We receive, collect, process, use and store directly and through third-party vendors and service providers a large amount of information, including personally identifiable information, protected health information and other sensitive and confidential information. This data is often accessed by us through transmissions over public and private networks, including the Internet.
Concerns about unsafe levels of ethylene oxide emissions in the air around some sterilization facilities have resulted in certain state environmental protection agency actions against those facilities that have impacted medical device manufacturers’ ability to use the ethylene oxide process to sterilize their devices.
Concerns about unsafe levels of ethylene oxide emissions in the air around some sterilization facilities have resulted in certain state environmental protection agency actions against those facilities that have impacted available capacity for medical device manufacturers’ to sterilize their devices.
If our licensor fails to properly enforce the patents subject to our license in the event of third-party infringement, our ability to retain our competitive advantage with respect to our products may be materially and adversely affected. Licensing of intellectual property is an important part of our business and involves complex legal, business and scientific issues.
If our licensor or other ultimate owners of such patents fails to properly enforce the patents subject to our license in the event of third-party infringement, our ability to retain our competitive advantage with respect to our products may be materially and adversely affected. 57 Table of Contents Licensing of intellectual property is an important part of our business and involves complex legal, business and scientific issues.
Our failure to comply with applicable regulatory requirements could result in enforcement action by the FDA, state or foreign regulatory agencies, which may include any of the following sanctions: • adverse publicity, warning letters, untitled letters, fines, injunctions, consent decrees and civil penalties; • repair, replacement, refunds, recalls, termination of distribution, administrative detention or seizures of our products; • operating restrictions, partial suspension or total shutdown of production; • customer notifications or repair, replacement or refunds; • refusing our requests for 510(k) clearance or PMA approvals or foreign regulatory approvals of new products, new intended uses or modifications to existing products; • withdrawals of current 510(k) clearances or PMAs or foreign regulatory approvals, resulting in prohibitions on sales of our products; • FDA refusal to issue certificates to foreign governments needed to export products for sale in other countries; and • criminal prosecution.
Our failure to comply with applicable regulatory requirements could result in enforcement action by the FDA, state or foreign regulatory agencies, which may include any of the following sanctions: • adverse publicity, warning letters, untitled letters, fines, injunctions, consent decrees and civil penalties; • repair, replacement, refunds, recalls, termination of distribution, administrative detention or seizures of our products; • operating restrictions, partial suspension or total shutdown of production; • customer notifications or repair, replacement or refunds; • refusing our requests for 510(k) clearance or PMA approvals or foreign regulatory approvals of new products, new intended uses or modifications to existing products; • withdrawals of current 510(k) clearances or PMAs or foreign regulatory approvals, resulting in prohibitions on sales of our products; • FDA refusal to issue certificates to foreign governments needed to export products for sale in other countries; and • criminal prosecution. 41 Table of Contents Any of these sanctions could also result in higher than anticipated costs or lower than anticipated sales and adversely affect our business, results of operations and financial condition.
While we do not analyze the ordering practices of physicians with respect to off-label uses, we are aware of certain off-label uses of our EXOGEN product.
While we do not analyze the ordering practices of physicians with respect to off-label uses, we are aware of certain off-label uses of our EXOGEN and StimRouter products.
We are subject to certain covenants under our Credit and Guaranty Agreement dated December 6, 2019 (as amended on October 29, 2021, July 11, 2022 and March 31, 2023, the “Amended 2019 Credit Agreement”), including, but not limited to: • a minimum interest coverage ratio and a maximum debt leverage ratio requirement as defined in the Amended 2019 Credit Agreement; • a minimum Liquidity (as defined in the Amended 2019 Credit Agreement) of not less than $10.0 million as of the end of each calendar month through June 30, 2024; • restrictions on the declaration or payment of certain distributions on or in respect of our equity interests; • restrictions on acquisitions, investments and certain other payments; • limitations on the incurrence of new indebtedness; • limitations on the incurrence of new liens on property or assets; • limitations on transfers, sales and other dispositions; • limitations on entering into transactions with affiliates; and • limitations on making any material change in any of our business objectives that could reasonably be expected to have a material adverse effect on the repayment of our Amended 2019 Credit Agreement.
We are subject to certain covenants under the Amended 2019 Credit Agreement, including, but not limited to: • a minimum interest coverage ratio and a maximum debt leverage ratio requirement as defined in the Amended 2019 Credit Agreement; • a minimum Liquidity (as defined in the Amended 2019 Credit Agreement) of not less than $10.0 million as of the end of each calendar month through October 29, 2025; • restrictions on the declaration or payment of certain distributions on or in respect of our equity interests; • restrictions on acquisitions, investments and certain other payments; • limitations on the incurrence of new indebtedness; • limitations on the incurrence of new liens on property or assets; • limitations on transfers, sales and other dispositions; • limitations on entering into transactions with affiliates; and • limitations on making any material change in any of our business objectives that could reasonably be expected to have a material adverse effect on the repayment of our Amended 2019 Credit Agreement.
If these third-parties fail to successfully carry out their contractual duties, comply with applicable regulatory obligations, including GCP requirements, or meet expected deadlines, or if these third-parties must be replaced, or if the quality or accuracy of the data they obtain is compromised due to the failure to adhere to clinical protocols or applicable regulatory requirements or for other reasons, our pre-clinical development activities or clinical studies may be extended, delayed, suspended or terminated.
In addition, our clinical trials must be conducted with product produced under applicable manufacturing requirements. 46 Table of Contents If these third parties fail to successfully carry out their contractual duties, comply with applicable regulatory obligations, including GCP requirements, or meet expected deadlines, or if these third parties must be replaced, or if the quality or accuracy of the data they obtain is compromised due to the failure to adhere to clinical protocols or applicable regulatory requirements or for other reasons, our pre-clinical development activities or clinical studies may be extended, delayed, suspended or terminated.
Failure to comply with applicable FDA requirements, or later discovery of previously unknown problems with our products or the manufacturing processes of our third-party manufacturers and suppliers, including any failure to take satisfactory corrective action in response to an adverse regulatory inspection, can result in, among other things: • administrative or judicially imposed sanctions; • injunctions or the imposition of civil penalties or fines; • recall or seizure of our products; • total or partial suspension of production or distribution; • refusal to grant pending or future clearances, approvals or certifications for our products; • withdrawal or suspension of regulatory clearances, approvals or certifications; • clinical holds; • untitled letters or warning letters; • refusal to permit the import or export of our products; and • criminal prosecution of us or our employees.
Failure to comply with applicable FDA requirements, or later discovery of previously unknown problems with our products or the manufacturing processes of our third-party manufacturers and suppliers, including any failure to take satisfactory corrective action in response to an adverse regulatory inspection, can result in, among other things: • administrative or judicially imposed sanctions; • injunctions or the imposition of civil penalties or fines; • recall or seizure of our products; • total or partial suspension of production or distribution; • refusal to grant pending or future clearances, approvals or certifications for our products; • withdrawal or suspension of regulatory clearances, approvals or certifications; • clinical holds; • untitled letters or warning letters; • refusal to permit the import or export of our products; and • criminal prosecution of us or our employees. 45 Table of Contents Any of these actions could prevent or delay us from marketing, distributing or selling our products and would likely harm our business.
We are an emerging growth company and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our Class A common stock less attractive to investors. We continue to qualify as an “emerging growth company” pursuant to the provisions of the JOBS Act.
We are an emerging growth company and a smaller reporting company, and we cannot be certain if the reduced disclosure requirements applicable to us will make our Class A common stock less attractive to investors. We are an “emerging growth company” pursuant to the provisions of the JOBS Act.
For example, we are currently undertaking a voluntary Class II recall of certain vials of ultrasound gel that we provide with our Exogen system due to particulates, which were microbial in nature, found in the gel.
For example, in December 2020 we undertook a voluntary Class II recall of certain vials of ultrasound gel that we provide with our Exogen system due to particulates, which were microbial in nature, found in the gel.
The manufacturing of our products may not be easily transferable to other sites in the event that any of our third-party manufacturers experience breakdown, failure or substandard performance of equipment, disruption of supply or shortages of, or quality issues with, components of our products and other supplies, labor problems, power outages, adverse weather conditions, natural disasters, global pandemics, such as COVID-19, or the need to comply with environmental and other directives of governmental agencies.
The manufacturing of our products may not be easily transferable to other sites in the event that any of our third-party manufacturers experience breakdown, failure or substandard performance of equipment, disruption of supply or shortages of, or quality issues with, components of our products and other supplies, labor problems, power outages, adverse weather conditions, natural disasters (including natural events caused by or intensified by climate change), global pandemics, or the need to comply with environmental and other directives of governmental agencies.
HCT/Ps regulated as “351” HCT/Ps are subject to premarket review and approval by the FDA.
HCT/Ps regulated as “Section 351” HCT/Ps are subject to premarket review and approval by the FDA.
Any failure by us to manage our growth effectively could have an adverse effect on our ability to achieve our development and commercialization goals. To achieve our long-term revenue goals, we also will need to successfully increase supply of our products to meet expected customer demand.
Any failure by us to manage our growth effectively could adversely affect our ability to achieve our development and commercialization goals. To achieve our long-term revenue goals, we also will need to successfully increase supply of our products to meet expected customer demand.
From our initial public offering in February 2021 through March 16, 2023, the per share trading price of our Class A common stock has been as high as $19.94 and as low as $1.37. It might continue to fluctuate significantly in response to various factors, some of which are beyond our control.
From our initial public offering in February 2021 through February 27, 2024, the per share trading price of our Class A common stock has been as high as $19.94 and as low as $0.80. It might continue to fluctuate significantly in response to various factors, some of which are beyond our control.
Regulatory changes could result in restrictions on our ability to carry on or expand our operations, higher than anticipated costs or lower than anticipated sales. 36 Table of Contents The failure to comply with applicable regulations could jeopardize our ability to sell our products and result in enforcement actions such as: • administrative or judicially imposed sanctions; • unanticipated expenditures to address or defend such actions; • injunctions, consent decrees or the imposition of civil penalties or fines; • recall or seizure of our products; • total or partial suspension of production or distribution; • refusal to grant pending or future clearances, approvals or certifications for our products; • withdrawal or suspension of regulatory clearances, approvals or certifications; • clinical holds; • untitled letters or warning letters; • refusal to permit the import or export of our products; and • criminal prosecution of us or our employees.
The failure to comply with applicable regulations could jeopardize our ability to sell our products and result in enforcement actions such as: • administrative or judicially imposed sanctions; • unanticipated expenditures to address or defend such actions; • injunctions, consent decrees or the imposition of civil penalties or fines; • recall or seizure of our products; • total or partial suspension of production or distribution; • refusal to grant pending or future clearances, approvals or certifications for our products; • withdrawal or suspension of regulatory clearances, approvals or certifications; • clinical holds; • untitled letters or warning letters; • refusal to permit the import or export of our products; and • criminal prosecution of us or our employees.
In addition, physicians may misuse our products or use improper techniques if they are not adequately trained, potentially leading to injury and an increased risk of product liability. If our products are misused or used with improper technique, we may become subject to costly litigation by our customers or their patients.
In addition, physicians may misuse our products or use improper techniques if they are not adequately trained, potentially leading to injury and an increased liability risks to us for product and medical malpractice related claims. If our products are misused or used with improper technique, we may become subject to costly litigation by our customers or their patients.
Efforts to reform the marketplace for healthcare services is ongoing, and we cannot predict with certainty what impact any U.S. federal and state health reforms will have on us, but such changes could impose new and/or more stringent regulatory requirements on our activities or result in reduced reimbursement for our products, any of which could adversely affect our business, results of operations and financial condition.
Efforts to reform the marketplace for healthcare services is ongoing, and we cannot predict with certainty what impact any U.S. federal and state health reforms will have on us, but such changes could impose new and/or more stringent regulatory requirements on our activities or result in reduced reimbursement for our products, any of which could adversely affect our business, results of operations and financial condition. 47 Table of Contents In addition, other legislative changes have been proposed and adopted since the ACA was enacted.
A party, whether internal or external, that is able to circumvent our security measures could, among other things, misappropriate or misuse sensitive or confidential information, user information or other proprietary information, or cause significant interruptions in our operations.
A party, whether internal or external, that is able to circumvent our security measures or those of our third-party vendors and service providers could, among other things, misappropriate or misuse sensitive or confidential information, misappropriate user information or other proprietary information, or cause significant interruptions in our operations.
The FCPA generally prohibits covered entities and their intermediaries from engaging in bribery or making other prohibited payments, offers or promises to foreign officials for the purpose of obtaining or retaining business or other advantages.
We are subject to the FCPA and other anti-bribery legislation around the world. The FCPA generally prohibits covered entities and their intermediaries from engaging in bribery or making other prohibited payments, offers or promises to foreign officials for the purpose of obtaining or retaining business or other advantages.
Except as described below with regard to MOTYS, we believe our HCT/Ps are regulated solely under Section 361 of the PHSA, and therefore, we have not sought or obtained 510(k) clearance, PMA approval, or licensure through a BLA for such HCT/Ps.
We believe our HCT/Ps are regulated solely under Section 361 of the PHSA, and therefore, we have not sought or obtained 510(k) clearance, PMA approval, or licensure through a BLA for such HCT/Ps.
For as long as we are an “emerging growth company,” we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including, but not limited to, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, reduced disclosure obligations relating to the presentation of financial statements in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and exemptions from the requirements of holding advisory “say-on-pay” votes on executive compensation and shareholder advisory votes on golden parachute compensation.
For as long as we are an “emerging growth company,” we may take advantage of certain exemptions from reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including, for example, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended, reduced disclosure obligations relating to the presentation of financial statements in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our periodic reports, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding advisory “say-on-pay” votes on executive compensation and shareholder advisory votes on golden parachute compensation.
If we initiate litigation to protect our rights, we run the risk of having our patents and other proprietary rights invalidated, canceled or narrowed, which could undermine our competitive position.
Our intellectual property has not been tested in litigation. If we initiate litigation to protect our rights, we run the risk of having our patents and other proprietary rights invalidated, canceled or narrowed, which could undermine our competitive position.
We have relied on our ability to fund our operations primarily through cash flows from operations as well as public and private debt and equity financings, but there can be no assurances that such financing or funding will continue to be available to us on satisfactory terms, or at all.
Moreover, the Company has historically relied on its ability to fund its operations primarily through cash flows from operations, as well as public and private debt and equity financings, but there can be no assurances that such financing or funding will continue to be available to the Company on satisfactory terms, or at all.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe believe that our facilities are sufficient to meet our current needs and that suitable additional space will be available as and when needed on acceptable terms. 63 Table of Contents
Biggest changeWe believe that our facilities are sufficient to meet our current needs and that suitable additional space will be available as and when needed on acceptable terms.
Item 2. Properties. Our principal executive offices are located on leased property in Durham, North Carolina. We also occupy leased office and manufacturing space in Cordova, Tennessee, Farmingdale, New York, Newport News, Virginia and Valencia, California. In addition, our international operations occupy leased office spaces in Hoofddorp, Netherlands, Mississauga, Canada and Hod Hasharon, Israel.
Item 2. Properties. Our principal executive offices are located on leased property in Durham, North Carolina. We also occupy leased office and manufacturing space in Cordova, Tennessee, Farmingdale, New York, and Valencia, California. In addition, our international operations occupy leased office spaces in Hoofddorp, Netherlands, Mississauga, Canada and Hod Hasharon, Israel.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeOn July 20, 2022, we filed a motion to dismiss all claims made against us on various grounds, as did all the other named defendants in the suit. A hearing on the Bioness and other defendant’s motions was held before the Court of Chancery on January 19, 2023.
Biggest changeThe Company believes that it is indemnified under the indemnification provisions contained in the Bioness Merger Agreement for these claims. On July 20, 2022, the Company filed a motion to dismiss all claims made against it on various grounds, as did all the other named defendants in the suit.
Commitments and contingencies of this Annual Report for information pertaining to legal proceedings. In addition, we are party to legal proceedings incidental to our business. While our management currently believes the ultimate outcome of these proceedings, individually and in the aggregate, will not have a material adverse effect on our consolidated financial statements, litigation is subject to inherent uncertainties.
Commitments and contingencies of this Annual Report for additional information pertaining to legal proceedings. In addition, we are party to legal proceedings incidental to our business. While our management currently believes the ultimate outcome of these proceedings, individually and in the aggregate, will not have a material adverse effect on our consolidated financial statements, litigation is subject to inherent uncertainties.
On March 23, 2017, Misonix’s former distributor in China, Cicel (Beijing) Science & Technology Co., Ltd., filed a lawsuit against Misonix and certain of its officers and directors in the United States District Court for the Eastern District of New York. The complaint alleged that Misonix improperly terminated its contract with the former distributor.
Misonix former distributor litigation On March 23, 2017, Misonix’s former distributor in China, Cicel (Beijing) Science & Technology Co., Ltd., filed a lawsuit against Misonix and certain of its officers and directors in the United States District Court for the Eastern District of New York. The complaint alleged that Misonix improperly terminated its contract with the former distributor.
Cicel’s motion for reconsideration of the court’s summary judgment ruling in Misonix’s favor was dismissed by the court on April 29, 2022. On July 18, 2022, Cicel voluntarily dismissed the remaining claim for trade secret theft and later filed an appeal in the United States Court of Appeals for the Second Circuit.
Cicel’s motion for reconsideration of the court’s summary judgment ruling in Misonix’s favor was dismissed by the Court on April 29, 2022. On July 18, 2022, Cicel voluntarily dismissed the remaining claim for trade secret theft and later filed an appeal to the United States Court of Appeals for the Second Circuit.
Item 3. Legal Proceedings. On January 12, 2023, the Company and certain of its current and former directors and officers were named as defendants in a putative class action lawsuit filed in the Middle District of North Carolina, Ciarciello v. Bioventus, Inc. , No. 1:23– CV – 00032-CCE-JEP (M.D.N.C. 2023).
Item 3. Legal Proceedings. Bioventus stockholder litigation On January 12, 2023, the Company and certain of its current and former directors and officers were named as defendants in a putative class action lawsuit filed in the Middle District of North Carolina, Ciarciello v. Bioventus, Inc., No. 1:23– CV – 00032-CCE-JEP (M.D.N.C. 2023).
Were an unfavorable ruling to occur, there exists the possibility of a material adverse impact on our financial condition and results of operations. Item 4. Mine Safety Disclosures. Not Applicable. 65 Table of Contents PART II
Were an unfavorable ruling to occur, there exists the possibility of a material adverse impact on our financial condition and results of operations. Item 4. Mine Safety Disclosures. Not Applicable. 68 Table of Contents PART II
The complaint also alleges that we aided and abetted the other defendants in breaching their fiduciary duties to the plaintiff and that we breached the Merger Agreement by failing to pay the plaintiff its pro rata share of the merger consideration. We believe that we are indemnified under the indemnification provisions contained in the Bioness Merger Agreement for these claims.
The complaint also alleges that the Company aided and abetted the other defendants in breaching their fiduciary duties to the plaintiff and that the Company breached the Merger Agreement by failing to pay the plaintiff its pro rata share of the merger consideration.
Mann Trust (Trust), which was the former majority shareholder of Bioness, the trustees of the Trust and Bioventus as defendants. The complaint alleges, among other things, that the individual directors, the Trust, and the trustees breached their fiduciary duty to the plaintiff in connection with their consideration and approval of our transaction.
The complaint alleges, among other things, that the individual directors, the Trust, and the trustees breached their fiduciary duty to the plaintiff in connection with their consideration and approval of the Company’s transaction.
Removed
The case is in its early stages, and a lead plaintiff has not yet been appointed. The Company believes the claims alleged lack merit and intends to file a motion to dismiss. The outcome of the litigation is not presently determinable, and any loss is neither probable nor reasonable estimable.
Added
On April 12, 2023, the Court appointed Wayne County Employees’ Retirement System as lead plaintiff. The plaintiff’s amended consolidated complaint was filed with the Court on June 12, 2023. On July 17, 2023, the defendants filed a motion to dismiss the complaint raising a number of legal and factual deficiencies with the amended consolidated complaint.
Removed
On June 15, 2022, the Company, through its subsidiary Bioness, filed a lawsuit in the United States District Court for the Eastern District of Virginia against Aretech, LLC (“Aretech”) alleging infringement by Aretech of various patents related to our Vector Gait and Safety Support System ® .
Added
In response to the defendants’ motion to dismiss, the lead plaintiff filed a second amended complaint on July 31, 2023. The defendants moved to dismiss the second amended complaint on August 21, 2023, which the Court granted in part and denied in part on November 6, 2023.
Removed
On August 8, 2022, Aretech filed an answer to the lawsuit denying infringement and asserting various affirmative defenses and counterclaims to the Bioness complaint. Bioness filed a motion to dismiss the defendant’s counterclaims on September 28, 2022. In response to Bioness’ motion to dismiss the counterclaims, on October 19, 2022, Aretech filed an amended answer and counterclaims.
Added
The Court dismissed the plaintiff’s Securities Act claims, but allowed the plaintiff’s Exchange Act claims to proceed into discovery. 67 Table of Contents On October 4, 2023, certain of the Company’s current and former directors and officers were named as defendants in a derivative shareholder lawsuit (in which the Company was a nominal defendant) filed in the United States District Court for the District of Delaware, Grogan, on behalf of Bioventus Inc., v.
Removed
On November 16, 2022, Bioness filed a partial motion to dismiss certain of the amended counterclaims. On January 23, 2023, the court granted-in-part Bioness’s motion dismissing Aretech’s antitrust and inventorship-related counterclaims, but allowed certain of Aretech’s counterclaims to proceed. The parties are presently finalizing a joint discovery plan and timeline.
Added
Reali, et.al., No. 1:23-CV-01099-RGA (D. Del. 2023). The complaint asserts violations of Section 14(a) of the Exchange Act, breaches of fiduciary duties and related state law claims, and a claim for contribution, and generally alleges the same purported misconduct as alleged in the Ciarciello case.
Removed
On March 23, 2023 the parties entered into a settlement and license agreement that provides for a payment by Aretech to us of $1.5 million to resolve all claims in the litigation. The agreement also provides cross licenses to the parties for certain of their respective patents relevant to the claims asserted in the litigation.
Added
On January 12, 2024, the Court agreed to stay this case pending resolution of the Ciarciello case.
Removed
We believe that we have various legal and factual defenses to these claims and intend to vigorously defend the appeal of the lower court’s summary judgement rulings in our favor.
Added
On February 9, 2024, another plaintiff filed a derivative shareholder lawsuit against certain of the Company’s current and former directors and officers (in which the Company is a nominal defendant) filed in the United States District Court for the District of Delaware, Sanderson, on behalf of Bioventus Inc., v. Reali, et.al., No. 1:24-cv-00180-RGA (D. Del. 2024).
Removed
Prior to the closing of our acquisition of Bioness, Bioness had been named as a defendant in a lawsuit, for which we are indemnified under the indemnification provisions contained in the Bioness Merger Agreement.
Added
Like the Grogan case, this case asserts violations of Section 10(b) of the Exchange Act, breaches of fiduciary duties and related state law claims, and a claim for contribution, and generally alleges the same purported misconduct as alleged in the Ciarciello case.
Removed
The case relates to an action brought in February 2021 in the Delaware State Court of Chancery by a former minority shareholder and director of Bioness, seeking a temporary restraining order contesting our acquisition of Bioness.
Added
The parties are in discussions to consolidate the two derivative matters and stay them on terms similar to those entered in the Grogan case. The Company believes the claims alleged in each of the above matters lack merit and intends to defend itself vigorously.
Removed
While the complaint to block the Bioness acquisition was dismissed by the court, a separate action was brought against the Company under the indemnification provisions of the Bioness Certificate of Incorporation to recover approximately $3.0 million in attorney fees and other expenses incurred by the director and shareholder in connection with the matter. 64 Table of Contents On August 19, 2021, the court issued a ruling granting, in part, plaintiff’s motion for summary judgment, awarding plaintiff attorney’s fees and related expenses incurred in connection with performance of the plaintiff’s directorial duties, and denying fees and expenses incurred in a non-director capacity.
Added
The outcome of the these matters is not presently determinable, and any loss is neither probable nor reasonably estimable.
Removed
In its ruling, the court’s order also directed the parties to agree upon a process that was to govern the payment of and challenges to plaintiff’s payment requests and required Bioness to pay 50% of the demanded amount into escrow if more than 50% of the total invoiced amount was in dispute.
Added
On March 6, 2024, the Second Circuit Court of Appeals issued its ruling affirming the lower Court’s summary judgement in favor of Misonix in all respects. Bioness stockholder litigation On February 8, 2022, a minority shareholder of Bioness filed an action in the Delaware State Court of Chancery in connection with the Company’s acquisition of Bioness.
Removed
Pursuant to the court’s order, Bioness paid approximately $1.3 million into escrow. On November 1, 2022, at a hearing before Delaware State Court of Chancery, the court ruled in favor of the former Bioness director awarding attorney’s fees in connection with the underlying pre-merger litigation and the advancement action in the amounts claimed, less approximately $50,000.
Added
Teuza, a Fairchild Technology Venture Ltd. v. Lindon, et. al., No. 2022-0130 -SG. This action names the former Bioness directors, the Alfred E. Mann Trust (Trust), which was the former majority shareholder of Bioness, the trustees of the Trust and Bioventus as defendants.
Removed
On December 23, 2022, Bioness and the plaintiff entered into a settlement agreement resolving the matter for the aggregate sum of $2.5 million payable to the plaintiff. The settlement was satisfied by releasing the $1.3 million previously paid by Bioness and held in escrow and by an additional payment of $1.2 million.
Added
A hearing on Bioness’ and other the defendant’s motions was held before the Court of Chancery on January 19, 2023. On April 27, 2023, the Court issued an order which, among other things, dismissed Bioventus from the case. Please refer to Part II, Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 12.
Removed
Pursuant to the indemnification obligations under the Bioness Merger Agreement, this subsequent payment was made on behalf of Bioness on December 28. 2022, by the selling majority shareholder under that agreement. Bioness subsequently recovered the $1.3 million paid into escrow from the selling Bioness shareholders pursuant an indemnification request under the Bioness Merger Agreement.
Removed
An order dismissing the case was entered by the court on January 27, 2023. On February 8, 2022, the above referenced minority shareholder of Bioness filed another action in the Delaware State Court of Chancery in connection with our acquisition of Bioness. This action names the former Bioness directors, the Alfred E.
Removed
The court has not yet issued its ruling on any of these motions. We believe that there are various legal and factual defenses to the claims plaintiff made against us and intend to defend ourselves vigorously.
Removed
On September 15, 2021, a purported stockholder of Misonix filed an action in the United States District Court for the Eastern District of New York, captioned Stein v. Misonix, Inc., et al., Case No. 2:21-cv-05127 (E.D.N.Y.) (the Stein Complaint). The Stein Complaint named Misonix and members of its board of directors as defendants.
Removed
The Stein Complaint was dismissed on April 6, 2022. On September 16, 2021, a purported stockholder of Misonix filed an action in the United States District Court for the Southern District of New York, captioned Ciccotelli v.
Removed
Misonix, Inc. et al., Case No. 1:21-cv-07773 (S.D.N.Y.) (the Ciccotelli Complaint) against Misonix, members of its board of directors, the Company, and its subsidiaries, Merger Sub I and Merger Sub II, as defendants. Plaintiff voluntarily dismissed the Ciccotelli Complaint on November 10, 2021.
Removed
On October 12, 2021, another purported stockholder of Misonix filed an action in the United States District Court for the Eastern District of New York, captioned Rubin v.
Removed
Misonix, Inc. et al., Case No. 1:21-cv-05672 (S.D.N.Y.) (the Rubin Complaint) and on October 15, 2021, another purported stockholder of Misonix filed an action in the United States District Court for the Southern District of New York, captioned Taylor v. Misonix, Inc. et al., Case No. 1:21-cv-08513 (S.D.N.Y.) (the Taylor Complaint).
Removed
The Rubin Complaint and the Taylor Complaint name Misonix and members of its board of directors as defendants. Plaintiffs voluntarily dismissed the Rubin and Taylor Complaints on January 21, 2022 and February 18, 2022, respectively.
Removed
Each of the complaints relating to the Misonix Acquisition asserted claims under Section 14(a) and Section 20(a) of the Exchange Act and SEC Rule 14a-9, challenging the adequacy of disclosures in the proxy statement/prospectus filed with the SEC on September 8, 2021 or the Definitive Proxy Statement filed with the SEC on September 24, 2021, regarding Misonix and/or Bioventus’ projections and J.P.
Removed
Morgan’s financial analysis. The complaints sought, among other relief, (i) injunctive relief preventing the parties from proceeding with the merger; (ii) rescission in the event that the merger is consummated; and (iii) an award of costs, including attorneys’ and experts’ fees. Please refer to Part II, Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 12.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThis amount does not take into account shareholders whose shares are held in “street name” by brokerage houses or other intermediaries. The closing price of our common stock on March 16, 2023 was $1.42. Dividends We do not anticipate declaring or paying any cash dividends to holders of our Class A common stock in the foreseeable future.
Biggest changeAs of February 27, 2024, we had approximately 167 holders of record of our Class A common stock. This amount does not take into account shareholders whose shares are held in “street name” by brokerage houses or other intermediaries. The closing price of our common stock on February 27, 2024 was $4.93.
The following performance graph compares the cumulative 23 months cumulative total return to stockholders on our Class A common stock relative to the cumulative total returns on the Nasdaq Composite Index and the S&P 500 Health Care Equipment Index for the period commencing on February 11, 2021 (the date our Class A common stock commenced trading on Nasdaq) through December 31, 2022 assuming an initial investment of $100.
The following performance graph compares the cumulative total return to stockholders on our Class A common stock relative to the cumulative total returns on the Nasdaq Composite Index and the S&P 500 Health Care Equipment Index for the period commencing on February 11, 2021 (the date our Class A common stock commenced trading on Nasdaq) through December 31, 2023 assuming an initial investment of $100.
Note that historic stock price performance is not necessarily indicative of future stock price performance. 66 Table of Contents 2/11/21 3/31/21 6/30/21 9/30/21 12/31/21 3/31/22 6/30/22 9/30/22 12/31/22 Bioventus Inc. $ 100.00 $ 79.54 $ 91.62 $ 73.71 $ 75.43 $ 73.40 $ 35.50 $ 36.44 $ 13.59 NASDAQ Composite $ 100.00 $ 94.45 $ 103.41 $ 103.01 $ 111.54 $ 101.39 $ 78.63 $ 75.40 $ 74.62 S&P 500 Health Care Equipment $ 100.00 $ 96.27 $ 104.57 $ 109.55 $ 113.11 $ 106.11 $ 85.61 $ 79.47 $ 90.75 Item 6. [Reserved.]
Note that historic stock price performance is not necessarily indicative of future stock price performance. 69 Table of Contents 2/11/21 3/31/21 6/30/21 9/30/21 12/31/21 3/31/22 6/30/22 9/30/22 12/31/22 3/31/23 6/30/23 9/30/23 12/31/23 Bioventus Inc. $ 100.00 $ 79.54 $ 91.62 $ 73.71 $ 75.43 $ 73.40 $ 35.50 $ 36.44 $ 13.59 $ 5.57 $ 15.04 $ 17.18 $ 27.43 NASDAQ Composite $ 100.00 $ 94.45 $ 103.41 $ 103.01 $ 111.54 $ 101.39 $ 78.63 $ 75.40 $ 74.62 $ 87.14 $ 98.30 $ 94.25 $ 107.03 S&P 500 Health Care Equipment $ 100.00 $ 96.27 $ 104.57 $ 109.55 $ 113.11 $ 106.11 $ 85.61 $ 79.47 $ 90.75 $ 93.13 $ 102.06 $ 88.00 $ 97.83 Item 6. [Reserved.]
Holders of our Class B common stock are not entitled to participate in any dividends declared by our Board. In determining the amount of any future dividends, our Board will take into account any legal or contractual limitations, our actual and anticipated future earnings, cash flow, debt service and capital requirements and other factors that our Board may deem relevant.
In determining the amount of any future dividends, our Board will take into account any legal or contractual limitations, our actual and anticipated future earnings, cash flow, debt service and capital requirements and other factors that our Board may deem relevant.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information On February 11, 2021, we closed an initial public offering (“IPO”) and our Class A common stock began trading on the Nasdaq Global Select Market under the symbol “BVS.” Prior to that time, there was no public market for our stock.
Market Information and Holders On February 11, 2021, we closed an initial public offering (“IPO”) and our Class A common stock began trading on the Nasdaq Global Select Market under the symbol “BVS.” Prior to that time, there was no public market for our stock. There is no established public trading market for our Class B common stock.
Subsidiaries of BV LLC are generally subject to similar legal limitations on their ability to make distributions to BV LLC. Performance Graph The following performance graph is not deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C or to the liabilities of Section 18 of the Exchange Act.
Performance Graph The following performance graph is not deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C or to the liabilities of Section 18 of the Exchange Act.
We currently intend to retain all available funds and any future earnings to finance the growth of our business. If we decide to pay cash dividends in the future, the declaration and payment of such dividends will be at the sole discretion of our board of directors (Board) and may be discontinued at any time.
If we decide to pay cash dividends in the future, the declaration and payment of such dividends will be at the sole discretion of our board of directors (“Board”) and may be discontinued at any time. Holders of our Class B common stock are not entitled to participate in any dividends declared by our Board.
Removed
There is no established public trading market for our Class B common stock. As of March 16, 2023, we had 1 holder of record of our Class B common stock. As of March 16, 2023, we had approximately 193 holders of record of our Class A common stock.
Added
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Added
As of February 27, 2024, we had 1 holder of record of our Class B common stock. Dividends We do not anticipate declaring or paying any cash dividends to holders of our Class A common stock in the foreseeable future. We currently intend to retain all available funds and any future earnings to finance the growth of our business.
Added
Subsidiaries of BV LLC are generally subject to similar legal limitations on their ability to make distributions to BV LLC. Equity Compensation Plans The information required by Item 5 of Form 10-K regarding equity compensation plans is incorporated herein by reference to Part III, Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters .

Item 7. Management's Discussion & Analysis

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

87 edited+33 added−59 removed83 unchanged
Biggest changeResults of Operations The following table sets forth components of our consolidated statements of operations as a percentage of net sales for the periods presented: Years Ended December 31, 2022 2021 Net sales 100.0 % 100.0 % Cost of sales (including depreciation and amortization) 35.4 % 29.7 % Gross profit 64.6 % 70.3 % Selling, general and administrative expense 64.9 % 59.0 % Research and development expense 5.1 % 4.4 % Restructuring costs 1.3 % 0.6 % Change in fair value of contingent consideration 1.3 % 0.2 % Depreciation and amortization 4.1 % 2.0 % Impairment of goodwill 36.9 % — % Impairment of variable interest entity assets — % 1.3 % Operating (loss) income (49.0 %) 2.8 % 72 Table of Contents The following table presents a reconciliation of net (loss) income to Adjusted EBITDA for the periods presented: Years Ended December 31, (in thousands) 2022 2021 Net (loss) income $ (213,391) $ 9,586 Interest expense, net 25,795 1,112 Income tax benefit (50,508) (1,966) Depreciation and amortization (a) 66,803 34,875 Acquisition and related costs (b) 27,081 22,964 Remeasurement gain on equity method investment (c) (23,709) — Restructuring and succession charges (d) 7,453 3,717 Equity compensation (e) 17,585 (4,512) Equity loss in unconsolidated investments (f) 1,003 1,868 Foreign currency impact (g) 250 132 Impairment of goodwill (h) 189,197 — Asset impairment charges (i) 10,285 — Impairments related to variable interest entity (j) — 7,043 Other items (k) 8,465 5,940 Adjusted EBITDA $ 66,309 $ 80,759 (a) Includes for the years ended December 31, 2022 and 2021, respectively, depreciation and amortization of $45,622 and $26,471 in cost of sales and $21,181 and $8,404 in operating expenses presented in the consolidated statements of operations and comprehensive (loss) income.
Biggest changeResults of Continuing Operations The following table sets forth components of our consolidated statements of operations as a percentage of net sales for the periods presented: Years Ended December 31, 2023 2022 Net sales 100.0 % 100.0 % Cost of sales (including depreciation and amortization) 35.9 % 35.4 % Gross profit 64.1 % 64.6 % Selling, general and administrative expense 59.4 % 64.9 % Research and development expense 2.6 % 4.7 % Restructuring costs 0.2 % 1.3 % Change in fair value of contingent consideration 0.1 % 0.2 % Depreciation and amortization 1.7 % 1.9 % Impairment of assets 15.4 % — % Impairment of goodwill — % 24.3 % Loss on disposals 0.7 % — % Operating loss (16.0 %) (32.7 %) 75 Table of Contents The following table presents a reconciliation of net loss from continuing operations to Adjusted EBITDA for the periods presented: Years Ended December 31, (in thousands) 2023 2022 Net loss from continuing operations $ (121,196) $ (144,651) Interest expense, net 40,676 12,021 Income tax expense (benefit), net 85 (44,374) Depreciation and amortization (a) 57,365 55,398 Acquisition and related costs (b) 5,694 21,731 Restructuring and succession charges (c) 2,331 7,453 Equity compensation (d) 2,722 17,585 Financial restructuring costs (e) 7,291 — Impairment of assets (f) 78,615 10,285 Impairment of goodwill (g) — 124,697 Loss on disposal of a business (h) 1,539 — Other items (i) 13,740 8,465 Adjusted EBITDA $ 88,862 $ 68,610 (a) Includes for the years ended December 31, 2023 and 2022, respectively, depreciation and amortization of $48,503 and $45,622 in cost of sales and $8,862 and $9,776 in operating expenses presented in the consolidated statements of operations and comprehensive (loss) income.
On June 17, 2022 the Company entered into an amendment to the Option Agreement with CartiHeal (“CartiHeal Amendment”) and Elron Ventures Limited, in its capacity as the shareholder representative, that provided for deferred payment of the consideration for CartiHeal to be paid in multiple tranches, one of which was $50.0 million due upon the earliest to occur — the publication in a peer-reviewed orthopedic journal of an article that presents the results of the pivotal clinical trial (“First Paper Milestone”) or July 1, 2023.
On June 17, 2022, the Company entered into an amendment to the Option Agreement with CartiHeal (“CartiHeal Amendment”) and Elron Ventures Limited, in its capacity as the shareholder representative, that provided for deferred payment of the consideration for CartiHeal to be paid in multiple tranches, one of which was $50.0 million due upon the earliest to occur of the publication in a peer-reviewed orthopedic journal of an article that presents the results of the pivotal clinical trial (“First Paper Milestone”) or July 1, 2023.
On July 11, 2022, we amended the Amended 2019 Credit Agreement in conjunction with the CartiHeal Acquisition to provide for an incremental $80.0 million term loan facility (together with the Term Loan, the “Term Loan Facilities”) to be used in part to fund the CartiHeal Acquisition.
On July 11, 2022, we amended the 2019 Credit Agreement in conjunction with the CartiHeal Acquisition to provide for an incremental $80.0 million term loan facility (together with the Term Loan, the “Term Loan Facilities”) to be used in part to fund the CartiHeal Acquisition.
Pursuant to the Settlement Agreement, Elron, on behalf of the Former Securityholders, have agreed to forbear from initiating any legal action or proceedings relating to non-payment of any obligations arising under the Option Agreement during a period of 30 calendar days (the “Interim Period”) in exchange for (i) a one-time non-refundable amount of $10.0 million and (ii) a one-time non-refundable payment of $0.2 million to Elron to be used in accordance with the expense fund provisions of the Option Agreement.
Pursuant to the Settlement Agreement, Elron, on behalf of the Former Securityholders, agreed to forbear from initiating any legal action or proceedings relating to non-payment of any obligations arising under the Option Agreement during a period of 30 calendar days (the “Interim Period”) in exchange for (i) a one-time non-refundable amount of $10.0 million and (ii) a one-time non-refundable payment of $0.2 million to Elron to be used in accordance with the expense fund provisions of the Option Agreement.
The three levels of inputs used to measure fair value are as follows: • Level 1—Quoted prices in active markets for identical assets or liabilities; • Level 2—Observable inputs other than quoted prices included within Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data; and Table of Contents • Level 3—Unobservable inputs that are supported by little or no market data.
The three levels of inputs used to measure fair value are as follows: • Level 1—Quoted prices in active markets for identical assets or liabilities; • Level 2—Observable inputs other than quoted prices included within Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data; and 83 Table of Contents • Level 3—Unobservable inputs that are supported by little or no market data.
MOTYS Update During the second quarter of 2022, prior to obtaining the results from our Phase 2 trial, we elected to discontinue the development of MOTYS, to focus our resources on other priorities, including the integration of our acquisitions and our expanded R&D and product development portfolio we inherited with these acquisitions.
MOTYS Update During the second quarter of 2022, prior to obtaining the results from our Phase 2 trial, we elected to discontinue the development of MOTYS to focus our resources on other priorities, including the integration of our 2021 and 2022 acquisitions and our expanded R&D and product development portfolio we inherited with these acquisitions.
Changes in estimates and assumptions could materially affect the determination of fair value for each reporting unit and could result in an impairment charge, which could be material to our financial position and results of operations. 82 Table of Contents On November 8, 2022, due to a significant decline in the value of our Class A common stock, circumstances became evident that a possible impairment existed as of the third quarter balance sheet date.
Changes in estimates and assumptions could materially affect the determination of fair value for each reporting unit and could result in an impairment charge, which could be material to our financial position and results of operations. 84 Table of Contents On November 8, 2022, due to a significant decline in the value of our Class A common stock, circumstances became evident that a possible impairment existed as of the third quarter balance sheet date.
We will continue to qualify as an emerging growth company until the earliest of: • The last day of our fiscal year following the fifth anniversary of the date of our IPO; • The last day of our fiscal year in which have annual gross revenues of $1.07 billion or more; • The date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; • The date on which we are deemed to be a “large accelerated filer”, which will occur at such time as we (1) have an aggregate worldwide market value of common equity securities held by non-affiliates of $700 million or more as of the last business day of our most recently completed second quarter, (2) have been required to file annual and quarterly reports under the Exchange Act for a period of at least 12 months, (3) have filed at least one annual report pursuant to the Exchange Act, and (4) are not eligible to use the requirements for smaller reporting companies as defined in Rule 12b-2 under the Exchange Act (annual revenue less than $100 million and either no public float or a public float of less than $700 million).
We will continue to qualify as an emerging growth company until the earliest of: • The last day of our fiscal year following the fifth anniversary of the date of our IPO; • The last day of our fiscal year in which have annual gross revenues of $1.235 billion or more; • The date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; • The date on which we are deemed to be a “large accelerated filer”, which will occur at such time as we (1) have an aggregate worldwide market value of common equity securities held by non-affiliates of $700 million or more as of the last business day of our second fiscal quarter, (2) have been required to file annual and quarterly reports under the Exchange Act for a period of at least 12 months, (3) have filed at least one annual report pursuant to the Exchange Act, and (4) are not eligible to use the requirements for smaller reporting companies as defined in Rule 12b-2 under the Exchange Act (annual revenue less than $100 million and either no public float or a public float of less than $700 million).
In certain international markets, we also sell to independent distributors on prearranged business terms, who manage or maintain the sales relationship with their physician customers. Refer to Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note 2. Summary of significant accounting policies for further information.
In certain international markets, we also sell to independent distributors on prearranged business terms, who manage or maintain the sales relationship with their physician customers. Refer to Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note 2. Significant accounting policies for further information.
Our impairment process includes applying a quantitative impairment analysis to the fair value of the reporting unit and comparing it to its carrying value. We used independent third-party valuation specialists in 2022 and 2021 using year-to-date October data in each year to assist management in performing our annual impairment evaluation.
Our impairment process includes applying a quantitative impairment analysis to the fair value of the reporting unit and comparing it to its carrying value. We used independent third-party valuation specialists in 2023 and 2022 using year-to-date October data in each year to assist management in performing our annual impairment evaluation.
The Company was not in compliance with certain of its covenants under the 2019 Credit Agreement as of December 31, 2022.
The Company was not in compliance with certain of its covenants under the 2019 Credit Agreement in effect as of December 31, 2022.
We concluded that the carrying value of the U.S. reporting unit exceeded its fair value. We recorded a non-cash goodwill impairment charge within the United States reporting unit for the year ended December 31, 2022. The impairment was recorded within impairment of goodwill on the consolidated statements of operations and comprehensive (loss) income.
We concluded that the carrying value of the U.S. reporting unit exceeded its fair value. We recorded a non-cash goodwill impairment charge within the U.S. reporting unit for the year ended December 31, 2022. The impairment was recorded within impairment of goodwill on the consolidated statements of operations and comprehensive (loss) income.
There were no significant adjustments arising from the change in estimates of variable consideration for the years ended December 31, 2022 and 2021. Accounts receivable allowances for credit losses We maintain allowances for credit losses to provide for receivables we do not expect to collect.
There were no significant adjustments arising from the change in estimates of variable consideration for the years ended December 31, 2023 and 2022. Accounts receivable allowances for credit losses We maintain allowances for credit losses to provide for receivables we do not expect to collect.
Indebtedness Our Amended 2019 Credit Agreement, as in effect from October 29, 2021 to July 11, 2022, consisted of a $360.8 million term loan (“Term Loan”) and a $50.0 million revolving credit facility (the “Revolver”).
Indebtedness Our 2019 Credit Agreement (as amended on August 29, 2021 and October 29, 2021), and in effect from October 29, 2021 to July 11, 2022, consisted of a $360.8 million term loan (“Term Loan”) and a $50.0 million revolving credit facility (the “Revolver”).
We have a majority economic interest, the sole voting interest in, and control the management of BV LLC. As a result, we consolidate the financial results of BV LLC and report a non-controlling interest representing the 20.3% that is owned by the Continuing LLC Owner.
We have a majority economic interest, the sole voting interest in, and control the management of BV LLC. As a result, we consolidate the financial results of BV LLC and report a non-controlling interest representing the 20.0% that is owned by the Continuing LLC Owner.
All obligations under the Amended 2019 Credit Agreement are guaranteed by the Company and certain wholly owned subsidiaries where substantially all the assets of the Company collateralize the obligations. The Term Loan Facilities will mature on October 29, 2026.
All obligations under the Amended 2019 Credit Agreement are guaranteed by the Company and certain wholly owned subsidiaries where substantially all the assets of the Company collateralize the obligations. The Term Loan Facilities will mature on October 29, 2026. The Revolver will mature on October 29, 2025.
A discussion of the year ended December 31, 2021 compared to the year ended December 31, 2020 has been reported previously in our 10-K for the fiscal year ended December 31, 2021, filed with the SEC on March 11, 2022, under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations." Executive Summary We are a global medical device company focused on developing and commercializing clinically differentiated, cost efficient and minimally invasive treatments that engage and enhance the body’s natural healing process.
A discussion of the year ended December 31, 2022 compared to the year ended December 31, 2021 has been reported previously in our Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 31, 2023, under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations." Executive Summary We are a global medical device company focused on developing and commercializing clinically differentiated, cost efficient and minimally invasive treatments that engage and enhance the body’s natural healing process.
There were no goodwill impairment charges for the years ended December 31, 2021 and 2020. Refer to Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 3. Balance sheet information.
There were no goodwill impairment charges for the years ended December 31, 2023 and 2021. Refer to Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 3. Balance sheet information.
Future cash requirements The following table summarizes certain estimated future cash requirements under our various contractual obligations committed to as of December 31, 2022 in total and disaggregated into current and long-term obligations.
Future cash requirements The following table summarizes certain estimated future cash requirements under our various contractual obligations committed to as of December 31, 2023 in total and disaggregated into current and long-term obligations.
We purchased CartiHeal (“CartiHeal Acquisition”) for an aggregate purchase price of approximately $315.0 million and an additional $135.0 million, becoming payable after closing upon the achievement of a certain sales milestone (Sales Milestone Consideration). We paid $100.0 million of the aggregate purchase price upon closing, consisting of a $50.0 million escrow deposit and $50.0 million from a financing arrangement.
We purchased CartiHeal (the “CartiHeal Acquisition”) for an aggregate purchase price of approximately $315.0 million and an additional $135.0 million, becoming payable after closing upon the achievement of a certain sales milestone (“Sales Milestone Consideration”). We paid $100.0 million of the aggregate purchase price upon closing, consisting of a $50.0 million escrow deposit and $50.0 million from a financing arrangement.
As a result, on March 31, 2023 (the “Closing Date”), we entered into another amendment to the Amended 2019 Credit Agreement to, among other things, modify certain financial covenants, waive the noncompliance at December 31, 2022 and to modify interest rates applicable to borrowings under the agreement.
As a result, on March 31, 2023, we entered into another amendment to the 2019 Credit Agreement to, among other things, modify certain financial covenants, waive the noncompliance at December 31, 2022 and modify interest rates applicable to borrowings under the agreement.
Refer to Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 10. Restructuring for further details regarding these cost cutting efforts. We anticipate that to the extent that we require additional liquidity, we will obtain funding through additional equity financings or the incurrence of other indebtedness or a combination of these potential sources of liquidity.
Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 10. Restructuring costs for further details regarding these cost cutting efforts. We anticipate that to the extent that we require additional liquidity, we will obtain funding through additional equity financings or the incurrence of other indebtedness or a combination of these potential sources of liquidity.
Bioventus Inc., as the managing member, causes BV LLC to make cash distributions to the owners of LLC Interests in an amount sufficient to (i) fund tax obligations in respect of allocations of taxable income from BV LLC; and (ii) cover Bioventus Inc. operating expenses, including payments under the Tax Receivable Agreement (“TRA”).
Bioventus Inc., as the managing member, causes BV LLC to make cash distributions to the owners of LLC Interests in an amount sufficient to (i) fund tax obligations in respect of allocations of taxable income from BV LLC; and (ii) cover Bioventus Inc. operating expenses, including payments under the TRA.
During the second quarter of 2022, prior to obtaining the results from our Phase 2 trial, we elected to discontinue the development of MOTYS, to focus our resources on other priorities, including the integration of our acquisitions and our expanded R&D and product development portfolio we inherited with these acquisitions.
During the 2022 fiscal year, prior to obtaining the results from our Phase 2 trial, we elected to discontinue the development of MOTYS to focus our resources on other priorities, including the integration of our acquisitions and our expanded R&D and product development portfolio we inherited with these acquisitions.
In addition, cost of sales includes depreciation related to production as well as amortization of product-related intellectual property and distribution rights associated with commercialized products. Certain products are manufactured by or obtained from third-party suppliers primarily located in Japan, Switzerland, Sweden and the United States.
In addition, cost of sales includes depreciation related to production as well as amortization of product-related intellectual property and distribution rights associated with commercialized products. Certain products are manufactured by or obtained from third-party suppliers primarily located in Japan, Switzerland, Sweden and the United States. Gross profit and gross margin Gross profit consists of net sales less cost of sales.
We sell our products primarily through our direct sales team, who manage and maintain the sales relationship with healthcare providers, distribution centers or specialty pharmacies. Certain surgical products are sold through independent distributors to hospitals so our neurosurgeon and orthopedic spine surgeon customers can use them in procedures.
We report sales net of contractual allowances, rebates and returns. We sell our products primarily through our direct sales team, who manage and maintain the sales relationship with healthcare providers, distribution centers or specialty pharmacies. Certain surgical products are sold through independent distributors to hospitals so our neurosurgeon and orthopedic spine surgeon customers can use them in procedures.
Amended 2019 Credit Agreement On July 11, 2022, we amended our Credit and Guaranty Agreement, dated as of December 6, 2019 (as amended on October 29, 2021, July 11, 2022 and March 31, 2023, the “Amended 2019 Credit Agreement”) in conjunction with the CartiHeal Acquisition to, among other things, provide for an $80.0 million term loan facility (“Term Loan Facility”).
Credit and Guaranty Agreement On July 11, 2022, we amended our Credit and Guaranty Agreement, dated as of December 6, 2019 (as previously amended on August 29, 2021 and October 29, 2021) in conjunction with the CartiHeal Acquisition to, among other things, provide for an $80.0 million term loan facility (“Term Loan Facility”).
Restructuring in 2022 also included costs to reduce headcount and to reorganize management structure for acquired businesses. Costs incurred for the year ended December 31, 2021 included costs to reduce headcount, reorganize management structure and to consolidate certain facilities for acquired businesses.
Costs incurred for the year ended December 31, 2022 included costs to reduce headcount, reorganize management structure and to consolidate certain facilities for acquired businesses.
We expect these needs to continue as we develop and commercialize new products and further our expansion into international markets. We have implemented previously announced restructuring initiatives to enhance our current financial position and sources of liquidity. These restructuring efforts are expected to result in $9.0 million to $10.0 million in cost savings on an annualized basis upon completion.
We expect these needs to continue as we develop and commercialize new products and further our expansion into international markets. We have implemented previously announced restructuring initiatives to enhance our current financial position and sources of liquidity. These restructuring efforts delivered $9.0 million to $10.0 million in cost savings on an annualized basis. Refer to Item 8.
Financial covenant requirements include (i) a maximum debt leverage ratio of not greater than 6.84 to 1.00 for the testing period ending March 31, 2023, 6.50 to 1.00 for the testing period ending June 30, 2023, 7.26 to 1.00 for the testing period ending September 30, 2023, 5.64 for the testing period ending December 31, 2023, 5.65 to 1.00 for the testing period ending March 31, 2024, 4.25 for the testing period ending June 30, 2024, 4.25 to 1.00 for the testing period ending September 30, 2024, and 4.00 to 1.00 for the testing period ending December 31, 2024 and each testing period thereafter, and, beginning with the testing period ending December 31, 2024, to be subject to a temporary increase to 4.50 to 1.00 upon certain events, and (ii) an interest coverage ratio not less than 2.25 to 1.00 for the testing period ending March 31, 2023, 2.21 to 1.00 for the testing period ending June 30, 2023, 1.70 to 1.00 for the testing period ending September 30, 2023, 1.98 to 1.00 for the testing period ending December 31, 2023, 2.25 to 1.00 for the testing period ending March 31, 2024, 2.25 to 1.00 for the testing period ending June 30, 2024, 2.25 to 1.00 for the testing period ending September 30, 2024 and 3.00 to 1.00 for the testing period ending December 31, 2024 and each testing period thereafter.
Financial covenant requirements include: (i) a maximum debt leverage ratio of not greater than 5.65 to 1.00 for the testing period ending March 31, 2024, 5.00 to 1.00 for the testing period ending June 30, 2024, 4.75 to 1.00 for the testing period ending September 30, 2024, 4.50 to 1.00 for the testing period ending December 31, 2024, 4.25 to 1.00 for testing period ending March 31, 2025, 4.00 to 1.00 for testing period ending June 30, 2025 and each testing period thereafter, and, beginning with the testing period ending March 31, 2025, to be subject to a temporary increase to 4.50 to 1.00 upon certain events, and (ii) an interest coverage ratio not less than 1.75 to 1.00 for the testing period ending March 31, 2024, 1.75 to 1.00 for the testing period ending June 30, 2024, 1.75 to 1.00 for the testing period ending September 30, 2024, 2.00 to 1.00 for the testing period ending December 31, 2024, 2.00 to 1.00 for the testing period ending March 31, 2025, 2.25 to 1.00 for the testing period ending June 30, 2025, 2.50 to 1.00 for the testing period ending September 20, 2025 and 3.00 to 1.00 for the testing period ending December 31, 2025 and each testing period thereafter.
Interest and penalties related to unrecognized tax benefits are recognized as a component of income tax expense. 83 Table of Contents JOBS Act We qualify as an “emerging growth company” pursuant to the provisions of the JOBS Act.
Interest and penalties related to unrecognized tax benefits are recognized as a component of income tax expense. 85 Table of Contents Emerging Growth Company and Smaller Reporting Company Status We qualify as an “emerging growth company” pursuant to the provisions of the JOBS Act.
Restructuring costs Years Ended December 31, Change (in thousands, except for percentage) 2022 2021 $ % Restructuring costs $ 6,779 $ 2,487 $ 4,292 172.6 % Restructuring costs for the year ended December 31, 2022 primarily included costs incurred as a result of an initiative to align the Company’s organizational and management cost structure to improve profitability and cash flow through headcount reduction and cutting third-party related costs.
Restructuring costs Years Ended December 31, Change (in thousands, except for percentage) 2023 2022 $ % Restructuring costs $ 840 $ 6,779 $ (5,939) (87.6 %) Restructuring costs for the year ended December 31, 2023 primarily included costs incurred as a result of an initiative to align the Company’s organizational and management cost structure to improve profitability and cash flow through headcount reduction and reducing third-party related costs.
Investors are encouraged to review the reconciliation of the non-GAAP measure provided in this Annual Report, including in the table above, to its most directly comparable U.S. GAAP measure.
Investors are encouraged to review the reconciliation of the non-GAAP measure provided in this Annual Report, including in all tables referencing Adjusted EBITDA, to its most directly comparable U.S. GAAP measure.
We report the income tax effects of these differences as deferred income taxes. Valuation allowances recognized reduce the related deferred tax assets to an amount which will, more likely than not, be realized. We recognize interest and penalties related to unrecognized tax benefits as a component of income tax expense.
We report the income tax effects of these differences as deferred income taxes. Valuation allowances recognized reduce the related deferred tax assets to an amount which will, more likely than not, be realized.
In addition, during the period commencing on the Closing Date and ending upon the satisfaction of certain conditions occurring not prior to the delivery of financial statements of the Company for the fiscal quarter ending June 30, 2024, the Company will be subject to certain additional requirements and covenants, including a requirement to maintain Liquidity (as defined in the Amended 2019 Credit Agreement) of not less than $10,000 as of the end of each calendar month during such period.
In addition, during the period commencing on the Closing Date and ending upon the satisfaction of certain conditions occurring not prior to October 29, 2025, the Company will be subject to certain additional requirements and covenants, including a requirement to maintain Liquidity (as defined in the Amended 2019 Credit Agreement) of not less than $10.0 million as of the end of each calendar month during such period.
Restructuring costs primarily consist of employee severance, legal, consulting and temporary labor expenses. Restructuring costs recorded in 2022 are the result of: i) aligning our organizational and management cost structure to improve profitability and cash flow and ii) headcount reductions related to 2021 acquisitions. Restructuring costs recorded in 2021 were the result of headcount reductions related to acquisitions.
Restructuring costs recorded in 2023 and 2022 are the result of: i) aligning our organizational and management cost structure to improve profitability and cash flow; and ii) headcount reductions related to 2021 acquisitions. Restructuring costs recorded in 2021 were the result of headcount reductions related to acquisitions.
Organization and basis of presentation of financial information for a further description of our significant accounting policies, however, we believe that the following accounting estimates are considered critical to our business in order to obtain a full understanding and to evaluate our reported financial results.
Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 2. Significant accounting policies for a further description of our significant accounting policies, however, we believe that the following accounting estimates are considered critical to our business in order to obtain a full understanding and to evaluate our reported financial results.
SOFR loans and base rate loans had a margin of 3.25% and 2.25%, respectively, subsequent to July 12, 2022 and prior to the Closing Date. As of the Closing Date, SOFR loans and base rate loans had a margin of 4.25% and 3.25%, respectively.
SOFR loans and base rate loans had a margin of 3.25% and 2.25%, respectively, subsequent to July 11, 2022 and prior to March 31, 2023. As of the March 2023 amendment, SOFR loans and base rate loans had a margin of 4.25% and 3.25%, respectively.
Non-GAAP Financial Measures - Adjusted EBITDA We present Adjusted EBITDA, a non-GAAP financial measure, because we believe it is a useful indicator that management uses as a measure of operating performance as well as for planning purposes, including the preparation of our annual operating budget and financial projections.
We recognize interest and penalties related to unrecognized tax benefits as a component of income tax expense. 74 Table of Contents Non-GAAP Financial Measures - Adjusted EBITDA We present Adjusted EBITDA, a non-GAAP financial measure, because we believe it is a useful indicator that management uses as a measure of operating performance as well as for planning purposes, including the preparation of our annual operating budget and financial projections.
We operate our business through two reportable segments, U.S. and International, and our portfolio of products is grouped into three verticals: • Pain Treatments is comprised of non-surgical joint pain injection therapies as well as peripheral nerve stimulation (“PNS”) products to help the patient get back to their normal activities. • Surgical Solutions is comprised of bone graft substitutes (“BGS”) to fuse and grow bones, improve results following spinal and other orthopedic surgeries as well as minimally invasive ultrasonic medical devices used for precise bone sculpting, removing tumors and tissue debridement, in various surgeries. 67 Table of Contents • Restorative Therapies is comprised of a bone healing system, skin allografts and products used to support healing of wounds as well as devices designed to help patients regain leg or hand function due to stroke, multiple sclerosis or other central nervous system disorders.
We operate our business through two reportable segments, U.S. and International, and our portfolio of products is grouped into three areas: • Pain Treatments is comprised of non-surgical pain injection therapies as well as peripheral nerve stimulation (“PNS”) products to help the patient get back to their normal activities. 70 Table of Contents • Surgical Solutions is comprised of bone graft substitutes (“BGS”) that increase bone formation to stimulate bone healing in spinal fusions and other orthopedic surgeries, as well as a portfolio of ultrasonic products used for precise bone cutting and sculpting, soft tissue management (i.e., tumor and liver resections) and tissue debridement, in various surgeries, including minimally invasive applications. • Restorative Therapies is comprised of a bone stimulation system, as well as devices designed to help patients regain leg or hand function due to stroke, multiple sclerosis or other central nervous system disorders.
Significant transactions CartiHeal On July 12, 2022, we acquired 100% of CartiHeal (2009) Ltd. (“CartiHeal”), a privately held company headquartered in Israel and the developer of the proprietary Agili-C implant for the treatment of joint surface lesions in traumatic and osteoarthritic joints.
The fair value of the Disposal Group’s intangibles were determined based on the consideration received for the Wound Business. CartiHeal On July 12, 2022, we acquired 100% of CartiHeal (2009) Ltd. (“CartiHeal”), a privately held company headquartered in Israel and the developer of the proprietary Agili-C implant for the treatment of joint surface lesions in traumatic and osteoarthritic joints.
Because future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Any changes in these estimates will be reflected in our consolidated financial statements as they occur. Refer to Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 1.
We use historical experience and other assumptions as the basis for our judgments in making these estimates. Because future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Any changes in these estimates will be reflected in our consolidated financial statements as they occur. Refer to Item 8.
Certain of our more critical accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty.
Certain of our more critical accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. On an ongoing basis, we evaluate our judgments, including those related to inventories and the recoverability of long-lived assets.
We have concluded that upon execution of the Settlement Agreement, the Company ceased to control CartiHeal for accounting purposes, and therefore, have deconsolidated CartiHeal (the “Deconsolidation”, or “Disposal”) effective February 27, 2023. We also concluded that this disposal will be treated as a discontinued operation.
We have concluded that upon execution of the Settlement Agreement, the Company ceased to control CartiHeal for accounting purposes, and therefore, deconsolidated CartiHeal (the “Deconsolidation”, or “Disposal”) effective February 27, 2023. We treated the Disposal as a discontinued operation. The loss upon disposal totaled $60.6 million and was recorded within loss from discontinued operations, net.
The Revolver will mature on October 29, 2025. 79 Table of Contents The Amended 2019 Credit Agreement contains customary affirmative and negative covenants, including those related to financial reporting and notification, restrictions on the declaration or payment of certain distributions on or in respect of Bioventus LLC’s equity interests, restrictions on acquisitions, investments and certain other payments, limitations on the incurrence of new indebtedness, limitations on transfers, sales and other dispositions of assets of Bioventus LLC and its subsidiaries, as well as limitations on making changes to the business and organizational documents of Bioventus LLC and its subsidiaries.
The capacity on the Revolver was reduced to $43.2 million at December 31, 2023 and will be further reduced by $5.0 million at June 30, 2024 in accordance with the Amended 2019 Credit Agreement. 81 Table of Contents The Amended 2019 Credit Agreement contains customary affirmative and negative covenants, including those related to financial reporting and notification, restrictions on the declaration or payment of certain distributions on or in respect of Bioventus LLC’s equity interests, restrictions on acquisitions, investments and certain other payments, limitations on the incurrence of new indebtedness, limitations on transfers, sales and other dispositions of assets of Bioventus LLC and its subsidiaries, as well as limitations on making changes to the business and organizational documents of Bioventus LLC and its subsidiaries.
Upon execution of the Settlement Agreement, we transferred 100% of our shares in CartiHeal to a trustee (the “Trustee”) for the benefit of the Former Securityholders.
Upon execution of the Settlement Agreement, we transferred 100% of our shares in CartiHeal to a trustee (the “Trustee”) for the benefit of the Former Securityholders. We had no ownership interest and no voting rights during the Interim Period.
Restructuring costs recorded in 2020 relate to efforts in our international business to improve operating efficiency. Depreciation and amortization Depreciation expense primarily consists of depreciation of computer equipment and software as well as demonstration and consignment inventory, leasehold improvements, furniture, fixtures, machinery and equipment. Amortization expense primarily consists of amortization expense related to customer relationships and other intangible assets.
Depreciation and amortization Depreciation expense primarily consists of depreciation of computer equipment and software as well as demonstration and consignment inventory, leasehold improvements, furniture, fixtures, machinery and equipment. Amortization expense primarily consists of amortization expense related to customer relationships and other intangible assets.
Organization for further details on the Company’s covenant compliance and Note 5. Financial instruments in this Annual Report for further details on the Company’s indebtedness. Information regarding cash flows Cash, cash equivalents and restricted cash as of December 31, 2022 totaled $31.8 million, compared to $99.2 million as of December 31, 2021.
Refer to Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 5. Financial instruments in this Annual Report for further details on the Company’s indebtedness. Information regarding cash flows Cash, cash equivalents and restricted cash as of December 31, 2023 totaled $37.0 million, compared to $30.2 million as of December 31, 2022.
In addition to historical consolidated financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Some of the numbers included herein have been rounded for the convenience of presentation.
Risk Factors and our consolidated financial statements and the related notes to those statements included elsewhere in this Annual Report on Form 10-K (“Annual Report”). In addition to historical consolidated financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Some of the numbers included herein have been rounded for the convenience of presentation.
We expect net sales and product mix to vary quarter by quarter and therefore our gross profit will likely fluctuate from quarter to quarter. 70 Table of Contents Selling, general and administrative expense Selling, general and administrative expense primarily consists of salaries, benefits and other related costs, including equity-based compensation, for personnel employed in sales, marketing, finance, legal, compliance, administrative, information technology, medical education and training, quality and human resource departments.
Selling, general and administrative expense Selling, general and administrative expense primarily consists of salaries, benefits and other related costs, including equity-based compensation, for personnel employed in sales, marketing, finance, legal, compliance, administrative, information technology, medical education and training, quality and human resource departments.
Financial instruments in this Annual Report for further information regarding long-term debt obligations. Does not reflect the increase to margin applicable for our interest payments that became effective as of March 31, 2023 (b) Refer to Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 12.
Financial instruments in this Annual Report for further information regarding long-term debt obligations. (b) Refer to Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 12.
We recognized a gain of $23.7 million due to the change in fair value of our equity method investment in CartiHeal as a result of the purchase. The gain was recognized in other income within the consolidated statement of operations and comprehensive (loss) income.
We recognized a gain of $23.7 million due to the change in fair value of our equity method investment in CartiHeal as a result of the purchase during the third quarter of 2022.
In April 2022, we exercised our Call Option to acquire all of the remaining shares of CartiHeal, excluding shares we already owned. Our decision to exercise the Call Option followed the FDA’s March 29, 2022 premarket approval of CartiHeal’s Agili-C implant.
Our decision to exercise the Call Option followed the FDA’s March 29, 2022 premarket approval of CartiHeal’s Agili-C implant.
Noncontrolling interest Years Ended December 31, Change (in thousands, except for percentage) 2022 2021 $ % Continuing LLC Owner $ 54,240 $ 4,124 $ 50,116 NM Other noncontrolling interest 447 5,665 (5,218) (92.1 %) Total $ 54,687 $ 9,789 $ 44,898 Subsequent to the IPO and related transactions, we are the sole managing member of BV LLC in which we own 79.7%.
Noncontrolling interest Years Ended December 31, Change (in thousands, except for percentage) 2023 2022 $ % Continuing LLC Owner $ 39,395 $ 54,240 $ (14,845) (27.4 %) Other noncontrolling interest — 447 (447) (100.0 %) Total $ 39,395 $ 54,687 $ (15,292) Subsequent to the IPO and related transactions, we are the sole managing member of BV LLC in which we own 80.0%.
In order to preserve our Call Option, in accordance with the Option Agreement and upon approval of the Board of Directors (“BOD”), we deposited $50.0 million into escrow in August 2021 for the potential acquisition of CartiHeal, which was included in restricted cash on the consolidated balance sheet at December 31, 2021.
In order to preserve our Call Option, in accordance with the Option Agreement and upon approval of the Board of Directors (“BOD”), we deposited $50.0 million into escrow in August 2021 for the potential acquisition of CartiHeal. In April 2022, we exercised our Call Option to acquire all of the remaining shares of CartiHeal, excluding shares we already owned.
Commitments and contingencies in this Annual Report for further information regarding operating lease liabilities. (c) Amounts that are contractually committed to as of December 31, 2022 related to multi-year exclusive supply agreements.
Commitments and contingencies in this Annual Report for further information regarding operating and finance lease liabilities. 80 Table of Contents (c) Amounts that are contractually committed to as of December 31, 2023 related to multi-year exclusive supply agreements. Generally, our purchase obligations under these supply agreements are based on forecasted requirements, subject in some cases to an annual contractual minimum.
We incurred $4.3 million during the year ended December 31, 2022 and we expect to incur approximately $5.0 million to $6.0 million exclusively to fulfill our remaining MOTYS Costs. 73 Table of Contents Net sales Years Ended December 31, Change (in thousands, except for percentage) 2022 2021 $ % U.S.
We incurred $1.0 million and $4.3 million in costs during the years ended December 31, 2023 and 2022, respectively, related to MOTYS. No further costs are expected on MOTYS. 76 Table of Contents Net sales Years Ended December 31, Change (in thousands, except for percentage) 2023 2022 $ % U.S.
(“Elron” and together with the Company, the “Parties”) as representative of CartiHeal’s selling securityholders under the Option Agreement collectively, the “Former Securityholders”).
On February 27, 2023, we entered into a settlement agreement (the “Settlement Agreement”) with Elron Ventures Ltd. (“Elron” and together with the Company, the “Parties”) as representative of CartiHeal’s selling securityholders under the Option Agreement collectively, the “Former Securityholders”).
Generally, our purchase obligations under these supply agreements are based on forecasted requirements, subject in some cases to an annual contractual minimum. 78 Table of Contents Other cash requirements We enter into contracts in the normal course of business with various third-parties for development, collaboration and other services for operating purposes. These contracts provide for termination upon notice.
Other cash requirements We enter into contracts in the normal course of business with various third parties for development, collaboration and other services for operating purposes. These contracts provide for termination upon notice.
Pursuant to the CartiHeal Amendment, we agreed to pay interest on each tranche of the Deferred Amount at a rate of 8.0% annually, until such tranche is paid.
Pursuant to the CartiHeal Amendment, we agreed to pay interest on each tranche of the Deferred Amount at a rate of 8.0% annually, until such tranche is paid. The First Paper Milestone under the Option Agreement occurred on February 13, 2023, triggering our obligation to make the first $50.0 million payment, plus applicable interest, under the Option Agreement.
On March 31, 2023, we further amended our Amended 2019 Credit Agreement to, among other things, modify certain financial covenant provisions, waive the noncompliance at December 31, 2022 and increase the applicable interest rate. Refer to Liquidity and Capital Resources—Credit Facilities for further information. B.O.N.E.S.
On March 31, 2023, we further amended our Credit and Guaranty Agreement to, among other things, modify certain financial covenant provisions, waive the noncompliance at December 31, 2022 and increase the applicable interest rate. We were in compliance as of December 31, 2023 with the financial covenants as stated within the Credit and Guaranty Agreement.
The following table sets forth total net sales, net (loss) income and Adjusted EBITDA for the periods presented: Years Ended December 31, (in thousands, except for loss per share) 2022 2021 Net sales $ 512,117 $ 430,898 Net (loss) income $ (213,391) $ 9,586 Adjusted EBITDA (1) $ 66,309 $ 80,759 Loss per share - basic and diluted $ (2.59) $ (0.15) (1) See below under Results of Operations-Adjusted EBITDA for a reconciliation of net (loss) income to Adjusted EBITDA.
The following table sets forth total net sales, net (loss) income and Adjusted EBITDA for the periods presented: Years Ended December 31, (in thousands, except for loss per share) 2023 2022 Net sales $ 512,345 $ 512,117 Net loss from continuing operations $ (121,196) $ (144,651) Adjusted EBITDA (1) $ 88,862 $ 68,610 Loss per Class A common stock, basic and diluted Continuing operations $ (1.54) $ (1.70) Discontinued operations (0.95) (0.89) Loss per Class A common stock, basic and diluted $ (2.49) $ (2.59) (1) See below under Results of Operations-Adjusted EBITDA for a reconciliation of net (loss) income to Adjusted EBITDA.
Certain wholly-owned subsidiaries of BV LLC are taxable entities for U.S. or foreign tax purposes and file tax returns in their local jurisdictions. Bioventus Inc. is subject to U.S. federal, state and local income taxes at the prevailing corporate tax rates with respect to our taxable income.
Accordingly, the members include the profits and losses of BV LLC in their income tax returns. Certain wholly-owned subsidiaries of BV LLC are taxable entities for U.S. or foreign tax purposes and file tax returns in their local jurisdictions.
We previously entered into an Option and Equity Purchase Agreement with CartiHeal (“Option Agreement”) in July 2020. The Option Agreement provided us with an exclusive option to acquire 100% of CartiHeal’s shares (“Call Option”), and provided CartiHeal with a put option that would require us to purchase 100% of CartiHeal’s shares under certain conditions.
The Option Agreement provided us with an exclusive option to acquire 100% of CartiHeal’s shares (“Call Option”), and provided CartiHeal with a put option that would require us to purchase 100% of CartiHeal’s shares under certain conditions. In August 2021, CartiHeal achieved pivotal clinical trial success, as defined in the Option Agreement, for the Agili-C implant.
Gross profit and gross margin Years Ended December 31, Change (in thousands, except for percentage) 2022 2021 $ % U.S. $ 296,782 $ 273,690 $ 23,092 8.4 % International 34,298 29,016 5,282 18.2 % Total $ 331,080 $ 302,706 $ 28,374 9.4 % Years Ended December 31, 2022 2021 Change U.S. 65.2 % 70.6 % (5.5 %) International 60.3 % 66.9 % (6.6 %) Total 64.6 % 70.3 % (5.6 %) U.S.
Gross profit and gross margin Years Ended December 31, Change (in thousands, except for percentage) 2023 2022 $ % U.S. $ 294,366 $ 296,782 $ (2,416) (0.8 %) International 33,827 34,298 (471) (1.4 %) Total $ 328,193 $ 331,080 $ (2,887) (0.9 %) Years Ended December 31, 2023 2022 Change U.S. 65.4 % 65.2 % 0.2 % International 54.1 % 60.3 % (6.2 %) Total 64.1 % 64.6 % (0.5 %) U.S.
As a result, we expect our research and development expenses to vary from low to the mid-single digits as a percentage of net sales as we introduce new products, extend existing product lines and expand indications. We see significant opportunity to develop innovative and clinically differentiated products in-house with our experienced research and development team.
We are focused on internal research and development to broaden our portfolio across all products and undertake clinical research to support their commercialization. As a result, we expect our research and development expenses to vary from low to the mid-single digits as a percentage of net sales as we introduce new products, extend existing product lines and expand indications.
Other expense (income) Other expense (income) primarily consists of foreign currency transaction and remeasurement gains and losses on transactions denominated in currencies other than our functional currency. Our foreign currency transaction and remeasurement gains and losses are primarily related to foreign currency denominated cash, liabilities and intercompany receivables and payables.
Interest expense includes any fair value gain or losses on these swaps. Other expense (income) Other expense (income) primarily consists of foreign currency transaction and remeasurement gains and losses on transactions denominated in currencies other than our functional currency.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with Part I, Item 1A, Risk Factors and our consolidated financial statements and the related notes to those statements included elsewhere in this Annual Report on Form 10-K (“Annual Report”).
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with Part I, Item 1A.
Other expense (income) may also include certain nonrecurring items. 71 Table of Contents Income tax expense The Company’s subsidiary Bioventus LLC (“BV LLC”) is a partnership for U.S. federal tax purposes. Accordingly, the members include the profits and losses of BV LLC in their income tax returns.
Our foreign currency transaction and remeasurement gains and losses are primarily related to foreign currency denominated cash, liabilities and intercompany receivables and payables. Other expense (income) may also include certain nonrecurring items. Income tax expense The Company’s subsidiary, Bioventus LLC (“BV LLC”), is a partnership for U.S. federal tax purposes.
These items include acquisition and related costs, remeasurement gains and losses on investments, impairments on goodwill, restructuring and succession charges, equity compensation expense, equity loss in unconsolidated investments, foreign currency impact, and other items.
These items include acquisition and related costs, impairment of goodwill, impairment of assets, restructuring and succession charges, equity compensation expense, financial restructuring costs, loss on disposal of a business and other items.
Segment Adjusted EBITDA Adjusted EBITDA for each of our reportable segments is as follows: Years Ended December 31, Change (in thousands, except for percentage) 2022 2021 $ % U.S. $ 56,231 $ 70,640 $ (14,409) (20.4 %) International $ 10,078 $ 10,119 $ (41) (0.4) % U.S.
Segment Adjusted EBITDA Adjusted EBITDA for each of our reportable segments is as follows: Years Ended December 31, Change (in thousands, except for percentage) 2023 2022 $ % U.S. $ 78,668 $ 56,513 $ 22,155 39.2 % International $ 10,194 $ 12,097 $ (1,903) (15.7) % U.S.
Clinical and preclinical development timelines, the probability of success and development costs can differ materially from expectations. Restructuring costs We have restructured portions of our operations and future restructuring activities are possible. Identifying and calculating the cost to exit operations requires certain assumptions to be made, the most significant of which are anticipated future liabilities.
We see significant opportunity to develop innovative and clinically differentiated products in-house with our experienced research and development team. Clinical and preclinical development timelines, the probability of success and development costs can differ materially from expectations. 73 Table of Contents Restructuring costs We have restructured portions of our operations and future restructuring activities are possible.
Although our estimates have been reasonably accurate in the past, significant judgment is required, and these estimates and assumptions may change as additional information becomes available and facts or circumstances change. Restructuring costs are recorded at estimated fair value. Key assumptions in determining the restructuring costs include negotiated terms and payments to terminate contractual obligations.
Identifying and calculating the cost to exit operations requires certain assumptions to be made, the most significant of which are anticipated future liabilities. Although our estimates have been reasonably accurate in the past, significant judgment is required, and these estimates and assumptions may change as additional information becomes available and facts or circumstances change.
In addition to tax expenses, we are obligated to make payments under the TRA, which could be significant.
Bioventus Inc. is subject to U.S. federal, state and local income taxes at the prevailing corporate tax rates with respect to our taxable income. In addition to tax expenses, we are obligated to make payments under the TRA, which could be significant.
(b) Includes acquisition and integration costs related to completed acquisitions, amortization of inventory step-up associated with acquired entities, and changes in fair value of contingent consideration. (c) Represents the gain on remeasurement of the Company’s equity method investment in CartiHeal based upon the fair value of consideration transferred for the CartiHeal Acquisition.
(b) Includes acquisition and integration costs related to completed acquisitions, amortization of inventory step-up associated with acquired entities, loss on disposal of fixed assets related to acquired businesses, and changes in fair value of contingent consideration. (c) Costs incurred were the result of adopting restructuring plans to reduce headcount, contract termination, reorganize management structure and consolidate certain facilities.
Components of our results of operations Net sales We generate net sales from a portfolio of active healing products that serve physicians spanning the orthopedic continuum, including sports medicine, total joint reconstruction, hand and upper extremities, foot and ankle, podiatric surgery, trauma, spine and neurosurgery. We report sales net of contractual allowances, rebates and returns.
Consolidated Appropriations Act In July 2022, in connection with the Consolidated Appropriations Act, 2021 (“CAA”), the Centers for Medicare and Medicaid Services (“CMS”) began utilizing new pricing information the Company reported to it pursuant to the newly adopted reporting obligations to adjust the Medicare payment to healthcare providers using our Durolane and Gelsyn-3 products. 72 Table of Contents Components of our results of operations Net sales We generate net sales from a portfolio of active healing products that serve physicians spanning the orthopedic continuum, including sports medicine, total joint reconstruction, hand and upper extremities, foot and ankle, podiatric surgery, trauma, spine and neurosurgery.
These increases were mostly offset with an increase in gross profit resulting from larger net sales. Liquidity and Capital Resources Sources of liquidity Our principal liquidity needs have historically been for acquisitions, working capital, research and development, clinical trials, and capital expenditures.
International Adjusted EBITDA decreased $1.9 million primarily due to increased compensation costs and a slight decline in gross profit. 79 Liquidity and Capital Resources Sources of liquidity Our principal liquidity needs have historically been for acquisitions, working capital, research and development, clinical trials, and capital expenditures.
Depreciation and amortization Years Ended December 31, Change (in thousands, except for percentage) 2022 2021 $ % Depreciation and amortization $ 21,153 $ 8,363 $ 12,790 152.9 % Depreciation and amortization increased during the year ended December 31, 2022 compared with the prior year primarily due to acquisitions, partially offset by lower amortization expense in the current year as certain assets became fully amortized.
Depreciation and amortization Years Ended December 31, Change (in thousands, except for percentage) 2023 2022 $ % Depreciation and amortization $ 8,842 $ 9,748 $ (906) (9.3 %) Depreciation and amortization decreased during year ended December 31, 2023 compared with the prior year primarily due to: (i) the impairment of intellectual property intangible assets associated with the Wound Business, which was divested during the second quarter of 2023; and (ii) a decline in amortization for certain customer relationships that became fully amortized during the first quarter of 2023.
(h) Represents a non-cash impairment charge due to the decline in the Company’s market capitalization. (i) Represents an asset impairment charge of our investment in Trice Medical, Inc. (j) Represents the loss on impairment of Harbor Medtech Inc.’s (“Harbor”) long-lived assets and the Company’s investment in Harbor.
(f) Represents a non-cash impairment charge for intangible assets attributable to our Wound Business due to its divestiture during the year ended December 31, 2023. Represents asset impairment charges on Trice Medical, Inc. for the year ended December 31, 2022. (g) Represents a non-cash impairment charge due to the decline in the Company’s market capitalization.
Pain Treatments $ 194,830 $ 201,068 $ (6,238) (3.1 %) Restorative Therapies 134,214 103,009 31,205 30.3 % Surgical Solutions 126,207 83,476 42,731 51.2 % Total U.S. net sales 455,251 387,553 67,698 17.5 % International Pain Treatments 21,495 20,539 956 4.7 % Restorative Therapies 20,420 18,563 1,857 10.0 % Surgical Solutions 14,951 4,243 10,708 NM Total International net sales 56,866 43,345 13,521 31.2 % Total net sales $ 512,117 $ 430,898 $ 81,219 18.8 % (NM = Not Meaningful) U.S.
Pain Treatments $ 197,954 $ 194,830 $ 3,124 1.6 % Restorative Therapies 116,851 134,214 (17,363) (12.9 %) Surgical Solutions 135,055 126,207 8,848 7.0 % Total U.S. net sales 449,860 455,251 (5,391) (1.2 %) International Pain Treatments 22,847 21,495 1,352 6.3 % Restorative Therapies 20,222 20,420 (198) (1.0 %) Surgical Solutions 19,416 14,951 4,465 29.9 % Total International net sales 62,485 56,866 5,619 9.9 % Total net sales $ 512,345 $ 512,117 $ 228 — % U.S.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeEffects of inflation We do not believe that inflation has had a material effect on our results of operations during the periods presented herein. 85 Table of Contents Item 8. Financial Statements and Supplementary Data. Index to Consolidated Financial Statements Page Bioventus Inc.
Biggest changeEffects of inflation We do not believe that inflation has had a material effect on our results of operations during the periods presented herein. 87 Table of Contents
We are also exposed to interest rate risk in connection with borrowings under our Amended 2019 Credit Agreement, which bear interest at a floating rate based on one-month LIBOR plus an applicable borrowing margin.
We are also exposed to interest rate risk in connection with borrowings under our Amended 2019 Credit Agreement, which bear interest at a floating rate based on one-month SOFR plus an applicable borrowing margin.
We terminated this interest rate swap agreement on October 28, 2022. 84 Table of Contents Foreign exchange risk management We operate in countries other than the United States and are exposed to foreign currency risks. We bill most direct sales outside of the United States in local currencies.
We terminated this interest rate swap agreement on October 28, 2022. Foreign exchange risk management We operate in countries other than the United States and are exposed to foreign currency risks. We bill most direct sales outside of the United States in local currencies.
Changes in the fair values of derivative instruments are recognized in the consolidated statements of operations and comprehensive (loss) income in the period incurred. Interest rate risk Our cash and cash equivalents balance as of December 31, 2022 consisted of demand deposits and institutional money market funds held in U.S. and foreign banks.
Changes in the fair values of derivative instruments are recognized in the consolidated statements of operations and comprehensive (loss) income in the period incurred. 86 Table of Contents Interest rate risk Our cash and cash equivalents balance as of December 31, 2023 consisted of demand deposits and institutional money market funds held in U.S. and foreign banks.
As of December 31, 2022, a 1.0% increase in interest rate would result in $13.8 million increase in total interest payable over the remaining life of the Amended 2019 Credit Agreement in the event we were to draw down the entire capacity of our revolving credit facility.
As of December 31, 2023, a 1.0% increase in interest rate would result in $9.7 million increase in total interest payable over the remaining life of the Amended 2019 Credit Agreement in the event we were to draw down the entire capacity of our revolving credit facility.
Removed
Report of Independent Registered Public Accounting Firm (PCAOB ID Number 248) 87 Consolidated Statements of Operations and Comprehensive (Loss) Income 88 Consolidated Balance Sheets 89 Consolidated Statements of Changes in Stockholders’ and Members’ Equity 90 Consolidated Statements of Cash Flows 91 Notes to the Consolidated Financial Statements 92 86 Table of Contents GRANT THORNTON LLP REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 4140 ParkLake Ave., Suite 130 Raleigh, NC 27612-3723 D +1 919 881 2700 F +1 919 881 2795 Opinion on the financial statements We have audited the accompanying consolidated balance sheets of Bioventus Inc.
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(a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive (loss) income, changes in stockholders’ and members’ equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”).
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In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.
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Going concern The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, uncertainty exists related to the Company’s ability to meet certain financial covenants within 12 months from the date of report issuance.
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These conditions, along with other matters as set forth in Note 1, raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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Basis for opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits.
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We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
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We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
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The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
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Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
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Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ GRANT THORNTON LLP We have served as the Company’s auditor since 2019.
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Raleigh, North Carolina March 31, 2023 87 Table of Contents Bioventus Inc.
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Consolidated Statements of Operations and Comprehensive (Loss) Income Years Ended December 31, 2022, 2021 and 2020 (Amounts in thousands, except share amounts) 2022 2021 2020 Net sales $ 512,117 $ 430,898 $ 321,161 Cost of sales (including depreciation and amortization of $45,622, $26,471 and $21,169 respectively) 181,037 128,192 87,642 Gross profit 331,080 302,706 233,519 Selling, general and administrative expense 332,606 254,253 193,078 Research and development expense 25,941 19,039 11,202 Restructuring costs 6,779 2,487 563 Change in fair value of contingent consideration 6,452 829 — Depreciation and amortization 21,153 8,363 7,439 Impairment of goodwill 189,197 — — Impairment of variable interest entity assets — 5,674 — Operating (loss) income (251,048) 12,061 21,237 Interest expense, net 25,795 1,112 9,751 Other (income) expense (12,944) 3,329 (4,428) Other expense 12,851 4,441 5,323 (Loss) income before income taxes (263,899) 7,620 15,914 Income tax (benefit) expense, net (50,508) (1,966) 1,192 Net (loss) income (213,391) 9,586 14,722 Loss attributable to noncontrolling interest 54,687 9,789 1,689 Net (loss) income attributable to Bioventus Inc. $ (158,704) $ 19,375 $ 16,411 Net (loss) income $ (213,391) $ 9,586 $ 14,722 Other comprehensive (loss) income, net of tax Change in prior service cost and unrecognized gain (loss) for defined benefit plan adjustment 133 60 (54) Change in foreign currency translation adjustments (501) (1,318) 2,126 Comprehensive (loss) income (213,759) 8,328 16,794 Comprehensive loss attributable to noncontrolling interest 54,766 9,789 1,689 Comprehensive (loss) income attributable to Bioventus Inc. $ (158,993) $ 18,117 $ 18,483 Loss per share of Class A common stock, basic and diluted (1) : $ (2.59) $ (0.15) Weighted-average shares of Class A common stock outstanding, basic and diluted (1) : 61,389,107 45,472,483 (1) Per share information for the year ended December 31, 2021 represents loss per share of Class A common stock and weighted-average shares of Class A common stock outstanding from February 16, 2021 through December 31, 2021, the period following Bioventus Inc.'s initial public offering and related transactions described in Note 1.
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Organization and Note 9. Earnings per share within the Notes to the Consolidated Financial Statements. The accompanying notes are an integral part of these consolidated financial statements. 88 Table of Contents Bioventus Inc.
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Consolidated Balance Sheets as of December 31, 2022 and 2021 (Amounts in thousands, except share amounts) 2022 2021 Assets Current assets: Cash and cash equivalents $ 31,814 $ 43,933 Restricted cash 23 5,280 Accounts receivable, net 136,645 124,963 Inventory 85,408 61,688 Prepaid and other current assets 18,685 27,239 Total current assets 272,575 263,103 Restricted cash, less current portion — 50,000 Property and equipment, net 27,647 22,985 Goodwill 13,759 147,623 Intangible assets, net 1,038,724 695,193 Operating lease assets 17,308 17,186 Deferred tax assets — 481 Investment and other assets 2,636 29,291 Total assets $ 1,372,649 $ 1,225,862 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 37,549 $ 16,915 Accrued liabilities 111,954 131,473 Accrued equity-based compensation — 10,875 Current portion of long-term debt 33,056 18,038 Current portion of deferred consideration 117,615 — Other current liabilities 3,843 3,558 Total current liabilities 304,017 180,859 Long-term debt, less current portion 385,010 339,644 Deferred income taxes 154,001 133,518 Deferred consideration, less current portion 79,269 — Contingent consideration 84,682 16,329 Other long-term liabilities 25,338 21,723 Total liabilities 1,032,317 692,073 Commitments and contingencies (Note 12) Stockholders’ Equity: Preferred stock, $0.001 par value, 10,000,000 shares authorized, 0 shares issued Class A common stock, $0.001 par value, 250,000,000 shares authorized as of December 31, 2022 and December 31, 2021, 62,063,014 and 59,548,504 shares issued and outstanding as of December 31, 2022 and December 31, 2021, respectively 62 59 Class B common stock, $0.001 par value, 50,000,000 shares authorized, 15,786,737 shares issued and outstanding as of December 31, 2022 and December 31, 2021 16 16 Additional paid-in capital 481,919 465,272 Accumulated deficit (165,306) (6,602) Accumulated other comprehensive (loss) income (110) 179 Total stockholders’ equity attributable to Bioventus Inc. 316,581 458,924 Noncontrolling interest 23,751 74,865 Total stockholders’ equity 340,332 533,789 Total liabilities and stockholders’ equity $ 1,372,649 $ 1,225,862 The accompanying notes are an integral part of these consolidated financial statements. 89 Table of Contents Bioventus Inc.
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Consolidated Statements of Changes in Stockholders’ and Members’ Equity Years Ended December 31, 2022, 2021 and 2020 (Amounts in thousands, except share amounts) Class A Common Stock Class B Common Stock Members’ Equity Shares Amount Shares Amount Additional Paid-in Capital Accumulated other comprehensive (loss) income Accumulated Deficit Non- controlling Interest Total Stockholders' and Members’ Equity Balance at December 31, 2019 $ 145,617 Equity-based compensation 26 Distribution to members (19,250) Debt conversion 973 Net income 14,722 Other comprehensive income 2,072 Balance at December 31, 2020 $ 144,160 — $ — — $ — $ — $ — $ — $ — $ 144,160 Prior to Organizational Transactions: Refund from members 123 — — — — — — — — 123 Equity-based compensation (39) — — — — — — — — (39) Net income 25,977 — — — — — — — — 25,977 Other comprehensive loss (1,507) — — — — — — — — (1,507) Effect of Organizational Transactions (168,714) 31,838,589 32 15,786,737 16 41,813 — — 79,119 (47,734) Subsequent to Organizational Transactions: Initial public offering, net of offering costs — 9,200,000 9 — — 106,441 — — — 106,450 Issuance of Class A common stock for equity plans — 169,125 — — — 1,617 — — — 1,617 Issuance of Class A common stock for acquisitions, net of registration fees — 18,340,790 18 — — 272,706 — — — 272,724 Distribution to Continuing LLC Owner — — — — — — — — (3,306) (3,306) Net loss — — — — — — — (6,602) (9,789) (16,391) Deconsolidation of variable interest entity — — — — — — — — 3,746 3,746 Equity based compensation — — — — — 15,059 — — 4,825 19,884 Replacement equity awards in connection with acquisitions — — — — — 27,636 — — — 27,636 Acquisition of noncontrolling interest — — — — — — — — 200 200 Other comprehensive income — — — — — — 179 — 70 249 Balance at December 31, 2021 $ — 59,548,504 $ 59 15,786,737 $ 16 $ 465,272 $ 179 $ (6,602) $ 74,865 $ 533,789 Issuance of Class A common stock for equity plans 2,514,510 3 — — 5,819 — — — 5,822 Net loss — — — — — — (158,704) (54,687) (213,391) Tax withholdings on equity compensation awards — — — — (3,352) — — — (3,352) Deconsolidation of noncontrolling interest — — — — — — — 247 247 Equity based compensation — — — — 14,180 — — 3,405 17,585 Other comprehensive loss — — — — — (289) — (79) (368) Balance at December 31, 2022 62,063,014 $ 62 15,786,737 $ 16 $ 481,919 $ (110) $ (165,306) $ 23,751 $ 340,332 The accompanying notes are an integral part of these consolidated financial statements . 90 Table of Contents Bioventus Inc.
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Consolidated Statements of Cash Flows Years Ended December 31, 2022, 2021 and 2020 (Amounts in thousands) 2022 2021 2020 Operating activities: Net (loss) income $ (213,391) $ 9,586 $ 14,722 Adjustments to reconcile net (loss) income to net cash from operating activities: Depreciation and amortization 66,803 34,875 28,643 Provision for expected credit losses 5,190 485 1,215 Equity-based compensation from 2021 Stock Incentive Plan 17,585 19,844 — Profits interest plan, liability-classified and other equity awards compensation — (24,356) 10,103 Change in fair value of contingent consideration 6,452 829 — Change in fair value of interest rate swap (6,396) (2,730) 1,599 Deferred income taxes (52,792) (9,756) 644 Change in fair value of Equity Participation Rights — (2,774) — Impairment of goodwill and asset impairment charges 199,482 — — Impairments related to variable interest entity — 7,043 — Loss on debt retirement and modification — 2,162 — Revaluation gain on previously held equity interest in CartiHeal (23,709) — (511) Unrealized loss (gain) on foreign currency fluctuations 1,383 472 (490) Other, net 388 588 966 Changes in operating assets and liabilities: Accounts receivable (18,022) (20,052) (3,941) Inventories (18,618) 3,183 (528) Accounts payable and accrued expenses 10,913 18,211 20,510 Other current and noncurrent assets and liabilities 11,195 (14,619) (733) Net cash from operating activities - continuing operations (13,537) 22,991 72,199 Net cash from operating activities - discontinued operations — — (400) Net cash from operating activities (13,537) 22,991 71,799 Investing activities: Acquisitions, net of cash acquired (104,841) (262,870) — Purchase of property and equipment (10,042) (7,370) (16,579) Investments and acquisition of distribution rights (1,478) (13,520) (4,093) Other (75) — — Net cash from investing activities - continuing operations (116,436) (283,760) (20,672) Net cash from investing activities - discontinued operations — — 172 Net cash from investing activities (116,436) (283,760) (20,500) Financing activities: Proceeds from issuance of Class A common stock sold in initial public offering, net of underwriting discounts and offering costs — 107,777 — Proceeds from issuance of Class A and B common stock 5,822 1,633 — Registration fees for Class A common stock to purchase Misonix — (1,838) — Tax withholdings on equity-based compensation (3,352) — — Borrowing on revolver 25,000 20,000 49,000 Payment on revolver (25,000) (20,000) (49,000) Proceeds from the issuance of long-term debt, net of issuance costs 79,659 257,453 — Payments on long-term debt (20,038) (91,250) (10,000) Distributions to members — (367) (19,886) Other, net (15) (37) 317 Net cash from financing activities 62,076 273,371 (29,569) Effect of exchange rate changes on cash 521 (228) 589 Net change in cash, cash equivalents and restricted cash (67,376) 12,374 22,319 Cash, cash equivalents and restricted cash at the beginning of the period 99,213 86,839 64,520 Cash, cash equivalents and restricted cash at the end of the period $ 31,837 $ 99,213 $ 86,839 Supplemental disclosure of noncash investing and financing activities Accrued liabilities for distribution rights $ — $ — $ 1,000 Accrued member distributions $ — $ 3,181 $ 31 Debt conversion $ — $ — $ 973 Accounts payable for purchase of property, plant and equipment $ 419 $ 695 $ 336 The accompanying notes are an integral part of these consolidated financial statements. 91 Table of Contents Bioventus Inc.
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Notes to the Consolidated Financial Statements (Amounts in thousands, except unit and share amounts) 1. Organization The Company Bioventus Inc.
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(together with its subsidiaries, the “Company”) was formed as a Delaware corporation for the purpose of facilitating an initial public offering (“IPO”) and other related transactions in order to carry on the business of Bioventus LLC and its subsidiaries (“BV LLC”).
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Bioventus Inc. functions as a holding company with no direct operations, material assets or liabilities other than the equity interest in BV LLC. BV LLC is a limited liability company formed under the laws of the state of Delaware on November 23, 2011 and operates as a partnership. BV LLC commenced operations in May 2012.
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The Company is focused on developing and commercializing clinically differentiated, cost efficient and minimally invasive treatments that engage and enhance the body’s natural healing processes. The Company is headquartered in Durham, North Carolina and has approximately 1,120 employees at December 31, 2022.
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Initial Public Offering On February 16, 2021, the Company closed an IPO of 9,200,000 shares of Class A common stock at a public offering price of $13.00 per share, which includes 1,200,000 shares issued pursuant to the underwriters' over-allotment option.
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The Company received $111,228 in proceeds, net of underwriting discounts and commissions of $8,372, which was used to purchase newly-issued membership interests from BV LLC at a price per interest equal to the IPO price of $13.00. The Company also incurred offering expenses totaling $4,778 in addition to the underwriting discounts and commissions.
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Offering expenses of $1,327 were paid in 2020 and $3,451 were paid in 2021. The Company is the sole managing member of, has a majority economic interest in, has the sole voting interest in, and controls the management of BV LLC.
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As a result, the Company consolidates the financial results of BV LLC and reports a non-controlling interest for the interest not held by the Company.
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IPO Transactions In connection with the IPO, the Company completed the following transactions (“Transactions”). • Amended and restated the limited liability company agreement of BV LLC (“BV LLC Agreement”), to, among other things, (i) provide for a new single class of common membership interests in BV LLC (“LLC Interests”); (ii) exchange all of the existing membership interests in BV LLC (“Original BV LLC Owners”) for new LLC Interests; and (iii) appoint Bioventus Inc. as the sole managing member of BV LLC.
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Stockholders’ equity for further information. • Amended and restated the Bioventus Inc. certificate of incorporation to, among other things, (i) provide for an increase in the authorized shares of Class A common stock; (ii) provide for Class B common stock with voting rights but no economic interest, which shares were issued to the Original BV LLC Owners on a one-for-one basis with the number of LLC Interests they owned; and (iii) provide for undesignated preferred stock.
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Refer to Note 8. Stockholders’ equity for further information. • Acquired, by merger, ten entities that were Original BV LLC Owners (“Former LLC Owners”), for which the Company issued 31,838,589 shares of Class A common stock as merger consideration (“IPO Mergers”).
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The only assets held by the Former LLC Owners were 31,838,589 LLC Interests and a corresponding number of shares of Class B common stock.
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Upon consummation of the IPO Mergers, the 31,838,589 shares of Class B common stock were canceled, and the Company recognized the 31,838,589 LLC Interests at carrying value, as the IPO Mergers are considered to be a recapitalization transaction.
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The financial statements for periods prior to the IPO and Transactions have been adjusted to combine the previously separate entities for presentation purposes. Prior to the Transactions, Bioventus Inc. had no operations. Interim periods The Company reports quarterly interim periods on a 13-week basis within a standard calendar year.
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Each annual reporting period begins on January 1 and ends on December 31. Each quarter ends on the Saturday closest to calendar quarter-end, with the exception of the fourth quarter, which ends on December 31. The 13-week quarterly periods for fiscal year 2022 ended on April 2, July 2 and October 1.
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Comparable periods for 2021 ended on April 3, July 3 and October 2. The fourth and first quarters may vary in length depending on the calendar year. 92 Table of Contents Consolidation The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”).
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The consolidated financial statements include the Company, its subsidiaries and investments in which the Company has control. Amounts pertaining to the non-controlling ownership interests held by third-parties in the operating results and financial position of the Company’s controlled subsidiaries are reported as non-controlling interests. All intercompany balances and transactions have been eliminated in consolidation.
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Reclassifications Certain prior period amounts have been reclassified to conform to the current period presentation. These changes had no effect on previously reported total revenues, net (loss) income, other comprehensive (loss) income, members’ equity or cash flows. Unless otherwise noted, all financial information in the consolidated financial statement footnotes reflects the Company’s results from continuing operations.
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Segment reporting The Company identifies a business as an operating segment if: (i) it engages in business activities from which it may earn revenues and incur expenses; (ii) its operating results are regularly reviewed by the Chief Operating Decision Maker (CODM), to make decisions about resources to be allocated to the segment and assess its performance; and (iii) it has available discrete financial information.
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The Company’s CODM is its Chief Executive Officer. The CODM reviews financial information at the operating segment level to allocate resources and to assess the operating results and financial performance for each operating segment. The Company’s two reportable segments are U.S. and International.
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U.S. and International products are primarily sold to physicians spanning the orthopedic continuum, including sports medicine, total joint reconstruction, hand and upper extremities, foot and ankle, podiatric surgery, trauma, spine and neurosurgery, as well as directly to their patients. Refer to Note 13. Revenue recognition and Note 14. Segments for further information regarding the Company’s business segments.
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Use of estimates The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities, at the date of the financial statements, as well as the reported amounts of revenues and expenses during the period.
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On an ongoing basis, management evaluates these estimates, including those related to contractual allowances and sales incentives, allowance for credit losses, inventory reserves, goodwill and intangible assets impairment, valuation of assets and liabilities assumed in acquisitions, useful lives of long lived assets, noncontrolling interest, fair value measurements, litigation and contingent liabilities, income taxes, and equity-based compensation.
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Management bases its estimates on historical experience, future expectations and other relevant assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from those estimates.
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COVID-19 On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law, which was aimed at providing emergency assistance and health care for individuals, families, and businesses affected by the COVID-19 pandemic and generally supporting the U.S. economy.
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The CARES Act, among other things, included provisions relating to refundable payroll tax credits, deferment of employer social security payments, NOL carryback periods, alternative minimum tax credit refunds, and modifications to the net interest deduction limitations. The CARES Act allowed the Company to defer employer social security payroll tax payments from May 2020 through December 31, 2020 totaling $1,889.
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The Company repaid $1,440 in both December 2022 and 2021, including payments on deferred payroll tax balances acquired in business combinations. As a result of the CARES Act and at the direction of the U.S. Department of Health and Human Services (HHS), the Company received $4,101 in Provider Relief Fund Payments in 2020.
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The Company determined it complied with the conditions to be able to keep and use the funds to reimburse for health care related expenses and lost revenue attributable to the public health emergency resulting from COVID-19. The payments were recorded as other income on the consolidated statement of operations and comprehensive (loss) income for the year ended December 31, 2020.
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Going Concern The accompanying consolidated financial statements have been prepared under the going concern basis of accounting, which presumes that the Company’s liquidation is not imminent; however, certain conditions and events raise substantial doubt about the Company’s ability to continue as a going concern. 93 Table of Contents As of December 31, 2022, the Company was not in compliance with the maximum debt leverage requirement that was then applicable under the Credit and Guaranty Agreement, dated December 6, 2019 (as amended on October 29, 2021, July 11, 2022 and March 31, 2023, the “Amended 2019 Credit Agreement”).
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On March 31, 2023, the Company entered into an amendment to the Amended 2019 Credit Agreement to modify certain financial covenants and to avoid an event of default by waiving the noncompliance at December 31, 2022. For additional information regarding this amendment, see Note 5. Financial Instruments below.
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Although management has concluded that there is substantial doubt regarding the Company’s ability to continue as a going concern, this conclusion is based on analysis under applicable accounting principles.
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If the Company’s current operating projections are met, the Company believes that it should be able to meet its obligations as they come due within the twelve month period after the date the financial statements contained herein are issued. However, the Company has based this estimate on assumptions of revenues and operating costs that may prove to be wrong.
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Moreover, given the risks associated with employee turnover and retention of key talent, and the previously disclosed material weaknesses in internal controls over financial reporting, there is substantial risk that the Company might not meet its projections.
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If the Company does not meet its projections, there is substantial risk that the Company may not be able to meet its obligations as they come due within the twelve month period after the date the financial statements were issued.
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It is therefore probable that there is substantial doubt about the Company’s ability to continue as a going concern despite recent covenant relief from its lenders.
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In light of this, the Company is continuing to actively pursue plans to mitigate these conditions and events, including seeking covenant waivers or amendments from lenders, and other potential actions such as implementing various cost cutting measures and exploring divestiture opportunities for non-core assets; however, there can be no assurances that it is probable these measures will successfully mitigate these conditions and events.
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Therefore, these plans do not alleviate the substantial doubt about the Company’s ability to continue as a going concern. However, if mitigating steps are not taken or are not successful, the Company is at substantial risk of failing its covenants in the second quarter of 2024.
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A breach of a financial covenant under the Amended 2019 Credit Agreement could accelerate repayment of our obligations under the agreement. Refer to Note 5. Financial instruments for further discussion concerning the Company’s long-term debt obligations.
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As part of efforts to improve its financial condition, on February 27, 2023, the Company reached an agreement to return the assets and liabilities of CartiHeal (2009) Ltd. (“CartiHeal”), a wholly-owned subsidiary of the Company, to its former securityholders. The deconsolidation of CartiHeal relieved deferred consideration liabilities and milestone obligations related to the acquisition of CartiHeal. Refer to Note 4.
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Acquisitions and investments and Note 15. Subsequent events for further information regarding the acquisition and subsequent deconsolidation of CartiHeal. In addition, the Company announced a restructuring plan in December 2022 to align the Company’s organizational and management cost structure to improve profitability and cash flow. Refer to

Other BVS 10-K year-over-year comparisons