ecor-20241231.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
For the fiscal year ended December 31, 2024
OR
FOR THE TRANSITION PERIOD FROM TO
Commission File Number001-38538
electroCore, Inc.
(Exact name of Registrant as specified in its Charter)
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (973)290-0097
Securities registered pursuant to Section12(b) of the Act:
Title of each class Trading symbol(s) Name of each exchange on which registered
Common Stock, Par Value $0.001 Per Share ECOR Nasdaq Capital Market
Securities registered pursuant to Section12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule405 of the Securities Act.YES☐NO☒
Indicate by check mark if the Registrant is not required to file reports pursuant to Section13 or 15(d) of the Act.YES☐NO☒
Indicate by check mark whether the Registrant: (1)has filed all reports required to be filed by Section13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the Registrant was required to file such reports), and (2)has been subject to such filing requirements for the past 90days. YES☒NO☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule405 of RegulationS-T (§232.405 of this chapter) during the preceding 12months (or for such shorter period that the Registrant was required to submit such files).YES☒NO☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large, accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule12b-2 of the Exchange Act).YES☐NO☒
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, based on the closing price of the shares of common stock on the Nasdaq Capital Stock Market on June 30, 2024 was $34,861,164.
The number of shares of Registrant’s Common Stock outstanding as of March 6, 2025 was 7,193,092.
Table of Contents Page
PART I
Item 1. Business 1
Item 1A. Risk Factors. 12
Item 1B. Unresolved Staff Comments 85
Item 1C. Cybersecurity 85
Item 2. Properties 86
Item 3. Legal Proceedings 86
Item 4. Mine Safety Disclosures 87
PART II
Item 6. [Reserved] 88
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 96
Item 8. Financial Statements and Supplementary Data 96
Item 9A. Controls and Procedures 97
Item 9B. Other Information 97
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 97
PART III
Item 10. Directors, Executive Officers and Corporate Governance 98
Item 11. Executive Compensation 108
Item 14. Principal Accountant Fees and Services 121
PART IV
Item 15. Exhibits and Financial Statement Schedules 122
i
Cautionary Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K, or Annual Report, contains forward-looking statements that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Annual Report, including statements regarding our future results of operations and financial position, strategy and plans, and our expectations for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described under the heading “Risk Factors” contained in Item 1A of this Annual Report. In light of these risks, uncertainties and assumptions, actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements in this Annual Report and you should not place undue reliance on these forward-looking statements.
Any forward-looking statements in this Annual Report reflect our current views with respect to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.
References to electroCore
In this Annual Report, unless otherwise stated or the context otherwise indicates, references to “ECOR,” “electroCore,” “the Company,” “we,” “us,” “our” and similar references refer to electroCore, Inc., a Delaware corporation.
Risk Factor Summary
The following is a summary of certain important factors that may make an investment in our Company speculative or risky. You should carefully consider the full risk factor disclosure set forth in Item 1A of this Annual Report, in addition to the other information herein, including the section of this report titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes.
• We may not be able to establish or strengthen our brands.
Trademarks and Tradenames
The electroCore, gammaCore, Truvaga, TAC-STIM names, logos, and other trademarks of electroCore, Inc. appearing in this Annual Report on Form 10-K are the property of electroCore, Inc. All other trademarks, service marks and trade names in this Annual Report on Form 10-K are the property of their respective owners. We have omitted the ® and TM designations, as applicable, for the trademarks used in this Annual Report on Form 10-K.
Market Data and Forecasts
Unless otherwise indicated, information in this Annual Report on Form 10-K concerning economic conditions, our industry, and our markets, including our general expectations and competitive position, market opportunity and market size, is based on a variety of sources, including information from independent industry analysts and publications, and/or our own estimates and research.
Our estimates are derived from industry and general publications, studies and surveys conducted by third parties, as well as data from our own internal research. These publications, studies and surveys generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information, and we have not independently verified industry data from such third-party sources. While we believe our internal research is reliable and that our internal estimates are reasonable, such research has not been verified by any independent source and our internal estimates are based on our good faith beliefs as of the respective dates of such estimates. We are responsible for all of the disclosure in this Annual Report on Form 10-K.
PART I
Item 1. Business
Our Business
An Overview
ElectroCore is a bioelectronic medicine and general wellness company dedicated to improving health and quality of life through our proprietary non-invasive vagus nerve stimulation (“nVNS”) technology platform and related product offerings.
nVNS modulates neurotransmitters through its effects on both the peripheral and central nervous systems. Our nVNS treatment is delivered through a proprietary high-frequency burst waveform that safely and comfortably passes through the skin and stimulates therapeutically relevant fibers in the vagus nerve. Various scientific publications suggest that nVNS works through a variety of mechanistic pathways including the modulation of neurotransmitters.
Historically, vagus nerve stimulation or VNS, required an invasive surgical procedure to implant a costly medical device. This generally limited VNS from being used by anyone other than the most severe patients. Our non-invasive medical devices and general wellness products are self-administered and intended for regular or intermittent use over many years.
Our capabilities include product development, regulatory affairs and compliance, sales and marketing, product testing, electromechanical assembly, fulfillment, and customer support. We derive revenues from the sale of products in the United States and select overseas markets. We have two principal product categories:
We believe our nVNS products may be used in the future to effectively treat additional medical conditions.
Primary Marketed Products and Business Strategy
Our goal is to be a leader in non-invasive neuromodulation to deliver better health. To achieve this, we offer multiple propositions:
• Truvaga for the support of general health and wellbeing; and
• TAC-STIM for human performance.
Our flagship gammaCore Sapphire, is a prescription medical device that is FDA cleared for a variety of primary headache conditions. gammaCore is available by prescription only and Sapphire is a portable, reusable, rechargeable and reloadable personal use option for patients to use at home or on the go. Prescriptions are written by a health care provider and dispensed from a specialty pharmacy, through the patient’s healthcare system, or shipped to certain patients in the United States from our facility in Rockaway, NJ. After the initial prescription is filled, access to additional therapy can be refilled for certain of our gammaCore products through the input of a prescription-only authorization.
We offer two versions of our Truvaga products for the support of general health and wellbeing. Truvaga 350 is a personal use consumer electronics general wellness product and Truvaga Plus, which was launched in April 2024, is our next generation, app-enabled general wellness product. Neither product requires a prescription and is available direct-to-consumer from electroCore at www.truvaga.com, or through online retailers,
such as Amazon.com. TAC-STIM handset is a form of nVNS for human performance
and has been developed in collaboration with the United States Department of
Defense Biotech Optimized for Operational Solutions and Tactics, or BOOST
program. TAC-STIM handsets are available as a Commercial Off the
Shelf (COtS) solution to professional organizations and are the subject of
ongoing research and evaluation within the United States Air Force Special
Operations Command, the United States Army Special Operations Command and at
the United States Air Force Research Laboratory.
Truvaga and TAC-STIM are intended for general wellness in compliance with the FDA guidance document entitled “General Wellness: Policy for Low-Risk Devices; Guidance for Industry and FDA Staff, issued on September 27, 2019.” Truvaga and TAC-STIM handsets are not intended to diagnose, treat, cure, or prevent any disease or medical condition.
Our two largest customers by revenue are the United States Department of Veterans Affairs and United States Department of Defense, or VA, and the United Kingdom National Health Service or NHS utilizing our FDA cleared and CE marked product, gammaCore.
The United States Department of Veteran Affairs comprised 70.6% of our revenue during the year ended December 31, 2024. The majority of our 2024 sales were made pursuant to our qualifying contract under the FSS, which was secured by us in December 2018, as well as open market sales to individual facilities within the government channels. The initial term of our FSS contract was scheduled to expire on January 15, 2024. On January 5, 2024, we obtained a modification to the initial contract, temporarily extending the term from January 15, 2024, to March 14, 2024,
and subsequently extended the term to June 14, 2025, while the U.S. Department of Veteran Affairs VA Federal Supply Schedule Service reviews
our follow-on offer application for a replacement contract. Although we continue to work with the appropriate government personnel to replace
our FSS contract, there can be no assurance that the VA will accept our follow-on application to replace our contract which may limit or
eliminate our ability to sell certain gammaCore products into the government channel pursuant to our qualifying FSS contract or individual
facilities that utilize our FSS contract number for open market purchases.
In August 2023, we signed a non-exclusive distribution agreement
with Lovell Government Services, or Lovell, providing Lovell the right to list
and distribute certain gammaCore products into the federal market. Lovell is a
Service-Disabled Veteran-Owned Small Business (SDVOSB) offering medical and
pharmaceutical goods and services to federal healthcare providers. Listing
products with Lovell is intended to streamline the sales process to a variety
of government procurement channels through Lovell’s compliance with contracting
regulations and its provision of logistical solutions connected directly into
government contracting portals, all of which are intended to help government
agencies meet their SDVOSB procurement goals. Customers for these vehicles are federal
healthcare systems such as the Veterans Health Administration (VHA, which
includes the VA), the Military Health System (MHS), and Indian Health Services
(IHS), which we believe serve up to approximately 21
million patients combined.
Between November 2023 and January 2024, certain
gammaCore products were added to the FSS, the VA’s Distribution and Pricing
Agreement or DAPA, GSA Advantage, and Defense Logistics Agency’s ECAT system
procurement portals through the Lovell contract vehicles, enabling the purchase
of gammaCore products within the government channel and throughout the federal
markets, including, but not limited to, the VA. The gammaCore products offered
through Lovell provide government customers with similar product configuration
options to those currently sold through our existing FSS contract and open
market sales made directly to individual VA facilities. We expect a significant
portion of our 2025 sales to continue in the government channel broadly, and to
our largest customer the VA, specifically, pursuant to our FSS contract if
replaced and / or through our relationship with Lovell and its qualifying FSS,
GSA, DAPA, and ECAT contracts for which gammaCore has been added.
Sales under the UK MedTech Funding Mandate, or MTFM, for cluster headache (CH) in the UK comprised 6.6% of our revenue during the year ended December 31, 2024. In 2025, we plan on continued use of this program. In 2023, NHS granted a two-year extension in which our prescription gammaCore therapy will continue to be listed in the NHS catalogue. This extension is through March 17, 2026, with an option for us to extend an additional two years. In 2025, we expect the National Institute for Health and Care Excellence, or NICE, to review the guidance document and any changes in recommendation or pricing may adversely impact our ability to work with NHS, England on the MTFM program and could have an adverse impact on our financial results. We continue to utilize distribution partners to commercialize our nVNS technology in selected territories outside the United States and United Kingdom.
On December 17, 2024, we entered into a definitive agreement to acquire NURO. NURO is a commercial stage healthcare company that develops and commercializes neurotechnology devices to address unmet needs in the chronic pain market through its Quell® platform: a wearable, app and cloud-enabled neuromodulation platform that is indicated for the treatment of fibromyalgia symptoms (Quell Fibromyalgia) and lower-extremity chronic pain (Quell 2.0). The transaction does not include NURO’s Japan-related DPNCheck® technology and business, which are expected to be divested by NURO prior to closing of the transaction. Consummation of the transaction is subject to approval by holders of at least a majority of the outstanding shares of NURO common stock entitled to vote on the merger, and the filing with the SEC of NURO’s Form 10-K with respect to the fiscal year ended December 31, 2024, in addition to other closing conditions.
Primary Headache Market and Competition for our gammaCore Products’
In the United States, 39 million patients are affected by migraine, with more than 28 million being adult women. Approximately 8 million Americans are seeing a professional about headache and approximately 2.5 million Americans have a prescription for migraine therapy. Migraine attacks can be extremely disabling and more than 90% of migraine sufferers are unable to work or function normally while experiencing migraine. According to an analysis cited in The American Journal of Managed Care, published in 2020, the annual economic burden of migraine in the United States is approximately $78 billion. The analysis further provides an estimate of annual total direct and indirect costs of all migraine-related health services between $8,500 and $9,500 for an individual patient with chronic migraine. In the United States and EU, research has found that the age of first diagnosis of migraine peaks in the early-to-mid teens and the disease continues to persist throughout adulthood for many of these sufferers, demonstrating that it is often a disorder of long duration.
The market for the treatment and prevention of migraine is highly competitive with most migraine patients managing their conditions with over-the-counter therapies. The prescription triptan drug class is generally considered first line therapy for the acute treatment of migraine. There are many additional pharmaceutical approaches currently marketed and under development by third parties. In particular, injectables such as Botulinum toxin (Botox) and calcitonin gene-related peptides antagonists or CGRPs have gained significant adoption and market share, with oral CGRPs gaining more market share.
There are several neuromodulation devices that have been marketed for the treatment of migraine, including CEFALY (sold by CEFALY Technologies sprl), Nerivio (sold by Theranica Bioelectronics), and Savi Dual (sold by eNeura, Inc.) as well as other neuromodulation devices that may be marketed for use in treating pain associated with primary headache. Cefaly has been granted OTC clearance allowing its product to be sold without a prescription and the impact of this clearance on the competitive landscape remains to be seen.
The estimated prevalence of CH (Cluster Headache) in the United States ranges from 0.1% to 0.2% of the total population, with an estimated 400,000 patients. CH is a condition in which patients experience extremely painful headaches. CH predominantly affects males in their prime earning ages of 20 to 50, and the attacks of pain occur in bouts, known as cluster periods, during which attacks are experienced at a frequency ranging from every other day to as often as eight times per day.
Injectable sumatriptan (Imitrex) is an FDA-approved commercially available therapy for the acute treatment for CH. The side effect profile and cost of Imitrex, however, limits patients to treating only a small fraction of their attacks each month and has to be subcutaneously injected, which may be particularly difficult to do during an active CH attack. The most frequently used acute treatments for CH attacks are subcutaneous sumatriptan and high flow rate inhaled oxygen. Alternative treatments include intranasal triptans and intravenous dihydroergotamine, or DHE. Galcanezumab, a calcitonin gene-related peptide was recently approved by the FDA for the treatment of episodic CH. Additional medications that are used by patients off-label include verapamil, lithium, and valproate.
Our prescription gammaCore therapy competes with numerous existing therapies from many different sources, including pharmaceutical, biotechnology, medical device and other healthcare companies, and therapies that may become available in the future. We believe the key competitive factors affecting the potential success of our therapy are safety, efficacy, side effect profile, convenience, price, the availability of generic drugs and the availability of coverage and reimbursement from government and certain other third-party payers.
Market and Competition for our General Wellness Products
In January 2024, McKinsey & Company estimated the global general wellness market to be more than $1.8 trillion with the US market, spanning health, fitness, appearance, sleep, nutrition, and mindfulness, to be more than $480 billion and growing at greater than 5% annually.
According to Grand View Research, the global stress management treatment market is expected to reach approximately $20 billion by 2024, with the US stress management market size valued at $2.4 billion in 2022 and expected to grow at a compound annual growth rate (CAGR) of 5.3% from 2023 to 2030.
Research and Development
We are developing future iterations ofnVNStechnology, including the use of our intellectual property around the delivery ofsmartphone-integrated andsmartphone-connected non-invasive therapies. In 2024, we launched our next generation app-enabled consumer device under the Truvaga brand.
We are cooperating with a variety of Investigator Initiated Trials (“IIT”) to evaluate additional indications and/or markets for our products. If successful, we believe these trials will provide marketing support for future expansion of our business into new indications and markets.
Regulatory Clearances
Prescription
gammaCore, which is our prescription only, handheld device intended for regular or intermittent use over many years, is cleared by the FDA for use in the following indications:
• The acute treatment of pain associated with episodic cluster headache;
• The acute treatment of pain associated with migraine headache;
• The preventive treatment of migraine headache in adult patients;
• Treatment of hemicrania continua and paroxysmal hemicrania in adult patients.
The FDA clearances of ourprescription gammaCore therapy to treat headache were facilitated by the FDA'screation of a new regulatory category: External VagusNerve Stimulator for Headache (21 CFR 882-5892). Based on this category’s description, we anticipate that some additional label expansions may be possible through the pathway under Section 510(k) of the Federal Drug and Cosmetic Act or through de novo classifications relating to uses of External Vagus Nerve Stimulators.
In January 2022, the FDA grantedgammaCoreSapphire “Breakthrough Device designation for the treatment of post-traumatic stress disorder or PTSD.” PTSD is a highly prevalent and disabling disorder with limited approved treatment options. The FDA’s Breakthrough Device designation is designed to expedite the development and regulatory review of medical devices that hold the potential for more effective treatment or diagnosis of life-threatening or irreversibly debilitating disease or condition. The Company is currently discussing the pathway for obtaining FDA clearance for treatment of PTSD by using gammaCore Sapphire.
We are considering additional medical indications for ournVNStechnology which are being studied in several investigator-initiated trials, orIITs. These indications include, post-traumatic stress disorder, opioid use disorders, symptoms of Parkinson's disease, stroke, concussion, attention, sleep, mood, fatigue and memory retention among others.
We received a CE Certificate of Conformity for gammaCore for the treatment of primary headache from the British Standards Institution, which was at the time a European Union notified body. This CE Certificate of Conformity allowed us to affix the CE Mark on gammaCore and to commercialize it in the European Economic Area and other countries that recognize the CE Mark. In addition, we received CE Certificates of Conformity on gammaCore covering four other indications for use, including reactive airway disease and gastric motility disorders. Post-Brexit, these CE Certificates of Conformity remain valid in the UK and EU. BSI has established a Netherlands entity, which remains a notified body, and BSI in the UK has equivalent status as a “UK approved body”. Under current guidance, CE marked medical devices may be placed on the UK market up until the sooner of the expiry of the CE Certificate of Conformity or June 30, 2028. After that date, we will need to obtain UKCA marking (the UK replacement for CE marking) for commercialization of our gammaCore products in the UK.
In 2019, NICE published a Medical Technology Guidance document recommending the use ofgammaCorefor CH within NHS of England and Wales. We expect NICE to review the Medical Technology Guidance in 2025.In January 2021, NHS Scotland adopted the NICE recommendation and recommendedgammaCorefor use in treatment of CH in Scotland.
NHS England awardedgammaCorea place on the Innovation Technology Payment, or ITP, program for treatment of patients with refractory (severe) cluster headache, a reimbursement pathway that opened in April 2019. Effective April 1, 2021, gammaCore was listed on the MTFM Policy. gammaCore is still listed in the policy, which requires commissioners to fund the therapy from their existing allocations.
General Wellness
Truvaga and TAC-STIM are being marketed in the United States as general wellness and human performancedevices pursuant to the FDA guidance document entitled“General Wellness: Policy for Low-Risk Devices; Guidance for Industry and FDA Staff, issued on September 27, 2019.” They are not intended to diagnose, treat, cure, or prevent any disease or medical condition.
Manufacturing
We are the FDA-registered and ISO registered legal manufacturer of our nVNS products. We rely upon third-party contract manufacturers and suppliers, located both within and outside the United States, for substantially all the components of our nVNS products. In order to protect against risk of supply chain disruption, we seek to maintain adequate inventory and, if necessary, there is adequate safety stock to qualify a secondary contract manufacturer when any supply chain disruption is identified. Additionally, we retain the internal expertise and capabilities to perform all assembly aspects of our commercial product. These measures include purchasing what we consider to be sufficient advanced supply of key components to reasonably assure that no component shortages will interrupt our ability to manufacture and deliver our products to patients on a timely basis. All the electronic components used in our products are either high-volume, non-custom commodity components, or alternate components are available. The majority of these components have multiple sources, and the few with single sources have been purchased with sufficient reserves to permit continued production while simple product design modifications can be made. We rely upon certain qualified third parties, from time to time, for engineering, design and validation of new and modified devices.
At our facility in Rockaway, NJ, we inspect inbound component parts to ensure they meet our design and manufacturing specifications prior to assembly. This quality process involves physical inspection and electrical performance testing. After successful completion of this inspection, each unit is then assembled, programmed, and packaged, along with appropriate labeling and accessories.
Intellectual Property
Patents and Patent Applications
As of February 1, 2025, we held more than 215patents and patent applications, including 145issued U.S. patents, 32 U.S. patent applications, and 36international patents and applications. All of our current issued patents are projected to expire between 2026 and 2037.
Copyrights, Trademarks and Trade Secrets
As of February 1, 2025, our trademark portfolio consisted of 12US trademark registrations, including electroCore, gammaCore, gammaCore Sapphire, gammaCore Emerald and TAC-STIM, 23international trademark registrations, and 13pending US and international trademark applications.
We also rely upon trade secrets, know-how and continuing technological innovation, and may pursue licensing opportunities in the future, to develop and maintain our competitive position. We seek to protect our proprietary rights through a variety of methods, including confidentiality agreements and proprietary information agreements with suppliers, employees, consultants and others who may have access to proprietary information, under which they are bound to assign to us inventions made during the term of their employment or term of service.
Some of the software related to our Truvaga Plus product which was launched in 2024 is licensed from third-parties, and we rely entirely on third-party software developers for the design of the software for this product.
U.S. Food and Drug Administration (FDA) Regulation
Many of our products are medical devices that are subject to extensive regulation by the U.S. FDA under the Federal Food, Drug, and Cosmetic Act, or FDCA, and the regulations promulgated thereunder, as well as by other regulatory bodies in the United States and abroad. The FDA classifies medical devices into one of three classes based on the risks associated with the medical device and the controls deemed necessary to reasonably ensure the device’s safety and effectiveness. These three classes are:
Before being introduced into the U.S. market, our medical devices must obtain marketing clearance or approval from FDA through the 510(k) pre-market notification process, the de novo classification process (summarized below under De Novo Classification Process), or the PMA process, unless they are determined to be Class I devices or to otherwise qualify for an exemption from one of these available forms of pre-market review and authorization by the FDA. To date, our products have all been classified as Class II, moderate-risk medical devices and have been subject to the 510(k) review and clearance process.
Additionally, the FDA also has a policy, General Wellness: Policy for Low-Risk Devices, regarding general wellness products. Under this policy, the FDA does not intend to examine low risk general wellness products to determine whether they are devices within the meaning of the FDCA or, if they are devices, whether they comply with the relevant regulatory requirements for devices (e.g., establishment registration, pre-market review). The policy defines general wellness products as products that meet the following two factors: (1) are intended for only general wellness use, as defined in the policy, and (2) present a low risk to the safety of users and other persons. We market Truvaga and TAC-STIM as general wellness products pursuant to this policy.
510(k) Pre-Market Notification Process
Class II devices typically require pre-market review and clearance by the FDA, which is accomplished through the submission of a 510(k) pre-market notification before the device may be marketed. To obtain 510(k) clearance, we must demonstrate that a new device is substantially equivalent to another device with 510(k) clearance or grandfathered status, or to a device that was reclassified from Class III to Class II or Class I - this device to which the new device is compared is called the “predicate device.” In some cases, we may be required to perform clinical trials to support a claim of substantial equivalence. If clinical trials are required, we may be required to submit an application for an investigational device exemption, or IDE, which must be cleared by the FDA prior to the start of a clinical investigation, unless the device and clinical investigation are considered non-significant risk by the FDA or are exempt from the IDE requirements. Whether or not an IDE is required for a clinical study involving a medical device, an appropriate Institutional Review Board (IRB) must review and approve the study protocol before it is initiated. It generally takes three months from the date of the pre-market notification submission to obtain a final 510(k) clearance decision from the FDA, but it can be significantly longer.
After a medical device receives a 510(k) clearance letter, which authorizes commercial marketing of the new device for one or more specific indications for use, any modification that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use, requires the submission of a new 510(k) notification or could require de novo classification or a PMA. The FDA allows each company to make this determination, but the FDA can review the decision as part of routine compliance audits of the company. If the FDA disagrees with a company’s decision not to seek prior FDA authorization, the FDA may require the company to seek additional 510(k) clearance or pre-market approval. The FDA also can require the company to cease marketing and/or recall the medical device in question until its regulatory status is resolved.
De Novo Classification Process
If the FDA determines that a new, previously unclassified medical device or its intended use is not substantially equivalent to a predicate device, the device is automatically placed into Class III, requiring the submission of a PMA. Devices that cannot be cleared through the 510(k) process due to lack of a predicate device but would be considered low or moderate risk (in other words, they do not rise to the level of requiring the approval of a PMA because any risks associated with the device could be mitigated through general controls and/or special controls) may be eligible for the 510(k) De Novo classification process. If a product is classified as Class II through the De Novo classification process, then that device may serve as a predicate device for subsequent 510(k) pre-market notifications.
FDA has issued a Guidance document that formally codifies requirements for the medical device De Novo process and the procedures and criteria for product developers to file a De Novo classification request.
PMA Application Process
If a medical device does not qualify for the 510(k)-pre-market notification process and is not eligible for classification as a low or moderate-risk device through the De Novo process, the device is deemed to be Class III and a company must submit a PMA application to seek authorization for its commercial sale. A PMA requires more extensive pre-filing testing than is required in the 510(k) application and is more costly, lengthy and uncertain. The PMA review and approval process can take one to three years or longer, from the time the PMA application is filed with the FDA. Under a PMA, the company must demonstrate to the FDA that the new medical device is safe and effective for its intended purpose. A PMA typically includes extensive pre-clinical and clinical trial data, and information about the device, its design, manufacture, labeling and components. Before approving a PMA, the FDA generally also performs an on-site inspection of manufacturing facilities for the product to ensure compliance with the FDA’s quality system regulation, or QSR.
If FDA approves the PMA, the approved indications may be more limited than those originally sought. In addition, FDA’s approval order may include post-approval conditions that the FDA believes necessary to ensure the safety and effectiveness of the device, including, among other things, restrictions on labeling, promotion, sale and distribution and post-market study requirements. Failure to comply with the post-approval conditions can result in adverse enforcement or administrative actions, including the withdrawal of the approval. Approval of a new PMA application or a PMA supplement may be required before making certain types of modifications to the device, including to its labeling, intended use or indication, or manufacturing process, especially when such modifications have the potential to affect safety and effectiveness.
Post-Marketing Compliance Obligations
Regardless of which pre-market pathway a medical device uses to reach the U.S. market, after a device is placed on the market, numerous regulatory requirements continue to apply. These include:
Our international sales are subject to regulatory requirements in the countries in which our products are sold. The regulatory review process varies from country to country and may in some cases require the submission of clinical data.
In 2014, we received CE Certificate of Conformity in the European Economic Area, or EEA, for our prescription gammaCore therapy to treat primary headache, including migraine, CH, and hemicrania continua, as well as medication overuse headache in adults. The CE Certificate of Conformity was extended to additional indications, including for the treatment or prevention of symptoms of reactive airway disease, which includes asthma, bronchoconstriction, exercise induced bronchospasm, and COPD in adults.
In the EEA and UK, gammaCore must currently comply with the essential requirements in Annex I to Directive 93/42/EEC, or the Essential Requirements, relating to the approximation of the laws of the member states concerning medical devices or the EU Medical Devices Directive (UK law, implemented through the Medical Devices Regulations 2002, continues to be based on these requirements). Compliance with these requirements is a prerequisite to be able to affix the CE mark to gammaCore, without which they cannot be marketed or sold in the EEA. To demonstrate compliance with the Essential Requirements and obtain the right to affix the CE Mark medical devices manufacturers must undergo a conformity assessment procedure, which varies according to the type of medical device and its classification. Except for low-risk medical devices (Class I with no measuring function and which are not sterile) where the manufacturer can issue an EC Declaration of Conformity based on a self-assessment of the conformity of its products with the Essential Requirements, a conformity assessment procedure requires the intervention of a notified body, which is an organization designated by a competent authority of an EEA country to conduct conformity assessments. Depending on the relevant conformity assessment procedure, the notified body would audit and examine the technical documentation and the quality system for the manufacture, design and final inspection of the medical devices. The notified body issues a CE Certificate of Conformity following successful completion of a conformity assessment procedure conducted in relation to the medical device and its manufacturer and their conformity with the Essential Requirements. This CE Certificate of Conformity entitles the manufacturer to affix the CE mark to its medical devices after having prepared and signed a related EC Declaration of Conformity.
Under current guidance, CE marked medical devices may be placed on the UK market up until the sooner of the expiry of the CE Certificate of Conformity or June 30, 2028. After that date, we will need to obtain UKCA marking (the UK replacement for CE marking) from a UK approved body (the new equivalent of an EU notified body) for commercialization of our gammaCore products in the UK. See “Item 1 – Business – Regulatory Clearances” for additional information.
As a general rule, demonstration of conformity of medical devices and their manufacturers with the Essential Requirements must be based, among other things, on the evaluation of clinical data supporting the safety and performance of the products during normal conditions of use. Specifically, a manufacturer must demonstrate that the device achieves its intended performance during normal conditions of use and that the known and foreseeable risks, and any adverse events, are minimized and acceptable when weighed against the benefits of its intended performance, and that any claims made about the performance and safety of the device (e.g., product labeling and instructions for use) are supported by suitable evidence. This assessment must be based on clinical data, which can be obtained from (1) clinical studies conducted on the devices being assessed, (2) scientific literature from similar devices whose equivalence with the assessed device can be demonstrated or (3) both clinical studies and scientific literature. gammaCore is a Class IIa medical device in the EU. The conduct of clinical studies in the EEA is governed by detailed regulatory obligations. These may include the requirement of prior authorization by the competent authorities of the country in which the study takes place and the requirement to obtain a positive opinion from a competent ethics committee. This process can be expensive and time-consuming.
Moreover, in May 2017, the EU Medical Devices Regulation 2017/745, or MDR was adopted. The MDR repeals and replaces the EU Medical Devices Directive. Unlike directives, which must be implemented into the national laws of the EEA member states, the regulations would be directly applicable, i.e., without the need for adoption of EEA Member State laws implementing them, in all EEA member states and are intended to eliminate current differences in the regulation of medical devices among EEA member states. The MDR, among other things, is intended to 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 applicable on May 26, 2021, with the transition period intended to end on May 26, 2024. While progress has been made on the transition from the MDD to the MDR, a European Commission proposal published onJanuary 6, 2023, stated that the overall number and capacity of conformity assessment or notified bodies remains insufficient to carry out the tasks required of them. In addition, many manufacturers are not sufficiently prepared to meet the strengthened requirements of the MDR by the end of the transition period. This was threatening the availability of medical devices on the EU market. The European Commission extended the transition period fromMay 26, 2024 untilDecember 31, 2028 for Class IIa devices, which includes the gammaCore products (gammaCore Sapphire, gammaCore-S). Once applicable, the new regulations will among other things:
It was necessary for notified bodies to be accredited by the EU Member States’ accreditation bodies to conduct assessment procedures for medical devices in accordance with the Regulation. We have the necessary certificates for the MDR.
On March 29, 2017, the United Kingdom formally notified the EU of its intention to withdraw from the Union pursuant to Article 50 of the Lisbon Treaty, commonly referred to as Brexit, and completed a transitional period on December 31, 2020. Following Brexit, EU law and the EU Court of Justice no longer have supremacy over British laws or its Supreme Court. The United Kingdom's European Union (Withdrawal) Act 2018 retains relevant EU law as domestic law, which can be amended or repealed. For medical devices, the key changes are that:
-UK “notified bodies” have lost this status, and are no longer able to issue CE certificates. Some, including BSI, have set up an EU entity as a new notified body to issue CE certificates.
-the UK is replacing the EU CE marking system with “UKCA” marking. The transition period has been extended, and currently CE marked medical devices may be placed on the UK market up until the sooner of the expiry of the Certificate of Conformity or June 30, 2028. After this date, manufacturers will need UKCA marking to place medical devices on the UK market. Medical devices sold in the UK and EU will need both CE and UKCA marking.
The United Kingdom’s national laws and regulations for medical devices are currently based on retained EU legislation, but may diverge in future. Potentially changing regulatory schemes and tariffs engendered by Brexit may add additional complexity, cost and delays to our UK operations, and in marketing or selling our products in both the United Kingdom and the EEA. Our revenue and profit, supply and demand for our products, and customer retention and acquisition in both the long term and short term could be adversely affected.
Federal Trade Commission
We are subject to Federal Trade Commission, or FTC, regulatory oversight. Under the Federal Trade Commission Act (FTC Act), the FTC is empowered, among other things, to (a) prevent unfair methods of competition and unfair or deceptive acts or practices in or affecting commerce; (b) seek monetary redress and other relief for conduct injurious to consumers; and (c) gather and compile information and conduct investigations relating to the organization, business, practices, and management of entities engaged in commerce. The FTC has very broad enforcement authority, and failure to abide by the substantive requirements of the FTC Act and other consumer protection laws can result in administrative or judicial penalties, including civil penalties, or injunctions affecting the manner in which Truvaga could be marketed in the future.
Other Regulations
We may also be subject to healthcare fraud and abuse regulation in the jurisdictions in which we conduct our business. These laws include, without limitation, applicable anti-kickback, false claims, transparency and patient privacy and security laws and regulations.
Advertising and Promotion
Advertising and promotion of medical devices, in addition to being regulated by the FDA, are also regulated by the FTC and by federal and state regulatory and enforcement authorities, including the Department of Justice, the Office of Inspector General of the Department of Health and Human Services, and various state attorneys general. Although physicians are permitted to use their medical judgment to use medical devices for indications other than those cleared or approved by the FDA, we may not promote our products for such “off-label” uses and can only market our products for cleared or approved uses. Other companies’ promotional activities for their FDA-regulated products have been the subject of FTC enforcement actions brought under healthcare reimbursement laws and consumer protection statutes. FTC enforcement actions often result in consent decrees that constrain future actions. In addition, under the federal Lanham Act and similar state laws, competitors and others can initiate litigation relating to advertising claims.
Import and Export Requirements
To import a device, the importer must file an entry notice and bond with the United States Bureau of Customs and Border Protection (CBP). All devices are subject to FDA examination before release from CBP. Any article that appears to be in violation of the FDCA may be refused admission and a notice of detention and hearing may be issued. If the FDA ultimately refuses admission, the CBP may issue a notice for redelivery and, if a company fails to redeliver the goods or otherwise satisfy CBP and the FDA with respect to their disposition, may assess liquidated damages for up to three times the value of the lot. The CBP also imposes its own regulatory requirements on the import of our products, including inspection and possible sanctions for noncompliance.
Human Capital Resources
As of February 1, 2025, we employed73full-time employees in the US and abroad. None of our employees are represented by a labor union or covered by a collective bargaining agreement. We consider our relationship with our employees to be good.
We believe our success depends on our ability to attract, develop and retain key personnel. The skills, experience and industry knowledge of key employees significantly benefit our operations and performance. Our board of directors and management oversee various employee initiatives. New employees are provided industry-relevant compliance training and are introduced to our Code of Business Conduct and Ethics to which all employees are required to annually confirm compliance.
Employee health and safety in the workplace is one of our core values.
Company History
electroCore, Inc. was founded in 2005 as a limited liability company, which converted into a Delaware corporation pursuant to a statutory conversion effective June 21, 2018. The Company is headquartered in New Jersey and has two wholly owned subsidiaries: electroCore UK Ltd. and electroCore Germany GmbH. The Company has ceased its operations in Germany, although sales to Germany are still supported by electroCore UK Ltd.
Our primary Internet website address is www.electrocore.com. We also maintain websites at www.gammacore.com, www.gammacore.co.uk, www.truvaga.com, and www.tac-stim.com. The content reflected on our websites is not incorporated by reference herein unless expressly noted.
Available Information
Our annual reports on Form10-K, quarterly reports on Form10-Q and current reports on Form8-K and proxy statements, and all amendments thereto, are available free of charge on our Internet website. These reports are posted on our website as soon as reasonably practicable after such reports are electronically filed with the SEC. The public may read and copy any materials that we file with the SEC electronically through the SEC website (www.sec.gov). The information contained on the SEC’s website is not incorporated by reference into this Form 10-K and should not be considered to be part of this Form 10-K. Within the Investors section of our website, we provide information concerning corporate governance, including our Corporate Governance Guidelines, board committee charters, Code of Conduct and other information. A copy of the Code of Conduct may be provided to any person without charge upon written request to: electroCore, Inc., Attn: Corporate Secretary, 200 Forge Way, Suite 205, Rockaway, NJ 07866. The content reflected on any website reflected in this Form 10-K is not incorporated by reference herein unless expressly noted.
Item 1A. Risk Factors.
RISK FACTORS
You should carefully consider the following risk factors, in addition to the other information in this Annual Report, including the section of this Annual Report titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes. If any of the events described in the following risk factors and the risks described elsewhere in this Annual Report occur, our business, operating results, and financial condition could be seriously harmed. This Annual Report also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of factors that are described below and elsewhere in this Annual Report.
Risk Related to our Financial Position, Operating Results and Need for Additional Capital
We may be required to obtain additional funds in the future, and these funds may not be available on acceptable terms or at all.
Our operations have consumed substantial amounts of cash since inception. We believe that our growth will depend, in part, on our ability to fund our commercial efforts for our nVNS platform technology, including opportunistically pursuing research and development activities for additional indications for our gammaCore therapy, as well as our ability to invest in programs to commercialize our general wellness and human performance products. If our revenue continues to grow, it is likely we will have increased working capital needs in connection with increased inventory purchases and accounts receivable. Our ability to collect our accounts receivable on a timely basis is dependent on the intent and ability of our customers to pay on a timely basis. There is no assurance that we will have sufficient cash flow and liquidity to fund our planned activities. As a result, we may need to seek additional funds in the future or curtail or forgo some or all of such activities. If we seek to and are unable to raise funds on favorable terms, or at all, we may not be able to support our commercialization efforts or increase our research and development activities, and the growth of our business may be negatively impacted. As a result, we may be unable to compete effectively. Changes, including those relating to the payor and competitive landscape, our commercialization strategy, our development activities, our government contracting mechanisms, and regulatory matters, may occur beyond our control that would cause us to consume our available capital more quickly. Our future capital requirements will depend on many factors, including:
• our ability to collect accounts receivable on a timely basis;
To finance our activities, we may seek funds through borrowings or through additional rounds of financing, including public or private equity or debt offerings and collaborative arrangements with corporate partners. We may be unable to raise funds on favorable terms, if at all. On November 29, 2024, we entered into an At The Market Offering Agreement (the "Sales Agreement") with H.C. Wainwright & Co., LLC ("Wainwright") under which we may offer and sell shares of our common stock from time to time having an aggregate offering price of up to $20,000,000. Our stock price, market capitalization trading volume, and other macroeconomic factors may affect our ability to raise funds and the terms on which we will be able to raise funds. Our failure to obtain additional necessary financing could impair our ability to conduct our operations, and any such failure to raise capital as and when needed could have a negative impact on our financial condition and on our ability to (i) pursue our business plans and strategies and (ii) maintain our listing on theNasdaqStock Market.
Our lack of consistent sufficient
liquidity could make it more difficult for us to secure additional financing
terms acceptable to us, if at all, and may materially and adversely affect the
terms of any financing that we may obtain and our stock price generally. Our
ability to continue our operations depends upon, among other things, our
ability to increase revenue, reduce operating expenses, and obtain additional
funding through the sale of equity and/or debt securities, debt financing,
strategic transactions, or otherwise. However, there are significant risks and
uncertainties as to our ability to achieve these goals or to obtain required
funding on commercially reasonable terms or at all, including as a result of
the potential adverse impact on our business from macro-economic
conditions. There can be no assurance that we will have sufficient cash flow
and liquidity to fund our planned activities, which could force us to
significantly reduce or curtail our activities and ultimately potentially cease
operations.
The sale of additional equity or convertible debt securities could result in additional dilution to our stockholders. If we borrow additional funds or issue debt securities, lenders or security holders could have rights superior to holders of our common stock, and such indebtedness could contain covenants that will restrict our operations. We might have to obtain funds through arrangements with collaborative partners or others that may require us to relinquish rights to our technologies, therapeutic candidates, or products that we otherwise would not relinquish. If we do not obtain additional resources, our ability to capitalize on business opportunities will be limited and we may be unable to compete effectively, and the growth of our business would be materially and adversely harmed.
We launched new cash pay initiatives, including our gConcierge and gCDirect programs, as well as our direct-to-consumer business channel and patients, providers or consumers may be slow to adopt these programs or their pricing which could adversely impact our business and financial results.
We currently have a cash-pay business channel for our prescription gConcierge and gCDirect programs and direct-to-consumer business channel through our ecommerce websites. We intend to expand our direct-to-consumer business channel by continuing to increase our advertising and promotional activities in 2025. This will require significant investment and expansion of our sales and marketing capabilities and further development by us relating to this business channel. We have limited experience with scaling and commercializing a direct-to-consumer cash-pay business channel in the United States and abroad, which may impact our ability to rely on this channel as a positive source of revenue. If we are unsuccessful in executing our commercialization efforts in our direct-to consumer business channel and do not achieve the sales levels that we reasonably anticipate to materialize in light of current planning and forecasting, we will be unable to recover the investments described above. Additionally, there is a risk that potentially lower pricing of our therapy in the direct-to-consumer cash-pay business channel could lead to lower pricing and reimbursement in our legacy business channels and, therefore, this risk could have an adverse impact on our financial position and results of operations as well as heighten our need to obtain additional financial capital to support our business projects.
If third-party payors do not provide adequate coverage and reimbursement for the use of gammaCore, it may affect our ability to generate significant revenues.
Some of our success in marketing and commercializing gammaCore depends, and will continue to depend, on whether U.S. and international government health administrative authorities, private health insurers, and other payor organizations provide adequate coverage and reimbursement for the cost of our products. Many third-party payors do not currently cover nVNS for any indications other than epilepsy because they have determined all other nVNS modalities to be investigational or experimental. If physicians or insurers do not find our clinical data compelling or wish to wait for additional studies, they may choose not to use or provide coverage and reimbursement for gammaCore. We cannot provide assurance that data we or others may generate in the future will be consistent with data observed in our existing clinical studies, and we cannot provide similar assurance that our current or future published clinical evidence will be sufficient to obtain adequate coverage and reimbursement for gammaCore. Moreover, if we cannot obtain adequate coverage for and reimbursement of the cost of gammaCore, we cannot provide assurance that patients will be willing to incur the full cost of our prescription gammaCore therapy. Access to adequate coverage and reimbursement by third-party payors for our prescription gammaCore therapy or the willingness of patients to bear the entire cost of our therapy is essential in the acceptance of our gammaCore by physicians, patients, and other customers for our therapy.
Third-party payors, whether foreign or domestic, or governmental or commercial, are developing increasingly sophisticated methods of controlling healthcare costs. In addition, in the United States, no uniform policy of coverage and reimbursement for our prescription gammaCore therapy exists among third-party payors. Therefore, coverage and reimbursement for our prescription gammaCore therapy can differ significantly from payor to payor. In addition, payors continually review new technologies for possible coverage and can, without notice, deny coverage for these new products and procedures. As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our prescription gammaCore therapy to each payor separately, with no assurance that coverage and adequate reimbursement will be obtained or maintained if obtained. Reimbursement systems in international markets vary significantly by country and by region within some countries, and reimbursement approvals must be obtained on a country-by-country basis. In many international markets, a product must be approved for reimbursement before it can be approved for sale in that country. Further, many international markets have government-managed healthcare systems that control reimbursement for new devices and procedures.
In most markets, there are private insurance systems and government-managed systems. If sufficient and timely coverage and reimbursement are not available for our current or future gammaCore products, or if reimbursement rates change, in either the United States or internationally, the demand for our gammaCore product and our revenues would be adversely affected.
We have a limited history commercializing our nVNS platform technology, including through direct-to-consumer channels, and commercial success is uncertain.
We have limited experience engaging in direct-to-consumer commercial activities and limited established relationships with marketing agencies, analytic platforms, and social media following, all of which are becoming increasingly important to direct-to-consumer initiatives. We may be unable to gain broader market acceptance for our nVNS platform technology in our sales channels and markets, including direct-to-consumer channels in the United States or abroad, for a number of reasons, including:
• limited brand awareness
We have a limited history commercializing our general wellness and human performanceproducts in the United States for which market acceptance and commercial success are uncertain.
As a small company with a limited history of selling our general wellness and human performance products, we have limited experience engaging in commercial activities and limited established relationships and experience with direct-to-consumer channels and third-party suppliers on whom we depend for the manufacture of our product components. In addition, as a general matter, we may fail to adapt our existing or future technology to patient and customer requirements or emerging treatment standards in our relevant geographic and product markets. New industry standards for the development, manufacture, and marketing of medical devices and general wellness products may evolve in separate ways, and we may not be able to conform to the changes, meet new standards in a timely fashion, or maintain a competitive position in our target marketplace. Moreover, if we face material delays in introducing our products and new technology, we may fail to attract new customers in part due to diminished brand awareness and ineffective implementation of marketing and promotion strategy. Specifically, we may be unable to successfully commercialize our general wellness and human performance products in the United States for a number of reasons, including:
We recently launched our next generation app-enabled consumer wellness product under the brand Truvaga and there can be no assurance that the new product will continue to be well received or adopted, which may impact our financial results.
In April 2024, we launched our next generation app-enabled consumer wellness product with a new form factor that is operated by a companion application. We continue to have limited experience with app-enabled devices which is important to our direct-to-consumer initiatives. Achieving broad market acceptance for app-enabled consumer wellness products in our direct-to-consumer channels in the United States or abroad, for a number of reasons, including:
• limited brand awareness;
Our next generation app-enabled consumer wellness product may require modifications and improvements, which may cause added expense and negatively impact our financial results.
If our next generation app-enabled consumer wellness product is not well received, we may need to make modifications or improvements including software updates, which may require additional research and development expense, or stop selling the new device all together which would negatively impact our financial results.Undiscovered vulnerabilities in our app-enabled wellness product could expose us or consumers to hackers or other unscrupulous third parties who develop and deploy viruses and other malicious software programs that could attack our products. Actual or perceived security vulnerabilities in our products could harm our reputation and lead some customers to return products, to reduce or delay future purchases, or use competing products. In addition, to the extent a competitor were to develop app-software that competes with ours, customers may choose not to purchase our wellness product.
We generate sales of TAC-STIM branded products to active-duty military and accordingly, military budgetary cuts or government strikes could negatively impact our financial results.
We recently launched our TAC-STIM branded products for human performance within the active-duty military channel. Funding for purchases of TAC-STIM product is subject to governmental budgetary decisions and any spending cuts or government policies may negatively impact the timing or amounts of sales to these customers, which could result in lost sales and harm our business and operation results.
Unfavorable global economic conditions and government regulations could adversely affect our business, financial condition or results of operations.
Our
results of operations could be adversely affected by general conditions in the
global economy and in the global financial markets. Factors such as
geopolitical events (including the ongoing wars in Ukraine and Israel),
inflationary pressures, public health crises, and U.S. election cycles, and changes in government administration and policies have
caused extreme volatility and disruptions in the capital and credit markets in
recent years. Uncertainty or unfavorable global economic conditions could
result in a variety of impacts to our business, including weakening demand for
our Inspire system, and adversely impacting our ability to raise additional
capital when needed on acceptable terms, if at all. A weak or declining economy
has strained in the past and may in the future strain our manufacturers or suppliers,
possibly resulting in supply disruption, or cause our customers to delay making
payments for our services. Further, the Trump administration has proposed or
enacted tariffs and substantial changes to trade policies, which could
adversely affect our business. For example, the Trump administration has
imposed tariffs on certain foreign products, including most recently from
Canada, Mexico and China, that in the past have resulted in and may result in
future retaliatory tariffs on U.S. goods and products. We cannot predict
whether these policies will continue, or if new policies will be enacted, or
the impact, if any, that any policy changes could have on our business. Any of
the foregoing could harm our business and we cannot anticipate all of the ways
in which the economic climate and financial market conditions could adversely
affect our business. There is also uncertainty surrounding potential changes to
the healthcare regulatory environment
in the United States, and it is not possible to predict how these changes may
be implemented, and the ultimate effects of such
changes on our business. In addition, the U.S. federal government and other
governments may reduce funding for health care or other
programs or make changes that adversely affect the number of persons eligible
for certain programs, the services provided to enrollees
in such programs and premiums we can charge. The levels of U.S. federal
government spending are difficult to predict and are
subject to significant risk. Considerable uncertainty exists regarding how
future budget and program decisions will unfold, including
the spending priorities of the new presidential administration and Congress,
and what challenges budget reductions, if any, will
present for our business and our industry generally. For example, on January
20, 2025, President Trump established by executive order
the U.S. DOGE Service Temporary Organization ("DOGE") to reform
federal government processes and reduce expenditures, and
on February 5, 2025, the Centers for Medicare & Medicaid Services, or CMS,
announced that it is collaborating with DOGE to determine
where there may be opportunities for more effective and efficient use of
resources. Further, there are reports that the administration
is exploring and implementing policies which may put limits on, or freeze,
credit card spending by government employees on behalf of government agencies,
which could adversely affect our business with the VA. Additionally, the Trump administration
took several Executive Actions, including the issuance of a number of Executive
Orders, that imposed significant burdens on, or otherwise materially delayed,
the FDA’s ability to engage in routine oversight activities, such as
implementing statutes through rulemaking, issuance of guidance, and review and
approval of marketing applications. It is difficult to predict whether or how
these orders will be rescinded and replaced under the current or future administrations.
We have limited operating experience at our current scale of operations. If we are unable to manage our growth effectively, our brand, company culture, and financial performance may suffer.
Implementation of our growth strategy for our gammaCore, general wellness and human performance products may require greater overall planned capital expenditures, and we cannot guarantee that any such increased expenditures will bring forth corresponding, offsetting revenue growth. Because we have a relatively limited history operating our business at its current and evolving scale, it is difficult for us to evaluate our present and future business prospects, including our ability to plan for, and model, future growth scenarios. Our limited operating experience at this scale, combined with the rapidly evolving customer demand and other market structure properties of the health and general wellness geographic and product markets in which we operate and other economic factors beyond our control, reduces our ability to accurately forecast quarterly or annual revenue. In particular, our ability to accurately forecast customer demand could be affected by myriad factors, including, without limitation, changes in customer demand levels for our products, changes in demand levels for the products of our competitors, the relative pace of acceptance of personalized health and general wellness recommendations, unanticipated weakening of various macroeconomic conditions, and capricious shifts in consumer confidence in future macroeconomic stability and/or the public capital markets. Failure to manage our future growth plans effectively could have an adverse effect on our financial condition and operating results.
Any significant disruption to our ecommerce business could result in lost sales.
We launched new cash pay initiatives for our Truvaga consumer product and prescription gammaCore therapy, including our ecommerce websites in both the United States and United Kingdom. Online sales are subject to a number of risks. System interruptions or delays could cause potential patients to fail to purchase our products, harming our brands. Operating our direct-to-consumer ecommerce business depends on our ability to maintain the efficient and uninterrupted administration of online prescription generation, order-taking, and fulfillment activities. Our ecommerce operations subject us to certain risks that could have an adverse effect on our operating results, including risks related to the computer systems that operate our website and related support systems, such as system failures, viruses, denial of service attacks, computer hackers, data privacy breaches, and other disruptions. If we are unable to continually add software and hardware, effectively upgrade our systems and network infrastructure, and take other steps to improve the efficiency and efficacy of our systems, system interruptions or delays could occur that would adversely affect our operating results.
We utilize third-party vendors for our customer-facing ecommerce technology, portions of our prescription generation, order management system, and fulfillment internationally. We depend on our technology vendors to manage “up-time” of the front-end ecommerce store, manage regulatory control measures around prescriptions, the intake of our orders, and export orders for fulfillment. Any failure on the part of our third-party ecommerce vendors, or in our ability to transition third-party services effectively, could result in lost sales and harm our business.
We are subject to increasing operating costs and inflation risks, which may adversely affect our performance.
While we may attempt to offset potential increases in operating costs through a variety of measures focused on increasing revenues or reducing operating expenses, there is no assurance that we will be able to do so. Therefore, operating costs may rise faster than associated revenues resulting in a material negative impact on our cash flow and margins.
We are also impacted by inflationary pressures in wages in local and regional labor markets; structural labor market benefits, whether driven by competition for talent or ordinary course pay increases, and other rising costs. Increases in the rate of inflation could also significantly impact our cost base. In all countries in which we operate, wage inflation, whether driven by competition for talent or ordinary course pay increases, may also increase the cost of our cost products and adversely impact our results of operations and financial condition if we are not able to pass those costs on to our patients and consumers or charge premium prices when justified by actual or perceived market demand.
Moreover, some of our existing or future customers may consider our products and services to be discretionary by nature. Factors affecting the aggregate level of spending for such customers possibly include current macroeconomic conditions, including inflation, consumer confidence in future macroeconomic conditions, fears of recession, the availability and cost of customer credit, rates of employment, and tax rates, which are factors that would adversely impact demand for our products.
We have a history of significant losses. If we do not achieve and sustain profitability and positive cash flow from operations, our financial condition could suffer. Our failure to become and remain profitable could negatively impact the results of our operations as well as your investment.
We have experienced significant net losses, and we may continue to incur losses for the foreseeable future while we operate our sales and marketing infrastructure, endeavor to increase acceptance of our prescription gammaCore therapy and develop our general wellness and human performance product line in relevant markets, fund our various research and development activities, and obtain regulatory clearance or approval for other products or indications in the United States and internationally. We have never been profitable and have incurred net losses in each year since our inception.
We incurred net losses of $11.9 million and $18.8 million for the year ended December 31, 2024 and 2023, respectively. As of December 31, 2024, our accumulated deficit was $177.1 million. Our prior losses, combined with potential future losses, and may continue to have for the foreseeable future, an adverse effect on our stockholders’ deficit and working capital.
To become and remain profitable, we must continue to grow our nVNS platform technology and identify promising areas of adoption with significant potential in terms of marketability, brand awareness, and product distinguishability, among other business considerations. This will require us to be successful in a range of challenging activities, which may include obtaining adequate coverage and reimbursement from payors; marketing and selling any current and future product candidates for which we may obtain appropriate marketing clearance, approval or authorization; developing commercial-scale manufacturing processes; managing various risks associated with the design, manufacture, marketing, and sale of human performance, general wellness product offerings, including compliance risk stemming from inadequate monitoring and analysis of applicable FDA and other relevant guidance as well as applicable consumer protection laws, rules, and regulations, ineffective initial and periodic assessment of claims and intended uses of such offerings, and inadequate government affairs, regulatory change management, or other corporate compliance functions that typically identify and remediate nonconformance with administrative law requirements, whether U.S. federal, state, or otherwise, and execute regulatory compliance processes more broadly; completing future clinical trials of gammaCore for additional therapeutic indications; obtaining additional marketing clearance, approval, or authorization from applicable regulatory authorities; militating against risk in, and enhancing the measures of cost efficiency in, our manufacturing; satisfying any post-marketing requirements; and developing the marketing and promotional expertise necessary to succeed in an integrative, well-funded direct-to-consumer approach through the sale of our general wellness and human performance product offerings. Because of the numerous risks and uncertainties associated with our commercialization efforts as well as our research and clinical development activities, uncertainly remains around the timing to achieve or maintain profitability. We intend to continue to make targeted investments in building our U.S. and UK commercial infrastructure as we commercialize our nVNS platform technology.
If we fail to become profitable or are unable to sustain profitability, then we may be unable to continue our operations at planned levels and may be forced to further reduce, or ultimately terminate, our operations. As of December 31, 2024, we had cash, cash equivalents, restricted cash and marketable securities of $12.2 million. There can be no assurance that we will have sufficient cash flow and liquidity to fund our planned activities, which could force us to significantly reduce or curtail our activities and ultimately and potentially cease operations. Our failure to become and remain profitable would decrease the value of our company and could impair our ability to raise capital, maintain our research and development and marketing efforts, and expand our business or continue our operations. Accordingly, a decline in the market value of our company could cause you to lose all or part of your investment.
We must successfully attract, hire, train, and retain qualified professionals to service our direct-to-consumer sales channels, and we must productively deploy our professionals to become profitable.
Identifying, recruiting, hiring, and retaining professionals, including employees, independent contractors, and consultants with diverse skill sets across our broad geography of operations consistent with servicing our existing, new, and evolving sales channels, including direct-to-consumer are critical to our sales strategy.The market for qualified professionals is evolving, dynamic, and increasingly challenging.Our corporate reputation is a significant factor on consumers’ evaluation of whether to buy our products and on potential employees’ evaluation of whether to join our company.If we are unable to recruit skilled professionals, and if we do not deploy those professionals productively, our results of operations may be adversely impacted.We must manage our sales and marketing team well and plan and train for future needs effectively while accurately predicting physician, patient, and consumer demand. We may not be able to retain such talented professionals long-term for a variety of reasons, including their desire to remain as independent content creators rather than full-time employees.If we are unable to attract, hire, train, and retain highly skilled professionals and productively deploy them on our sales and marketing efforts, we will jeopardize our ability to develop ongoing and future sales, which could adversely affect our financial condition and results of operations.
Competition for highly skilled professionals is intense in the markets where we operate, and we may experience significant employee turnover rates due to such competition. If we are unable to retain professionals with specialized skills, our revenues, operating efficiency, and profitability would decrease.Cost reductions, such as reducing headcount, or voluntary departures that result from our failure to retain the professionals we hire, could negatively affect our reputation as an employer and our ability to hire skilled professionals to meet our business requirements. Increased compensation to retain skilled professionals could lead to lower margins or higher costs and price increases that could in turn lead to a general reduction in demand levels for our products.
Any significant growth in the market for our products and services or our entry into a new market may require an expansion of our employee base for managerial, marketing, operational, financial, and other purposes.During any period of growth, we may face problems relating to our operational and financial systems and controls, including quality control and delivery and service capacities.We would also need to continue to expand, train, and manage our employee base.Continued future growth will impose significant added responsibilities upon the members of management to identify, recruit, maintain, integrate, and motivate new employees.
Our consultants and certain of our sales force are classified as independent contractors, and we can face consequences if it is determined that they are misclassified as such.
There is often uncertainty in the application of worker classification laws, and, consequently, there is risk that our independent contractors could be deemed to be misclassified under applicable law. The tests governing whether a service provider is an independent contractor or an employee are typically highly fact-intensive and vary by jurisdiction. Laws and regulations that govern the status and misclassification of independent contractors are also subject to divergent interpretations by various authorities, which contributes to uncertainty or unpredictability in the law. A misclassification determination or allegation creates potential exposure for us, including, but not limited to, monetary exposure arising from or relating to failure to withhold and remit taxes, unpaid wages, and wage and hour laws and requirements (such as those pertaining to minimum wage and overtime); claims for employee benefits, social security, workers’ compensation and unemployment; claims of discrimination, harassment, and retaliation under civil rights laws; claims under laws pertaining to unionizing, collective bargaining, and other concerted activity; and other claims, charges, or other proceedings under laws and regulations applicable to employers and employees, including risks relating to allegations of joint employer liability. Such claims could result in monetary damages (including, but not limited to, wage-based damages or restitution, compensatory damages, liquidated damages, and punitive damages), interest, fines, penalties, costs, fees (including, but not limited to, attorneys’ fees), criminal and other liability, assessment, or settlement. Such an allegation, claim, adverse determination, including but not limited to with respect to advisors and consultants that provide services to us, could also harm our brand and reputation, which could in turn adversely impact our business.
If we experience price fluctuations for our products, and we are unable to reduce our expenses, including the per unit cost of producing our products, there may be a material adverse effect on our business, results of operations, and financial condition.
We anticipate that we will experience price fluctuations for our products due to pricing pressure relating to our efforts to increase consumer demand for our products. We may also face pricing pressure from managed care organizations and other third-party payors due to increased market power of our payors while the medical device industry consolidates as well as increased competition among suppliers, including manufacturing services providers. If the prices for our products decrease, and we are unable to reduce our expenses, including the cost of sourcing materials, logistics, and the cost to manufacture our products, our sales, results of operations, financial condition and cash flows, could be adversely affected. Macroeconomic conditions may result in increased costs for manufacturing and outsourced services and cause additional pressure to reduce the prices for our products if a recession or depression occurs, and people are unable to afford our products. Any increased or unexpected pricing pressures, costs, delays, or failures to achieve cost savings, and unexpected risks we encounter in our business, including those caused by factors outside our control, could adversely affect our business, results of operations, financial condition and cash flows.
Unstable market and economic conditions may have serious adverse consequences on our business, financial condition and share price.
The global economy, including credit and financial markets, has experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, bank failures, declines in consumer confidence, declines in economic growth, increases in unemployment rates, increases in inflation rates and uncertainty about economic stability. For example, the COVID-19 pandemic resulted in widespread unemployment, economic slowdown and extreme volatility in the global capital markets. Similarly, the current Russia-Ukraine war, and other conflicts including military activities in the Red Sea and Persian Gulf as well as those relating to the Gaza Strip and Israel, and the results of the recent elections in the United States may exacerbate volatility in the global capital markets or disrupt the global supply chain and energy markets. Any such volatility and disruptions may have adverse consequences on us or the third parties on whom we rely. If the equity and credit markets deteriorate, including as a result of political unrest or war, it may make any necessary debt or equity financing more difficult to obtain in a timely manner or on favorable terms, more costly or more dilutive. Inflation can adversely affect us by increasing our costs, including personnel costs. Any significant increases in inflation and related increase in interest rates could have a material adverse effect on our business, results of operations and financial condition.
Future acquisitions, including the recently announced acquisition of NURO, strategic investments, or alliances could disrupt our business and harm our business, financial condition, and operating results.
In addition to our pending transaction to potentially acquire NURO, we may in the future explore potential acquisitions of companies and technologies, strategic investments, or alliances to strengthen our business. Acquisitions involve numerous risks, any of which could harm our business, including:
• regulatory hurdles;
• anticipated benefits may not materialize;
• coordination of product development and sales and marketing functions;
Failure to appropriately mitigate these risks or other issues related to such acquisitions and strategic investments could result in reducing or completely eliminating any anticipated benefits of transactions and harm our business generally. Future acquisitions could also result in dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities, amortization expenses or the impairment of goodwill, any of which could harm our business, financial condition, and operating results.
The closing of our acquisition of NURO is subject to customary closing conditions, and there can be no assurance that NURO will meet the closing conditions, and failure to close the transaction may harm our business and cause our stock price to fall.
On December 17, 2024, we entered into a definitive agreement to acquire NURO (the “NURO Agreement). Consummation of the transaction is subject to customary closing conditions, including approval by holders of at least a majority of the outstanding shares of NURO common stock entitled to vote on the merger, and the filing with the SEC of NURO’s Form 10-K with respect to the fiscal year ended December 31, 2024. There can be no assurance that NURO will meet the closing conditions set forth in the NURO Agreement and failure to consummate the transaction may harm the business and cause our stock price to fall.
Unanticipated costs relating to our acquisition of NURO could have an adverse impact on our business, financial condition, and operating results.
We have incurred substantial legal, accounting, financial advisory and other acquisition-related costs, and our management has devoted considerable time and effort in connection with our acquisition of NURO. If the acquisition of NUROis not completed, we will bear certain fees and expenses associated with the acquisition without realizing the benefits of the acquisition. If the acquisition of NURO is completed, we expect to incur substantial expenses in connection with integrating the business, operations, network, systems, technologies, policies and procedures of NURO. The fees and expenses may be significant and could have an adverse impact on our business, financial condition, and operating results.
We may not be able to fully realize the benefits from the NURO Transaction.
The acquisition of NURO may not perform as expected. If we are unsuccessful at, among other things, integrating NURO into our operations or managing the NURO business, our revenues and margins could be adversely affected, and our business could suffer. See also “Risk Related to our Financial Position, Operating Results and Need for Additional Capital - Future acquisitions, including the recently announced acquisition of NURO, strategic investments, or alliances could disrupt our business and harm our business, financial condition, and operating results.”
Litigation may arise in connection with our acquisition of NURO, which could be costly, prevent consummation of the transaction, divert management’s attention, and otherwise harm our business, financial condition, and results of operations.
Litigation in connection with acquisitions is not unusual and we are aware that purported shareholders of NURO have made written demands, including that NURO’s proxy statement omitted material information with respect to the proposed merger and allegations of breach of fiduciary duties by the directors of NURO. Although NURO believes that such allegations are immaterial and that no supplemental disclosures are required by applicable law, rule, regulation or statute, there can be no assurance that litigation will not ensue. Such litigation may be time-consuming and expensive and may distract our management from running the day-to-day operations of our business. The litigation costs and diversion of management’s attention and resources to address the claims and counterclaims in any litigation related to our acquisition of NURO may adversely affect our business, results of operations, prospects, and financial condition. If our acquisition of NURO is not consummated for any reason, litigation may be filed in connection with the failure to consummate the transaction. Any litigation related to the transaction may result in negative publicity or an unfavorable impression of us, which could adversely affect the price of our common stock, impair our ability to recruit or retain employees, damage our relationships with our customers and business partners, or otherwise harm our operations and financial performance.
Additionally, NURO is, and following the closing of the acquisition, the Company may be, subject to the laws and regulations applicable to NURO, including a settlement order between NURO and the FTC entered into on March 4, 2020, which enjoins NURO from engaging in deceptive acts or practices in violation of the FTC Act in the manufacturing, labeling, advertising, marketing, distribution and sale of certain of NURO’s stimulation devices. Any violation of such laws and regulations, including the settlement, could have an adverse impact on our business, financial condition, and operating results.
Closing down the DPNCheck business may be costly and provide additional regulatory scrutiny.
We do not intend to continue operations of the DPNCheck business. While NURO has agreed to take steps to close down the DPNCheck business prior to closing, other than the agreement which has already been signed for the DPNCheck rights in Japan, there can be no assurance that NURO will be ab le to close down DPNCheck prior to closing the transaction. DPNCheck is a medical device with both insurance coverage and active customers. Shutting down the business may require adherence to certain regulatory conditions which could be costly or create contingent liability to the Company and may harm our business, financial condition, and operating results. See also “Risk Related to our Financial Position, Operating Results and Need for Additional Capital - Future acquisitions, including the recently announced acquisition of NURO, strategic investments, or alliances could disrupt our business and harm our business, financial condition, and operating results.”
Risks Related to Our Business
Regulatory requirements and changes to payors’ prescription benefit plans and medical pathway plans could adversely impact our business and financial results.
Applicable Medicare Part D regulations and federal and state laws will impose additional requirements on us upon execution of our commercialization strategy. Our commercialization strategy, including our planned reimbursement approach with respect to our prescription gammaCore therapy, is likely to subject us to additional audit oversight requirements, and if material contractual or regulatory non-compliance were to be identified, applicable sanctions and/or monetary penalties may be imposed, which could have an adverse effect on our financial position, results of operations, or cash flows.
In time, changes in payor prescription benefit plans or medical pathway plans could have the effect of rendering existing pharmacy benefit plans or medical pathway plans less valuable to beneficiaries and reduce the total market for our prescription gammaCore therapy. In addition, some payors could decide to discontinue providing full or partial coverage to their members for our prescription gammaCore therapy, which could have an adverse effect on our financial position, results of operations, or cash flows.
Our commercialization strategy of gammaCore may expose us to increased billing, cash application, and credit risks.
Our commercialization strategy may involve funding for our prescription gammaCore therapy through medical benefit coverage, the majority of which is provided by private insurers, as well as reimbursement by government agencies. Such claims are generally for very high-priced medicines, and collection of payments from insurance companies, patients, and other payors generally takes substantially longer than for those claims administered through a pharmacy benefit manager. Because of the high cost of these claims, complex billing requirements, and the nature of the medical benefit coverage determination process, these accounts receivable are characterized by higher risk in collecting the full amounts due and applying the associated payments. In addition, possible sales in our EUA business channel to hospitals may involve higher credit risks than sales to other payors.
Revenues from the sale of our prescription gammaCore therapy partially depend on the continued availability of reimbursement by government and private insurance plans. The government’s Medicare regulations are complex, and, as a result, the billing and collection process is time-consuming and typically involves the submission of claims to multiple payors whose payment of claims may be contingent upon the payment of another payor. Because of the coordination with multiple payors, and the complexity in determining reimbursable amounts, these accounts receivable have higher risk in collecting the full amounts due and applying the associated payments.
Our prescription gammaCore therapy commercialization strategy may require premium payments from members for the ongoing benefit as well as amounts due from insurers and government-sponsored or national health insurance programs. As a result of the demographics of the consumers covered under these programs, and the complexity of the calculations as well as the potential magnitude and timing of settlement for amounts due from insurers and government-sponsored or national health insurance programs, these accounts receivable may be subject to billing and realization risk.
A significant portion of our sales will be made to the VA pursuant to our FSS contract of via open market purchases. The U.S. federal government and other governments may reduce funding for health care or other programs or make changes that adversely affect the number of persons eligible for certain programs, the services provided to enrollees in such programs and premiums we can charge. The levels of U.S. federal government spending are difficult to predict and are subject to significant risk. Considerable uncertainty exists regarding how future budget and program decisions will unfold, including the spending priorities of the new presidential administration and Congress, and what challenges budget reductions, if any, will present for our business and our industry generally. For example, on January 20, 2025, President Trump established by executive order DOGE to reform federal government processes and reduce expenditures, and on February 5, 2025, the Centers for Medicare & Medicaid Services, or CMS, announced that it is collaborating with DOGE to determine where there may be opportunities for more effective and efficient use of resources. Further, there are reports that the administration is exploring and implementing policies which may put limits on, or freeze, credit card spending by government employees on behalf of government agencies, which could adversely affect our business with the VA. Any reduction in government spending or limitations put in place through government processes to reduce expenditures could have an adverse effect on the results of operations and financial condition.
Furthermore, we expect a portion of our 2025 sales will be made pursuant to the distribution agreement with Lovell Government Services (“Lovell”) and their contract vehicles. As a result of this relationship an increasing portion of gammaCore therapy sales in the government channel will be processed through Lovell and payment made to us by Lovell according to the terms of the Lovell distribution agreement. Additionally, we may be subject to increased credit risk associated with state and local government agencies experiencing increased fiscal challenges. As a result of the aforementioned risks, our commercialization strategy, even if successful, may involve the incurrence of bad debt expenses potentially impacting our results of operations and liquidity. Any payment delays or disputes in our relationship with Lovell could have an adverse effect on our results of operations and financial condition.
Third-party payors have been resistant to cover gammaCore through pharmacy benefit plans, which has hindered our commercialization strategy and required changes to our existing business that could delay and negatively impact our ability to generate revenue.
In the United States, our initial strategy to obtain reimbursement for gammaCore under payors’ pharmacy benefit has not achieved adequate coverage and reimbursement. To obtain coverage and reimbursement from Medicare and any other third-party payor that will not cover gammaCore under a pharmacy benefit, we are seeking coverage and reimbursement as a medical device or item of durable medical equipment. While this would provide coverage for the therapy under a patient’s medical insurance, patients may be unwilling to pay out of pocket for deductibles and co-pay for the therapy. Any determination by commercial payors to provide coverage for gammaCore through the medical benefit pathway and not through pharmacy benefit pathway will further delay or pose more risks to our commercial plan for prescription gammaCore therapy since additional medical device codes are required, and we may incur additional direct and indirect expenses in assisting patients with their co-pay or other costs emergent from the determination by payors to not cover gammaCore under the pharmacy benefit pathway. Coverage by commercial payors through the medical benefit pathway or other decisions by commercial payors that have the effect of making patients personally responsible for the costs of, or costs associated with, our prescription gammaCore therapy could adversely impact our results of operations and financial condition.
These potential changes may entail numerous risks, including increased operating expenses, requirements to comply with healthcare regulatory laws, the loss of or delay in obtaining revenue, and uncertainty in our ability to successfully implement the modifications. The failure to obtain recognition by third-party payors under the pharmacy benefit model has required us to modify our commercialization strategy, our distribution model, our pricing, and our operations, any of which could have a material adverse effect on the sales of gammaCore and the results of our operations and financial condition.
We must demonstrate to patients, physicians, and third-party payors the medical and economic benefits of our prescription gammaCore therapy compared to those of our competitors or other available therapies, and such comparisons may not be realizable.
Physicians play a significant role in determining the course of a patient’s treatment and, as a result, the type of product that will be used to treat a patient. As a result, our success depends, in large part, on effectively marketing our prescription gammaCore therapy to physicians. We have received several 510(k) clearances from the FDA for prescription gammaCore therapy; however, such clearances do not necessitate adoption by physicians. In order for our prescription gammaCore therapy to gain widespread adoption, we must successfully demonstrate to physicians the medical and economic benefits of our prescription gammaCore therapy compared to competitors’ products, including pharmaceutical and neuromodulation devices that have been marketed for the treatment of different forms of primary headache by competitors with greater financial or other resources. We also may face challenges because nVNS, is relatively new compared to existing traditional treatments for cluster and migraine headaches.
Acceptance of our prescription gammaCore therapy depends on educating patients and physicians as to the distinctive characteristics, perceived benefits, safety, ease of use, and cost-effectiveness of our prescription gammaCore therapy relative to our competitors’ products and communicating to physicians the proper use of our prescription gammaCore therapy. If we are not successful in convincing patients and physicians of the merits of our prescription gammaCore therapy or educating them on the benefits of our prescription gammaCore therapy, they may not seek a prescription or prescribe our prescription gammaCore therapy, and we may be unable to increase our sales, sustain our growth, or achieve profitability. In addition, we believe support of our products by physicians is essential for market acceptance and adoption. If we do not receive support from physicians, or long-term data do not show the benefits of using our prescription gammaCore therapy, patients and physicians may not use it. In such circumstances, our results of operations would be materially and adversely affected.
We must demonstrate to customers the benefits of nVNS platform technology for general wellness and human performance compared to those of our competitors and such comparisons may not be realizable.
Consumer sentiments play a significant, and increasing, role in determining customer adoption of certain general wellness products. In general, our success depends on the continued willingness of consumers to use health and general wellness products and services and to place value in the primacy of scientific evidence in the marketing of general wellness products and services. To be successful, we will need to continue to significantly invest in educating consumers about our products. This need is elevated in the light of the health and general wellness market’s particular characteristics. The market is heavily saturated, and the expected future demand for and market acceptance of innovative products and services in the market is uncertain. While we believe it is reasonable to predict that the overall health and general wellness market will continue to grow, it is difficult to predict the future growth rates, if any, of certain sectors that intersect with comparable and substitution products relevant to our business. As a result, if our market does not further develop, or develops more slowly than expected, or becomes saturated with competitors with greater financial or other resources, or if our products do not achieve sufficient adoption in accordance with present and future business plans, our financial condition, and operating results could be materially and adversely affected. In particular, as stated previously, acceptance of our nVNS platform technology depends on educating patients as to the distinctive characteristics, perceived benefits, safety, ease of use, and cost-effectiveness of our nVNS platform technology relative to our competitors’ products and communicating to customers the proper use of our nVNS products. As a result, our success depends, in large part, on effectively marketing our nVNS platform technology to consumers. For our nVNS platform technology to gain widespread adoption, we must successfully demonstrate to consumers the relative benefits of our nVNS platform technology compared to competitors’ products. We also may face challenges because nVNS is relatively new compared to existing general wellness products across a multitude of price points. Further, the competitive landscape for general wellness products is crowded and continues to rapidly evolve. Therefore, our general wellness business line faces a diverse set of challenges that may have a significant effect on your investment.
Stimulating therapeutically relevant fibers in the vagus nerve by a proprietary high-frequency burst waveform that passes through the skin cells represents a novel approach to treating pain, and we must overcome significant challenges to successfully develop, commercialize, and manufacture our product.
We have concentrated our development and commercialization efforts on products based on a platform of stimulating therapeutically relevant fibers in the vagus nerve by a proprietary high-frequency burst waveform that passes through the skin. We believe that our product platform represents a novel approach to treating pain. However, to date, the FDA has cleared only our gammaCore products for commercialization based on this platform. The processes and requirements imposed by the FDA or other applicable health authorities may cause delays and additional costs in obtaining approvals for marketing authorization for our gammaCore products. Because our platform is novel, regulatory agencies, as well as insurance and other coverage providers and payors, may lack experience in evaluating product candidates like gammaCore and gammaCore Sapphire. This inexperience may lengthen the regulatory review process, increase our development costs, and delay or prevent reimbursement and commercialization of our platform products. Additionally, advancing this novel platform creates significant challenges for us, including:
• enrolling sufficient numbers of patients in future clinical trials;
• manufacturing our products on a large scale and in a cost-effective manner;
We must be able to overcome these challenges in order to successfully develop, commercialize, and manufacture our gammaCore and product candidates.
Our operating results may vary significantly from quarter to quarter because of seasonality, bulk orders, shipments to distributors, or otherwise.
Our quarterly revenue and results of operations may fluctuate from quarter to quarter due to, among others, the following reasons:
• patients' acceptance of our nVNS platform technology;
• customer acceptance of our general wellness and human performance products;
• the timing and amount of TAC-STIM sales and cash disbursements;
• payor adoption;
• estimated useful life of products;
• the timing of when individual payor coverage becomes available;
• patient and physician product returns;
• fluctuations in our marketing spend to drive patient purchases;
• the introduction of new products, therapies, and technologies by competitors;
• the productivity of our field sales function;
• supplier, manufacturing, or quality issues with our products;
• the timing of stocking orders from our distributors;
• timing of working capital requirements;
• the timing of customer budget cycles.
Our results may also fluctuate on a seasonal basis due to the seasonality of cluster and migraine headache attacks for our medical device products and the holiday seasons for our general wellness products, which could affect the comparability of our results between periods. These seasonal variations are difficult to predict accurately, may vary across different markets, and at times may be entirely unpredictable, which introduce additional risk into our business because we may rely upon forecasts of customer demand to build inventory in advance of anticipated sales. In addition, we believe our limited commercial history has, in part, made our seasonal patterns more difficult to discern, making it more difficult to predict future seasonal patterns.
We derive a material portion of our revenue made pursuant to our qualifying contract under the Federal Supply Schedule or FSS, as well as open market sales to individual facilities within the government channels. While we have submitted a follow-on offer application for a new contract, there can be no assurance our application will be accepted which could adversely impact our business, results of operations, and financial condition.
The majority of our 2024 sales were made pursuant to our qualifying contract under the Federal Supply Schedule or FSS, which was secured by us in December 2018, as well as open market sales to individual facilities within the government channels. The initial term of our FSS contract was scheduled to expire on January 15, 2024. On January 5, 2024, we obtained a modification to the initial contract, temporarily extending the term from January 15, 2024, to March 14, 2024, and subsequently extended to June 14, 2025. Although we continue to work with the appropriate government personnel to obtain a follow-on FSS contract, there can be no assurance that the VA will accept our follow-on application and replace our contract which may limit or eliminate our ability to sell certain gammaCore products into the government channel pursuant to our qualifying FSS contract or individual facilities that utilize our FSS contract number for open market purchases. The delay in contract replacement or loss of our FSS contract altogether could adversely affect our business, results of operations, and financial condition.
In August 2023, we signed a non-exclusive distribution agreement with Lovell Government Services (Lovell) providing Lovell the right to list and distribute certain gammaCore products into the federal market. The gammaCore products offered through Lovell provide government customers with similar product configuration options to those currently sold through our existing FSS contract and open market sales made directly to individual VA facilities. Between November 2023 and January 2024, certain gammaCore products were added to the FSS, the VA’s Distribution and Pricing Agreement (DAPA), GSA Advantage, and Defense Logistics Agency’s ECAT system procurement portals through the Lovell contract vehicles, enabling the purchase of gammaCore products within the government channel and throughout the federal markets, including, but not limited to, the VA. We expect a significant portion of our 2025 sales to continue in the government channel broadly pursuant to our FSS contract if extended and / or through our relationship with Lovell and its qualifying FSS, GSA, DAPA, ECAT contracts for which gammaCore has been added. There can be no assurance that government channel customers will adopt the new ordering process through Lovell and its qualifying FSS, GSA, DAPA, ECAT contracts, which could adversely affect our business, results of operations, and financial condition.
We derive a material portion of our revenue from a limited number of customers, and the loss of one or more of these customers could adversely impact our business, results of operations, and financial condition.
Our customer base is concentrated. During the years ended December 31, 2024 and 2023, revenue from VA facilities pursuant to the terms and conditions of our qualifying contract under the FSS and open market sales represented 70.6% and 60.1% of our total revenue, respectively. In 2024, one specific VA facility represented approximately 11.3% of our revenue from this channel. If we were to lose one or more of our significant customers, our revenue may be adversely affected. The loss of one or more of our significant customers could adversely affect our business, results of operations, and financial condition.
We expect an increasing portion of our 2025 sales will be made pursuant to the distribution agreement with Lovell and its contract vehicles, concentrating our customer base even further as revenue generated from the VA facilities pursuant to the terms and conditions of our qualifying contract under the FSS and open market sales is partially shifted to sales under our agreement with Lovell. Any delay in payments by our customers as well as any disagreement, disagreement or change in relationship status with the FSS procurement office, Lovell or other customers could adversely affect our business, results of operations, and financial condition.
We currently generate a small portion of our revenue through distribution of other manufacturers products through our government sales channel, and any issue arising from these products may impact our relationship with the Veterans Administration resulting in negative impact to our business.
Pursuant to a distribution agreement with Lovell, we currently distribute products manufactured by other companies throughout the VA. We do not control the production of these products, their regulations, or efficacy. There can be no assurance that the VA will adopt these products and any issues stemming from the use of these products distributed by or on behalf of the Company may adversely affect our relationship with the VA and negatively impact our business, results of operations, and financial condition. Additionally, there can be no assurance that we will continue to distribute such products throughout the VA in the future, which could negatively impact our business, results of operations, and financial condition.
We currently distribute products manufactured by other companies. Any disruption in our supply chain, or our failure to successfully manage our relationships with our suppliers could harm our business.
We distribute products supplied by other companies. If we fail to manage our relationships with our suppliers effectively, or if our suppliers experience delays, disruptions, capacity constraints, shortage of raw materials or components, or quality control problems in their operations, our ability to ship products may be impaired and our competitive position and reputation could be harmed. In addition, any adverse change in our suppliers financial or business condition could disrupt our ability to supply quality products to our customers. Such reliance increases our risks of various supply chain disruptions. In addition, qualifying a new supplier could be an expensive and lengthy process. If we experience increased demand that our suppliers are unable to fulfill, or if they are unable to provide us with adequate supplies of high-quality products for any reason, we could experience a delay in our order fulfillment, and it may have a material adverse effect on our business, results of operations, and financial condition.
Furthermore, we expect our suppliers to comply with all legal requirements relating to health and safety, labor relations, the environment, supply chain ethics, and transparency. If any of our suppliers engage in or are perceived to have engaged in legal or ethics violations, we may be unable to continue our relationship with such suppliers. If we are required to find alternative sources of supply, qualification of alternative suppliers and the establishment of reliable supplies could result in delays and a possible loss of sales, which may have a material adverse effect on our business, results of operations, and financial condition. Furthermore, the actions of our suppliers could, in certain instances, result in reputational damage to us.
Even when we effectively manage our suppliers and logistics partners, forces outside our control may still disrupt our supply chain. Such factors may include catastrophic events such as the COVID-19 pandemic, raw material shortages and price volatility; and sanctions, war, or other geopolitical conflict.
Failure to protect our information technology infrastructure against cyber-based attacks, network security breaches, service interruptions, or data corruption could significantly disrupt our operations and adversely affect our business and operating results.
We rely on information technology and telephone networks and systems, including the internet, to process and transmit sensitive electronic information and to manage or support a variety of business processes and activities, including sales, billing, customer service, marketing, procurement and supply chain, manufacturing, and distribution. We also rely on information technology systems to support our proprietary data warehouse, which, among other things, maintains patient product serial numbers and allows for prescription refills at specialty pharmacies through RFID cards. In addition, we use enterprise information technology systems to record, process, and summarize financial information and results of operations for internal reporting purposes and to comply with regulatory, financial reporting, legal, and tax requirements. Our information technology systems, some of which are managed by third parties, and the information technology systems of third parties may be susceptible to damage, disruptions, or shutdowns due to computer viruses, attacks by computer hackers, failures during the process of upgrading or replacing software, databases or components thereof, power outages, hardware failures, telecommunication failures, user errors, or catastrophic events. Despite the precautionary measures we and third parties have taken to prevent breakdowns in information technology and telephone systems, if these systems are breached or suffer severe damage, disruption, or shutdown, and we are unable to effectively resolve the issues in a timely manner, our business and operating results may suffer, and we may be subject to related lawsuits.
We may engage in future acquisitions that increase our capital requirements, dilute our stockholders, cause us to incur debt, or assume contingent liabilities that subject us to other risks.
We may evaluate various strategic transactions, including licensing or acquiring complementary therapies, products and technologies, or businesses. Any potential acquisitions may entail numerous risks, including increased operating expenses and cash requirements, assimilation of operations and products, retention of key employees, diversion of our management’s attention, and uncertainties in our ability to maintain key business relationships of the acquired entity or entities. In addition, if we undertake acquisitions, we may issue dilutive securities, assume or incur debt obligations, incur large one-time expenses, and acquire intangible assets that could result in significant future amortization expense. Moreover, we may not be able to locate suitable acquisition opportunities, and this inability could impair our ability to grow or obtain access to technology or products that may be important to the development of our business.
We may seek to grow our business through acquisitions or investments in new or complementary businesses, products, or technologies through the licensing of products or technologies from third parties. The failure to manage acquisitions, investments, licenses, or other strategic alliances, or the failure to integrate them with our existing business, could harm our business.
Our success depends in part on our ability to continually enhance and broaden our product offerings in response to changing customer demands, competitive pressures, and technologies. Accordingly, from time to time, we may consider opportunities to acquire or make investments in businesses or make investments in or license other technologies and products, that may enhance our capabilities, complement our current products, or expand the geographic or product breadth of our markets or customer base.
Potential and completed acquisitions, strategic investments, licenses, and other alliances involve numerous risks, including:
• issues maintaining uniform standards, procedures, controls, and policies;
• potential losses related to investments in other companies;
• potential loss of key employees of the acquired business; and
• increased transaction, legal and accounting compliance costs.
We do not know if we will be able to identify acquisitions or strategic relationships we deem suitable, whether we will be able to successfully complete any such transactions on favorable terms or at all, or whether we will be able to successfully integrate any acquired business, product, or technology into our business or retain any key personnel, suppliers, or distributors.
To finance any acquisitions, investments, or strategic alliances, we may choose to issue shares of our common stock or other equity-linked securities as consideration, which could dilute the ownership of our stockholders. Additional funds may not be available on terms that are favorable to us, or at all. If the price of our common stock is low or volatile, we may be unable to consummate any acquisitions, investments, or strategic alliances using our stock as consideration.
If serious adverse events or other undesirable side effects are identified during the use of our prescription gammaCoretherapy in clinical trials or IITs(collectively and unless the context requires otherwise, “clinical trials”) or general wellness product consumer studies, it may adversely affect our development of such product candidates.
Undesirable side effects caused by our prescription gammaCoretherapy or general wellness products could cause us or regulatory authorities to interrupt, delay, or halt nonclinical studies and future clinical trials or could make it more difficult for us to enroll patients in clinical trials and could, if injuries occur, result in product liability litigation. If serious adverse events or other undesirable side effects or unexpected characteristics of our prescription gammaCoretherapy or general wellness products are observed in clinical trials or consumer studies, further clinical development of such product candidate may be delayed or we may not be able to continue development of such product candidate at all, and the occurrence of these events could have a material adverse effect on our business. Undesirable side effects caused by our prescription gammaCoretherapy or general wellness products could also result in an inability to obtain consumer confidence in the efficacy of nVNS, the delay or denial of regulatory clearance or approval by the FDA or other regulatory authorities or in more restrictive labels than we desire.
Commercialization of our prescription gammaCore Sapphire therapy for additional conditions may require clinical trials, which are very expensive, take a long time to complete, and are difficult to design and implement and involve uncertain outcomes. Furthermore, results of earlier preclinical studies and clinical trials may not be predictive of results of future preclinical studies, clinical trials, or commercial success.
The risk of failure for our prescription gammaCore therapy in additional treatment areas is high. It is difficult if not impossible to predict when or if any of our product candidates will receive regulatory clearance or approval in additional areas of indication. To obtain the requisite regulatory clearance or approvals to market and sell our prescription gammaCore therapy in additional indications, we must demonstrate through extensive preclinical studies and clinical trials that it is safe and effective in humans for use in each additional target indication. Clinical testing is expensive and can take many years to complete, and the outcome is inherently uncertain. Failure can occur at any time during the clinical trial process.
In addition, the results of preclinical studies and early clinical trials may not be predictive of the results of later-stage preclinical studies or clinical trials. The results generated to date in preclinical studies or clinical trials for our prescription gammaCore therapy in cluster and migraine headaches do not ensure that later preclinical studies or clinical trials will demonstrate similar results in other therapeutic indications, and it should be noted that we did not achieve the primary endpoints in our pivotal trials for cluster and migraine headaches. There can be no assurance that the FDA and other regulatory authorities will be satisfied by data from clinical trials for other treatment indications, even where we believe such data to be compelling. Our prescription gammaCore therapy may fail to show the desired safety and efficacy traits in additional areas of indication in future clinical trials despite having progressed through preclinical and earlier stage clinical trials. Many companies in the pharmaceutical and medical device industries have suffered significant setbacks in later-stage clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials, and we cannot be certain that we will not face similar setbacks. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have, nonetheless, failed to obtain marketing clearance or approval of their products.
In some instances, there can be significant variability in safety or efficacy results between different clinical trials of the same product candidate due to numerous factors, including changes in clinical trial procedures set forth in protocols, differences in the size and type of the patient populations, adherence to the dosing regimen and other clinical trial protocols, and the rate of dropout among clinical trial participants. If we fail to produce positive results in our planned preclinical studies or clinical trials of any of our product candidates, the development timeline and regulatory clearance and commercialization prospects for our product candidates, and, correspondingly, our business and financial prospects, would be materially and adversely affected.
Any clinical trial we conduct in the United States may subject us to additional costs and detriments compared to a foreign clinical trial, which may negatively impact our financial condition and our business.
Conducting any clinical trial within the United States may subject us to additional costs and drawbacks, which may negatively impact our financial condition and our business. The costs of a foreign clinical trial (or FCT) may be significantly lower than costs of an equivalent trial in the United States, as the materials and location costs of an FCT may be lower than a trial within the United States. Electing to run a clinical trial within the United States may impose significant added financial costs compared to a FCT. Among other factors, the faster recruitment of patients overseas and completion of trials in a FCT may represent considerable cost savings that we would forego in conducting clinical trials within the United States. These and other costs from conducting any clinical trial for our prescription gammaCore therapy instead of a FCT may negatively impact our financial condition and our business. In addition, a FCT may offer other non-financial benefits, such as a larger potential population of qualified patients to participate in clinical trials compared against the potential enrollee population in the United States where clinical trials may compete for a limited number of the same potential patients. These and other foregone benefits of a FCT may negatively impact our financial condition and our business.
If we are unable to enroll patients in future clinical trials, our research and development efforts could be adversely affected.
Identifying and qualifying patients to participate in future clinical trials for our prescription gammaCoretherapy in additional areas of indications are critical to our success. Successful and timely completion of future clinical trials will require that we enroll a sufficient number of patients who remain in the study until conclusion. If we are unable to enroll a sufficient number of patients in our future clinical trials, ourtimelinesfor recruiting patients, conducting clinical trials, and obtaining regulatory clearance or approval of our prescription gammaCoretherapy in additional areas of indication may be delayed. These delays could result in increased costs, delays in advancing our product development, delays in testing the effectiveness of our technology, or termination of clinical trials altogether.
We cannot predict how successful we will be at enrolling patients in future clinical trials. Patient enrollment is affected by other factors including:
• the eligibility criteria for the trial in question;
• the perceived risks and benefits of the product candidate in the trial;
• the efforts to facilitate timely enrollment in clinical trials;
• the design of the trial;
• the patient referral practices of physicians;
• the ability to monitor patients adequately during and after treatment;
• the ability to obtain and maintain patient consents;
In addition, our clinical trials will compete with other clinical trials that are in the same therapeutic areas as we are targeting, and this competition will reduce the number and types of patients available to us because some patients who might have opted to enroll in our trials may instead opt to enroll in a trial being conducted by one of our competitors.
Delays in the completion of any clinical trial of our prescription gammaCoretherapy will increase our costs, slow down our expansion into additional treatment indications and approval process, and delay or potentially jeopardize our ability to commence product sales and generate future revenue.We have recently reduced resources in research and development which may delay our receipt of regulatory approvals for additional indications.In addition, many of the factors that may lead to a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory clearance or approval of our prescription gammaCoretherapy in additional treatment indications.
Clinical trials may be delayed, suspended, or terminated for many reasons, which will increase our expenses and delay the time it takes to develop and expand our prescription gammaCoretherapy in additional treatment indications.
We may experience delays in our ongoing or future preclinical studies or clinical trials, and we do not know whether future preclinical studies or clinical trials will begin on time, need to be redesigned, will enroll an adequate number of patients on time or be completed on schedule, if at all. The commencement and completion of clinical trials may be delayed, suspended or terminated as a result of many factors, including:
• changes in regulatory requirements, policies and guidelines;
• delays relating to adding new clinical trial sites;
• delays in establishing the appropriate dosage levels;
• the quality of the product candidate falling below acceptable standards;
Consistent with recent years, we continue not to invest in certain clinical trials in indications that are more exploratory in nature.
We could also encounter delays if a clinical trial is suspended or terminated (or paused by us, as we have done with our PREMIUM II trial) by theIRBsor ethics committees of the institutions at which such trials are being conducted, by the data safety monitoring board for such trial, or by the FDA or other regulatory authorities. Such authorities may suspend or terminate a clinical trial due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements, including theFDA’scurrent Good Clinical Practice (or GCP) regulations, or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a drug, changes in governmental regulations, or administrative actions, or lack of adequate funding to continue the clinical trial.
In addition, we may encounter delays if the FDA, or other regulators, conclude that our financial relationships with investigators result in a perceived or actual conflict of interest that may have affected the interpretation of a study, the integrity of the data generated at the applicable clinical trial site, or the utility of the clinical trial itself. Principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and receive cash compensation and/or stock options in connection with such services. If these relationships and any related compensation to, or ownership interest by, the clinical investigator carrying out the study result in perceived or actual conflicts of interest, or if the FDA or other regulators conclude that the financial relationship may have affected interpretation of the study, the integrity of the data generated at the applicable clinical trial site may be questioned, and the utility of the clinical trial itself may be jeopardized, which could result in the delay or rejection by the FDA. Any such delay or rejection could prevent us from commercializing any of our products currently in development.
If we experience delays in the commencement or completion of any clinical trial of our product candidates, or if any of our future clinical trials are terminated, the commercial prospects of our prescription gammaCore therapy may be harmed, and our ability to generate revenue from sales may be delayed or materially diminished.
We do not know whether any of our future preclinical studies or clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all. Any delays in completing clinical trials will increase our costs, slow down our product candidate development and approval process, and jeopardize our ability to commence sales and generate associated revenue. Any of these occurrences may significantly harm our business, financial condition, and prospects. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial, suspension, or revocation of expanded regulatory clearance or approval of our product candidates. Significant preclinical study or clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our product candidates or could allow our competitors to bring products to market before we do and impair our ability to successfully commercialize our product candidates.
Even if our products are approved or cleared in the United States and obtain a CE Certificate of Conformity in the EEA, comparable regulatory authorities of additional foreign countries must also approve the manufacturing and marketing of our products in those countries. Approval and clearance procedures vary among jurisdictions and can involve requirements and administrative review periods different from, and greater than, those in the United States or the EEA, including additional preclinical studies or clinical trials. Any of these occurrences may harm our business, financial condition, and prospects significantly.
Our cost-control efforts might not assure profitability and may affect morale and make it difficult to retain employees, independent contractors, or attract new ones.
We have previously implemented reductions in force affecting a large portion of our workforce, redeployed resources across our organization, and taken other measures to reduce our operating expenses. These efforts do not assure profitability. Furthermore, no assurance can be given as to the need to implement additional cost reductions in the future. Cost savings may also be offset by future hiring or other costs incurred in pursuing strategic objectives. Reductions in force, strategic redeployment, and other cost-cutting measures could adversely affect morale in our organization and our reputation as an employer, which could lead to the loss of valued employees and could make it more difficult for us to hire new employees in the future, and the reduction of our headcount could adversely affect our operations and make it more difficult for us to pursue new opportunities and initiatives in the future.
We have outsourced certain finance and accounting functions and may outsource other back-office functions, which will make us more dependent upon third parties.
In an effort to be more efficient and generate cost savings, we have outsourced certain finance and accounting functions. As a result, we rely on third parties to ensure that our needs are sufficiently met. This reliance subjects us to risks arising from the loss of control over processes, changes in pricing that may affect our operating results, and potentially, termination of these services by our suppliers. The failure of our service providers to perform services in a satisfactory manner may have a significant adverse effect on our business. We may outsource other back-office functions in the future, which would increase our reliance on third parties.
If we fail to properly manage our anticipated growth, our business could suffer.
We have a relatively short history of operating as a commercial company. We intend to continue to grow our existing business and may experience periods of rapid growth and expansion, which could place significant additional strain on our limited personnel, information technology systems, and other resources. In particular, maintaining our sales force in the United States requires significant management, financial, and other supporting resources. Any failure by us to manage our growth effectively could have an adverse effect on our ability to achieve our commercialization and development goals.
In the future, we may experience difficulties with manufacturing, quality control, component supply, inventory, distribution, and shortages of qualified personnel, among other problems. These problems could result in delays in availability of our prescription gammaCore therapy or general wellness products and increases in expenses. Any such delay or increased expense could adversely affect our ability to generate revenue.
Future growth will also impose significant added responsibilities on management, including the need to identify, recruit, train, or integrate new businesses and additional employees. In addition, rapid and significant growth will place a strain on our administrative and operational infrastructure.
In order to manage our operations and growth, we will need to continue to improve our operational and management controls, reporting and information technology systems, and financial internal control procedures. If we are unable to manage our growth effectively, it may be difficult for us to execute our business strategy, and our operating results and business could suffer.
If we fail to continue to develop and retain an effective sales force, our business could suffer.
In order to continue to market and sell our nVNS platform technology, we may in the future need to substantially expand our sales force. There is significant competition for such personnel. Once hired, the training process is lengthy because it requires significant education for new sales personnel to achieve the level of clinical competency with our products expected by physicians. Upon completion of the training, our territory business managers typically require "lead time" in the field to grow their network of accounts and achieve the productivity levels we expect them to reach. Furthermore, the use of our products often requires or benefits from direct support from us. If we are unable to attract, motivate, develop, and retain qualified sales personnel, and if our sales personnel do not achieve the productivity levels, we expect them to reach, our revenue will not grow at the rate we expect and our financial performance will suffer. Also, to the extent we hire personnel from our competitors, we may have to wait until applicable non-competition provisions have expired before deploying such personnel in restricted territories or incur costs to relocate personnel outside of such territories, and, in the past, we have been subject to, and may, in the future, be subject to, allegations that these new hires have been improperly solicited, or that they have divulged to us proprietary or other confidential information of their former employers. Any of these risks may adversely affect our business.
We have limited history of commercializing general wellness products within the United States or abroad. We have limited established relationships with stakeholders and experience in direct-to-consumer channels and limited relationships with third-party suppliers on whom we depend for the manufacture of our product components.
If our competitors are better able to develop and market primary headache treatments that are safer, more effective, less costly, easier to use, or otherwise more attractive than our prescription gammaCore therapy, our business and business prospects will be adversely impacted.
The pharmaceutical and medical device industries are highly competitive and subject to rapid innovation and change. Our success depends, in part, upon our ability to establish a competitive position in the cluster and migraine markets by securing broad market acceptance of our prescription gammaCore therapy. We believe that the primary competitive factors in the primary headache markets including those for CH and migraine headache are cost, demonstrated clinical effectiveness, product safety, reliability and durability, ease of use, product support and service, minimal side effects, and sales force experience and relationships. We face significant competition in the United States and internationally, which we believe will intensify over time. Many of the companies developing or marketing competing products enjoy several advantages over us, including:
• more experienced and larger sales forces;
• greater name recognition;
• more established sales and marketing programs and distribution networks;
• earlier regulatory clearance or approval;
• long-established relationships with physicians and hospitals;
• the ability to acquire and integrate our competitors and/or their technology;
• established history of product reliability, safety, and durability;
Our competitors may develop and patent processes or products earlier than us, obtain patents that may apply to us at any time, obtain regulatory clearance or approvals for competing products or processes more rapidly than us, or develop more effective or less expensive products or technologies that render our technology or products obsolete or less competitive. We also face fierce competition in recruiting and retaining qualified sales, scientific, and management personnel, establishing clinical trial sites, and enrolling patients in clinical studies. If our competitors are more successful than us in these matters, our business may be harmed.
Many of our competitors are large, well-established companies with substantially greater resources than us and have a long history of competing in the migraine or general wellness markets.
Many of our current and potential primary headache competitors are publicly traded, or are divisions of publicly traded, major pharmaceutical and medical device companies that have substantially greater financial, technical, sales and marketing resources than we do. We will face steep competition from Allergan plc, Amgen Inc., H. Lundbeck A/S, Novartis International AG, Teva Pharmaceutical Industries Ltd., Pfizer Inc., and Eli Lilly and Company, among other established and potential competitors that may be better capitalized and have a history of commercializing products around the world. Also, several neuromodulation devices are approved for the treatment and/or prevention of migraine, including Cefaly, Nerivo, Savi Dual, or any other neuromodulation devices that may be marketed for use in treating pain associated with primary headache. Cefaly has been granted an OTC clearance allowing it to be sold without a prescription, and the impact of this clearance on the competitive landscape remains to be seen. Given the size of the existing and potential market in the United States, we expect that, as we continue our commercial efforts in the United States, our current and future competitors, including any who may compete with us in the direct-to-consumer channel, will take aggressive action to protect their current share of the market.
We will face significant competition in establishing our market share in the United States and may encounter unforeseen obstacles and competitive challenges in the United States. In addition, some physicians have a long-standing practice of using the headache products of our larger, more established competitors. Physicians who use our competitors’ products for the treatment of migraine headache may be reluctant to try new products from a source with which they are less familiar. If these physicians do not try, and subsequently adopt, our product, then, our financial performance would be adversely affected.
In the United Kingdom, three of the CGRP monoclonal antibody therapies have been recommended for use in the National Health Service by the National Institute Health and Care Excellence for the prevention of migraine. All of our current business with the National Health Service in the United Kingdom is for the prevention and treatment of cluster headache, and these recommendations may limit our ability to penetrate the NHS migraine market in the United Kingdom.