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What changed in TELA Bio, Inc.'s 10-K — 2023 vs 2024

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

+441 added−421 removedSource: 10-K (2025-03-21) vs 10-K (2024-03-22)

Top changes in TELA Bio, Inc.'s 2024 10-K

441 paragraphs added · 421 removed · 345 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

136 edited+32 added−28 removed231 unchanged
Biggest changeOviTex Portfolio ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ OviTex OviTex 1S OviTex 2S OviTex LPR ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Size and Shape ​ 4 × 8 cm to 25 × 40 cm* (Rectangle or Square) ​ 4 × 8 cm to 25 × 40 cm* (Rectangle or Square) ​ 4 × 8 cm to 25 × 40 cm* (Rectangle or Square) ​ 12 × 18 cm to 15 x 25 cm (Ellipse); 9 cm to 15 cm (Round) Strength ​ + ​ ++ ​ +++ ​ + Layers of Ovine Rumen ​ Four ​ Six ​ Eight ​ Four Common Procedures ​ Moderate ventral hernia (pre-peritoneal placement), inguinal hernia, hiatal hernia ​ Moderate to complex ventral hernia, can be placed intraperitoneally ​ Complex ventral hernia and abdominal wall reconstruction and can be used for bridging, can be placed intraperitoneally ​ Laparoscopic or Robotic-assisted surgery Polymer ​ Resorbable (PGA) or Permanent (Polypropylene) ​ Resorbable (PGA) or Permanent (Polypropylene) ​ Resorbable (PGA) or Permanent (Polypropylene) ​ Permanent (Polypropylene) Shelf Life ​ Resorbable-18 months Permanent-36 months ​ Resorbable-18 months Permanent-36 months ​ Resorbable-18 months Permanent-36 months ​ 36 months Configuration ​ Exposed polymer on both sides ​ Exposed polymer on one side, and one smooth side ​ Two smooth sides ​ Exposed polymer on one side, and one smooth side Commercial Availability ​ · U.S. · Europe ​ · U.S. · Europe ​ · U.S. · Europe ​ · U.S. · Europe * 25 x 30 cm and 25 x 40 cm sizes currently only available with permanent (polypropylene) polymer. + Denotes relative level of strength. ​ 20 Table of Contents OviTex Plastic and Reconstructive Surgery — OviTex PRS OviTex PRS, has received 510(k) clearance from the FDA, which clearance was obtained by Aroa and is held by us, and is indicated for use in implantation to reinforce soft-tissue where weakness exists in patients requiring soft-tissue repair or reinforcement in plastic and reconstructive surgery.
Biggest changeOur OviTex IHR product was specifically designed for use in laparoscopic and robotic-assisted inguinal hernia repair and is available in anatomical and rectangle shapes. ​ 20 Table of Contents OviTex Portfolio ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ OviTex ​ OviTex 1S ​ OviTex 2S ​ OviTex LPR ​ OviTex IHR ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Size and Shape ​ 4x8 cm to 25x40 cm* (Rectangle or Square) ​ 4x8 cm to 25x40 cm* (Rectangle or Square) ​ 4x8 cm to 25x40 cm* (Rectangle or Square) ​ 12x18 cm to 15x25 cm* (Ellipse); 9cm to 15cm (Round) ​ 10x17 cm (Anatomical); 13x17 cm (Rectangle) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Strength ​ + ​ ++ ​ +++ ​ + ​ + ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Layers of Ovine Rumen ​ Four ​ Six ​ Eight ​ Four ​ Three or Four (anatomical); Three (Rectangle) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Procedures ​ Moderate ventral hernia (pre-peritoneal placement), inguinal hernia, hiatal hernia ​ Moderate to complex ventral hernia, can be placed intraperitoneally ​ Complex ventral hernia and abdominal wall reconstruction and can be used for bridging, can be placed intraperitoneally ​ Laparoscopic or Robotic-assisted surgery ​ Laparoscopic or Robotic-assisted inguinal hernia repair ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Polymer ​ Resorbable (PGA) or Permanent (Polypropylene) ​ Resorbable (PGA) or Permanent (Polypropylene) ​ Resorbable (PGA) or Permanent (Polypropylene) ​ Permanent (Polypropylene) ​ Permanent (Polypropylene) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Shelf Life ​ Resorbable‑18 months Permanent-36 months ​ Resorbable‑18 months Permanent-36 months ​ Resorbable‑18 months Permanent-36 months ​ 36 months ​ 36 months ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Configuration ​ Exposed polymer on both sides ​ Exposed polymer on one side, and one smooth side ​ Two smooth sides ​ Exposed polymer on one side, and one smooth side ​ Exposed polymer on both sides ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial Availability ​ U.S.
Our intellectual property applies to our differentiated product construction and materials. In addition, we believe our exclusive manufacturing and long-term supply and license agreement (the “Aroa License”) with Aroa creates a competitive advantage by allowing us to secure an exclusive supply of ovine rumen at a low cost.
Our intellectual property applies to our differentiated product construction and materials. In addition, we believe our exclusive manufacturing and long-term supply and license agreement with Aroa (the “Aroa License”) creates a competitive advantage by allowing us to secure an exclusive supply of ovine rumen at a low cost.
Limitations of permanent synthetic mesh products may include: ● significant persistent foreign body inflammatory response that can result in encapsulation of the implant by fibrotic tissue or contraction of the mesh; ● chronic post-operative pain; ● scar tissue formation and lack of regeneration of soft-tissue; ● permanent susceptibility to mesh infection; ● significant cost associated with subsequent repairs or failed and infected mesh; 11 Table of Contents ● compromised abdominal wall anatomy due to damaged and eroded tissue rendering subsequent surgical repairs challenging; and ● migration of the permanent synthetic mesh which can result in organ erosion or perforation.
Limitations of permanent synthetic mesh products may include: ● significant persistent foreign body inflammatory response that can result in encapsulation of the implant by fibrotic tissue or contraction of the mesh; 11 Table of Contents ● chronic post-operative pain; ● scar tissue formation and lack of regeneration of soft-tissue; ● permanent susceptibility to mesh infection; ● significant cost associated with subsequent repairs or failed and infected mesh; ● compromised abdominal wall anatomy due to damaged and eroded tissue rendering subsequent surgical repairs challenging; and ● migration of the permanent synthetic mesh which can result in organ erosion or perforation.
Failure to comply with applicable regulatory requirements can result in enforcement action by the FDA, which may include any of the following sanctions: ● warning letters, untitled letters, Form 483s, fines, injunctions, consent decrees and civil penalties; ● recall or seizure of products; ● operating restrictions, partial suspension or total shutdown of production; ● the FDA’s refusal of requests for 510(k) clearance or premarket approval of new products, new intended uses or modifications to existing products; ● the FDA’s refusal to issue certificates to foreign governments needed to export products for sale in other countries; ● withdrawing 510(k) clearance or premarket approvals that have already been granted; and ● criminal prosecution.
Failure to comply with applicable regulatory requirements can result in enforcement action by the FDA, which may include any of the following sanctions: ● warning letters, untitled letters, Form 483s, fines, injunctions, consent decrees and civil penalties; ● recall or seizure of products; ● operating restrictions, partial suspension or total shutdown of production; ● the FDA’s refusal of requests for 510(k) clearance or premarket approval of new products, new intended uses or modifications to existing products; ● the FDA’s refusal to issue certificates to foreign governments needed to export products for sale in other countries; ● withdrawing approvals that have already been granted; and ● criminal prosecution.
These include: ● the FDA’s Quality Systems Regulations (“QSR”), which requires manufacturers, including third party manufacturers, to follow stringent design, testing, production, control, supplier/contractor selection, complaint handling, documentation and other quality assurance procedures during all aspects of the manufacturing process; ● labeling and marketing regulations which require that promotion is truthful, not misleading, fairly balanced and provides adequate directions for use and that all claims are substantiated; ● complying with requirements for 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; ● advertising and promotion requirements, including FDA prohibitions against the promotion of products for uncleared, unapproved or off-label uses and FDA guidance on off-label dissemination of information and responding to unsolicited requests for information; ● restrictions on sale, distribution or use of a device; ● device establishment, registration and listing requirements and annual reporting requirements; 30 Table of Contents ● approval or clearance of 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 manufacturers report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction were to recur; ● medical device 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; ● recall requirements, including a mandatory recall if there is a reasonable probability that the device would cause serious adverse health consequences or death; ● an order of repair, replacement or refund; ● device tracking requirements; and ● post-market surveillance activities and regulations, which apply when necessary to protect the public health or to provide additional safety and effectiveness data for the device.
These include: ● the FDA’s Quality Systems Regulations (“QSR”), which requires manufacturers, including third party manufacturers, to follow stringent design, testing, production, control, supplier/contractor selection, complaint handling, documentation and other quality assurance procedures during all aspects of the manufacturing process; ● labeling and marketing regulations which require that promotion is truthful, not misleading, fairly balanced and provides adequate directions for use and that all claims are substantiated; ● complying with requirements for 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; ● advertising and promotion requirements, including FDA prohibitions against the promotion of products for uncleared, unapproved or off-label uses and FDA guidance on off-label dissemination of information and responding to unsolicited requests for information; ● restrictions on sale, distribution or use of a device; ● device establishment, registration and listing requirements and annual reporting requirements; ● approval or clearance of 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 manufacturers report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction were to recur; ● medical device 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; ● recall requirements, including a mandatory recall if there is a reasonable probability that the device would cause serious adverse health consequences or death; ● an order of repair, replacement or refund; 31 Table of Contents ● device tracking requirements; and ● post-market surveillance activities and regulations, which apply when necessary to protect the public health or to provide additional safety and effectiveness data for the device.
The embroidering pattern varies between our OviTex and OviTex PRS portfolios to impart different biomechanical properties tailored for their respective intended clinical applications. Our OviTex products are designed with a lockstitch embroidery pattern that is sewn in a grid pattern to minimize unraveling (when cut).
The embroidering pattern varies between our OviTex and OviTex PRS products to impart different biomechanical properties tailored for their respective intended clinical applications. Our OviTex products are designed with a lockstitch embroidery pattern that is sewn in a grid pattern to minimize unraveling (when cut).
Our portfolio of products, generally designed with over 95% biologic material, combines the benefits of both biologic and polymer materials while addressing their limitations by interweaving polymer fibers through layers of a minimally-processed biologic material.
Our portfolio of products, generally designed with over approximately 95% biologic material, combines the benefits of both biologic and polymer materials while addressing their limitations by interweaving polymer fibers through layers of a minimally-processed biologic material.
TELA Bio ® , OviTex ® , Minimize the Foreign Body Footprint ® , and A More Natural Hernia Repair ® are registered trademarks of ours in the U.S. and TELA Bio ® and OviTex ® are registered trademarks in the foreign jurisdictions in which we conduct our business.
TELA Bio ® , OviTex ® , the TELA Bio logo OviTex ® , Minimize the Foreign Body Footprint ® , and A More Natural Hernia Repair ® are registered trademarks of ours in the U.S. and TELA Bio ® and OviTex ® are registered trademarks in the foreign jurisdictions in which we conduct our business.
The MDR went into effect on May 26, 2021, and it: ● strengthens the rules on placing devices on the market 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; ● improves the traceability of medical devices throughout the supply chain to the end-user or patient through a unique identification number; ● 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 an additional check by experts before they are placed on the market.
The MDR went into effect on May 26, 2021, and it: ● strengthens the rules on placing devices on the market 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; ● improves the traceability of medical devices throughout the supply chain to the end-user or patient through a unique identification number; ● sets up a central database (Eudamed) to provide patients, healthcare professionals and the public with comprehensive information on products available in the EU; and 32 Table of Contents ● strengthens rules for the assessment of certain high-risk devices, such as implants, which may have to undergo an additional check by experts before they are placed on the market.
In addition to our broad-based equity award programs, we have used targeted equity-based grants with vesting conditions to enhance retention of personnel. 37 Table of Contents Corporate Information We were incorporated on April 17, 2012. Our primary executive offices are located at 1 Great Valley Parkway, Suite 24, Malvern, Pennsylvania 19355 and our telephone number is (484) 320-2930.
In addition to our broad-based equity award programs, we have used targeted equity-based grants with vesting conditions to enhance retention of personnel. Corporate Information We were incorporated on April 17, 2012. 38 Table of Contents Our primary executive offices are located at 1 Great Valley Parkway, Suite 24, Malvern, Pennsylvania 19355 and our telephone number is (484) 320-2930.
We make available, free of charge and through our website, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to any such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. ​ ​ ​ ​ 38 Table of Contents
We make available, free of charge and through our website, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to any such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. ​ ​ ​ ​ ​ 39 Table of Contents
Our intellectual property also covers the development of extracellular matrix scaffolds derived from ovine rumen, methods for isolating these scaffolds from ovine rumen, layering multiple sheets of these ovine rumen scaffolds together, sewing in an anti-adhesive layer into a scaffold, and adding unique patterns sewn or embroidered into these scaffolds using different polymers to impart reinforcing strength.
Our intellectual property also covers the development of extracellular matrix derived from ovine rumen, methods for isolating these scaffolds from ovine rumen, layering multiple sheets of these ovine rumen matrices together, sewing in an anti-adhesive layer into a matrix, and adding unique patterns sewn or embroidered into these matrices using different polymers to impart reinforcing strength.
Our reinforced tissue matrices are designed to improve the outcomes of soft-tissue reconstructions by reinforcing tissue while allowing rapid tissue integration, revascularization and biomechanical control. In addition to overall strength, a key property that we engineer into our products is the degree to which they stretch, known as compliance.
Our reinforced tissue matrices are designed to improve the outcomes of soft-tissue reconstructions by reinforcing tissue while allowing rapid tissue integration, revascularization and biomechanical control. In addition to overall strength, a key property that we engineer into our products is the degree to which they stretch, which we refer to as compliance.
We believe that our continued ability to compete favorably depends on: ● successfully expanding our commercial operations; ● continuing to innovate and maintain scientifically-advanced technology; ● attracting and retaining skilled personnel; ● maintaining and obtaining intellectual property protection for our products; and ● conducting clinical studies and obtaining and maintaining regulatory approvals.
We believe that our continued ability to compete favorably depends on: ● successfully deploying our commercial operations; ● continuing to innovate and maintain scientifically-advanced technology; ● attracting and retaining skilled personnel; ● maintaining and obtaining intellectual property protection for our products; and ● conducting clinical studies and obtaining and maintaining regulatory approvals.
This preclinical data is supported by our compelling clinical evidence showing the safety and efficacy of our OviTex products in published data on over 1,000 hernia patients. 16 Table of Contents ● Long-term supply agreement that provides pricing flexibility.
This preclinical data is supported by our compelling clinical evidence showing the safety and efficacy of our OviTex products in published data on over 1,200 hernia patients. 16 Table of Contents ● Long-term supply agreement that provides pricing flexibility.
There can be no assurance that submission of an IDE will result in the ability to commence clinical trials, and although the FDA’s approval of an IDE allows clinical testing to go forward for a specified number of subjects, it does not bind the FDA to accept the results of the trial as sufficient to prove the product’s safety and efficacy, even if the trial meets its intended success criteria.
There can be no assurance that submission of an IDE will result in the ability to commence clinical trials, and although the FDA’s approval of an IDE allows clinical testing to go forward for a specified 30 Table of Contents number of subjects, it does not bind the FDA to accept the results of the trial as sufficient to prove the product’s safety and efficacy, even if the trial meets its intended success criteria.
In breast reconstruction, biologic matrices are utilized for prosthetic based reconstruction following the removal of cancerous breast tissue. Based on the current sales of biologic matrices in the U.S., we estimate the annual U.S. current addressable market opportunity for our OviTex PRS products to be approximately $700 million.
In breast reconstruction, biologic matrices are utilized for prosthetic based reconstruction following the removal of cancerous breast tissue. Based on the current sales of biologic matrices in the U.S., we estimate the annual U.S. current addressable market opportunity for our OviTex PRS products to be approximately $800 million.
Despite improvements 12 Table of Contents compared to the use of permanent synthetic mesh or biologic matrices, current limitations of resorbable synthetic mesh may include: ● significant foreign body inflammatory response that can result in encapsulation or contraction of the mesh until resorbed; ● scar tissue formation and lack of remodeling of soft-tissue; ● mesh infection until resorbed; ● migration of the mesh until resorbed which can result in organ erosion or perforation; and ● lack of mid-term and long-term soft-tissue reinforcement as resorption progresses.
Despite improvements compared to the use of permanent synthetic mesh or biologic matrices, current limitations of resorbable synthetic mesh may include: ● significant foreign body inflammatory response that can result in encapsulation or contraction of the mesh until resorbed; ● scar tissue formation and lack of remodeling of soft-tissue; ● mesh infection until resorbed; ● migration of the mesh until resorbed which can result in organ erosion or perforation; and ● lack of mid-term and long-term soft-tissue reinforcement as resorption progresses.
These limitations may lead to undesirable results requiring additional surgical intervention. Additionally, biologic matrices are typically expensive to source. Our Solution We have created a new category of tissue reinforcement materials that were purposefully designed in close collaboration with more than 100 surgeons to address the unmet clinical needs in soft-tissue reconstruction.
These limitations may lead to undesirable results requiring additional surgical intervention. Additionally, biologic matrices are typically expensive to source. Our Solution We have created a new category of reinforced tissue matrices that were purposefully designed in close collaboration with more than 100 surgeons to address the unmet clinical needs in soft-tissue reconstruction.
Our OviTex PRS product is available in arced rectangle, contour and oval shapes in a range of sizes (4 × 16 cm through 20 × 25 cm) to suit surgeon preference and nature of the soft-tissue repair in plastic and reconstructive surgery. The device may be trimmed to a desired shape to further accommodate individual anatomy.
Our OviTex PRS product is available in arced rectangle, contour and oval shapes in a range of sizes (4 × 16 cm through 20 × 25 cm) to suit surgeon preference and nature of the soft-tissue repair in plastic and 21 Table of Contents reconstructive surgery. The device may be trimmed to a desired shape to further accommodate individual anatomy.
The letter-to-file is in lieu of submitting a new 510(k) to obtain clearance for every change. The FDA can always review these letters-to-file in an inspection. If the FDA disagrees with a manufacturer’s determination, the FDA can require the manufacturer to cease marketing and/or request the recall of the modified device until marketing authorization is obtained.
The letter-to-file is in lieu of submitting a new 510(k) to obtain clearance for every change. The FDA can always review these letters-to-file in an inspection. If the FDA disagrees with a manufacturer’s determination, the FDA can 28 Table of Contents require the manufacturer to cease marketing and/or request the recall of the modified device until marketing authorization is obtained.
This may lead to divergence between the GDPR and UK GDPR. ​ EU member states have introduced national laws implementing the GDPR which impose additional requirements; this adds to the complexity of processing personal data in or from the EEA or United Kingdom. Guidance on implementation and compliance practices are often updated or otherwise revised.
This may lead to divergence between the GDPR and UK GDPR. ​ 34 Table of Contents EU member states have introduced national laws implementing the GDPR which impose additional requirements; this adds to the complexity of processing personal data in or from the EEA or United Kingdom. Guidance on implementation and compliance practices are often updated or otherwise revised.
Based on the volume weighted average selling price of our OviTex products, we estimate the annual U.S. total addressable market opportunity for our OviTex products to be approximately $1.5 billion. ​ ​ ​ ​ ​ ​ ​ ​ ​ Approximate ​ ​ ​ ​ Number of ​ ​ ​ ​ Annual ​ ​ ​ ​ U.S.
Based on the volume weighted average selling price of our OviTex products, we estimate the annual U.S. total addressable market opportunity for our OviTex products to be approximately $1.8 billion. ​ ​ ​ ​ ​ ​ ​ ​ ​ Approximate ​ ​ ​ ​ Number of ​ ​ ​ ​ Annual ​ ​ ​ ​ U.S.
Indications for use include the repair of hernias and/or abdominal wall defects that require the use of reinforcing or bridging material to obtain the desired surgical outcome. Our OviTex products can be used in a variety of hernia repairs, including simple and complex ventral, inguinal and hiatal hernias, as well as abdominal wall reconstructions.
Indications for use include the repair of hernias and/or abdominal wall defects that require the use of reinforcing 19 Table of Contents or bridging material to obtain the desired surgical outcome. Our OviTex products can be used in a variety of hernia repairs, including simple and complex ventral, inguinal and hiatal hernias, as well as abdominal wall reconstructions.
All of our OviTex products were designed to minimize the amount of polymer material implanted in patients. The synthetic material in our OviTex products comprise less than 5% of our final product or approximately 12% in our OviTex LPR devices.
All of our OviTex products were designed to minimize the amount of polymer material implanted in patients. The synthetic material in our OviTex products comprise less than 5% of our final product or approximately 12% in our OviTex LPR devices or approximately 15% in our OviTex IHR devices.
Long-term pain or discomfort at the hernia repair site is one of the most serious complications of hernia surgery and may, in some cases, persist for years. 9 Table of Contents Given the limitations of and lack of innovation in existing hernia repair products, we believe a significant market opportunity exists for our portfolio of OviTex products.
Long-term pain or discomfort at the hernia repair site is one of the most serious complications of hernia surgery and may, in some cases, persist for years. Given the limitations of and lack of innovation in existing hernia repair products, we believe a significant market opportunity exists for our portfolio of OviTex products.
Our OviTex PRS products are designed with a patented corner-lock stitch pattern designed to resist deformation and to control the degree and direction of stretching of the product. 13 Table of Contents Our capabilities in polymer science, biologics, textile engineering and analytical testing enable us to quickly design innovative products for development and manufacture.
Our OviTex PRS products are designed with a patented corner-lock stitch pattern designed to resist deformation and to control the degree and direction of stretching of the product. Our capabilities in polymer science, biologics, textile engineering and analytical testing enable us to quickly design innovative products for development and manufacture.
In September 2023, we entered into a distribution agreement with Advanced Medical Solutions Limited, a company registered in England, to be their exclusive distributor of their LiquiFix Hernia Mesh Fixation Devices (LiquiFix FIX8™ and LiquiFix Precision™). In March 2024, we announced the full commercial launch of LiquiFix in the U.S.
For example, in September 2023, we entered into a distribution agreement with Advanced Medical Solutions Limited, a company registered in England, to be their exclusive distributor of certain hernia mesh fixation devices in the U.S. In March 2024, we announced the full commercial launch of the LiquiFix Hernia Mesh Fixation Devices (LiquiFix FIX8™ and LiquiFix Precision™) in the U.S.
Following surgical hernia repair, convalescence has a significant socioeconomic impact. Absence from work during this period can range from approximately five to 14 days according to one study. Pain is the most common cause of delay in returning to work, followed by wound problems.
Following surgical hernia repair, convalescence has a significant 9 Table of Contents socioeconomic impact. Absence from work during this period can range from approximately five to 14 days according to one study. Pain is the most common cause of delay in returning to work, followed by wound problems.
Polymer fibers are interwoven through the layers of biologic material in unique embroidered patterns and contribute to approximately 5% of the overall device by mass. The interwoven polymer utilized can be either permanent, made from polypropylene, or resorbable, made from polyglycolic acid (“PGA”) or polylactic-co-glycolic acid (“PLGA”).
Polymer fibers are interwoven through the layers of biologic 13 Table of Contents material in unique embroidered patterns and contribute to approximately 5% of the overall device by mass. The interwoven polymer utilized can be either permanent, made from polypropylene, or resorbable, made from polyglycolic acid (“PGA”) or polylactic-co-glycolic acid (“PLGA”).
In addition, under the Aroa License, Aroa is our exclusive manufacturer and supplier for the development of our bovine and ovine extracellular matrix products. Pursuant to the terms of the Aroa License, we made upfront payments to Aroa totaling $2.3 million and granted Aroa 74,316 newly issued shares of our restricted common stock.
In addition, under the Aroa License, Aroa is our exclusive manufacturer and supplier for the development of our bovine and ovine extracellular matrix products. 23 Table of Contents Pursuant to the terms of the Aroa License, we made upfront payments to Aroa totaling $2.3 million and granted Aroa 74,316 newly issued shares of our restricted common stock.
The Affordable Care Act is intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against healthcare fraud and abuse, add new transparency requirements for healthcare and health insurance industries, impose new taxes and fees on pharmaceutical and medical device manufacturers, and impose additional health policy reforms.
The Affordable Care Act was intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against healthcare fraud and abuse, add new transparency requirements for healthcare and health insurance industries, impose new fees on pharmaceutical and medical device manufacturers, and impose additional health policy reforms.
Food and Drug Administration (“FDA”), which clearances were obtained and are currently held by our exclusive contract manufacturer of these products, Aroa. In April 2019, our first OviTex PRS products received 510(k) clearance from the FDA, which clearance was initially obtained by Aroa and is currently held by us.
Our OviTex products have received 510(k) clearances from the U.S. Food and Drug Administration, (“FDA”) which clearances were obtained and are currently held by our exclusive contract manufacturer of these products, Aroa. In April 2019, our first OviTex PRS products received 510(k) clearance from the FDA, which clearance was initially obtained by Aroa and is currently held by us.
All clinical investigations of investigational devices to determine safety and effectiveness must be conducted in 29 Table of Contents accordance with the FDA’s IDE regulations which govern investigational device labeling, prohibit promotion of the investigational device, and specify an array of recordkeeping, reporting and monitoring responsibilities of study sponsors and study investigators.
All clinical investigations of investigational devices to determine safety and effectiveness must be conducted in accordance with the FDA’s IDE regulations which govern investigational device labeling, prohibit promotion of the investigational device, and specify an array of recordkeeping, reporting and monitoring responsibilities of study sponsors and study investigators.
In addition, an increasing emphasis on managed care in the U.S. has increased and will continue to increase the pressure on medical product and service pricing. Human Capital Resources As of December 31, 2023, we had 227 employees worldwide. None of our employees are represented by a collective bargaining agreement and we have never experienced a work stoppage.
In addition, an increasing emphasis on managed care in the U.S. has increased and will continue to increase the pressure on medical product and service pricing. Human Capital Resources As of December 31, 2024, we had 209 employees worldwide. None of our employees are represented by a collective bargaining agreement and we have never experienced a work stoppage.
Violations could 35 Table of Contents result in fines, criminal sanctions against us, our officers, or our employees, the closing down of our facilities, requirements to obtain export licenses, cessation of business activities in sanctioned countries, implementation of compliance programs, and prohibitions on the conduct of our business.
Violations could result in fines, criminal sanctions against us, our officers, or our employees, the closing down of our facilities, requirements to obtain export licenses, cessation of business activities in sanctioned countries, implementation of compliance programs, and prohibitions on the conduct of our business.
Given the limitations of and lack of innovation in existing biologic matrices for plastic and reconstructive surgical procedures, we believe a significant market opportunity exists for our OviTex PRS portfolio products. Current Materials Used in Hernia Repair and Abdominal Wall Reconstruction and Their Limitations Hernia Repair and Abdominal Wall Reconstruction The vast majority of hernias are treated with surgical repair.
Given the limitations of and lack of innovation in existing biologic matrices for plastic and reconstructive surgical procedures, we believe a significant market opportunity exists for our OviTex PRS products. 10 Table of Contents Current Materials Used in Hernia Repair and Abdominal Wall Reconstruction and Their Limitations Hernia Repair and Abdominal Wall Reconstruction The vast majority of hernias are treated with surgical repair.
In addition, we also continue to explore the development of lower-cost, higher-margin resorbable polymer-based devices targeting our current indications. We are also exploring additional technologies that may complement our existing products, or expand the number of our product lines, in each case within the hernia, plastic and reconstruction, and broader soft-tissue reconstruction and preservation markets.
In addition, we also continue to explore the development of lower-cost, higher-margin resorbable polymer-based devices targeting our current indications. We are also exploring additional technologies that may complement our existing products, or expand the number of our products, in each case within the hernia, plastic and reconstruction, and broader soft-tissue reconstruction market.
Our OviTex PRS portfolio is priced below leading biologic matrices. Our Strengths We are focused on developing and commercializing a new category of tissue reinforcement materials for surgeons and patients that aim to address the shortcomings of existing products.
Our OviTex PRS portfolio is priced below leading biologic matrices. Our Strengths We are focused on developing and commercializing a new category of reinforced tissue matrix for surgeons and patients that aim to address the shortcomings of existing products.
The current shelf life of permanent OviTex PRS is 36 months and the current shelf life of resorbable OviTex PRS is 12 months. OviTex PRS Product Pipeline and Research and Development We continue to advance our product pipeline to broaden our treatment capabilities for soft-tissue reinforcement.
The current shelf life of permanent OviTex PRS is 36 months, the current shelf life of short-term resorbable OviTex PRS is 12 months and the current shelf life of the long-term resorbable OviTex PRS is 18 months. OviTex PRS Product Pipeline and Research and Development We continue to advance our product pipeline to broaden our treatment capabilities for soft-tissue reinforcement.
Of the enrolled patients, 78% were characterized as high risk for experiencing an SSO based on at least one known risk factor, which included obesity, active smoking, COPD, diabetes mellitus, coronary artery disease, or advanced age (≥75 years).
Of the enrolled patients, 78% were characterized as high risk for experiencing an SSO based on at least one known risk factor, which included obesity, active smoking, chronic obstructive pulmonary disease (“COPD”), diabetes mellitus, coronary artery disease, or advanced age (≥75 years).
Robotic- 10 Table of Contents assisted surgery is also performed using small incisions in the patient’s abdomen or groin and a trocar, but the surgeon sits at a console in the operating room and operates the robotic instruments remotely.
Robotic-assisted surgery is also performed using small incisions in the patient’s abdomen or groin and a trocar, but the surgeon sits at a console in the operating room and operates the robotic instruments remotely.
Some Class I devices, also called Class I reserved devices, also require premarket clearance by the FDA through the 510(k) premarket notification process described below. Most Class I products are exempt from the premarket notification requirements.
Some Class I devices, also called Class I reserved devices, also require premarket clearance 27 Table of Contents by the FDA through the 510(k) premarket notification process described below. Most Class I products are exempt from the premarket notification requirements.
In addition, we paid Aroa $4.0 million in revenue-based milestone payments upon our achievement of certain net sales thresholds for sales of our products within the Licensed Territory. As of December 31, 2022, we had satisfied all milestone payment obligations under the Aroa License. We are responsible for commercializing the products manufactured for us by Aroa.
In addition, we paid Aroa $4.0 million in revenue-based milestone payments upon our achievement of certain net sales thresholds for sales of our products within the Licensed Territory. We have satisfied all milestone payment obligations under the Aroa License. We are responsible for commercializing the products manufactured for us by Aroa.
We believe this team is well-positioned to lead us through the commercial expansion of our products and development and launch of future products. Our Growth Strategy Our goal is to become the leading provider of soft-tissue reconstruction products. The key elements of our strategy include: ● Expand our U.S. commercial organization to support our growth.
We believe this team is well-positioned to lead us through the commercial expansion of our products and development and launch of future products. 17 Table of Contents Our Growth Strategy Our goal is to become the leading provider of soft-tissue reconstruction products. The key elements of our strategy include: ● Successfully deploy our U.S. commercial organization to support our growth.
Our research and development efforts are based at our facility in Malvern, Pennsylvania. Commercial Strategy Our commercial efforts are predominantly focused on the U.S. market where we have established strong relationships with key constituencies, including hospitals, ambulatory surgery centers, GPOs, IDN, third-party payors and other key clinical and economic decision makers by offering a unique high quality, cost-effective product.
Commercial Strategy Our commercial efforts are predominantly focused on the U.S. market where we have established strong relationships with key constituencies, including hospitals, ambulatory surgery centers, GPOs, IDN, third-party payors and other key clinical and economic decision makers by offering a unique high quality, cost-effective product.
There are an estimated 1.1 million hernia repairs annually in the U.S. including recurrences, which we categorize as approximately (i) 60,000 complex/moderate ventral hernia repairs and abdominal wall reconstructions, (ii) 345,000 simple ventral hernia repairs and (iii) 665,000 inguinal hernia repairs, and (iv) 40,000 hiatal hernia repairs. The healthcare burden of hernia disease to patients, insurers and employers is significant.
There are an estimated 1.2 million hernia repairs annually in the U.S. including recurrences, which we categorize as approximately (i) 105,000 complex/moderate ventral hernia repairs and abdominal wall reconstructions, (ii) 395,000 simple ventral hernia repairs and (iii) 645,000 inguinal hernia repairs, and (iv) 42,000 hiatal hernia repairs. The healthcare burden of hernia disease to patients, insurers and employers is significant.
Ovine rumen is the source of the biologic material used in our OviTex and OviTex PRS products. We use biologic material from ovine rumen because of its plentiful supply, optimal biomechanical profile and open collagen architecture that allows for rapid cellular infiltration.
Ovine rumen, the forestomach of a sheep, is the source of the biologic material used in both of our OviTex and OviTex PRS products. 8 Table of Contents We use biologic material from ovine rumen because of its plentiful supply, optimal biomechanical profile and open collagen architecture that allows for rapid cellular infiltration.
Additionally, we have contracted with three national group purchasing organizations (“GPOs”) covering our OviTex and OviTex PRS products and plan to continue to contract with additional GPOs and other integrated delivery networks (“IDNs”) to increase access to and penetration of hospital accounts.
Additionally, we have contracted with three national group purchasing organizations (“GPOs”) in the United States covering our OviTex and OviTex PRS products and plan to continue to contract with additional GPOs and other integrated delivery networks (“IDNs”) to increase access to and penetration of hospital accounts for all products we commercialize.
This expertise has been utilized in the development of our OviTex and OviTex PRS products and is currently being leveraged in the development of our additional OviTex and OviTex PRS product pipeline seeking to enhance product features for various applications within our indications.
This expertise has been utilized in the development of our OviTex and OviTex PRS products, including our OviTex LPR and OviTex IHR configurations and is currently being leveraged in the development of our additional configurations within product pipelines seeking to enhance product features for various applications within our indications.
A determination of liability under such laws could result in fines and penalties and restrictions on a company’s ability to operate in these jurisdictions. 34 Table of Contents Transparency Laws The federal Physician Payments Sunshine Act (“Sunshine Act”) which was enacted as part of the Patient Protection and Affordable Care Act (“PPACA”) generally requires certain manufacturers of a drug, device, biologic or other medical supply that is covered by Medicare, Medicaid or the Children’s Health Insurance Program and applicable GPOs to report on an annual basis: (i) certain payments and other transfers of value given to certain healthcare professionals and teaching hospitals and (ii) any ownership or investment interest that U.S. physicians, or their immediate family members, have in their company.
Transparency Laws The federal Physician Payments Sunshine Act (“Sunshine Act”) which was enacted as part of the Patient Protection and Affordable Care Act (“PPACA”) generally requires certain manufacturers of a drug, device, biologic or other medical supply that is covered by Medicare, Medicaid or the Children’s Health Insurance Program and applicable GPOs to report on an annual basis: (i) certain payments and other transfers of value given to certain healthcare professionals and 35 Table of Contents teaching hospitals and (ii) any ownership or investment interest that U.S. physicians, or their immediate family members, have in their company.
If the FDA determines that the device is “not substantially 27 Table of Contents equivalent” to a previously cleared device, the device is automatically designated as a Class III device.
If the FDA determines that the device is “not substantially equivalent” to a previously cleared device, the device is automatically designated as a Class III device.
We are currently devoting research and development resources to develop additional variations of our OviTex and OviTex PRS product lines, including the additional IHR configurations to further enhance product compatibility in robotic procedures, larger versions of our current product configurations, the development of configurations with longer-acting resorbable polymers and other potential product and packaging enhancements to extend the shelf life of our products.
We are currently devoting research and development resources to develop additional variations of our OviTex and OviTex PRS products, including larger versions of our current OviTex PRS product configurations, the development of OviTex configurations with longer-acting resorbable polymers and other potential product and packaging enhancements to extend the shelf life of our products.
As we innovate and develop our products, the new features and improved surgical techniques expand the clinical applications for soft-tissue reinforcement. Areas of focus include enhanced surgical handling, increased permeability, and longer-acting resorbable polymers. Improving the surgical handling and implementation of our devices benefits both the clinician and patient. Increasing product permeability encourages a more-natural healing response.
As we innovate and develop our products, the new features and improved surgical techniques expand the clinical applications for soft-tissue reinforcement. Areas of focus include enhanced surgical handling, larger product configurations, increased permeability, and longer-acting resorbable polymers. Improving the surgical handling and implementation of our devices benefits both the clinician and patient.
We own seventeen U.S. issued or allowed patents which will expire between 2035 and 2041 and sixteen pending U.S. patent applications, which subject to issuance, are projected to expire between 2035 and 2044, without taking into account potential patent term extensions or adjustments.
We own twenty-three U.S. issued or allowed patents which will expire between 2035 and 2041 and twelve pending U.S. patent applications, which subject to issuance, are projected to expire between 2035 and 2045, without taking into account potential patent term extensions or adjustments.
We have invested in our direct sales and marketing infrastructure to expand our presence and to promote awareness and adoption of our products. As of December 31, 2023, we had 91 sales territories in the U.S.
We have invested in our direct sales and marketing infrastructure to expand our presence and to promote awareness and adoption of our products. As of December 31, 2024, we had 75 sales territories in the U.S. and 13 sales territories in Europe.
In October 2022, the 24-month results of our BRAVO study were published in the Annals of Medicine and Surgery . The BRAVO study was designed to evaluate the clinical performance of OviTex for primary or recurrent ventral hernias using open, laparoscopic, or robotic techniques in 92 enrolled patients.
In October 2022, the 24-month results of our single arm, multicenter post-market clinical study, which we refer to as our BRAVO study, were published in the Annals of Medicine and Surgery . The BRAVO study was designed to evaluate the clinical performance of OviTex for primary or recurrent ventral hernias using open, laparoscopic, or robotic techniques in 92 enrolled patients.
The American Taxpayer Relief Act of 2012 reduced Medicare payments to several types of providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. The Affordable Care Act has been subject to challenges in the courts.
The American Taxpayer Relief Act of 2012 reduced Medicare payments to several types of providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.
Our first portfolio of products, the OviTex Reinforced Tissue Matrix (“OviTex”), which we first commercialized in the U.S. in July 2016 and in Europe in February 2019, addresses unmet needs in hernia repair and abdominal wall reconstruction by combining the benefits of biologic matrices and polymer materials while minimizing their shortcomings, at a cost-effective price. ​ Hernia repair is one of the most common surgeries performed in the U.S., representing approximately 1.1 million procedures annually.
Our first portfolio of products, the OviTex Reinforced Tissue Matrix ( “OviTex”) which we first commercialized in the U.S. in July 2016 and in Europe in February 2019, addresses unmet needs in hernia repair and abdominal wall reconstruction by combining the benefits of biologic matrices and polymer materials while minimizing their shortcomings, at a cost-effective price.
We expect our clinical evidence will provide surgeons with safety and efficacy data on the appropriate use of our products and we plan to obtain further clinical evidence to support additional regulatory clearances or approvals of our reinforced tissue matrices for additional indications for use in the future.
We expect our clinical evidence will provide surgeons with safety and efficacy data on the appropriate use of our products and we plan to obtain further clinical evidence to support additional regulatory clearances or approvals of our reinforced tissue matrices for additional indications for use in the future. 22 Table of Contents Preclinical Programs Our pre-clinical program is paramount in the design of our products.
We continue to assess additional strategic partnerships with medical device companies whereby we may enter into distribution, product development and/or licensing agreements for new products complimentary to, or related to, existing and future products in our distribution channel. ​ We have a broad portfolio of intellectual property protecting our products that we believe, when combined with the proprietary manufacturing processes associated with our products and our know-how, provides significant barriers to entry.
We may assess additional strategic partnerships with medical device companies whereby we may enter into distribution, product development and/or licensing agreements for additional products complimentary to, or related to, existing and future products in our distribution channel, which could result in the payment by us of single digit percentage royalties or other product acquisition costs We have a broad portfolio of intellectual property protecting our products that we believe, when combined with the proprietary manufacturing processes associated with our products and our know-how, provides significant barriers to entry.
Other legislative changes have been proposed and adopted since passage of the Affordable Care Act. The Budget Control Act of 2011, among other things, included aggregate reductions to Medicare payments to healthcare providers of up to 2.0% per fiscal year, and will last through 2031 unless additional Congressional action is taken.
The Budget Control Act of 2011, among other things, included aggregate reductions to Medicare payments to healthcare providers of up to 2.0% per fiscal year, and will last through 2031 unless additional Congressional action is taken.
In March 2024, we sold our distribution rights to MiMedx Group, Inc. in exchange for an initial $5.0 million payment and additional future payments aggregating between a minimum of $3.0 million and a maximum of $7.0 million based on net sales of NIVIS over the next two years.
In March 2024, we sold our distribution rights to MiMedx Group, Inc. in exchange for an initial $5.0 million payment and additional future payments aggregating between a minimum of $3.0 million and a maximum of $7.0 million based on net sales of NIVIS (now marketed as HELIOGEN) during the first two years following its launch by MiMedx Group, Inc.
Surgeons continue to use our OviTex PRS reinforced tissue matrices in their surgeries and, in addition to a potential IDE study, we have also commenced a retrospective clinical study evaluating the effectiveness and safety of our OviTex PRS products. ​ 22 Table of Contents Intellectual Property Our success depends in part on our ability to obtain, maintain, protect and enforce our proprietary technology and intellectual property rights, in particular, our patent and trademark rights, preserving the confidentiality of our trade secrets, and operating without infringing the valid and enforceable patents and other proprietary rights of third parties.
Surgeons continue to use our OviTex PRS reinforced tissue matrices in their surgeries and, in addition to a potential IDE study, we have also commenced our OPERA study, a retrospective-prospective trial evaluating the safety profile of OviTex PRS in previous pre-pectoral and sub-pectoral implant-based breast reconstructions. ​ Intellectual Property Our success depends in part on our ability to obtain, maintain, protect and enforce our proprietary technology and intellectual property rights, in particular, our patent and trademark rights, preserving the confidentiality of our trade secrets, and operating without infringing the valid and enforceable patents and other proprietary rights of third parties.
We are focused on partnering with our existing GPO- and IDN-contracted customers to promote implementation of our contracts, increase our access to surgeon customers, broaden awareness of products and help drive utilization of our products within associated hospitals and healthcare systems. To date, we have contracted with three national GPOs covering our OviTex and OviTex PRS products.
We are focused on partnering with our existing GPO- and IDN-contracted customers to promote implementation of our contracts, increase our access to surgeon customers, broaden awareness of products and our economic messaging and help drive utilization of our products within associated hospitals and healthcare systems.
These new requirements aim at ensuring better identification and traceability of the devices. Manufacturers are responsible for entering the necessary data on Eudamed, which includes the UDI database, and for keeping it up to date.
These new requirements aim at ensuring better identification and traceability of the devices. Manufacturers are responsible for entering the necessary data on Eudamed, which includes the UDI database, and for keeping it up to date. Eudamed is not yet fully functional and will be gradually rolled out.
We previously co-developed and commercialized our NIVIS Fibrillar Collagen Pack (“NIVIS”), an absorbent matrix of Type I and Type III bovine collagen designed to manage moderately to heavily exudating wounds and to control minor bleeding, in partnership with Regenity Biosciences.
In March 2024, we announced the full commercial launch of LiquiFix in the U.S. We previously co-developed and commercialized the NIVIS Fibrillar Collagen Pack, (“NIVIS”) an absorbent matrix of Type I and Type III bovine collagen designed to manage moderately to heavily exudating wounds and to control minor bleeding, in partnership with Regenity Biosciences.
Surgeons may select the most appropriate product from our OviTex portfolio based on the size of the defect, necessity or surgeon preference for internal organ contact, use of a minimally invasive or open surgical technique and risk of infection. OviTex Laparoscopic and Robotic Procedures Our OviTex LPR product was specifically designed for use in laparoscopic and robotic-assisted hernia surgical repairs.
Surgeons may select the most appropriate product from our OviTex portfolio based on the size of the defect, necessity or surgeon preference for internal organ contact, use of a minimally invasive or open surgical technique and risk of infection.
In addition to the BRAVO study and other current clinical initiatives, we also commenced enrollment in May 2021 for our BRAVO II study, a prospective study evaluating the use of OviTex in robot-assisted ventral and inguinal hernia repairs. ​ Our second portfolio of products, the OviTex PRS Reinforced Tissue Matrix (“OviTex PRS”), which we first commercialized in the U.S. in May 2019, addresses unmet needs in plastic and reconstructive surgery.
Among these other initiatives, we continue to enroll patients for our BRAVO II study, a prospective study evaluating the use of OviTex in robot-assisted ventral and inguinal hernia repairs. 7 Table of Contents Our second portfolio of products, the OviTex PRS Reinforced Tissue Matrix, (“OviTex PRS”) which we first commercialized in the U.S. in May 2019, addresses unmet needs in plastic and reconstructive surgery.
In these studies, we compared our OviTex and OviTex PRS products to market leading competitive materials. The results showed our reinforced tissue matrices exhibited a minimal inflammatory response, rapid cellular infiltration and revascularization and demonstrated early and complete remodeling into functional tissue. The OviTex results have been published in the peer-reviewed journal Hernia (https://doi.org/10.1007/s10029-019-02119-z).
The results showed our reinforced tissue matrices exhibited a minimal inflammatory response, rapid cellular infiltration and revascularization and demonstrated early and complete remodeling into functional tissue. The OviTex results have been published in the peer-reviewed journal Hernia (https://doi.org/10.1007/s10029-019-02119-z). The OviTex PRS results have been published in the peer-reviewed journal ePlasty (ePlasty 2022;22:e43).
Enforcement actions may be brought by the Department of Justice or the SEC, and recent enacted legislation has expanded the SEC’s power to seek disgorgement in all FCPA cases filed in federal court and extended the statute of limitations in SEC enforcement actions in intent-based claims such as those under the FCPA from five years to ten years.
Enforcement actions may be brought by the Department of Justice or the SEC, and recent enacted legislation has expanded the SEC’s power to seek disgorgement in all FCPA cases filed in federal court and extended the statute of limitations in SEC enforcement actions in intent-based claims such as those under the FCPA from five years to ten years. 36 Table of Contents International Laws In Europe, and throughout the world, other countries have enacted anti-bribery laws and/or regulations similar to the FCPA.
Healthcare Reform The U.S. and many foreign jurisdictions have enacted or proposed legislative and regulatory changes affecting the healthcare system. The U.S. government, state legislatures and foreign governments also have shown significant interest in implementing cost-containment programs to limit the growth of government-paid healthcare costs, including price controls and restrictions on reimbursement.
The U.S. government, state legislatures and foreign governments also have shown significant interest in implementing cost-containment programs to limit the growth of government-paid healthcare costs, including price controls and restrictions on reimbursement.
Total ​ ​ ​ Tissue ​ Addressable ​ Traditional ​ Reinforcement ​ Market ​ Products ​ Material ​ Opportunity ​ Utilized Complex/Moderate Ventral Repair /Abdominal Wall Reconstruction 60,000 ​ $ 360 million Biologic Matrices and Resorbable Synthetic Mesh Simple Ventral Hernia Repair 345,000 ​ $ 515 million Permanent Synthetic Mesh Inguinal Hernia Repair 665,000 ​ $ 600 million Permanent Synthetic Mesh Hiatal Hernia Repair 40,000 ​ $ 40 million Biologic Matrices and Resorbable Synthetic Mesh Total 1,110,000 ​ $ 1.5 billion ​ OviTex PRS Modern advances in tissue engineering have transformed the plastic and reconstructive surgeon’s management strategies across a wide variety of applications.
Total ​ ​ ​ Tissue ​ Addressable ​ Traditional ​ Reinforcement ​ Market ​ Products ​ Material ​ Opportunity ​ Utilized Complex/Moderate Ventral Repair /Abdominal Wall Reconstruction 105,000 ​ $ 630 million Biologic Matrices and Resorbable Synthetic Mesh Simple Ventral Hernia Repair 395,000 ​ $ 590 million Permanent Synthetic Mesh Inguinal Hernia Repair 645,000 ​ $ 540 million Permanent Synthetic Mesh Hiatal Hernia Repair 42,000 ​ $ 42 million Biologic Matrices and Resorbable Synthetic Mesh Total 1,187,000 ​ $ 1.8 billion ​ OviTex PRS Modern advances in tissue engineering have transformed the plastic and reconstructive surgeon’s management strategies across a wide variety of applications.
Some of our competitors have: ● significantly greater name recognition; ● broader or deeper relations with healthcare professionals, customers and third-party payors; ● more established distribution networks; ● greater experience in conducting research and development, manufacturing, clinical trials, marketing and obtaining regulatory clearance or approval for products; and ● greater financial and human resources for product development, sales and marketing and patent prosecution.
Some of our competitors have: ● significantly greater name recognition; ● broader or deeper relations with healthcare professionals, customers and third-party payors; ● more established distribution networks; 26 Table of Contents ● greater experience in conducting research and development, manufacturing, clinical trials, marketing and obtaining regulatory clearance or approval for products; ● greater financial and human resources for product development, sales and marketing and patent prosecution; and ● more established, wider-ranging and deeper contractual relationships with GPO and IDNs that can be leveraged to drive greater utilization of their products.
In addition to our U.S. intellectual property, we also own five issued non-U.S. patents and three pending non-U.S. patent applications, which, subject to issuance, would be projected to expire between 2036 and 2040 and have exclusively licensed issued patents in Europe and Canada that will expire in 2029.
In addition to our U.S. intellectual property, we also own eight issued non-U.S. patents and seven pending non-U.S. patent applications, including six applications under the Patent Cooperation Treaty (“PCT”), which, subject to issuance, would be projected to expire between 2036 and 2044 and have exclusively licensed issued patents in Europe and Canada that will expire in 2029.
The RICH study, a multicenter, prospective study sponsored by LifeCell Corporation (“LifeCell”) that evaluated the performance of Strattice, the industry leader for biological tissue matrices in complex abdominal wall reconstruction, in open ventral incisional hernia repair in contaminated abdominal wall defects, demonstrated post-operative hernia recurrence rates of 19% and 28% at 12-months and 24-months follow-up, respectively.
The RICH study, a multicenter, prospective study sponsored by LifeCell Corporation (“LifeCell”) that evaluated the performance of Strattice, the industry leader for biological tissue matrices in complex abdominal wall reconstruction, in open ventral incisional hernia repair in contaminated abdominal wall defects, demonstrated post-operative hernia recurrence rates of 19% and 28% at 12-months and 24-months follow-up, respectively. 12 Table of Contents Resorbable Synthetic Mesh Resorbable synthetic mesh, including biologically-derived synthetic mesh, was introduced as a third category of hernia repair materials and as an alternative to permanent synthetic mesh and biologic matrices.
Unless an exemption applies, each new or significantly modified medical device we seek to commercially distribute in the U.S. will require either a premarket notification to the FDA requesting permission for commercial distribution under Section 510(k) of the FDCA also referred to as a 510(k) clearance, or approval from the FDA of a PMA application. 26 Table of Contents Both the 510(k) clearance and PMA processes can be resource intensive, expensive, and lengthy, and require payment of significant user fees, unless an exemption is available.
Unless an exemption applies, each new or significantly modified medical device we seek to commercially distribute in the U.S. will require either a premarket notification to the FDA requesting permission for commercial distribution under Section 510(k) of the FDCA also referred to as a 510(k) clearance, or approval from the FDA of a PMA application.
In addition, we continue to pursue contracts with additional GPOs and IDNs. GPO and IDN contracts enable greater access to geographies with high procedural volumes and provide prioritized status within hospital procurement systems. ● Continue to build upon clinical evidence of the effectiveness and safety of our products.
GPO and IDN contracts enable greater access to geographies with high procedural volumes and provide prioritized status within hospital procurement systems. ● Continue to build upon clinical evidence of the effectiveness and safety of our products. We are committed to evidence-based medicine and investing in clinical data to support the use of our products.
We believe that genuine collaboration with surgeons and healthcare providers results in the development of new solutions that empower patient care.
We believe that genuine collaboration with surgeons and healthcare providers results in the development of new solutions that empower patient care and addresses unmet needs within the soft tissue reconstruction market.
We plan to continue to expand our product offerings and the treatment capabilities of our products to address a broader patient base within soft-tissue reconstruction. As we innovate and develop our products, the new features and improved surgical techniques expand the clinical applications for soft-tissue reinforcement. Areas of focus include enhanced surgical handling, increased permeability, and longer-acting resorbable polymers.
We plan to continue to expand our product offerings and the treatment capabilities of our products to address a broader patient base within soft-tissue reconstruction. As we innovate and develop our 18 Table of Contents products, the new features and improved surgical techniques expand the clinical applications for soft-tissue reinforcement.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAt the state level, legislatures have increasingly passed legislation and implemented regulations designed to control healthcare costs, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. 66 Table of Contents We expect that additional federal, state and foreign healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in limited coverage and reimbursement and reduced demand for our products, once approved, or additional pricing pressures. and could seriously harm our future revenues.
Biggest changeAt the state level, legislatures have increasingly passed legislation and implemented regulations designed to control healthcare costs, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
These provisions provide, among other things, that: ● our board of directors has the exclusive right to expand the size of our board of directors and to elect directors to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors; ● our board of directors is divided into three classes, Class I, Class II and Class III, with each class serving staggered three-year terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors; ● our stockholders may not act by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; ● a special meeting of stockholders may be called only by the chair of our board of directors, our chief executive officer (or president, in the absence of a chief executive officer) or a majority of our board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; ● our fourth amended and restated certificate of incorporation prohibits cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; ● our board of directors may alter certain provisions of our third amended and restated bylaws without obtaining stockholder approval; 76 Table of Contents ● the approval of the holders of at least two-thirds of our shares entitled to vote at an election of our board of directors is required to adopt, amend or repeal our third amended and restated bylaws or repeal the provisions of our fourth amended and restated certificate of incorporation regarding the election and removal of directors; ● stockholders must provide advance notice and additional disclosures to nominate individuals for election to the board of directors or to propose matters that can be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain voting control of our shares; and ● our board of directors is authorized to issue shares of preferred stock and to determine the terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer.
These provisions provide, among other things, that: ● our board of directors has the exclusive right to expand the size of our board of directors and to elect directors to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors; ● our board of directors is divided into three classes, Class I, Class II and Class III, with each class serving staggered three-year terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors; ● our stockholders may not act by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; ● a special meeting of stockholders may be called only by the chair of our board of directors, our chief executive officer (or president, in the absence of a chief executive officer) or a majority of our board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; ● our fourth amended and restated certificate of incorporation prohibits cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; ● our board of directors may alter certain provisions of our third amended and restated bylaws without obtaining stockholder approval; ● the approval of the holders of at least two-thirds of our shares entitled to vote at an election of our board of directors is required to adopt, amend or repeal our third amended and restated bylaws or repeal the provisions of our fourth amended and restated certificate of incorporation regarding the election and removal of directors; ● stockholders must provide advance notice and additional disclosures to nominate individuals for election to the board of directors or to propose matters that can be acted upon at a stockholders’ meeting, which may 78 Table of Contents discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain voting control of our shares; and ● our board of directors is authorized to issue shares of preferred stock and to determine the terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer.
For example: ● others may be able to make products that are similar to our products or utilize similar technology but that are not covered by the claims of our patents or that incorporate certain technology in our products that is in the public domain; ● we, or our future licensors or collaborators, might not have been the first to make the inventions covered by the applicable issued patent or pending patent application that we own now or may own or license in the future; ● we, or our future licensors or collaborators, might not have been the first to file patent applications covering certain of our or their inventions; ● we may not be able to successfully commercialize our products before our relevant patents we may have, or to which we have ownership rights through licensing agreements, expire; ● others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights; 56 Table of Contents ● it is possible that our current or future pending patent applications will not lead to issued patents; ● issued patents that we hold rights to may be held invalid or unenforceable, including as a result of legal challenges by our competitors or other third parties; ● our competitors or other third parties 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; ● we may not develop additional proprietary technologies that are patentable; ● the patents of others may harm our business; and ● we may choose not to file a patent in order to maintain certain trade secrets or know-how, and a third party may subsequently file a patent covering such intellectual property.
For example: ● others may be able to make products that are similar to our products or utilize similar technology but that are not covered by the claims of our patents or that incorporate certain technology in our products that is in the public domain; ● we, or our future licensors or collaborators, might not have been the first to make the inventions covered by the applicable issued patent or pending patent application that we own now or may own or license in the future; ● we, or our future licensors or collaborators, might not have been the first to file patent applications covering certain of our or their inventions; ● we may not be able to successfully commercialize our products before our relevant patents we may have, or to which we have ownership rights through licensing agreements, expire; ● others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights; 57 Table of Contents ● it is possible that our current or future pending patent applications will not lead to issued patents; ● issued patents that we hold rights to may be held invalid or unenforceable, including as a result of legal challenges by our competitors or other third parties; ● our competitors or other third parties 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; ● we may not develop additional proprietary technologies that are patentable; ● the patents of others may harm our business; and ● we may choose not to file a patent in order to maintain certain trade secrets or know-how, and a third party may subsequently file a patent covering such intellectual property.
The failure to comply with applicable regulations could jeopardize our ability to sell our reinforced tissue matrix products and result in enforcement actions such as: ● warning letters, untitled letters or Form 483s; ● fines; ● injunctions; 58 Table of Contents ● civil penalties; ● termination of distribution; ● recalls or seizures of products; ● delays in the introduction of products into the market; ● total or partial suspension of production; ● refusal to grant future clearances or approvals; ● withdrawals or suspensions of current clearances or approvals, resulting in prohibitions on sales of our products; and ● in the most serious cases, criminal penalties.
The failure to comply with applicable regulations could jeopardize our ability to sell our reinforced tissue matrix products and result in enforcement actions such as: ● warning letters, untitled letters or Form 483s; ● fines; ● injunctions; 59 Table of Contents ● civil penalties; ● termination of distribution; ● recalls or seizures of products; ● delays in the introduction of products into the market; ● total or partial suspension of production; ● refusal to grant future clearances or approvals; ● withdrawals or suspensions of current clearances or approvals, resulting in prohibitions on sales of our products; and ● in the most serious cases, criminal penalties.
Our ability to accurately forecast demand for such products could be negatively affected by many factors, including: ● product introductions by competitors; ● an increase or decrease in surgeon demand for our products or for products of our competitors; ● our failure to accurately manage our expansion strategy; ● our failure to accurately forecast surgeon acceptance of new products; ● our failure to obtain contracts with a significant number of GPOs and IDNs; ● unanticipated changes in general market conditions or regulatory matters; ● the severity and duration of market disruptions as a result of the COVID-19 outbreak; and 71 Table of Contents ● weakening of economic conditions or consumer confidence.
Our ability to accurately forecast demand for such products could be negatively affected by many factors, including: ● product introductions by competitors; ● an increase or decrease in surgeon demand for our products or for products of our competitors; ● our failure to accurately manage our expansion strategy; 73 Table of Contents ● our failure to accurately forecast surgeon acceptance of new products; ● our failure to obtain contracts with a significant number of GPOs and IDNs; ● unanticipated changes in general market conditions or regulatory matters; ● the severity and duration of market disruptions as a result of the COVID-19 outbreak; and ● weakening of economic conditions or consumer confidence.
Any of these impacts, or any other impacts resulting from the factors described above or other related or similar factors not described above, could have material adverse impacts on our liquidity and our business, financial condition or results of operations. ​ 42 Table of Contents Risks Related to the Commercialization of our Products To date, the vast majority of our revenue has been generated from sales of our OviTex products, and we therefore are highly dependent on the commercial success of the OviTex product line.
Any of these impacts, or any other impacts resulting from the factors described above or other related or similar factors 43 Table of Contents not described above, could have material adverse impacts on our liquidity and our business, financial condition or results of operations. ​ Risks Related to the Commercialization of our Products To date, the vast majority of our revenue has been generated from sales of our OviTex products, and we therefore are highly dependent on the commercial success of the OviTex product line.
If we or our licensors fail to maintain the patents and patent applications covering our product or if we or our licensors otherwise allow our patents or patent applications to be abandoned or lapse, it can create opportunities for competitors to enter the market, which would hurt our competitive position and could impair our ability to successfully commercialize our products. 55 Table of Contents Patent terms may be inadequate to protect our competitive position on our product candidates for an adequate amount of time.
If we or our licensors fail to maintain the patents and patent applications covering our product or if we or our licensors otherwise allow our patents or patent applications to be abandoned or lapse, it can create opportunities for competitors to enter the market, which would hurt our competitive position and could impair our ability to successfully commercialize our products. 56 Table of Contents Patent terms may be inadequate to protect our competitive position on our product candidates for an adequate amount of time.
Accordingly, there is uncertainty as to whether a 77 Table of Contents court would enforce such a forum selection provision as written in connection with claims arising under the Securities Act. General Risk Factors Our ability to maintain our competitive position depends on our ability to attract and retain senior management and other highly qualified personnel.
Accordingly, there is uncertainty as to whether a court would enforce such a forum selection provision as written in connection with claims arising under the Securities Act. 79 Table of Contents General Risk Factors Our ability to maintain our competitive position depends on our ability to attract and retain senior management and other highly qualified personnel.
Our officers, directors and principal stockholders each holding more than 5% of our common stock, collectively, control approximately 46% of our outstanding common stock. As a result, these stockholders, if they act together, will be able to significantly influence our management and affairs and most matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions.
Our officers, directors and principal stockholders each holding more than 5% of our common stock, collectively, control approximately 49% of our outstanding common stock. As a result, these stockholders, if they act together, will be able to significantly influence our management and affairs and most matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions.
The occurrence of any of these events could have a material adverse effect on our business, financial condition and results of operations. 39 Table of Contents We may require substantial additional capital to finance our planned operations, which may not be available to us on acceptable terms or at all.
The occurrence of any of these events could have a material adverse effect on our business, financial condition and results of operations. 40 Table of Contents We may require substantial additional capital to finance our planned operations, which may not be available to us on acceptable terms or at all.
To be “substantially equivalent,” the proposed device must have the same intended use as the predicate device, 57 Table of Contents and either have the same technological characteristics as the predicate device or have different technological characteristics and the information in the premarket notification demonstrates that the device is as safe and effective and does not raise different questions of safety or effectiveness than the predicate device.
To be “substantially equivalent,” the proposed device must have the same intended use as the predicate device, 58 Table of Contents and either have the same technological characteristics as the predicate device or have different technological characteristics and the information in the premarket notification demonstrates that the device is as safe and effective and does not raise different questions of safety or effectiveness than the predicate device.
European sales are subject to a number of risks, including: ● difficulties in staffing and managing international operations; ● increased competition as a result of more products and procedures receiving regulatory approval in international markets; ● longer accounts receivable payment cycles and difficulties in collecting accounts receivable; ● fluctuations in currency exchange rates; ● non-U.S. certification and regulatory clearance or approval requirements; ● difficulties in developing effective marketing campaigns in unfamiliar countries; ● customs clearance and shipping delays; ● complexities associated with managing multiple payor reimbursement regimes, government payors or patient self-pay systems; ● political, social, and economic instability abroad, terrorist attacks, and security concerns in general; ● the impact of the macroeconomic factors, including pandemics, epidemics and other public health outbreaks, inflationary pressures and geopolitical conflicts, such as the ongoing Russia-Ukraine conflict and the current conflict in Israel and Gaza (including any escalation or expansion); ● natural disasters and pandemics, epidemics or public health outbreaks, which result in lock-downs, travel restrictions and other restrictions on our ability to operate internationally; ● preference for locally produced products; ● potentially adverse tax consequences, including the complexities of non-U.S. value-added tax systems, tax inefficiencies related to our corporate structure, and restrictions on the repatriation of earnings; ● the burdens of complying with a wide variety of non-U.S. laws and different legal standards; and ● increased financial accounting and reporting burdens and complexities.
European sales are subject to a number of risks, including: ● difficulties in staffing and managing international operations; ● increased competition as a result of more products and procedures receiving regulatory approval in international markets; ● longer accounts receivable payment cycles and difficulties in collecting accounts receivable; ● fluctuations in currency exchange rates; ● non-U.S. certification and regulatory clearance or approval requirements; ● difficulties in developing effective marketing campaigns in unfamiliar countries; ● customs clearance and shipping delays; ● complexities associated with managing multiple payor reimbursement regimes, government payors or patient self-pay systems; ● political, social, and economic instability abroad, terrorist attacks, and security concerns in general; ● the impact of the macroeconomic factors, including pandemics, epidemics and other public health outbreaks, inflationary pressures and geopolitical conflicts, such as the ongoing Russia-Ukraine conflict and the current conflict in the Middle East (including any escalation or expansion); ● natural disasters and pandemics, epidemics or public health outbreaks, which result in lock-downs, travel restrictions and other restrictions on our ability to operate internationally; ● preference for locally produced products; ● potentially adverse tax consequences, including the complexities of non-U.S. value-added tax systems, tax inefficiencies related to our corporate structure, and restrictions on the repatriation of earnings; 48 Table of Contents ● the burdens of complying with a wide variety of non-U.S. laws and different legal standards; and ● increased financial accounting and reporting burdens and complexities.
Although Aroa obtains its supply of ovine rumen from jurisdictions with sheep that are not currently known to carry any prion disease (progressive neurodegenerative disorders, including scrapie disease), there can be no assurance that these flocks will remain prion disease-free or that a future outbreak or presence of other unintended and potentially hazardous agents would not adversely affect our products or patients that may receive them.
Although Aroa obtains its supply of ovine rumen from jurisdictions with sheep that are not currently known to carry any prion disease (progressive neurodegenerative disorders, including scrapie disease), there can be no assurance that these flocks will remain prion disease-free or that a future outbreak or presence of other unintended and potentially hazardous agents 50 Table of Contents would not adversely affect our products or patients that may receive them.
It includes new regulations which, among other things: ● strengthen the rules on placing devices on the market and reinforce surveillance once they are available; ● establish explicit provisions on manufacturers’ responsibilities for the follow-up of the quality, performance and safety of devices placed on the market; ● improve the traceability of medical devices throughout the supply chain to the end-user or patient through a unique identification number; ● establish a central database to provide patients, healthcare professionals and the public with comprehensive information on products available in the EU; and ● strengthen rules for the assessment of certain high-risk devices, which may have to undergo an additional check by experts before they are placed on the market.
The MDR introduces new regulations which, among other things: ● strengthen the rules on placing devices on the market and reinforce surveillance once they are available; ● establish explicit provisions on manufacturers’ responsibilities for the follow-up of the quality, performance and safety of devices placed on the market; ● improve the traceability of medical devices throughout the supply chain to the end-user or patient through a unique identification number; ● establish a central database to provide patients, healthcare professionals and the public with comprehensive information on products available in the EU; and ● strengthen rules for the assessment of certain high-risk devices, which may have to undergo an additional check by experts before they are placed on the market.
For example, the GDPR imposes higher standards for obtaining consent from individuals to process their personal data, more robust disclosures to individuals and a strengthened individual data rights regime, shortened timelines for data breach notifications, limitations on retention of information, increased requirements pertaining to special categories of personal data and pseudonymised (i.e., key-coded) data and additional obligations when we contract third-party processors in connection with the processing of the personal data.
For example, the GDPR imposes higher standards for obtaining consent from individuals to process their personal data (where consent is required), more robust disclosures to individuals and a strengthened individual data rights regime, shortened timelines for data breach notifications, limitations on retention of information, increased requirements pertaining to special categories of personal data and pseudonymised (i.e., key-coded) data and additional obligations when we contract third-party processors in connection with the processing of the personal data.
Our indebtedness may limit our flexibility in operating our business and adversely affect our financial health and competitive position. As of December 31, 2023, we had $40.0 million of indebtedness outstanding under our credit facility with MidCap Financial Trust (“MidCap”) that matures in May 2027.
Our indebtedness may limit our flexibility in operating our business and adversely affect our financial health and competitive position. As of December 31, 2024, we had $40.0 million of indebtedness outstanding under our credit facility with MidCap Financial Trust (“MidCap”) that matures in May 2027.
Products in later stages of clinical trials may fail to show the desired safety and efficacy despite having progressed through nonclinical studies and earlier clinical trials. ​ Interim or preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.
Products in later stages of clinical trials may fail to show the desired safety and efficacy despite having progressed through nonclinical studies and earlier clinical trials. ​ 72 Table of Contents Interim or preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.
As such, we are highly dependent upon Aroa’s continued ability to supply our OviTex and OviTex PRS products at the levels we require and any production shortfall that impairs the supply of our 48 Table of Contents OviTex and OviTex PRS products could have a material adverse effect on our business, financial condition and results of operations and adversely affect our ability to satisfy demand for our OviTex and OviTex PRS products, which could adversely affect our product sales and operating results materially.
As such, we are highly dependent upon Aroa’s continued ability to supply our OviTex and OviTex PRS products at the levels we require and any production shortfall that impairs the supply of our OviTex and OviTex PRS products could have a material adverse effect on our business, financial condition and results of operations and adversely affect our ability to satisfy demand for our OviTex and OviTex PRS products, which could adversely affect our product sales and operating results materially.
The facility may be harmed or rendered inoperable by natural or man-made disasters, including, but not limited to, tornadoes, 72 Table of Contents flooding, fire, public health emergencies such as pandemics and power outages, which may render it difficult or impossible for us to perform our customer service research, development and commercialization activities for some period of time.
The facility may be harmed or rendered inoperable by natural or man-made disasters, including, but not limited to, tornadoes, flooding, fire, public health emergencies such as pandemics and power outages, which may render it difficult or impossible for us to perform our customer service research, development and commercialization activities for some period of time.
There can be no assurance that we would be able to timely implement any mitigation plans relating to our supply chain. ​ Continued concerns about the systemic impact of potential economic slowdown or recession, liquidity constraints, failures and instability in the U.S. and international financial banking systems, and geopolitical turmoil, including the ongoing Russia-Ukraine conflict and the current conflict in Israel and Gaza (including any escalation or expansion), have contributed to increased market volatility and diminished expectations for economic growth in the world.
There can be no assurance that we would be able to timely implement any mitigation plans relating to our supply chain. ​ Continued concerns about the systemic impact of potential economic slowdown or recession, liquidity constraints, failures and instability in the U.S. and international financial banking systems, and geopolitical turmoil, including the ongoing Russia-Ukraine conflict and the current conflict in the Middle East (including any escalation or expansion), have contributed to increased market volatility and diminished expectations for economic growth in the world.
The federal carry forwards for losses incurred prior to 2018 will begin expiring in 2032 for federal purposes. Federal net operating losses incurred in 2018 and onward have an indefinite expiration under the 2017 Tax Cut & Jobs Act. The state carry forwards will begin expiring in 2027.
The federal carry forwards for losses incurred prior to 2018 will begin expiring in 2032 for federal purposes. Federal net operating losses incurred in 2018 and onward have an indefinite expiration under the 2017 Tax Cut & Jobs Act. The state carry forwards will begin expiring in 2026.
Product development involves a high degree of risk, and there can be no assurance that our new product development efforts will result in any commercially successful products. 46 Table of Contents To successfully market and sell our products in markets outside of the U.S., we must address many international business risks with which we have limited experience.
Product development involves a high degree of risk, and there can be no assurance that our new product development efforts will result in any commercially successful products. To successfully market and sell our products in markets outside of the U.S., we must address many international business risks with which we have limited experience.
In addition, some countries limit the enforceability of patents against third parties, including government agencies or government contractors. In these countries, patents may provide limited or no benefit. Patent protection must ultimately be sought on a country-by-country basis, which is an expensive and time-consuming process with uncertain outcomes.
In addition, some countries limit the enforceability of patents against third parties, including government agencies or government contractors. In these countries, patents may provide limited or no benefit. Patent protection must ultimately be sought on 55 Table of Contents a country-by-country basis, which is an expensive and time-consuming process with uncertain outcomes.
Furthermore, any breach in our information technology systems could lead to the unauthorized access, disclosure and use of non-public information from our patient registry or other patient information which is protected by HIPAA and other laws.
Furthermore, any compromise in our information technology systems could lead to the unauthorized access, disclosure and use of non-public information from our patient registry or other patient information which is protected by HIPAA and other laws.
If we breach any material obligations, or use the intellectual property licensed to us in an unauthorized manner, we may be required to pay damages and the licensor may have the right to terminate the license, which could result in us being unable to develop, manufacture and sell products that are 50 Table of Contents covered by the licensed technology, having to negotiate new or reinstated licenses on less favorable terms, or enabling a competitor to gain access to the licensed technology.
If we breach any material obligations, or use the intellectual property licensed to us in an unauthorized manner, we may be required to pay damages and the licensor may have the right to terminate the license, which could result in us being unable to develop, manufacture and sell products that are covered by the licensed technology, having to negotiate new or reinstated licenses on less favorable terms, or enabling a competitor to gain access to the licensed technology.
Whether or not we are successful in defending against any such actions or investigations, we could incur substantial costs, including legal fees, and divert the attention of management in defending ourselves against any of these claims or investigations, which could have a material adverse effect on our business, financial condition and results of operations.
Whether or not we are successful in defending against any such actions or investigations, we could incur substantial costs, 74 Table of Contents including legal fees, and divert the attention of management in defending ourselves against any of these claims or investigations, which could have a material adverse effect on our business, financial condition and results of operations.
Our business processes personal data, including some data related to health. When conducting clinical trials, we face risks associated with collecting trial participants’ data, especially health data, in a manner consistent with applicable 64 Table of Contents laws and regulations. We also face risks inherent in handling large volumes of data and in protecting the security of such data.
Our business processes personal data, including some data related to health. When conducting clinical trials, we face risks associated with collecting trial participants’ data, especially health data, in a manner consistent with applicable laws and regulations. We also face risks inherent in handling large volumes of data and in protecting the security of such data.
If any of these events were to occur, our business and financial results could be adversely affected. Other jurisdictions outside the EU and the United 65 Table of Contents Kingdom are similarly introducing or enhancing laws and regulations relating to privacy and data security, which enhances risks relating to compliance with such laws.
If any of these events were to occur, our business and financial results could be adversely affected. Other jurisdictions outside the EU and the United Kingdom are similarly introducing or enhancing laws and regulations relating to privacy and data security, which enhances risks relating to compliance with such laws.
Such recalls and withdrawals may also be used by our competitors to harm our reputation for safety or be perceived by 69 Table of Contents patients as a safety risk when considering the use of our products, either of which could have a material adverse effect on our business, financial condition and results of operations.
Such recalls and withdrawals may also be used by our competitors to harm our reputation for safety or be perceived by patients as a safety risk when considering the use of our products, either of which could have a material adverse effect on our business, financial condition and results of operations.
If one or more of these risks are realized, our business, financial condition and results of operations could be adversely affected. 47 Table of Contents Risks Related to Our Reliance on Third Parties We are highly dependent upon Aroa, as the exclusive manufacturer and supplier of our OviTex and OviTex PRS products.
If one or more of these risks are realized, our business, financial condition and results of operations could be adversely affected. Risks Related to Our Reliance on Third Parties We are highly dependent upon Aroa, as the exclusive manufacturer and supplier of our OviTex and OviTex PRS products.
Additionally, in the event that our trademarks are successfully challenged, we could be forced to rebrand our products, which could result in loss of brand recognition and could require us to devote resources to advertising and 54 Table of Contents marketing new brands. Our competitors may infringe our trademarks, and we may not have adequate resources to enforce our trademarks.
Additionally, in the event that our trademarks are successfully challenged, we could be forced to rebrand our products, which could result in loss of brand recognition and could require us to devote resources to advertising and marketing new brands. Our competitors may infringe our trademarks, and we may not have adequate resources to enforce our trademarks.
If we fail to comply with our reporting obligations, the FDA could take action, including untitled letters, warning letters, administrative actions, criminal prosecution, imposition of civil monetary penalties, revocation of related approvals, seizure of our products or delay in clearance or approval of future products.
If we fail to comply with our reporting obligations, the FDA could take action, including untitled letters, warning letters, administrative actions, criminal 62 Table of Contents prosecution, imposition of civil monetary penalties, revocation of related approvals, seizure of our products or delay in clearance or approval of future products.
If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business. If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.
If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business. 77 Table of Contents If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.
If we or our vendors experience a cybersecurity incident, significant disruption or a breach of our information technology systems, our business could be adversely affected. We rely extensively on information technology systems to conduct our business.
If we or our vendors experience a cybersecurity incident, significant disruption or a compromise of our information technology systems, our business could be adversely affected. We rely extensively on information technology systems to conduct our business.
Under the Aroa License Aroa also holds the FDA clearances under which we commercialize our OviTex and OviTex LPR products, and maintains ultimate responsibility for all regulatory interactions with FDA relating to our OviTex producst, including OviTex LPR and decisions made with respect to changing or updating those clearances.
Under the Aroa License Aroa also holds the FDA clearances under which we commercialize our OviTex products, including OviTex LPR and OviTex IHR, and maintains ultimate responsibility for all regulatory interactions with FDA relating to these OviTex products and decisions made with respect to changing or updating those clearances.
The market price of our common stock is likely to be highly volatile and may fluctuate substantially due to many factors, including: ● the volume and timing of sales of our products; ● the introduction of new products or product enhancements by us or others in our industry; ● disputes or other developments with respect to our or others’ intellectual property rights; ● our ability to develop, obtain regulatory clearance for, and market new and enhanced products on a timely basis; ● product liability claims or other litigation; ● quarterly variations in our results of operations or those of others in our industry; ● media exposure of our products or of those of others in our industry; ● changes in governmental regulations or in reimbursement; ● changes in earnings estimates or recommendations by securities analysts; ● broad trends impacting companies within the pharmaceutical, biotechnology and medical technology industries; and ● general market conditions and other factors, including factors unrelated to our operating performance or the operating performance of our competitors, including any economic downturn as a result of the COVID-19 pandemic, or macroeconomic factors such as geopolitical tensions or the outbreak or escalation of hostilities or war.
The market price of our common stock is likely to be highly volatile and may fluctuate substantially due to many factors, including: ● the volume and timing of sales of our products; ● the introduction of new products or product enhancements by us or others in our industry; ● disputes or other developments with respect to our or others’ intellectual property rights; ● our ability to develop, obtain regulatory clearance for, and market new and enhanced products on a timely basis; ● product liability claims or other litigation; ● quarterly variations in our results of operations or those of others in our industry; ● media exposure of our products or of those of others in our industry; 76 Table of Contents ● changes in governmental regulations or in reimbursement; ● changes in earnings estimates or recommendations by securities analysts; ● broad trends impacting companies within the pharmaceutical, biotechnology and medical technology industries; and ● general market conditions and other factors, including factors unrelated to our operating performance or the operating performance of our competitors, including global pandemic such as the COVID-19 pandemic, or macroeconomic factors such as geopolitical tensions, tariffs, or the outbreak or escalation of hostilities or war.
We may also fail to recognize that we have become aware of a reportable adverse event, especially if it is not reported to us as an adverse event or if it is an adverse 61 Table of Contents event that is unexpected or removed in time from the use of the product.
We may also fail to recognize that we have become aware of a reportable adverse event, especially if it is not reported to us as an adverse event or if it is an adverse event that is unexpected or removed in time from the use of the product.
In addition, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.
In addition, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be 54 Table of Contents compromised by disclosure during this type of litigation.
As a result, the interim results that we report may differ from future results of the same trials, 70 Table of Contents or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated.
As a result, the interim results that we report may differ from future results of the same trials, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated.
While some third-party payors currently cover and provide reimbursement for procedures using our currently cleared or approved products, we can give no assurance that these third-party payors will continue to provide coverage and adequate reimbursement for the procedures using our products, to permit hospitals and surgeons to offer procedures using our products to patients requiring treatment, or that current reimbursement levels for procedures using our products will continue.
While some third-party payors currently cover and provide reimbursement for procedures using our currently cleared or approved products, we can give no assurance that these third-party payors will continue to provide coverage and adequate reimbursement for the 46 Table of Contents procedures using our products, to permit hospitals and surgeons to offer procedures using our products to patients requiring treatment, or that current reimbursement levels for procedures using our products will continue.
If the FDA disagrees and requires new clearances or approvals for these modifications, we may be required to recall and to stop selling or marketing such products as modified until we obtain clearance or approval, which could harm our operating results and require us to 59 Table of Contents redesign such products.
If the FDA disagrees and requires new clearances or approvals for these modifications, we may be required to recall and to stop selling or marketing such products as modified until we obtain clearance or approval, which could harm our operating results and require us to redesign such products.
While there have been minimal disruptions to our supply chain to date, there is a risk that in the future supplies of our products could be disrupted or delayed based on competition within the supply chain or otherwise affected by substantial inflationary pressures due to macroeconomic conditions.
While there have been minimal disruptions to our supply chain to date, there is a risk that in the future supplies of our products could be disrupted or delayed based on competition within the supply chain or otherwise affected by substantial inflationary pressures from other underlying macroeconomic conditions.
We have received, and we may in the future receive, letters or other threats or claims from third parties inviting us to take licenses under, or alleging that we infringe, their patents. Moreover, we may become party to adversarial proceedings regarding our or third-party patent portfolios.
We have received, and we may in the future receive, letters or other threats or claims from third parties inviting us to take licenses under, or alleging that we infringe, their patents. 53 Table of Contents Moreover, we may become party to adversarial proceedings regarding our or third-party patent portfolios.
The laws of some non-U.S. 51 Table of Contents countries do not protect our proprietary rights to the same extent as the laws of the U.S., and we may encounter significant problems in protecting our proprietary rights in these countries.
The laws of some non-U.S. countries do not protect our proprietary rights to the same extent as the laws of the U.S., and we may encounter significant problems in protecting our proprietary rights in these countries.
The FDA will require a PMA, rather than a 510(k) clearance for the use of OviTex PRS in breast surgery.
The FDA will require a PMA, rather than a 510(k) clearance for the use of OviTex PRS in breast reconstruction.
Factors that may cause fluctuations in our quarterly and annual results include: ● surgeon and patient adoption of our products; ● timing of new product offerings, acquisitions, licenses or other significant events by us or our competitors; ● changes in coverage policies by third-party payors that affect the reimbursement of procedures in which our products are used; ● unanticipated pricing pressure; ● our ability to obtain and maintain regulatory clearance or approval for any products in development or for our current products for additional indications or in additional jurisdictions; 67 Table of Contents ● the hiring, retention and continued productivity of our sales representatives; ● our ability to expand the geographic reach of our sales and marketing efforts; ● results of clinical research and trials on our existing products and products in development; ● delays in, or failure of, component and raw material deliveries by Aroa; ● recalls or other field safety corrective actions by Aroa; ● business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters such as earthquakes, floods or public health emergencies such as the COVID-19 pandemic; and ● positive or negative coverage in the media or clinical publications of our products or products of our competitors or our industry.
Factors that may cause fluctuations in our quarterly and annual results include: ● surgeon and patient adoption of our products; ● timing of new product offerings, acquisitions, licenses or other significant events by us or our competitors; ● changes in coverage policies by third-party payors that affect the reimbursement of procedures in which our products are used; ● unanticipated pricing pressure; ● established relationships or product purchase-level commitments of GPOs, IDNs and other third-party payors with whom we and our competitors contract; 69 Table of Contents ● our ability to obtain and maintain regulatory clearance or approval for any products in development or for our current products for additional indications or in additional jurisdictions; ● the hiring, retention and continued productivity of our sales representatives; ● our ability to expand the geographic reach of our sales and marketing efforts; ● results of clinical research and trials on our existing products and products in development; ● delays in, or failure of, component and raw material deliveries by Aroa; ● recalls or other field safety corrective actions by Aroa; ● business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters such as earthquakes, floods or public health emergencies such as the COVID-19 pandemic; and ● positive or negative coverage in the media or clinical publications of our products or products of our competitors or our industry.
The degree of market acceptance of any of our products will depend on a number of factors, including: ● whether surgeons and others in the medical community consider our products to be safe, effective and cost effective; ● the potential and perceived advantages of our products over alternative products; ● the effectiveness of our sales and marketing efforts for our products; ● the prevalence and severity of any complications associated with using our products; ● the convenience and ease of use of our products relative to competing products; ● product labeling or product insert requirements by regulatory authorities; ● the competitive pricing of our products; ● the quality of our products meeting patient and surgeon expectations; ● the results of clinical trials and post-market clinical studies relating to the use of our products; ● pricing pressure, including from GPOs and government payors; ● the availability of coverage and adequate reimbursement for procedures using our products from third-party payors, including government authorities; 43 Table of Contents ● the willingness of patients to pay out-of-pocket for our products in the absence of coverage and adequate reimbursement by third-party payors, including government authorities; and ● our ability to provide incremental clinical and economic data that show the safety, clinical efficacy and cost effectiveness, and patient benefits from, our products.
The degree of market acceptance of any of our products will depend on a number of factors, including: ● whether surgeons and others in the medical community consider our products to be safe, effective and cost effective; ● the potential and perceived advantages of our products over alternative products; ● the effectiveness of our sales and marketing efforts for our products; ● the prevalence and severity of any complications associated with using our products; ● the convenience and ease of use of our products relative to competing products; ● product labeling or product insert requirements by regulatory authorities; ● the competitive pricing of our products; ● the quality of our products meeting patient and surgeon expectations; ● the results of clinical trials and post-market clinical studies relating to the use of our products; 44 Table of Contents ● pricing pressure, including from GPOs and government payors; ● obtaining favorable contract treatment with GPOs and other third-party payors to enable growing adoption of our products across hernia procedures; ● the availability of coverage and adequate reimbursement for procedures using our products from third-party payors, including government authorities; ● the willingness of patients to pay out-of-pocket for our products in the absence of coverage and adequate reimbursement by third-party payors, including government authorities; and ● our ability to provide incremental clinical and economic data that show the safety, clinical efficacy and cost effectiveness, and patient benefits from, our products.
It is important to our business that we continue to enhance our OviTex and OviTex PRS products and develop and introduce new reinforced tissue matrix products. Developing products is expensive and time-consuming and could divert management’s attention away from other aspects of our business.
It is important to our business that we continue to enhance our OviTex and OviTex PRS products and develop and introduce new reinforced tissue matrix products and complementary soft -tissue reconstruction solutions. Developing products is expensive and time-consuming and could divert management’s attention away from other aspects of our business.
Although an issued patent is presumed valid and enforceable, its issuance is not conclusive as to its validity or its enforceability and it may not provide us with adequate proprietary protection or competitive advantages against competitors with similar products.
Although an issued patent is presumed valid and enforceable, its issuance is not conclusive as to its validity or its enforceability and it may not provide us with adequate proprietary protection or competitive advantages against 52 Table of Contents competitors with similar products.
Approximately 10%, 8% and 5% of our revenue for the years ended December 31, 2023, 2022 and 2021, respectively, came from sales in markets outside of the U.S. Part of our sales strategy is to maintain our European presence.
Approximately 15%, 10% and 8% of our revenue for the years ended December 31, 2024, 2023 and 2022, respectively, came from sales in markets outside of the U.S. Part of our sales strategy is to maintain our European presence.
Our license and other agreements impose, and any future collaboration agreements or license agreements we enter into are likely to impose various development, commercialization, funding, milestone, royalty, diligence, sublicensing, insurance, patent prosecution and enforcement or other obligations on us.
Our license and other agreements impose, and any future collaboration agreements or license agreements we enter into are likely to impose 51 Table of Contents various development, commercialization, funding, milestone, royalty, diligence, sublicensing, insurance, patent prosecution and enforcement or other obligations on us.
Our ability to supply our OviTex and OviTex PRS products commercially and to develop any future products depends, in part, on our ability to obtain these materials, components and products in accordance with regulatory requirements and in sufficient quantities for commercialization and clinical testing.
Our ability to supply our OviTex and OviTex PRS products commercially and to develop any future products depends, in part, on our ability to obtain these materials, components and products in accordance with regulatory requirements and in sufficient quantities for 49 Table of Contents commercialization and clinical testing.
This statement applies to our OviTex PRS products as they are not cleared or approved for use in breast surgery and thus, we are prohibited from 44 Table of Contents marketing them for that use.
This statement applies to our OviTex PRS products as they are not cleared or approved for use in breast surgery and thus, we are prohibited from marketing them for that use.
For example, Aroa was unable to supply us with our products from September 2017 to December 2017 due to a quality testing process failure identified by Aroa. Personnel shortages and reduced manufacturing capacity due to the COVID-19 pandemic may also result in a disruption in production.
For example, Aroa was unable to supply us with our products from September 2017 to December 2017 due to a quality testing process failure identified by Aroa. Any personnel shortages and reduced manufacturing capacity may also result in a disruption in production.
The licensed patents will expire between 2029 and 2031. Our ability to enforce our patent rights depends on our ability to detect infringement. It may be difficult to detect infringers who do not advertise the components that are used in their products.
Our issued U.S. patents will expire between 2035 and 2041. The licensed patents will expire between 2029 and 2031. Our ability to enforce our patent rights depends on our ability to detect infringement. It may be difficult to detect infringers who do not advertise the components that are used in their products.
In these circumstances, we may be subject to significant enforcement actions, including significant fines or penalties. International regulatory approval processes may take more or less time than the FDA clearance or approval process.
In these circumstances, we may be subject to significant enforcement actions, including significant fines or penalties. 60 Table of Contents International regulatory approval processes may take more or less time than the FDA clearance or approval process.
For more information, see the sections entitled “Business – 63 Table of Contents Government Regulation – Anti-Kickback Statutes, – False Claims Laws; – Transparency Laws; and – Other Federal Healthcare Fraud and Abuse Laws ” in this Annual Report.
For more information, see the sections entitled “Business – Government Regulation – Anti-Kickback Statutes, – False Claims Laws; – Transparency Laws; and – Other Federal Healthcare Fraud and Abuse Laws ” in this Annual Report.
Any prolonged delays in normalized levels of elective surgeries by governmental, hospital or payor actions would continue to impair net sales of our products. ​ General supply chain disruptions, initially arising from COVID-19, have in the wake of geopolitical turmoil, such as the ongoing Russia-Ukraine conflict and the current conflict in Israel and Gaza (including any escalation or expansion) continued to threaten trade globally and weaken supply systems.
Any prolonged delays in normalized levels of elective surgeries by governmental, hospital or payor actions would continue to impair net sales of our products. ​ General supply chain disruptions, initially arising from COVID-19, have in the wake of severe weather events and geopolitical turmoil, such as the ongoing Russia-Ukraine conflict and the current conflict in the Middle East (including any escalation or expansion) continue to threaten trade globally and weaken supply systems.
While we continue to diversify our portfolio and revenue sources, we expect that sales of our OviTex products and our OviTex PRS products will account for the majority of our revenue for the foreseeable future while we continue to grow market share for our OviTex PRS products and other ancillary products that we may develop or distribute from time to time.
While we continue to diversify our portfolio and revenue sources, we expect that sales of our OviTex products will account for the majority of our revenue for the foreseeable future while we continue to grow market share for our OviTex PRS products, LIQUIFIX and any complementary products that we may develop or distribute from time to time.
We cannot be certain that any particular challenge will be successful in limiting or eliminating the challenged patent rights of the third party. Any lawsuits resulting from such allegations could subject us to significant liability for damages and/ or invalidate our proprietary rights.
We may also occasionally use these proceedings to challenge the patent rights of others. We cannot be certain that any particular challenge will be successful in limiting or eliminating the challenged patent rights of the third party. Any lawsuits resulting from such allegations could subject us to significant liability for damages and/ or invalidate our proprietary rights.
Our ability to grow our revenue in future periods will depend on our ability to increase sales of our OviTex and OviTex PRS products and any new product or product indications that we introduce, which will, in turn, depend in part on our success in expanding our customer base and driving increased use of our products.
Our ability to grow our revenue in future periods will depend on our ability to increase sales of our OviTex in hernia and abdominal wall reconstruction and OviTex PRS products in plastic and reconstructive procedures and any new product or product indications that we introduce, which will, in turn, depend in part on our success in expanding our customer base and driving increased use of our products.
Sales of our OviTex products accounted for 67%, 70% and 78% of total revenue for the years ended December 31, 2023, 2022 and 2021, respectively.
Sales of our OviTex products accounted for 66%, 67% and 70% of total revenue for the years ended December 31, 2024, 2023 and 2022, respectively.
In the EEA, we compete with Bard, a subsidiary of Becton, Dickinson and Company, who produces other soft-tissue reinforcement products. Many of these competitors are large, well-capitalized companies with significantly greater market share and resources than us, selling products that have been on the market prior to the commercialization of our products.
In the EEA, we compete with Bard, who produces other soft-tissue reinforcement products. Many of these competitors are large, well-capitalized companies with significantly greater market share and contracting power than us, selling products that have been on the market prior to the commercialization of our products.
Foreign Corrupt Practices Act, in which violations of these laws could result in substantial penalties and prosecution. We are exposed to trade and economic sanctions and other restrictions imposed by the U.S. and other governments and organizations. The U.S.
We are subject to anti-bribery, anti-corruption, and anti-money laundering laws, including the U.S. Foreign Corrupt Practices Act, in which violations of these laws could result in substantial penalties and prosecution. We are exposed to trade and economic sanctions and other restrictions imposed by the U.S. and other governments and organizations. The U.S.
We rely on our own direct sales force, which as of December 31, 2023 consisted of 94 representatives in the U.S. and 10 representatives in Europe, to market and sell our products.
We rely on our own direct sales force, which as of December 31, 2024 consisted of 91 representatives in the U.S. and 12 representatives in Europe, to market and sell our products.
If we become profitable, our ability to use our net operating loss carryforwards and other tax attributes to offset future taxable income or taxes may be subject to limitations. As of December 31, 2023, we had federal and state net operating loss carry forwards (“NOLs”) of approximately $239.4 million and $196.1 million, respectively.
If we become profitable, our ability to use our net operating loss carryforwards and other tax attributes to offset future taxable income or taxes may be subject to limitations. As of December 31, 2024, we had federal and state net operating loss carry forwards (“NOLs”) of approximately $266.7 million and $218.9 million, respectively.
The Medical Devices Regulation is intended to, among other things, establish a uniform, transparent, predictable and sustainable regulatory framework across the EEA for medical devices and ensure a high level of safety and health while supporting innovation. The MDR became fully effective on May 26, 2021.
The Medical Devices Regulation is intended to, among other things, establish a uniform, transparent, predictable and sustainable regulatory framework across the EEA for medical devices and ensure a high level of safety and health while supporting innovation.
Supply chain disruptions could adversely impact our operations and financial condition. ​ Global supply chains have been impacted because of the lingering economic impacts COVID-19 pandemic, recent geopolitical tensions such as the ongoing Russia-Ukraine conflict and the current conflict in Israel and Gaza (including any escalation or expansion) and other factors, and this may impact the availability of raw materials and components used in the manufacture of our products.
Supply chain disruptions could adversely impact our operations and financial condition. ​ Global supply chains have been impacted because of severe weather, recent geopolitical tensions such as the ongoing Russia-Ukraine conflict and the current conflict in the Middle East (including any escalation or expansion) and other factors, and this may impact the availability of raw materials and components used in the manufacture of our products.
Failure to comply with these regulations may harm our business. Changes in funding for the FDA and other government agencies could hinder their ability to hire and retain key leadership and other personnel, or otherwise prevent new products and services from being developed or commercialized in a timely manner.
Changes in funding for the FDA and other government agencies could hinder their ability to hire and retain key leadership and other personnel, or otherwise prevent new products and services from being developed or commercialized in a timely manner.
We first commercialized OviTex products in the U.S. in 2016 and have subsequently launched our OviTex products in Europe, introduced our larger sized OviTex products, our OviTex LPR product for use in laparoscopic and robotic-assisted hernia surgical repairs and larger configurations of our LPR product.
We first commercialized OviTex products in the U.S. in 2016 and have subsequently launched our OviTex products in Europe, introduced our larger sized OviTex products, as well as OviTex LPR and OviTex IHR product configurations for deeper penetration into laparoscopic and robotic-assisted hernia surgical repairs.
In the EEA, we have obtained the CE mark for our OviTex products. For more information regarding regulation of our products, see “Business—Government Regulation.” An element of our strategy is to continue to add new features and expand the indications and uses for our current products.
For more information regarding regulation of our products, see “Business—Government Regulation.” An element of our strategy is to continue to add new features and expand the indications and uses for our current products.
As of December 31, 2023, our commercial organization consisted of 166 employees in the U.S. and 14 employees in Europe. To generate future revenue growth, we plan to expand the size and geographic scope of our direct sales 40 Table of Contents organization.
As of December 31, 2024, our commercial organization consisted of 133 employees in the U.S. and 16 employees in Europe. To generate future revenue growth, we plan to continue to expand the size and geographic scope of our direct 41 Table of Contents sales organization.
Even if surgeons or medical professionals use our OviTex and OviTex PRS products only for their approved indications, a failure by such surgeons and medical professionals to use our products in accordance with the processes and procedures established to properly utilize our OviTex and OviTex PRS products could result in product liability lawsuits, costly investigations and potentially affect our ability to achieve sufficient market penetration for our OviTex and OviTex PRS products.
Even if surgeons or medical professionals use our OviTex and OviTex PRS products only for their approved indications, a failure by such surgeons and medical professionals to employ proper surgical techniques to handle and use our products in accordance with proper instructions for use could result in product liability lawsuits, costly investigations and potentially affect our ability to achieve sufficient market penetration for our OviTex and OviTex PRS products.
If any of the physicians or other providers or entities with whom we expect to do business is found not to be in compliance with applicable laws, they may be subject to the same criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs. We are subject to anti-bribery, anti-corruption, and anti-money laundering laws, including the U.S.
If any of the physicians or other providers or entities with whom we expect to do business is found not to be in compliance with applicable laws, they may be subject 65 Table of Contents to the same criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.
For the years ended December 31, 2023, 2022 and 2021, we had net losses of $46.7 million, $44.3 million and $33.3 million, respectively. As of December 31, 2023, we had an accumulated deficit of $320.9 million.
For the years ended December 31, 2024, 2023 and 2022, we had net losses of $37.8 million, $46.7 million and $44.3 million, respectively. As of December 31, 2024, we had an accumulated deficit of $358.7 million.
In the U.S., we currently compete with LifeCell Corporation, a subsidiary of AbbVie, Davol Inc., a subsidiary of Becton, Dickinson and Company, MTF Biologics and RTI Surgical, which produce, among other things, soft-tissue reconstruction surgery products, including Strattice and Alloderm, Phasix, FlexHD and Cortiva, respectively.
In the U.S., we currently compete with Allergan, a subsidiary of AbbVie, C.R. Bard, a subsidiary of Becton, Dickinson and Company, MTF Biologics, RTI Surgical and Integra Life Sciences, which produce, among other things, soft-tissue reconstruction surgery products, including Strattice and Alloderm, Phasix, FlexHD, Cortiva,and SurgiMend and DuraSorb, respectively.
Any such access, disclosure, or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information and damage to our reputation.
Any such access, disclosure, or other loss of information could require us to notify impacted stakeholders(including affected individuals, regulators and investors) and result in legal claims or proceedings, liability under laws that protect the privacy of personal information and damage to our reputation.
The success of any new reinforced tissue matrix product offering or product enhancements to our OviTex and OviTex PRS products will depend on several factors, including our ability to: ● properly identify and anticipate surgeon and patient needs; ● develop and introduce new products and product enhancements in a timely manner; ● avoid infringing upon the intellectual property rights of third parties; ● ensure the quality, manufacture and supply of new products by Aroa; ● demonstrate, if required, the safety and efficacy of new products with data from preclinical studies, clinical trials and post-market clinical studies; ● obtain the necessary regulatory clearances or approvals for expanded indications, new products or product modifications; ● be fully FDA-compliant with marketing of new devices or products; ● provide adequate training to potential users of our new products; ● receive adequate coverage and reimbursement for procedures performed with our new products; and ● develop and expand an effective and dedicated sales and marketing team.
The success of any new product offerings or product enhancements to our OviTex and OviTex PRS products will depend on several factors, including our ability to: ● properly identify and anticipate surgeon and patient needs; ● develop and introduce new products and product enhancements in a timely manner; ● avoid infringing upon the intellectual property rights of third parties; ● ensure the quality, manufacture and supply of new products by Aroa or other third-party manufacturers we engage; ● demonstrate, if required, the safety and efficacy of new products with data from preclinical studies, clinical trials and post-market clinical studies; ● obtain the necessary regulatory clearances or approvals for expanded indications, new products or product modifications; ● be fully FDA-compliant with marketing of new devices or products; ● provide adequate training to potential users of our new products; ● receive adequate coverage and reimbursement for procedures performed with our new products; and ● develop and expand an effective and dedicated sales and marketing team. 47 Table of Contents If we are not successful in introducing new product indications and developing and commercializing new products and product enhancements, our ability to increase our revenue may be impaired, which could have a material adverse effect on our business, financial condition and results of operations.
A full allowance for the value of the NOLs is provided for in our audited financial statements for the year of December 31, 2023 included in this 73 Table of Contents Annual Report on Form 10-K. We cannot guarantee what the ultimate outcome or amount of the benefit we may receive from the NOLs, if any, will be.
An allowance for the majority of the NOLs which relate to the U.S. is provided for in our audited financial statements for the year of December 31, 2024 included in this Annual Report on Form 10-K. We cannot guarantee what the ultimate outcome or amount of the benefit we may receive from the NOLs, if any, will be.
The continuing uncertainty surrounding global economic conditions and financial markets, including the lingering economic impact of the COVID-19 pandemic on our customers, may adversely affect demand for our products and procedures and result in lower reimbursement rates or coverage for our products, resulting in lower sales volume and downward pricing pressure on our products and slower adoption of new products. ​ The full extent to which these macroeconomic factors, will further, directly or indirectly, impact our business, results of operations and financial condition, including our sales, expenses, manufacturing capability, supply chain integrity, research and development activities, and employee-related matters, will depend on future developments that are highly uncertain. ​ 41 Table of Contents Information pertaining to the impact of these macroeconomic pressures on our operations to date can be found in “Management's Discussion and Analysis of Financial Position and Results of Operations” in this Annual Report on Form 10-K. ​ Rising inflation rates could negatively impact our revenues and profitability if increases in the prices of our product or a decrease in consumer spending results in lower volumes of elective surgeries.
The full extent to which these macroeconomic factors, will further, directly or indirectly, impact our business, results of operations and financial condition, including our sales, expenses, manufacturing capability, supply chain integrity, research and development activities, and employee-related matters, will depend on future developments that are highly uncertain. ​ Information pertaining to the impact of these macroeconomic pressures on our operations to date can be found in “Management’s Discussion and Analysis of Financial Position and Results of Operations” in this Annual Report on Form 10-K. ​ Rising inflation rates could negatively impact our revenues and profitability if increases in the prices of our product or a decrease in consumer spending results in lower volumes of elective surgeries.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeWe have also implemented a process for employees to undergo cybersecurity training during onboarding, and thereafter, on an annual basis as part of our larger compliance training program. 78 Table of Contents We have established monitoring procedures in our effort to mitigate risks related to cybersecurity incidents.
Biggest changeWe have established monitoring procedures in our effort to mitigate risks related to cybersecurity incidents.
The Audit Committee receives quarterly updates from our Vice President, Information Technology & Compliance (“IT Officer”) relating to IT and cybersecurity matters, including cybersecurity risks and threats. The Audit Committee provides periodic updates to our board of directors on cybersecurity matters discussed at such meetings.
The Audit Committee receives quarterly updates from our Vice President, Information Technology (“IT Officer”) relating to IT and cybersecurity matters, including cybersecurity risks and threats. The Audit Committee provides periodic updates to our board of directors on cybersecurity matters discussed at such meetings.
Our IT department further supports and has dedicated resources to assist our IT Officer in monitoring, preventing, detecting, mitigating, and remediating any cybersecurity incidents pursuant to our policies and procedures. ​ We have also established a Disclosure Committee, which regularly reviews relevant information related to potential public disclosure of critical business risks and material events. ​ We have not identified any cybersecurity incidents or threats that have materially affected us or are reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition.
Our IT department further supports and has dedicated resources to assist our IT Officer in monitoring, preventing, detecting, mitigating, and remediating any cybersecurity incidents pursuant to our policies and procedures. ​ We have also established a Disclosure Committee, which regularly reviews relevant information related to potential public disclosure of critical business risks and material events. ​ We have not identified any cybersecurity incidents or threats that have materially affected our information or system or are reasonably likely to materially affect our information and systems, including our business strategy, results of operations, or financial condition.
As part of our cybersecurity risk management, we have adopted a business continuity and incident response plan, which is designed to establish our processes for identifying and responding to significant events that may lead to a business disruption or crisis, including those arising from or related to cybersecurity threats.
As part of our cybersecurity risk management, we have adopted a business continuity and incident response plan, which is designed 80 Table of Contents to establish our processes for identifying and responding to significant events that may lead to a business disruption or crisis, including those arising from or related to cybersecurity threats.
Before contracting with certain third parties, such as those that have access to our IT networks, we have a process to conduct diligence on those third parties, which includes a security assessment.
Before contracting with certain third parties, such as those that have access to our IT networks, we have a process to conduct diligence on those third parties, which includes a security assessment. We have also implemented a process for employees to undergo cybersecurity training during onboarding, and thereafter, on an annual basis as part of our larger compliance training program.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES Our products are manufactured by our exclusive manufacturer and supplier of our products, Aroa, at their facility in Auckland, New Zealand which currently totals approximately 40,000 square feet. We lease our corporate headquarters in Malvern, Pennsylvania, which houses our research and development operations, controlled environment room, and office space, and currently totals approximately 41,000 square feet.
Biggest changeITEM 2. PROPERTIES Our products are manufactured by our exclusive manufacturer and supplier of our products, Aroa, at their facility in Auckland, New Zealand which currently totals approximately 40,000 square feet.
Added
We lease our corporate headquarters in Malvern, Pennsylvania, which houses our research and development operations, controlled environment room, and office space, and currently totals approximately 41,000 square feet until June 30, 2025, after which we will relinquish approximately 5,000 square feet of excess office and warehouse space.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe cannot predict the results of any such disputes, and despite the potential outcomes, the existence thereof may have an adverse material impact on us due to diversion of management time and attention as well as the financial costs related to resolving such disputes. 79 Table of Contents ITEM 4. MINE SAFETY DISCLOSURES Not applicable. PART II
Biggest changeWe cannot predict the results of any such disputes, and despite the potential outcomes, the existence thereof may have an adverse material impact on us due to diversion of management time and attention as well as the financial costs related to resolving such disputes. ITEM 4. MINE SAFETY DISCLOSURES 81 Table of Contents Not applicable. PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock has been publicly traded on the Nasdaq Global Market under the symbol “TELA” since November 8, 2019. Holders As of March 14, 2024, the Company had approximately 64 record holders of its common stock.
Biggest changeITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock has been publicly traded on the Nasdaq Global Market under the symbol “TELA” since November 8, 2019. Holders As of March 14, 2025, the Company had approximately 58 record holders of its common stock.
Securities Authorized for Issuance Under Equity Compensation Plans The information under the heading “Securities Authorized for Issuance Under Equity Compensation Plans” will be filed in the Company’s definitive proxy statement for the 2024 annual meeting of stockholders and is incorporated herein by reference. Recent Sales of Unregistered Securities None. Issuer Purchases of Equity Securities None. ITEM 6.
Securities Authorized for Issuance Under Equity Compensation Plans The information under the heading “Securities Authorized for Issuance Under Equity Compensation Plans” will be filed in the Company’s definitive proxy statement for the 2025 annual meeting of stockholders and is incorporated herein by reference. Recent Sales of Unregistered Securities None. Issuer Purchases of Equity Securities None. ITEM 6.

Item 7. Management's Discussion & Analysis

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

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Biggest changeOther Income (Expense) Other income (expense) consists primarily of income earned on our cash and cash equivalents offset by miscellaneous tax expenses and foreign currency exchange gains and losses. ​ 85 Table of Contents Results of Operations Comparison of the Year Ended December 31, 2023 and 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ Change ​ 2023 2022 ​ Dollar Percentage ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Revenue ​ $ 58,453 ​ $ 41,418 ​ $ 17,035 41 % Cost of revenue (excluding amortization of intangible assets) ​ 17,961 ​ 13,570 ​ 4,391 32 ​ Amortization of intangible assets ​ 380 ​ 804 ​ (424) (53) ​ Gross profit ​ 40,112 ​ 27,044 ​ 13,068 48 ​ Gross margin ​ 69 % 65 % ​ ​ ​ Operating expenses: ​ ​ ​ ​ Sales and marketing ​ 59,681 ​ 43,252 ​ 16,429 38 ​ General and administrative ​ 14,887 ​ 13,862 ​ 1,025 7 ​ Research and development ​ 9,619 ​ 8,937 ​ 682 8 ​ Total operating expenses ​ 84,187 ​ 66,051 ​ 18,136 27 ​ Loss from operations ​ (44,075) ​ (39,007) ​ (5,068) 13 ​ Other expense: ​ ​ ​ ​ ​ Interest expense ​ (5,223) ​ (4,051) ​ (1,172) 29 ​ Loss on extinguishment of debt ​ ​ — ​ ​ (1,228) ​ ​ 1,228 ​ (100) ​ Other income (expense) ​ 2,634 ​ (10) ​ 2,644 NA ​ Total other expense ​ (2,589) ​ (5,289) ​ 2,700 (51) ​ Net loss ​ $ (46,664) ​ $ (44,296) ​ $ (2,368) 5 % Revenue Revenue increased by $17.0 million, or 41%, to $58.5 million for the year ended December 31, 2023 from $41.4 million for the year ended December 31, 2022.
Biggest changeOther Income Other income consists primarily of income earned on our cash and cash equivalents offset by miscellaneous tax expenses and foreign currency exchange gains and losses. ​ ​ 88 Table of Contents Results of Operations Comparison of the Year Ended December 31, 2024 and 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ Change ​ 2024 2023 ​ Dollar Percentage ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Revenue $ 69,300 ​ $ 58,453 ​ $ 10,847 19 % Cost of revenue (excluding amortization of intangible assets) 22,432 ​ 17,961 ​ 4,471 25 ​ Amortization of intangible assets 380 ​ 380 ​ — — ​ Gross profit 46,488 ​ 40,112 ​ 6,376 16 ​ Gross margin 67 % 69 % ​ ​ ​ Operating expenses: ​ ​ ​ Sales and marketing 64,648 ​ 59,681 ​ 4,967 8 ​ General and administrative 14,722 ​ 14,887 ​ (165) (1) ​ Research and development 8,813 ​ 9,619 ​ (806) (8) ​ Total operating expenses 88,183 ​ 84,187 ​ 3,996 5 ​ Other operating income: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gain on sale of product line ​ 7,580 ​ ​ — ​ ​ 7,580 NA ​ Loss from operations (34,115) ​ (44,075) ​ 9,960 (23) ​ Other (expense) income: ​ ​ ​ ​ Interest expense (5,290) ​ (5,223) ​ (67) 1 ​ Other income 1,420 ​ 2,634 ​ (1,214) (46) ​ Total other expense (3,870) ​ (2,589) ​ (1,281) 49 ​ Loss before income tax benefit ​ (37,985) ​ ​ (46,664) ​ ​ 8,679 ​ (19) ​ Income tax benefit ​ 144 ​ ​ — ​ ​ 144 ​ NA ​ Net loss $ (37,841) ​ $ (46,664) ​ $ 8,823 (19) % Revenue Revenue increased by $10.8 million, or 19%, to $69.3 million for the year ended December 31, 2024 from $58.5 million for the year ended December 31, 2023.
Investing Activities During the year ended December 31, 2023, cash used in investing activities was $0.6 million consisting of purchases of property and equipment. During the year ended December 31, 2022, cash used in investing activities was $1.9 million consisting of a $1.0 million payment made for our intangible asset and purchases of property and equipment.
During the year ended December 31, 2023, cash used in investing activities was $0.6 million consisting of purchases of property and equipment. During the year ended December 31, 2022, cash used in investing activities was $1.9 million consisting of a $1.0 million payment made for our intangible asset and purchases of property and equipment.
Overview We are a commercial-stage medical technology company focused on providing innovative soft-tissue reconstruction solutions that optimize clinical outcomes by prioritizing the preservation and restoration of the patient’s own anatomy. Our growing product portfolio is purposefully designed to leverage the patient’s natural healing response while minimizing long-term exposure to permanent synthetic materials.
We are a commercial-stage medical technology company focused on providing innovative soft-tissue reconstruction solutions that optimize clinical outcomes by prioritizing the preservation and restoration of the patient’s own anatomy. Our growing product portfolio is purposefully designed to leverage the patient’s natural healing response while minimizing long-term exposure to permanent synthetic materials.
Ovine rumen, the forestomach of a sheep, is the source of the biologic material used in our OviTex and OviTex PRS products. We use biologic material from ovine rumen because of its plentiful supply, optimal biomechanical profile and open collagen architecture that allows for rapid cellular infiltration.
Ovine rumen, the forestomach of a sheep, is the source of the biologic material used in both of our OviTex and OviTex PRS products. We use biologic material from ovine rumen because of its plentiful supply, optimal biomechanical profile and open collagen architecture that allows for rapid cellular infiltration.
During the year ended December 31, 2022, we used $40.7 million of cash in operating activities, resulting from our net loss of $44.3 million and the change in operating assets and liabilities of $5.3 million, offset by non-cash charges of $8.9 million.
During the year ended December 31, 2022, we used $40.7 million of cash in operating activities, resulting from our net loss of $44.3 million and the change in operating assets and liabilities of $5.3 million, offset by non-cash items of $8.9 million.
(2) Interest payable reflects the rate in effect as of December 31, 2023. The interest rate on borrowings under the MidCap Credit Facility is variable and resets monthly. End of term fee reflects final payment fee due at maturity.
(2) Interest payable reflects the rate in effect as of December 31, 2024. The interest rate on borrowings under the MidCap Credit Facility is variable and resets monthly. End of term fee reflects final payment fee due at maturity.
Our intellectual property applies to our differentiated product construction and materials. In addition, we believe our exclusive manufacturing and long-term supply and license agreement (the “Aroa License”) with Aroa creates a competitive advantage by allowing us to secure an exclusive supply of ovine rumen at a low cost.
Our intellectual property applies to our differentiated product construction and materials. In addition, we believe 84 Table of Contents our exclusive manufacturing and long-term supply and license agreement with Aroa (the “Aroa License”) creates a competitive advantage by allowing us to secure an exclusive supply of ovine rumen at a low cost.
Food and Drug Administration (“FDA”), which clearances were obtained and are currently held by our exclusive contract manufacturer of these products, Aroa. In April 2019, our first OviTex PRS products received 510(k) clearance from the FDA, which clearance was initially obtained by Aroa and is currently held by us.
Our OviTex products have received 510(k) clearances from the U.S. Food and Drug Administration, (“FDA”) which clearances were obtained and are currently held by our exclusive contract manufacturer of these products, Aroa. In April 2019, our first OviTex PRS products received 510(k) clearance from the FDA, which clearance was initially obtained by Aroa and is currently held by us.
Our non-cash charges were comprised of stock-based compensation expense of $4.0 million, our excess and obsolete inventory charge of $1.9 million, loss on extinguishment of debt of $1.2 million, depreciation and amortization expense of $1.2 million and interest expense of $0.7 million.
Our non-cash items were comprised of stock-based compensation expense of $4.0 million, our excess and obsolete inventory charge of $1.9 million, loss on extinguishment of debt of $1.2 million, depreciation and amortization expense of $1.2 million and noncash interest expense of $0.7 million.
In addition, we also continue to explore the development of lower-cost, higher-margin resorbable polymer-based devices targeting our current indications. We are also exploring additional technologies that may complement our existing products, or expand the number of our product lines, in each case within the hernia, plastic and reconstruction, and broader soft-tissue reconstruction and preservation markets.
In addition, we also continue to explore the development of lower-cost, higher-margin resorbable polymer-based devices targeting our current indications. We are also exploring additional technologies that may complement our existing products, or expand the number of our products, in each case within the hernia, plastic and reconstruction, and broader soft-tissue reconstruction market.
The continuing uncertainty surrounding macroeconomic conditions and financial markets, including the financial strain suffered by hospital customers during the COVID-19 pandemic, may adversely affect demand for our products and procedures and result in lower reimbursement rates or coverage for our products, resulting in lower sales volume and downward pricing pressure on our products and slower adoption of new products.
The continuing uncertainty surrounding macroeconomic conditions and financial markets, including the financial strain suffered by hospital customers first arising in response to the COVID-19 pandemic, may adversely affect demand for our products and procedures and result in lower reimbursement rates or coverage for our products, resulting in lower sales volume and downward pricing pressure on our products and slower adoption of new products.
Our non-cash charges were comprised of stock-based compensation expense of $5.0 million, our excess and obsolete inventory charge of $1.4 million, depreciation and amortization expense of $0.8 million and interest expense of $0.6 million.
Our non-cash items were comprised of stock-based compensation expense of $5.0 million, our excess and obsolete inventory charge of $1.4 million, depreciation and amortization expense of $0.8 million and noncash interest expense of $0.6 million.
Of the enrolled patients, 78% were characterized as high risk for experiencing an SSO based on at least one known risk factor, which included obesity, active smoking, COPD, diabetes mellitus, coronary artery disease, or advanced age (≥75 years).
Of the enrolled patients, 78% were characterized as high risk for experiencing an SSO based on at least one known risk factor, which included obesity, active smoking, chronic obstructive pulmonary disease (“COPD”), diabetes mellitus, coronary artery disease, or advanced age (≥75 years).
Components of Our Results of Operations Revenue Substantially all our revenue consists of direct sales of our products to hospital accounts in the U.S.
Components of Our Results of Operations Revenue The majority of our revenue consists of direct sales of our products to hospital accounts in the U.S.
Additionally, we have contracted with three national group purchasing organizations (“GPOs”) covering our OviTex and OviTex PRS products and plan to continue to contract with additional GPOs and other integrated delivery networks (“IDNs”) to increase access to and penetration of hospital accounts.
Additionally, we have contracted with three national group purchasing organizations (“GPOs”) in the United States covering our OviTex and OviTex PRS products and plan to continue to contract with additional GPOs and other integrated delivery networks (“IDNs”) to increase access to and penetration of hospital accounts for all products we commercialize.
As of December 31, 2023, we had $40.0 million of borrowings outstanding under our Credit and Security Agreement (the “MidCap Credit Agreement”) with MidCap Financial Trust, as agent and certain lender parties thereto.
As of December 31, 2024, we had $40.0 million of borrowings outstanding under our Credit and Security Agreement (the “MidCap Credit Agreement”) with MidCap Financial Trust, as agent and certain lender parties thereto. The MidCap Credit Agreement matures in May 2027.
We are currently devoting research and development resources to develop additional variations of our OviTex and OviTex PRS product lines, including the additional IHR configurations to further enhance product compatibility in robotic procedures, larger versions of our current product configurations, the development of configurations with longer-acting resorbable polymers and other potential product and packaging enhancements to extend the shelf life of our products.
We are currently devoting research and development resources to develop additional variations of our OviTex and OviTex PRS products, including larger versions of our current OviTex PRS product configurations, the development of OviTex configurations with longer-acting resorbable polymers and other potential product and packaging enhancements to extend the shelf life of our products.
We have invested in our direct sales and marketing infrastructure to expand our presence and to promote awareness and adoption of our products. As of December 31, 2023, we had 91 sales territories in the U.S.
We have invested in our direct sales and marketing infrastructure to expand our presence and to promote awareness and adoption of our products. As of December 31, 2024, we had 75 sales territories in the U.S. and 13 sales territories in Europe.
Our first portfolio of products, the OviTex Reinforced Tissue Matrix (“OviTex”), which we first commercialized in the U.S. in July 2016 and in Europe in February 2019, addresses unmet needs in hernia repair and abdominal wall reconstruction by combining the benefits of biologic matrices and polymer materials while minimizing their shortcomings, at a cost-effective price. ​ Hernia repair is one of the most common surgeries performed in the U.S., representing approximately 1.1 million procedures annually.
Our first portfolio of products, the OviTex Reinforced Tissue Matrix ( “OviTex”) which we first commercialized in the U.S. in July 2016 and in Europe in February 2019, addresses unmet needs in hernia repair and abdominal wall reconstruction by combining the benefits of biologic matrices and polymer materials while minimizing their shortcomings, at a cost-effective price.
Our gross margin has been, and we expect it will continue to be, affected by a variety of factors, including sales volume, royalties and inventory excess and obsolescence costs.
Our gross margin has been, and we expect it will continue to be, affected by a variety of factors, including sales volume, royalties and inventory excess and obsolescence costs. Our gross profit may increase to the extent our revenue grows.
If we are not in covenant compliance at the end of the Interest-Only Period, we are required to make 24 months of straight-line amortization payments, with the entire principal amount due at maturity. ​ Subject to certain limitations, the MidCap Term Loans have a prepayment fee equal to 3.0% of the prepaid principal amount for the first year following the closing date of the MidCap Term Loans, 2.0% of the prepaid principal amount for the second year following the closing date and 1.0% of the prepaid principal amount for the third year following the closing date and thereafter.
If we are not in covenant compliance at the end of the Interest-Only Period, we are required to make 24 months of straight-line amortization payments, with the entire principal amount due at maturity. ​ Subject to certain limitations, the MidCap Term Loans have a prepayment fee equal to 1.0% of the prepaid principal.
These expenses include salaries and related benefits including stock-based compensation, for employees focused on these efforts, consulting services, costs associated with our preclinical studies, costs incurred with our manufacturing partner under development agreements related to technology transfer, costs incurred from license agreements with no alternative future uses, laboratory materials and supplies and an allocation of related facilities costs.
These expenses include salaries and related benefits including stock-based compensation, for employees focused on these efforts, consulting services, costs associated with our preclinical studies and clinical studies undertaken to obtain regulatory clearance for new or expanded product indications, costs incurred 87 Table of Contents with our manufacturing partner under development agreements related to technology transfer, costs incurred from license agreements with no alternative future uses, laboratory materials and supplies and an allocation of related facilities costs.
We continue to assess additional strategic partnerships with medical device companies whereby we may enter into distribution, product development and/or licensing agreements for new products complimentary to, or related to, existing and future products in our distribution channel. ​ We have a broad portfolio of intellectual property protecting our products that we believe, when combined with the proprietary manufacturing processes associated with our products and our know-how, provides significant barriers to entry.
We may assess additional strategic partnerships with medical device companies whereby we may enter into distribution, product development and/or licensing agreements for additional products complimentary to, or related to, existing and future products in our distribution channel, which could result in the payment by us of single digit percentage royalties or other product acquisition costs We have a broad portfolio of intellectual property protecting our products that we believe, when combined with the proprietary manufacturing processes associated with our products and our know-how, provides significant barriers to entry.
In March 2024, we sold our distribution rights to MiMedx Group, Inc. in exchange for an initial $5.0 million payment and additional future payments aggregating between a minimum of $3.0 million and a maximum of $7.0 million based on net sales of NIVIS over the next two years.
In March 2024, we sold our distribution rights to MiMedx Group, Inc. in exchange for an initial $5.0 million payment and additional future payments aggregating between a minimum of $3.0 million and a maximum of $7.0 million based on net sales of NIVIS (now marketed as HELIOGEN) during the first two years following its launch by MiMedx Group, Inc.
We previously co-developed and commercialized our NIVIS Fibrillar Collagen Pack (“NIVIS”), an absorbent matrix of Type I and Type III bovine collagen designed to manage moderately to heavily exudating wounds and to control minor bleeding, in partnership with Regenity Biosciences.
In March 2024, we announced the full commercial launch of LiquiFix in the U.S. We previously co-developed and commercialized the NIVIS Fibrillar Collagen Pack, (“NIVIS”) an absorbent matrix of Type I and Type III bovine collagen designed to manage moderately to heavily exudating wounds and to control minor bleeding, in partnership with Regenity Biosciences.
In addition to the BRAVO study and other current clinical initiatives, we also commenced enrollment in May 2021 for our BRAVO II study, a prospective study evaluating the use of OviTex in robot-assisted ventral and inguinal hernia repairs. 81 Table of Contents ​ Our second portfolio of products, the OviTex PRS Reinforced Tissue Matrix (“OviTex PRS”), which we first commercialized in the U.S. in May 2019, addresses unmet needs in plastic and reconstructive surgery.
Among these other initiatives, we continue to enroll patients for our BRAVO II study, a prospective study evaluating the use of OviTex in robot-assisted ventral and inguinal hernia repairs. Our second portfolio of products, the OviTex PRS Reinforced Tissue Matrix, (“OviTex PRS”) which we first commercialized in the U.S. in May 2019, addresses unmet needs in plastic and reconstructive surgery.
Our gross profit may increase to the extent our revenue grows. 84 Table of Contents Sales and Marketing Expenses Sales and marketing expenses consist of commercial activities related to the sale of our products, along with the salaries and related benefits, including sales commissions and stock-based compensation for employees focused on these efforts.
Sales and Marketing Expenses Sales and marketing expenses consist of commercial activities related to the sale of our products, along with the salaries and related benefits, including sales commissions and stock-based compensation for employees focused on these efforts.
Cost of Revenue Cost of revenue (excluding amortization of intangible assets) increased by $4.4 million, or 32%, to $18.0 million for the year ended December 31, 2023 from $13.6 million for the year ended December 31, 2022.
Cost of Revenue Cost of revenue (excluding amortization of intangible assets) increased by $4.5 million, or 25%, to $22.4 million for the year ended December 31, 2024 from $18.0 million for the year ended December 31, 2023.
We believe that genuine collaboration with surgeons and healthcare providers results in the development of new solutions that empower patient care.
We believe that genuine collaboration with surgeons and healthcare providers results in the development of new solutions that empower patient care and addresses unmet needs within the soft tissue reconstruction market.
We received net proceeds of approximately $46.3 million after deducting underwriting discounts, commissions and other offering expenses. ​ In March 2024, we sold our distribution rights to MiMedx Group, Inc. in exchange for an initial $5.0 million payment and additional future payments aggregating between a minimum of $3.0 million and a maximum of $7.0 million based on net sales of NIVIS over the next two years. ​ We have incurred operating losses since our inception, and we anticipate that our operating losses will continue in the near term as we seek to invest in our sales and marketing initiatives to support our growth in existing and new markets and in additional research and development activities.
The exercise of the pre-funded warrants, if any, is not expected to provide significant additional funding to the Company. ​ In March 2024, we sold our distribution rights to MiMedx Group, Inc. in exchange for an initial $5.0 million payment and additional future payments aggregating between a minimum of $3.0 million and a maximum of $7.0 million based on net sales of NIVIS (now marketed as HELIOGEN) over the subsequent two years. ​ We have incurred operating losses since our inception, and we anticipate that our operating losses will continue in the near term as we seek to invest in our sales and marketing initiatives to support our growth in existing and new markets and in additional research and development activities.
We are also required to pay an exit fee at the time of maturity or prepayment event equal to 5% of all principal borrowings (or in the event of a prepayment event, the amount of principal being prepaid). ​ ​ 90 Table of Contents Contractual Obligations and Commitments The following table summarizes our contractual obligations as of December 31, 2023 and the effects that such obligations are expected to have on our liquidity and cash flows in future periods: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payments due by Period ​ ​ ​ ​ ​ Less than ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) Total 1 year 1 to 3 years 3 to 5 years Thereafter Principal payments on long-term debt (1) ​ $ 40,000 ​ $ — ​ $ — ​ $ 40,000 ​ $ — Interest and end of term charge on long-term debt (2) ​ 17,581 ​ 4,677 ​ 9,354 ​ 3,550 ​ — Operating lease commitments (3) ​ 3,736 ​ 601 ​ 1,137 ​ 1,153 ​ 845 Purchase commitments ​ 7,080 ​ 2,250 ​ ​ 4,830 ​ ​ — ​ ​ — Total ​ $ 68,397 ​ $ 7,528 ​ $ 15,321 ​ $ 44,703 ​ $ 845 (1) Assumes extension of Interest-Only Period to 48 months under the MidCap Credit Facilty.
We are also required to pay an exit fee at the time of maturity or prepayment event equal to 5% of all principal borrowings (or in the event of a prepayment event, the amount of principal being prepaid). ​ Contractual Obligations and Commitments The following table summarizes our contractual obligations as of December 31, 2024 and the effects that such obligations are expected to have on our liquidity and cash flows in future periods: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payments due by Period ​ ​ ​ ​ ​ Less than ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) Total 1 year 1 to 3 years 3 to 5 years Thereafter Principal payments on long-term debt (1) ​ $ 40,000 ​ $ — ​ $ 40,000 ​ $ — ​ $ — Interest and end of term charge on long-term debt (2) ​ 12,188 ​ 4,361 ​ 7,827 ​ — ​ — Operating lease commitments (3) ​ 3,135 ​ 580 ​ ​ 1,127 ​ 1,178 ​ 250 Total ​ $ 55,323 ​ $ 4,941 ​ $ 48,954 ​ $ 1,178 ​ $ 250 ​ (1) Assumes extension of Interest-Only Period to 48 months under the MidCap Credit Facility.
Financing Activities During the year ended December 31, 2023, cash provided by financing activities was $46.3 million, consisting primarily of $46.3 million in proceeds received from the sale of our common stock and $0.1 million of proceeds received from the exercise of stock options partially offset by the payment of withholding taxes related to stock-based compensation to employees. 89 Table of Contents During the year ended December 31, 2022, cash provided by financing activities was $40.9 million, consisting primarily of $34.4 million in proceeds from an underwritten public offering, $40.0 million in proceeds received from the issuance of long-term debt, partially offset by $30.0 million in repayments of long-term debt and $3.5 million in payments of issuance costs.
During the year ended December 31, 2022, cash provided by financing activities was $40.9 million, consisting primarily of $34.4 million in proceeds from an underwritten public offering, $40.0 million in proceeds received from the issuance of long-term debt, partially offset by $30.0 million in repayments of long-term debt and $3.5 million in payments of issuance costs.
The vast majority of our revenue to date has been generated from sales of our OviTex and OviTex PRS products in the U.S., with the remainder generated from sales of our OviTex products in Europe and the sale of other products.
As of December 31, 2024, we had an accumulated deficit of $358.7 million. The vast majority of our revenue to date has been generated from sales of our OviTex and OviTex PRS products in the U.S., with the remainder generated from sales of our OviTex products in Europe and the sale of other products.
During the year ended December 31, 2023, we sold 13,675 units of OviTex compared to 10,083 units of OviTex during the year ended December 31, 2022, a 36% increase in unit sales volume. Additionally, we sold 3,544 units of OviTex PRS compared to 2,385 units during the year ended December 31, 2022, a 49% increase in unit sales volume.
During the year ended December 31, 2024, we sold 18,121 units of OviTex compared to 13,675 units of OviTex during the year ended December 31, 2023, a 33% increase in unit sales volume. Additionally, we sold 4,645 units of OviTex PRS compared to 3,544 units during the year ended December 31, 2023, a 31% increase in unit sales volume.
Our non-cash charges were comprised of stock-based compensation expense of $3.7 million, our excess and obsolete inventory charge of $1.4 million, interest expense of $0.7 million and depreciation and amortization expense of $0.5 million.
Our non-cash items were comprised of the gain on sale of NIVIS of $7.6 million offset by stock-based compensation expense of $4.4 million, our excess and obsolete inventory charge of $3.0 million, depreciation and amortization expense of $1.0 million and noncash interest expense of $0.6 million.
The change in our operating assets and liabilities was primarily related to an increase in our inventory, accounts receivable and prepaid expenses and other assets, partially offset by increases in accounts payable and accrued expenses and other current and long-term liabilities.
The change in our operating assets 91 Table of Contents and liabilities was primarily related to increases in accounts receivable and inventory, partially offset by increases in accrued expenses.
The increase in cost of revenue was primarily the result of an increase in products purchased to support demand from our higher unit sales, partially offset by a lower charge for excess and obsolete inventory.
The increase in cost of revenue was primarily the result of an increase in products purchased to support demand from our higher unit sales and a higher charge for excess and obsolete inventory. Amortization of Intangible Assets Amortization of intangible assets was $0.4 million for both the years ended December 31, 2024 and 2023.
If we are unable to obtain adequate financing, we may be required to delay or reduce the current development, commercialization and marketing plans for our products. ​ 88 Table of Contents Cash Flows The following table summarizes our sources and uses of cash for each of the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (in thousands) 2023 ​ 2022 2021 Cash used in operating activities $ (40,857) ​ $ (40,748) ​ $ (30,432) Cash used in investing activities (599) ​ (1,872) ​ (627) Cash provided by financing activities 46,267 ​ 40,852 ​ 585 Effect of exchange rate changes on cash and cash equivalents 164 ​ (144) ​ 11 Net increase (decrease) in cash and cash equivalents and restricted cash $ 4,975 ​ $ (1,912) ​ $ (30,463) Operating Activities During the year ended December 31, 2023, we used $40.9 million of cash in operating activities, resulting from our net loss of $46.7 million and the change in operating assets and liabilities of $2.0 million, offset by non-cash charges of $7.8 million.
Cash Flows The following table summarizes our sources and uses of cash for each of the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (in thousands) 2024 ​ 2023 2022 Cash used in operating activities $ (41,595) ​ $ (40,857) ​ $ (40,748) Cash provided by (used in) investing activities 4,451 ​ (599) ​ (1,872) Cash provided by financing activities 43,057 ​ 46,267 ​ 40,852 Effect of exchange rate changes on cash and cash equivalents 28 ​ 164 ​ (144) Net increase (decrease) in cash and cash equivalents and restricted cash $ 5,941 ​ $ 4,975 ​ $ (1,912) Operating Activities During the year ended December 31, 2024, we used $41.6 million of cash in operating activities, resulting from our net loss of $37.8 million and the change in operating assets and liabilities of $4.9 million, offset by non-cash items of $1.1 million.
During the year ended December 31, 2021, we used $30.4 million of cash in operating activities, resulting from our net loss of $33.3 million and the change in operating assets and liabilities of $3.5 million, offset by non-cash charges of $6.3 million.
During the year ended December 31, 2023, we used $40.9 million of cash in operating activities, resulting from our net loss of $46.7 million and the change in operating assets and liabilities of $2.0 million, offset by non-cash items of $7.8 million.
Research and Development Research and development expenses increased by $0.7 million, or 8%, to $9.6 million for the year ended December 31, 2023 from $8.9 million for the year ended December 31, 2022. The increase was primarily due to higher compensation costs due to an increase in headcount, offset by lower study costs.
Research and Development Research and development expenses decreased by $0.8 million, or 8%, to $8.8 million for the year ended December 31, 2024 from $9.6 million for the year ended December 31, 2023. The decrease was primarily due to reduced clinical and preclinical study costs, including associated consulting expense, partially offset by higher compensation costs.
Other significant sales and marketing expenses include costs incurred with post-market clinical studies, conferences and trade shows, promotional and marketing activities, market research, as well as travel and training expenses.
Other significant sales and marketing expenses include costs incurred with post-market clinical studies, conferences and trade shows, promotional and marketing activities, market research, as well as travel and training expenses. We expect future sales and marketing expenses will primarily depend on our ability to drive operational leverage and efficiencies from our commercial organization.
As a result, we have experienced high volatility in our stock price over the prior year.
Due to this uncertainty and other factors, we have experienced high volatility in our stock price over the prior year.
Recent revenue growth has been driven by increasing revenue from product sales due to our expanding customer base, although macroeconomic pressures described in this Annual Report may impair our ability to continue to generate revenue and expand our customer base at historic rates.
Recent revenue growth has been driven by increasing revenue from product sales due to our expanding customer base and deeper penetration across procedures in existing customer accounts, although macroeconomic pressures described in this Annual Report may impair our ability to continue to generate revenue, expand our customer base, and increase utilization of our products in existing customer accounts at historic rates. 86 Table of Contents Cost of Revenue Cost of revenue primarily consists of the costs of licensed products, charges related to excess and obsolete inventory adjustments, royalties and costs related to shipping.
If we raise additional funds by issuing equity or equity-linked securities, our stockholders would experience dilution and any new equity securities could have rights, preferences and privileges superior to those of holders of our common stock. Debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt.
No sales were made under the 2023 Equity Agreement or during the year ended December 31, 2024. If we raise additional funds by issuing equity or equity-linked securities, our stockholders would experience dilution and any new equity securities could have rights, preferences and privileges superior to those of holders of our common stock.
Additionally, the true economic effects of COVID-19 pandemic may have created other labor and financial strains on healthcare systems that continue to reduce procedural volumes. 83 Table of Contents General Economic Uncertainty : Continued concerns about the systemic impact of a potential economic downturn or recession, increasing interest rates, further economic downturn or banking instability and geopolitical issues, including the ongoing Russia-Ukraine conflict and the current conflict in Israel and Gaza (including any escalation or expansion), have contributed to increased market volatility and diminished expectations for economic growth in the world.
These factors have and may continue to impact us in the following ways: 85 Table of Contents General Economic Uncertainty : Continued concerns about the systemic impact of a potential economic downturn or recession, increasing interest rates, further economic downturn or banking instability, monetary policy including the imposition of tariffs, changes and geopolitical issues, including the ongoing Russia-Ukraine conflict, the current conflict in the Middle East (including any escalation or expansion) and increasing tensions between China and Taiwan, have contributed to increased market volatility and diminished expectations for economic growth in the world.
During the year ended December 31, 2021, cash used in investing activities was $0.6 million consisting of purchases of property and equipment.
Investing Activities During the year ended December 31, 2024, cash provided by investing activities was $4.5 million, consisting of proceeds received from the sale of NIVIS of $5.4 million, partially offset by $1.0 million in purchases of property and equipment.
In addition, we have also designed an OviTex product specifically for use in laparoscopic and robotic-assisted hernia repair, which we market as OviTex LPR and began commercializing this product in November 2018. In February 2023, we launched two new, larger configurations of OviTex LPR, designed for ventral and incisional hernias.
Our OviTex portfolio consists of multiple product configurations intended to address various surgical procedures within hernia repair and abdominal wall reconstruction, including ventral, inguinal, and hiatal hernia repair. In addition, we have also designed an OviTex product specifically for use in laparoscopic and robotic-assisted hernia repair, which we market as OviTex LPR and began commercializing in November 2018.
The BRAVO study was designed to evaluate the clinical performance of OviTex for primary or recurrent ventral hernias using open, laparoscopic, or robotic techniques in 92 enrolled patients. The recurrence rate at the 24-month time point was 2.6%, and surgical site occurrences (“SSOs”) were observed in 38% of the study population.
The recurrence rate at the 24-month time point was 2.6%, and surgical site occurrences (“SSOs”), were observed in 38% of the study population.
As of December 31, 2023, no additional borrowings were made and our ability to draw from Tranche 2 has since expired. ​ Based on our current business plan, we believe that our existing cash resources will be sufficient to meet our capital requirements and fund our operations for at least the next 12 months from the issuance of this Annual Report.
Upon closing, we used a portion of the proceeds to repay borrowings under a previous credit facility and intend to use the remaining proceeds to fund operations and other general corporate purposes. ​ Based on our current business plan, we believe that our existing cash resources will be sufficient to meet our capital requirements and fund our operations for at least the next 12 months from the issuance of this Annual Report.
We purchase product from Aroa at a fixed transfer cost as a percentage of Aroa’s cost of goods, which, with the exception of our recent IHR-dedicated products, equals 27% of our net sales of licensed products.
We purchase product from Aroa at a fixed transfer cost as a percentage of Aroa’s cost of goods, which, subject to a true-up adjustment, results in an amount equal to 27% of our net sales of our OviTex and OviTex PRS products, with the exception of OviTex IHR product configurations, for which we pay the greater of the initial fixed transfer cost or 27% of our net sales of OviTex IHR.
In August 2023, we announced the launch of our OviTex PRS Long-Term Resorbable product configuration, which was designed to enhance the OviTex PRS portfolio with specific design features including bi-directional stretch and a fully resorbable, long-term polymer for reinforcement. ​ Our OviTex PRS portfolio is supported by non-human primate data that demonstrated more rapid tissue integration and tissue remodeling compared to the market leading biologic matrix used in this indication.
OviTex PRS Long-Term Resorbable, our most recent product configuration, launched in August 2023, and was designed to enhance the OviTex PRS portfolio with specific design features including bi-directional stretch and a fully resorbable, long-term polymer for reinforcement .
Based on the volume weighted average selling price of our OviTex products, we estimate the annual U.S. total addressable market opportunity for our OviTex products to be approximately $1.5 billion. ​ Our OviTex portfolio consists of multiple product configurations intended to address various surgical procedures within hernia repair and abdominal wall reconstruction, including ventral, inguinal, and hiatal hernia repair.
Hernia repair is one of the most common surgeries performed in the U.S., representing approximately 1.2 million procedures annually. Based on the volume weighted average selling price of our OviTex products, we estimate the annual U.S. total addressable market opportunity for our OviTex products to be approximately $1.8 billion.
In September 2023, we entered into a distribution agreement with Advanced Medical Solutions Limited, a company registered in England, to be their exclusive distributor of their LiquiFix Hernia Mesh Fixation Devices (LiquiFix FIX8™ and LiquiFix Precision™). In March 2024, we announced the full commercial launch of LiquiFix in the U.S.
Some additional product offerings include or have included atraumatic mesh fixation devices or surgical wound management and infection control solutions. In September 2023, we entered into a distribution agreement with Advanced Medical Solutions Limited, a company registered in England, to distribute their LiquiFix Hernia Mesh Fixation Devices (LIQUIFIX FIX8™ and LIQUIFIX Precision™).
Other Income (Expense) Other income (expense) increased by $2.6 million primarily due to higher interest income on increased cash balances and foreign currency translation adjustments. 87 Table of Contents Liquidity and Capital Resources Overview As of December 31, 2023, we had cash and cash equivalents of $46.7 million, working capital of $54.8 million and an accumulated deficit of $320.9 million.
Liquidity and Capital Resources Overview As of December 31, 2024, we had cash and cash equivalents of $52.7 million, working capital of $62.5 million and an accumulated deficit of $358.9 million. As of December 31, 2023, we had cash and cash equivalents of $46.7 million, working capital of $54.8 million and an accumulated deficit of $320.9 million.
Upon closing, we borrowed $40.0 million of Tranche 1 and used a portion of the proceeds to fully repay borrowings under the OrbiMed Credit Facility and intend to use the remaining proceeds to fund operations and other general corporate purposes.
Upon closing, we used a portion of the proceeds to fully repay borrowings under the OrbiMed Credit Facility and intend to use the remaining proceeds to fund operations and other general corporate purposes. ​ 92 Table of Contents Pursuant to the MidCap Credit Agreement, we provided a first priority security interest in all existing and future acquired assets, including intellectual property, owned by us.
General and Administrative General and administrative expenses increased by $1.0 million, or 7%, to $14.9 million for the year ended December 31, 2023 from $13.9 million for the year ended December 31, 2022.
General and Administrative General and administrative expenses decreased by $0.2 million, or 1%, to $14.7 million for the year ended December 31, 2024 from $14.9 million for the year ended December 31, 2023. The decrease was primarily due to decreases in professional fees, bad debt and insurance expense, partially offset by higher compensation costs.
In March 2023, we received an additional 510(k) clearance for our OviTex PRS Long-Term Resorbable device, which is currently held by us. We have also engaged in discussions with the FDA regarding an Investigational Device Exemption (“IDE”) protocol to study the safety and effectiveness of our OviTex PRS product for an indication in breast reconstruction surgery.
In March 2023, we received an additional 510(k) clearance for our OviTex PRS Long-Term Resorbable device, which is currently held by us. In May 2024, we received clearance of a Special 510(k) related to minor changes to our OviTex PRS Permanent and Short-Term Resorbable devices.
Based on the current sales of biologic matrices in the U.S., we estimate the annual U.S. current addressable market opportunity for our OviTex PRS products to be approximately $700 million. ​ Our OviTex products have received 510(k) clearances from the U.S.
We also continue to enroll patients in our OPERA study, a retrospective-prospective trial evaluating the safety profile of OviTex PRS in previous pre-pectoral and sub-pectoral implant-based breast reconstructions. Based on the current sales of biologic matrices in the U.S., we estimate the annual U.S. current addressable market opportunity for our OviTex PRS products to be approximately $800 million.
Business Update Regarding Macroeconomic Conditions Our business, results of operations and commercial operations have been impacted by macroeconomic conditions, including the COVID-19 pandemic, as well as, to a lesser extent, inflationary pressures, fluctuations in foreign currency in the jurisdictions in which we operate, banking instability and geopolitical conflicts.
Business Update Regarding Macroeconomic Conditions Our business, results of operations and commercial operations have been, and may continue to be impacted by macroeconomic conditions outside of our control, including general economic uncertainty, external cybersecurity events impacting our customers, disruptions in supply of critical surgical supplies for procedures utilizing our products, inflationary pressures, tariffs, regulatory changes in the market in which we operate, fluctuations in foreign currency in the jurisdictions in which we operate, banking instability, monetary policy changes and geopolitical conflicts.
To date, there have been over thirty published or presented works relating to these clinical findings, either by us or a third-party evaluating the OviTex product. In October 2022, the 24-month results of our single arm, multicenter post-market clinical study, which we refer to as our BRAVO study, were published in the Annals of Medicine and Surgery .
We have also focused on evaluating and publishing clinical data on the effectiveness and safety of our OviTex products. To date, there have been over forty published or presented works relating to these clinical findings, either by us or a third-party evaluating one or more product configurations in our OviTex portfolio.
Research and Development Expenses Research and development expenses consist primarily of product research, engineering, product development, regulatory compliance and clinical development.
We expect our general and administrative expenses to decrease as a percentage of revenue primarily as, and to the extent, our revenue grows. Research and Development Expenses Research and development expenses consist primarily of product research, engineering, product development, regulatory compliance and clinical development.
Our revenue for the years ended December 31, 2023 and 2022 was $58.5 million and $41.4 million, respectively, which represents an increase of $17.0 million, or 41% for the year ended December 31, 2023.
We intend to continue to make investments in research and development efforts to develop improvements and enhancements to our product portfolio. Our revenue for the years ended December 31, 2024 and 2023 was $69.3 million and $58.5 million, respectively, which represents an increase of $10.8 million, or 19% for the year ended December 31, 2024.
Gross Margin Gross margin increased to 69% for the year ended December 31, 2023 from 65% for the year ended December 31, 2022. The increase was primarily due to lower expense recognized for excess and obsolete inventory adjustments as a 86 Table of Contents percentage of revenue which resulted from improved inventory management processes and lower amortization of intangible assets.
The decrease was primarily due to higher expense recognized for excess and obsolete inventory adjustments as a percentage of revenue which resulted from the introduction of newer generation products. 89 Table of Contents Sales and Marketing Sales and marketing expenses increased by $5.0 million, or 8%, to $64.6 million for the year ended December 31, 2024 from $59.7 million for the year ended December 31, 2023.
Interest Expense Interest expense increased by $1.2 million, or 29%, to $5.2 million for the year ended December 31, 2023 from $4.1 million for the year ended December 31, 2022 due to the increased levels of borrowings under our Credit and Security Agreement (the “MidCap Credit Agreement”) with MidCap Financial Trust, as agent and certain lender parties thereto, and an increase to the variable component of our interest rate.
Interest Expense Interest expense increased by $0.1 million, or 1%, to $5.3 million for the year ended December 31, 2024 from $5.2 million for the year ended December 31, 2023 due to increases in the variable component of our interest rate.
Our OviTex products are manufactured by Aroa at their FDA registered and ISO 13485 compliant facility in Auckland, New Zealand. We purchase product from Aroa at a fixed transfer cost as a percentage of Aroa’s cost of goods sold, and, with the exception of our recent IHR-dedicated products equals 27% of our net sales of licensed products.
We purchase product from Aroa at a fixed transfer cost as a percentage of Aroa’s cost of goods sold, and subject to a true-up adjustment, resulting in an amount equal to 27% of our net sales of our OviTex and OviTex PRS products, with the exception of OviTex IHR product configurations, for which we pay the greater of the initial fixed transfer cost or 27% of our net sales of OviTex IHR.
General and Administrative Expenses General and administrative expenses consist primarily of salaries and related benefits, including stock-based compensation for personnel in executive, finance, information technology and administrative functions. General and administrative expenses also include professional service fees for legal, accounting, consulting, investor and public relations, insurance costs and direct and allocated facility-related costs.
General and administrative expenses also include professional service fees for legal, accounting, consulting, investor and public relations, insurance costs and direct and allocated facility-related costs. We expect future general and administrative expenses will primarily depend on our ability to efficiently execute on our growth initiatives.
The increase in revenue was primarily driven by an increase in unit sales of our products due to the ongoing expansion of our commercial organization, which resulted in the addition of new customers, increased penetration within existing customer accounts and growing international sales.
The increase in revenue was primarily driven by an increase in unit sales of our products due to the addition of new customers and growing international sales. This growth was partially offset by a decrease in average selling prices caused by product mix as the share of smaller-sized units increased.
During the year ended December 31, 2021, cash provided by financing activities was $0.6 million, consisting primarily of the proceeds received from the exercise of stock options. Indebtedness On May 26, 2022, we entered into the MidCap Credit Agreement with MidCap Financial Trust, as agent and certain lender parties thereto.
Indebtedness On May 26, 2022, we entered into the MidCap Credit Agreement with MidCap Financial Trust, as agent and certain lender parties thereto. The MidCap Credit Agreement provides for up to $40.0 million in MidCap Term Loans.
This revenue sharing arrangement allows us to competitively price our products and pass along cost-savings to our customers. 82 Table of Contents We market our products through a single direct sales force, predominantly in the U.S., as augmented by a smaller number of sales representatives and distributors in certain European countries.
We primarily market our products through a single direct sales force, predominantly in the U.S., with a small number of sales representatives in the United Kingdom and European Union, and also utilize a smaller number of independent contractors and distributors in the United States and certain European countries.
We expense research and development costs as they are incurred. We expect research and development expenses in absolute dollars to increase in the future as we develop new products and enhance existing products. We expect research and development expenses as a percentage of revenue to vary over time depending on the level and timing of new product development initiatives.
We expense research and development costs as they are incurred. We expect future research and development expenses will primarily depend on our ability to efficiently develop new products, enhance existing products and conduct research to generate clinical data in support of new or expanded indications for our products.
Our net loss for the same time periods was $46.7 million and $44.3 million, respectively, which represents an increase of $2.4 million, or 5% for the year ended December 31, 2023. As of December 31, 2023, we had an accumulated deficit of $320.9 million.
Our net loss for the same time periods was $37.8 million and $46.7 million, respectively, which represents a decrease of $8.8 million, or 19% for the year ended December 31, 2024 inclusive of the gain recognized of $7.6 million on the sale of NIVIS to the MiMedx Group, Inc.
The increase was primarily due to higher compensation costs as a result of the expansion of our commercial organization, increased travel, consulting and marketing expenses and additional employee-related costs due to an increase in headcount.
The increase was primarily due to higher compensation costs, primarily from commissions on an increased revenue base and severance costs, increased travel and consulting expense, and additional selling-related expenses related to product sampling and meeting expenses, which were partially offset by decreased marketing expenses.
Over time we expect our sales and marketing expenses to increase in absolute dollars as we continue to expand our commercial organization to both drive and support our planned growth in revenue. We expect our sales and marketing expenses to continue to decrease as a percentage of revenue, as and to the extent, our revenue grows.
We expect our sales and marketing expenses to continue to decrease as a percentage of revenue, as and to the extent, our revenue grows. General and Administrative Expenses General and administrative expenses consist primarily of salaries and related benefits, including stock-based compensation for personnel in executive, finance, information technology and administrative functions.
In April 2023, we completed an underwritten public offering in which we issued and sold 5,219,190 shares of our common stock (including 469,190 shares sold pursuant to the underwriters’ overallotment option in May 2023) at a public offering price of $9.50 per share.
On October 24, 2024, we completed an underwritten public offering of 14,670,000 shares of our common stock, including the exercise in full of the underwriters’ overallotment option to purchase additional shares of common stock, at a price to the public of $2.25 per share and, in lieu of common stock to investors who so chose, pre-funded warrants to purchase 5,800,000 shares of common stock at a public offering price of $2.2499 per pre-funded warrant, which 90 Table of Contents represents the per share public offering price for the shares of common stock less the $0.0001 per share exercise price for each pre-funded warrant.
Amortization of Intangible Assets Amortization of intangible assets decreased by $0.4 million, or 53%, to $0.4 million for the year ended December 31, 2023 from $0.8 million for the year ended December 31, 2022.
Gross Margin Gross margin decreased to 67% for the year ended December 31, 2024 from 69% for the year ended December 31, 2023.
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More recently, we have designed a set of OviTex products specifically for use in the inguinal hernia repair (“IHR”), which we expect to launch in the second quarter of 2024. ​ We have also focused on evaluating and publishing clinical data on the effectiveness and safety of our OviTex products.
Added
In February 2023, we launched two larger configurations of OviTex LPR, designed for ventral and incisional hernias. In April 2024, we launched OviTex IHR Reinforced Tissue Matrix, a new OviTex configuration specifically designed to address inguinal hernia procedures performed robotically and laparoscopically.
Removed
The FDA has stated that a premarket approval, rather than 510(k) clearance will be required for such an indication.
Added
In October 2022, the 24-month results of our single arm, multicenter post-market clinical study, which we refer to as our BRAVO study, were published in the Annals of Medicine and Surgery . The BRAVO study was designed to evaluate the clinical performance of OviTex for primary or recurrent ventral hernias using open, laparoscopic, or robotic techniques in 92 enrolled patients.
Removed
We have also commenced a retrospective clinical study evaluating the effectiveness and safety of our OviTex PRS products. ​ We also continue to expand our service offerings and diversify our supplier base as we continue to create a soft tissue preservation and restoration portfolio, including through the development of complimentary solutions in our indications such as atraumatic mesh fixation devices or surgical wound management and infection control.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

9 edited+1 added−5 removed9 unchanged
Biggest changeWe evaluate the carrying value of our inventory in relation to the estimated forecast of product demand, which takes into consideration the expiration date of the products. A significant decrease in demand could result in an increase in the amount of excess inventory on hand, which could lead to additional charges for excess and obsolete inventory.
Biggest changeA significant decrease in demand could result in an increase in the amount of excess inventory on hand, which could lead to additional charges for excess and obsolete inventory. The need to maintain substantial levels of inventory impacts our estimates for excess and obsolete inventory.
A 1% increase in interest rates would have resulted in a $0.4 million increase to our interest expense for the year ended December 31, 2023. Inflationary factors, such as increases in our cost of revenue and operating expenses, may adversely affect our operating results.
A 1% increase in interest rates would have resulted in a $0.4 million increase to our interest expense for the year ended December 31, 2024. Inflationary factors, such as increases in our cost of revenue and operating expenses, may adversely affect our operating results.
Recently Issued and Adopted Accounting Pronouncements A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 3 to our consolidated financial statements appearing elsewhere in this Annual Report.
Recently Issued and Adopted Accounting Pronouncements A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 3 to our consolidated financial statements appearing elsewhere in this Annual Report. ITEM 8.
We do not currently have any material exposure to foreign currency fluctuations and do not engage in any hedging activities as part of our normal course of business. 91 Table of Contents Critical Accounting Policies and Significant Judgments and Estimates Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the U.S. (“GAAP”).
We do not currently have any material exposure to foreign currency fluctuations and do not engage in any hedging activities as part of our normal course of business. Critical Accounting Policies and Significant Judgments and Estimates Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the U.S. (“GAAP”).
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this Item is set forth on pages F-1 through F-24 hereto. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this Item is set forth on pages F-1 through F-28 hereto. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.
We have reviewed the consolidated financial statements of this financial institution and believe they have sufficient assets and liquidity to conduct their operations in the ordinary course of business with little or no credit risk to us. Financial instruments that potentially subject us to concentrations of credit risk principally consist of cash equivalents and accounts receivable.
We have reviewed the consolidated financial statements of these financial institutions and believe they have sufficient assets and liquidity to conduct their operations in the ordinary course of business with little or no credit risk to us. Financial instruments that potentially subject us to concentrations of credit risk principally consist of cash equivalents and accounts receivable.
Following the events relating to Silicon Valley Bank in 2023, we established redundant accounts at high-credit-quality financial institution to mitigate liquidity risk to our cash and cash equivalents from any further instability in the financial industry.
Following the events relating to Silicon Valley Bank in 2023, we established a redundant 93 Table of Contents account at a high-credit-quality financial institution to mitigate liquidity risk to our cash and cash equivalents from any further instability in the financial industry.
As a result, we may be required to take additional charges for excess and obsolete inventory in the future if the purchased units do not align with sales.
In addition, we continue to introduce new products and sizes, which we believe will increase our revenue. As a result, we may be required to take additional charges for excess and obsolete inventory in the future if the purchased units do not align with sales.
Inventory Valuation Inventory is stated at the lower of cost or net realizable value, with cost determined using the first-in-first-out method. Inventory, which consists primarily of our OviTex and OviTex PRS products held on consignment or held in our warehouse, is considered finished goods and is purchased from a third party.
Inventory Valuation Inventory is stated at the lower of cost or net realizable value, with cost determined using the first-in-first-out method.
Removed
The need to maintain substantial levels of inventory impacts our estimates for excess and obsolete inventory. In addition, we continue to introduce new products and sizes, which we believe will increase our revenue.
Added
Inventory, which consists primarily of our OviTex and OviTex PRS products held on consignment or held in our warehouse, is considered finished goods and is purchased from a third party. 94 Table of Contents We evaluate the carrying value of our inventory in relation to the estimated forecast of product demand, which takes into consideration the expiration date of the products.
Removed
JOBS Act Accounting Election We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or JOBS Act, and are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies.
Removed
Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933 for complying with new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies.
Removed
Section 107 of the JOBS Act provides that we can elect to opt out of the extended transition period at any time, which election is irrevocable.
Removed
We have elected to avail ourselves of this exemption from complying with new or revised accounting standards and, therefore, will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. 92 Table of Contents ITEM 8.

Other TELA 10-K year-over-year comparisons