ITEM 1A. RISK FACTORS
RISK FACTORS
An investment in our common stock involves significant risks. Before
making an investment in our common stock, you should carefully consider all of the information contained in this Annual Report on Form
10-K and our other filings with the SEC including the material risks and uncertainties that we have identified below. The risks
and uncertainties identified below are not the only risks and uncertainties we face. If any of the material risks or uncertainties
that we face were to occur, the trading price of our common stock could decline and you could lose part or all of your investment. Please
note that additional risks not currently known to us or that we currently deem immaterial also may adversely affect our business, operations,
results of operations, financial condition and prospects.
Risks Related to Our Business
If we are unable to successfully introduce new products or fail to
keep pace with advances in technology, our business, financial condition and results of operations could be adversely affected.
We need to successfully introduce new products to achieve our strategic
business objectives. A significant element of our strategy is to increase revenue growth by investing in innovation and new product
development, which will require substantial resources. Our successful product development will depend on many factors, including
our ability to attract strong talent to lead our research and development efforts, properly anticipate and satisfy customer needs, adapt
to new technologies, obtain regulatory concurrence on a timely basis, demonstrate satisfactory clinical results, manufacture products
in an economical and timely manner, obtain appropriate intellectual property protection for our products, gain and maintain market acceptance
of our products, and differentiate our products from those of our competitors. In addition, patents attained by others can preclude
or delay our commercialization of a product. There can be no assurance that any products now in development or that we may seek to develop
in the future will achieve technological feasibility, obtain regulatory concurrence or gain market acceptance. If we cannot successfully
introduce new products or adapt to changing technologies, our products may become obsolete, and our revenue and profitability could suffer.
Our business depends on an adequate supply of drugs to be administered
by our products.
Demand for our products depends on the availability of drugs to be administered
by them. Currently, most of our products require immunoglobulin therapies that rely on blood plasma collection for drugs such as
Hizentra® and Cuvitru®. Any disruption in the supply of these drugs for any reason, including contamination, could significantly
adversely affect our business. The change of any drug indication by the FDA or comparable foreign governmental agencies could also
result in decreased demand for our products. In addition, pharmaceutical companies and other competitors have or are developing
alternative therapies for disease states that are deliverable without a medical device. The COVID-19 pandemic has negatively impacted
the collection of plasma, the source of the active ingredient of SCIg medications, which may limit the supply of these drugs. If there
is not an adequate supply of drugs requiring administration by medical devices such as those provided by us or alternative therapies are
developed, our sales may suffer and/or our products may become obsolete.
Our compliance with EU MDR regulations by May 2024 will require significant
investment and, if we are not in compliance by that time, we will not be able to sell our products in the EU.
In the European Union (“EU”), we are required to comply with
the new Medical Device Regulation (“MDR” or “EU MDR”) effective May 2021, which supersedes the prior Medical Device
Directives. Medical devices which have a valid CE certificate to the current Medical Device Directives (issued before May 2021), as do
all of our current products, can continue to be sold until May 2024 or until the CE certificate expires, whichever comes first, providing
there are no significant changes as defined in Article 120 of EU MDR. The MDR was published in May 2017 with a 3-year transition period.
That transition period was extended to May 2021 due to the COVID-19 pandemic. The CE mark required to sell medical devices in the EU is
affixed following conformity assessment and either approval from an appointed independent notified body or through self-certification
by the manufacturer. The selected pathway to CE marking is based on product risk classification. CE marking indicates conformity to the
applicable essential requirements of the relevant Medical Device Directives and in the future to the general safety and performance requirements
for the new MDR. The MDR will change multiple aspects of the existing regulatory framework for CE marking, such as increased clinical
evidence requirements and other new requirements, including Unique Device Identification (“UDI”) as well as many other post-market
obligations. MDR also significantly modifies and increases the compliance requirements for the industry and will require significant investment
by us in the near future to implement.
If we are unable to comply with the MDR by May 2024, we will not be able
to sell our products in the EU, which will materially impact our net revenues.
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Interruption of our manufacturing operations, including due to transitioning
to our new facility, could adversely affect our future revenues and operating income.
The FDA and other U. S. and non-U.S. government agencies regulate our manufacturing
operations, which includes product assembly, calibration, pre- and post-assembly quality control inspection and testing, and final packaging
for all of our products. Variations in the manufacturing process may result in production failures which could lead to launch delays,
product shortage, unanticipated costs, lost revenues and damage to our reputation. A failure to identify and address manufacturing
problems prior to the release of products to our customers may also result in a quality or safety issue that could result in a recall
or other inability to sell our products.
Our products are currently manufactured and stored at our corporate headquarters
and manufacturing facility. Products are also stored in storage facilities in the local NY area. Loss or damage to our manufacturing
and storage sites due to weather, vandalism, terrorism, a natural disaster, issues in our manufacturing process, equipment failure or
other factors, could adversely affect our ability to manufacture sufficient quantities of products or otherwise deliver products to meet
customer demand or contractual requirements which may result in a loss of revenue and other adverse business consequences, including damage
to our relationship with customers.
We take precautions to safeguard our facility and storage site, including
acquiring insurance, adopting health and safety protocols and utilizing off-site storage of computer data. Our insurance may not
cover our losses in any particular case. In addition, regardless of the level of insurance coverage, damage to our facilities may
harm our business, financial condition and operating results.
Our business has been and could continue to be adversely affected
by the COVID-19 pandemic.
The COVID-19 pandemic has and will continue affecting economies and businesses
around the world. We are closely monitoring the impact of COVID-19 on all aspects of our business, including how it may impact our
employees and business operations. While we did not incur significant manufacturing disruptions during 2021 from the COVID-19 pandemic,
customer purchasing patterns and clinical trial activity have been less predictable. The COVID-19 pandemic has also impacted the rate
of diagnosis of many conditions due to fewer infections causing patients to seek diagnosis, reduced access to healthcare professionals,
and other factors including conditions treated by SCIg using the FREEDOM infusion system. We also believe COVID-19 has precipitated
limited availability and rising costs of raw materials and labor, which may impact our financial results if current trends continue. We
may experience disruptions that could severely impact our results of operations and financial condition. We are unable to predict
the impact that COVID-19 will have on our future operating results and financial condition due to numerous uncertainties. These
uncertainties include the geographic spread of the pandemic, the severity of the virus, the impact of the virus directly on our employees
or those of our suppliers, the duration of the outbreak, governmental actions, travel restrictions and social distancing, business closures
or business disruptions (including those impacting our supply chain), delays in clinical trials, the effectiveness of actions taken in
the United States and other countries to contain and treat the disease, the availability of plasma and drugs that are administered by
our products, the number of new prescriptions for PIDD and CIDP, purchasing patterns of customers in response to the pandemic, changes
to our operations, or whether the United States and additional countries are required to move to complete lock-down status, among others.
Our sales representatives are unable to hold in-person meetings with customers and health care providers to discuss our products,
which may further impact our sales. As local jurisdictions continue to put restrictions in place, our ability to continue to manufacture
our products may also be limited. Such events may result in a period of business and manufacturing disruption, and in reduced operations,
any of which could materially affect our business, financial condition and results of operations. The health of our workforce and
our ability to meet staffing needs at our facility cannot be predicted and is vital to our operations. We will continue to monitor
the COVID-19 situation closely and intend to follow health and safety guidelines as they evolve. Further, the spread of COVID-19,
which has caused a broad impact globally, may materially affect us economically. While the potential economic impact brought by,
and the duration of, COVID-19 may be difficult to assess or predict, it has resulted in significant disruption of global financial markets,
which could reduce our ability to access capital, negatively affecting our liquidity. In addition, the recession resulting from
the spread of COVID-19 could materially affect our business and the value of our common stock. The ultimate long-term impact of
COVID-19 is highly uncertain and cannot be predicted with confidence.
We may be unable to compete successfully in our highly competitive
industry.
We operate in a single market – ambulatory infusion – and are
dependent upon our success in that market. We face competition in our market from a wide range of international and domestic companies,
including those that deliver electronic volumetric pumps, elastomeric infuser pumps and other mechanical devices. These include
large medical device companies with multiple product lines, some of which may have greater financial and marketing resources than we do.
We also face competition from companies that are even more specialized than ours with respect to particular markets or product lines.
Some of those companies have greater financial and sales and marketing resources than we do or offer products at a lower price point
than ours. In addition, former employees may develop products that are competitive with ours or capitalize on customer relationships
developed while employed with us, subject to their continuing obligations under confidentiality agreements and other restrictive covenants
that may survive their employment. We face competition on the basis of product features, clinical or economic outcomes, product
quality, availability, price, services, technological innovation and other factors. In addition, we face changing customer preferences
and requirements, changes in the ways health care services are delivered, including the transition of high-acuity care to lower-acuity,
and non-acute care settings.
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Competition may increase further as additional companies begin to enter
our market or modify their existing products to compete directly with ours. If we are forced to reduce our prices due to increased
competition, our business could suffer.
The medical technology industry has also experienced a significant amount
of consolidation, resulting in larger companies with greater access to markets. Health care systems, other health care companies
and even retail pharmacies are also consolidating, resulting in greater purchasing power for these companies. As a result, competition
among medical device suppliers to provide goods and services has increased. Group purchasing organizations and integrated health
delivery networks have also served to concentrate purchasing decisions for some customers, which has led to downward pricing pressure
for medical device suppliers. Further consolidation in the industry could intensify competition among medical device suppliers and
exert additional pressure on the prices of our products.
Consolidation in the medical industry could have a negative impact with
payor and provider relationships and distributor relationships, as we could lose market share as consolidation occurs.
Technological developments by others may disrupt our business and
negatively impact our revenues.
The medical device industry is subject to rapid technological change and
discovery and frequent product introductions. The development of new or improved products, processes or technologies by other companies
that provide better features, pricing or clinical outcomes or economic value may render our products or proposed products obsolete or
less competitive. If our competitors respond more quickly to new or emerging technologies and changes in customer requirements or
we do not introduce new versions or upgrades to our product portfolio in response to those requirements, our products may not be marketable.
If competitors develop more effective or affordable products or achieve earlier patent protection or product commercialization for
new products than we do, our operations will likely be adversely affected.
We are subject to costly and complex laws and governmental regulations
and any adverse regulatory action may materially adversely affect our financial condition and business operations.
Our medical devices and technologies, as well as our business activities,
are subject to a complex set of regulations and rigorous enforcement, principally by the FDA, and numerous other federal, state, and non-U.S.
governmental authorities. To varying degrees, each of these agencies requires us to comply with laws and regulations governing the
design, development, and manufacturing; testing, labeling, content and language of instructions for use and storage; clinical trials;
product safety; establishment registration and device listing; marketing, promotion, and distribution of our products; premarket clearance
and approval; record keeping procedures; advertising and promotion; recalls and field safety corrective actions; post-market surveillance,
including reporting of deaths or serious injuries and malfunctions that, if they were to recur, could lead to death or serious injury;
post-market approval studies; and product import and export.
In the U.S., our device products are subject to clearance or approval by
FDA under the FFDCA. Before we can market a new medical device, or a new use of, new claim for, or significant modification to,
an existing product, we must first receive either 510(k) clearance or approval of a PMA application from the FDA, unless an exemption
applies. Under the 510(k) process, the manufacturer must submit to the FDA a premarket notification, demonstrating that the device
is “substantially equivalent,” as defined in the statute, to a legally marketed predicate device. To be “substantially
equivalent,” the proposed device must have the same intended use as the predicate device, and either have the same technological
characteristics as the predicate device or have different technological characteristics and not raise different questions of safety or
effectiveness than the predicate device. If the manufacturer is unable to demonstrate substantial equivalence to FDA’s satisfaction,
or if there is no available predicate device, then the manufacturer may be required to seek approval through the PMA application process,
which is generally more costly and time consuming than the 510(k) process. Through the PMA application process, the applicant must
submit data and information demonstrating reasonable assurance of the safety and effectiveness of the device for its intended use. Accordingly,
a PMA application typically includes, but is not limited to, extensive technical information regarding device design and development,
pre-clinical and clinical trial data, manufacturing information, labeling and financial disclosure information for the clinical investigators
in device studies.
We cannot guarantee that we will be able to obtain or maintain FDA 510(k)
clearance or premarket approval for our new products or enhancements or modifications to existing products (including the use of our FREEDOM
System with therapies not covered by the existing FDA clearance), and the failure to maintain approvals or clearances, or obtain approval
or clearance could have a material adverse effect on our business, results of operations, financial condition and cash flows. Even if
we are able to obtain approval or clearance, it may:
• take a significant amount of time
• require the expenditure of substantial resources
• involve modifications, repairs, or replacements of our products, and
• limit the proposed uses of our products.
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Both before and after a product is commercially released, we have ongoing
responsibilities under the FDA and other applicable non-U.S. government agency laws and regulations. The FDA and other worldwide
regulatory agencies actively monitor compliance with local laws and regulations through review and inspection of design and manufacturing
practices, recordkeeping, reporting of adverse events, labeling and promotional practices. The results of these inspections can
include inspectional observations on the FDA’s Form 483, warning letters, or other forms of enforcement. If the FDA, state
or foreign regulatory authorities were to conclude that we are not in compliance with any applicable laws or regulations, or that any
of our medical products are ineffective or pose an unreasonable health risk, they could deem our products adulterated or misbranded, and
take enforcement action against us. FDA, state and foreign regulatory authorities have broad enforcement powers. Possible
enforcement actions include, but are not limited to: temporarily or permanently suspending the sale and/or distribution of such
medical products; detaining or seizing all adulterated or misbranded medical products; ordering recall, repair, replacement, or refund
of such products; refusing to grant pending pre-market approval or 510(k) clearance applications; and/or requiring us to notify health
professionals and others that the devices present unreasonable risks of substantial harm to the public health. In addition, the
FDA prohibits device manufacturers from promoting their products for uses and indications other than those set forth in the approved product
labeling, and failure to comply with this prohibition could subject us to significant civil or criminal exposure, administrative obligations
and costs, and/or other potential penalties from, and/or agreements with, the federal government. The FDA and other non-U.S. government
agencies may also assess civil or criminal penalties against us, our officers or employees and impose operating restrictions on a company-wide
basis. The FDA may also recommend prosecution to the U.S. Department of Justice. Any adverse regulatory action, depending
on its magnitude, may restrict us from effectively marketing and selling our products and limit our ability to obtain future pre-market
clearances or approvals, and could result in a substantial modification to our business practices and operations.
Regulations regarding the development, manufacture and sale of medical
devices are evolving and subject to future change and have tended to become more stringent over time. Regulatory changes could result
in restrictions on our ability to continue or expand our operations, higher than anticipated costs, or lower than anticipated sales. We
cannot predict what impact, if any, those changes might have on our business; however, failure to comply with applicable regulatory requirements
could have a material adverse effect on our business, financial condition, and results of operations. Later discovery of previously
unknown problems with a product or manufacturer could result in fines, delays or suspensions of regulatory clearances or approvals, seizures
or recalls of products, physician advisories or other field actions, operating restrictions and/or criminal prosecution. We may
also initiate field actions as a result of a failure to strictly comply with our internal quality policies. The failure to receive
product approval clearance on a timely basis, suspensions of regulatory clearances, seizures or recalls of products, physician advisories
or other field actions, or the withdrawal of product approval by the FDA or by comparable agencies in foreign countries could have a material
adverse effect on our business, financial condition or results of operations.
Governmental regulations outside the U.S. have also, and may continue to,
become increasingly stringent and common. In the EU, for example, a new MDR was published in 2017 which, when it enters into full
force in May 2021, will include significant additional premarket and post-market requirements. Penalties for regulatory non-compliance
could be severe, including fines and revocation or suspension of a company’s EU device approval, ability to distribute products
and criminal sanctions. Future foreign governmental laws and regulations may have a material adverse effect on us.
In addition, exported devices are subject to the regulatory requirements
of each country to which the device is exported. Some countries do not have medical device regulations, but in most foreign countries,
medical devices are regulated. Frequently, regulatory approval may first be obtained in a foreign country prior to application in
the U.S. due to differing regulatory requirements; however, other countries, such as China for example, require approval in the country
of origin or legal manufacturer first. Most countries outside of the U.S. require that product approvals be renewed or recertified
on a regular basis, generally every four to five years. The renewal or recertification process requires that we evaluate any device
changes and any new regulations or standards relevant to the device and conduct appropriate testing to document continued compliance.
Where renewal or recertification applications are required, they may need to be renewed and/or approved in order to continue selling
our products in those countries. There can be no assurance that we will receive the required approvals for new products or modifications
to existing products on a timely basis or that any approval will not be subsequently withdrawn or conditioned upon extensive post market
study requirements.
Our global regulatory environment is becoming increasingly stringent and
unpredictable, which could increase the time, cost and complexity of obtaining regulatory approvals for our products, as well as the clinical
and regulatory costs of supporting those approvals. Several countries that did not have regulatory requirements for medical devices
have established such requirements in recent years and other countries have expanded on existing regulations. Certain regulators
are exhibiting less flexibility and are requiring local preclinical and clinical data in addition to global data. While harmonization
of global regulations has been pursued, requirements continue to differ significantly among countries. In the United Kingdom, for
example, the Medicines and Healthcare products Regulatory Agency (MHRA) is responsible for regulating the UK medical device market. With
recent changes in the United Kingdom’s membership with the European Union, the MHRA has and will continue to impose new regulatory
obligations becoming effective in 2021 through 2023, for medical device manufacturers. We expect this global regulatory environment
will continue to evolve, which could impact our ability to obtain future approvals for our products or could increase the cost and time
to obtain such approvals in the future.
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Our business and financial results may be materially adversely affected
if our facility is not ready for manufacturing when the lease on our current facility expires in December 2022.
The lease on our current corporate headquarters and manufacturing facility
expires in December 2022. We have entered into a lease for a new facility for our operations, and we expect to complete our move into
that facility in June 2022. If we are unable to establish continuous manufacturing operations in our new facility before our existing
lease expires, our revenues will suffer. We may not be able to establish such operations before our existing lease expires due to a number
of factors, including delays in construction caused by raw materials, labor shortages and unforeseen complications; delays in receiving
necessary regulatory approvals from U.S. and international authorities; unexpected manufacturing quality issues; inability to hire or
retain necessary personnel; and other unforeseen circumstances. We have begun building our product inventory and expect to continue to
do so through the second quarter of 2022, in order to ensure we can continue to service our customers in the event we are unable to maintain
continuous manufacturing operations. Additionally, we have established Command as an alternate source of manufacturing as needed for continuity.
Proposed changes to the FDA 510(k) clearance pathway and post-market
safety monitoring process could adversely affect our ability to offer our new and existing products.
As discussed above, the FDA’s and other regulatory authorities’
policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our
product candidates. In addition, the FDA may change its clearance and approval policies, adopt additional regulations or revise
existing regulations, or take other actions which may prevent or delay approval or clearance of our future products under development.
In fact, the FDA has announced its intention to pursue comprehensive reforms
to its current 510(k) clearance pathway, which is used for clearance of low- to moderate-risk devices that are substantially equivalent
to a device already on the market, and to its post-market safety monitoring process. In May 2019, the FDA solicited public feedback
on its plans to develop proposals to drive manufacturers utilizing the 510(k) pathway toward the use of newer predicates, including whether
the FDA should publish a list of devices that have been cleared on the basis of demonstrated substantial equivalence to predicate devices
that are more than 10 years old. The FDA sought input on whether it should consider certain actions, such as whether to sunset certain
older devices that were used as predicates under the 510(k)-clearance pathway. These proposals have not yet been finalized or adopted,
and the FDA may work with Congress to implement such proposals through legislation. Accordingly, it is unclear the extent to which
any proposals, if adopted, could impose additional regulatory requirements on us that could delay our ability to obtain new 510(k) clearances,
increase the costs of compliance, or restrict our ability to maintain our current clearances, or otherwise create competition that may
negatively affect our business.
In September 2019, the FDA finalized a guidance to describe an optional
“safety and performance based” premarket review pathway for manufacturers of “certain, well-understood device types”
to demonstrate substantial equivalence under the 510(k) clearance pathway, by demonstrating that such device meets objective safety and
performance criteria established by the FDA, obviating the need for manufacturers to compare the safety and performance of their medical
devices to specific predicate devices in the clearance process. The FDA intends to maintain a list of device types appropriate for
the “safety and performance-based pathway” and develop product-specific guidance documents that identify the performance criteria
for each such device type, as well as the testing methods recommended in the guidance, where feasible. The FDA may establish performance
criteria for classes of devices for which we or our competitors seek or currently have received clearance. It is unclear the extent
to which such performance standards, if established, could impact our ability to obtain new 510(k) clearances or otherwise create competition
that may negatively affect our business.
These reforms could delay or prevent us from obtaining or maintaining 510(k)
clearances or other premarket authorizations for our existing or new devices. Compliance with the new rules could require us to
undertake significant additional costs prior to and following commercialization of our products, which may reduce the profitability of
those products.
In addition, FDA regulations and guidance are often revised or reinterpreted
by the FDA in ways that may significantly affect our business and our products. Any new statutes, regulations or revisions or reinterpretations
of existing regulations may impose additional costs or lengthen review times of any future products or make it more difficult to obtain
clearance or approval for, manufacture, market or distribute our products. We cannot determine what effect changes in regulations,
statutes, legal interpretation or policies, when and if promulgated, enacted or adopted may have on our business in the future. Such changes
could, among other things, require: additional testing prior to obtaining clearance or approval; changes to manufacturing methods; recall,
replacement or discontinuance of our products; or additional record keeping.
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Health care policy changes and industry cost-containment measures
could result in downward pricing pressure for our products and limit our sales.
Most of our customers, and those to whom our customers supply medical devices,
rely on third-party payers, including government programs and private health insurance plans, to reimburse some or all the cost of the
medical devices we manufacture. The continuing efforts of governmental authorities, insurance companies and other payers of health
care costs to contain or reduce these costs and, more generally, to reform the health care system, could limit the prices we are able
to charge for our products or the amounts of reimbursement available for our products or the drugs that they administer, which would put
pressure on us to reduce our prices for our products and/or limit our sales. The adoption of some or all of these proposals could
have a material adverse effect on our business, results of operations, financial condition and cash flows.
Issues with product quality could have an adverse effect upon our
business, subject us to regulatory actions, cause a loss of customer confidence in us or our products, among other negative consequences.
Quality management plays an essential role in determining and meeting customer
requirements, preventing defects, improving our products and services, and assuring the safety and efficacy of our products. Our
future success depends on our ability to maintain and continuously improve our quality management program. While we have a quality
system that covers the lifecycle of our products, quality and safety issues may occur with respect to any of our products. A quality
or safety issue may result in adverse inspection reports, voluntary or official action indicated, warning letters, import bans, product
recalls (either voluntary or required by the FDA or
similar governmental authorities in other countries) or seizures, monetary
sanctions, injunctions to halt manufacture and distribution of products, civil or criminal sanctions, costly litigation, refusal of a
government to grant approvals and licenses, restrictions on operations or withdrawal of existing approvals and licenses. An inability
to address a quality or safety issue in an effective and timely manner may also cause negative publicity, a loss of customer confidence
in us or our current or future products, which may result in the loss of sales and difficulty in successfully launching new products.
Defects or quality issues associated with our products could adversely
affect the results of our operations.
The design, manufacture and marketing of medical devices involve certain
inherent risks. Manufacturing or design defects, component failures, unapproved or improper use of our products, or inadequate disclosure
of risks or other information relating to the use of our products can lead to injury or other serious adverse events. We are subject
to the FDA’s medical device reporting regulations and similar foreign regulations, which require us to report to the FDA when we
receive or become aware of information that reasonably suggests that one or more of our products may have caused or contributed to a death
or serious injury or malfunctioned in a way that, if the malfunction were to recur, it could cause or contribute to a death or serious
injury. The timing of our obligation to report is triggered by the date we become aware of the adverse event as well as the nature
of the event. If we fail to comply with our reporting obligations, the FDA could take action, including warning letters, untitled
letters, administrative actions, criminal prosecution, imposition of civil monetary penalties, revocation of our device clearances or
approvals, seizure of our products, or delay in clearance or approval of future products.
These adverse events could also lead to safety alerts relating to our products
or recalls (either voluntary or as required by the FDA or similar governmental authorities in other countries), and could result, in certain
cases, in the removal of a product from the market. A recall could result in significant costs and lost sales and customers, enforcement
actions and/or investigations by state and federal governments or other enforcement bodies, as well as negative publicity and damage to
our reputation that could reduce future demand for our products. Any corrective action, whether voluntary or involuntary, as well
as defending ourselves in a lawsuit, will require the dedication of our time and capital, distract management from operating our business
and may harm our reputation and financial results.
Personal injuries relating to the use of our products can also result in
significant product liability claims being brought against us. A product liability claim, regardless of its merit or outcome, could
not only result in significant legal defense costs, but also have a material adverse effect on our business and reputation and ability
to attract and retain customers for our products. In some circumstances, adverse events could also cause delays in regulatory approval
of new products or the imposition of post-market approval requirements.
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We are subject to lawsuits.
We have been and may be party to lawsuits, settlement discussions, mediations,
arbitrations and other disputes, including patent and product liability claims, whether brought by companies, individuals or governmental
authorities. These matters may result in a loss of patent protection, reduced revenue, incurrence of significant liabilities and
diversion of our management’s time, attention and resources. Our insurance coverage may not provide adequate protection against
actual losses. In addition, we are subject to the risk that one or more of our insurers may become insolvent and become unable to
pay claims that may be made in the future. Even if we maintain adequate insurance, claims could have a material adverse effect on
our financial condition, liquidity and results of operations and on our ability to obtain suitable, adequate or cost-effective insurance
in the future. Litigation and other disputes, including any adverse outcomes, may have an adverse impact on our business, operations
or financial condition. Even claims without merit could subject us to adverse publicity and require us to incur significant legal
fees.
If we are unable to protect our patents or other proprietary rights,
or if we infringe the patents or other proprietary rights of others, our competitiveness and business prospects may be materially damaged.
Patent and other proprietary rights are essential to our business. We
own patents, trade secrets, trademarks and/or other intellectual property rights related to many of our products. Our success depends
to a significant degree on our ability to obtain and enforce patents, both in the U.S. and in other countries. We can lose the protection
afforded by these intellectual property assets through patent expirations, legal challenges or governmental action. Additionally,
our intellectual property rights may be challenged or infringed upon by third parties, particularly in countries where property rights
are not highly developed or protected, or we may be unable to enter into license agreements with third-party owners of intellectual property
on reasonable terms. Unauthorized use of our intellectual property rights or inability to preserve existing intellectual property
rights could adversely impact our competitive position and results of operations.
The patent position of a medical device company is often uncertain and
involves complex legal and factual questions. Significant litigation concerning patents and products is pervasive in our industry.
Patent claims include challenges to the coverage and validity of our patents on products or processes as well as allegations that
our products infringe patents held by competitors or other third parties. A loss in any of these types of cases could result in
a loss of patent protection or the ability to market products, which could lead to a significant loss of sales, or otherwise materially
affect future results of operations. We also rely on trademarks, trade secrets and know-how to develop, maintain and strengthen
our competitive positions. Third parties may know, discover or independently develop equivalent proprietary information or techniques,
or they may gain access to our trade secrets or disclose our trade secrets to the public.
Although our employees, consultants, parties to collaboration agreements
and other business partners are generally subject to confidentiality or similar agreements to protect our confidential and proprietary
information, these agreements may be breached, and we may not have adequate remedies in the event of a breach of confidence. To
the extent that our employees, consultants, parties to collaboration agreements and other business partners use intellectual property
owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.
Furthermore, our intellectual property, other proprietary technology and
other sensitive company data is potentially vulnerable to loss, damage or misappropriation from system malfunction, computer viruses,
unauthorized access to our data or misappropriation or misuse thereof by those with permitted access and other events. While we
have invested to protect our intellectual property, confidential information and other data, and continue to work diligently in this area,
there can be no assurance that our precautionary measures will prevent breakdowns, breaches, cyber incidents or other events. Such events
could have a material adverse effect on our reputation, business, financial condition or results of operations.
Misappropriation or other loss of our intellectual property from any of
the foregoing would have an adverse effect on our competitive position and may cause us to incur substantial litigation costs.
We need to attract and retain key employees to be competitive.
Our ability to compete effectively depends upon our ability to attract
and retain executives and other key employees, including people in technical, marketing, sales, research and development, quality assurance
and regulatory compliance positions. We depend on key management personnel and attracting and retaining other qualified personnel,
and our business could be harmed if we lose key management personnel or cannot attract and retain other qualified personnel. We
do not maintain any “key man” insurance policies on the lives of any of our employees.
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In addition, if we expect to grow our operations, it will be necessary
for us to attract and retain additional qualified personnel. In particular, we will need to find experienced key employees to lead
our research and development and operations functions. The failure to attract, integrate, motivate, and retain additional skilled
and qualified personnel could have a material adverse effect on our business. We compete for such personnel against numerous companies,
including larger, more established companies with significantly greater financial resources than we possess. Our ability to recruit
such talent will depend on a number of factors, including compensation and benefits, work location and work environment. There can
be no assurance that we will be successful in attracting or retaining such personnel and the failure to do so could have a material adverse
effect on our business, financial condition and results of operations.
We sell a majority of our products through only a few distributors
on whom we depend, and our financial results depend on their purchasing patterns.
Most of our customers prefer to purchase our products through distributors,
rather than directly from us, because of “one-stop shopping” convenience and their ability to ship directly to patients. We
sell most of our products through a small number of distributors, two in the U.S. and two outside the U.S. As of December 31, 2021,
these four distributors comprised approximately 62% of our net revenues with one U.S. distributor contributing 41%. Purchasing patterns
by these distributors cannot always be predicted and fluctuate from quarter to quarter and year to year based on, among other things,
their expectations of customer demand. Any decline in business with the distributors outside the U.S. could have an adverse impact
on our business. If we were unable to sell through the distributors outside the U.S., we would have to find other distributors or
broaden our customer base and expand direct relationships with customers. Other distributors may not be available or may not agree
to arrangements that are commercially reasonable. In the U.S. we could transition to direct customer purchase; however, customers
may not want to purchase directly from us and may decide to purchase competitors’ products through their distributors. Moreover,
a transition from distributors to direct customer purchase would be time consuming and costly.
We and our customers are subject to extensive regulation by governments
around the world, and if these regulations are not complied with, existing and future operations may be curtailed, and we could be subject
to liability.
Our devices and our customers’ drug-device combination products,
and/or compatible products, that may utilize our device are subject to extensive regulation by governmental authorities in the United
States, Europe and other countries, including the FDA. Not only do these regulations present challenges during the regulatory approval
process, but after our devices or our customers’ drug-device combination products, and/or compatible products, that may utilize
our device are approved for new indications and placed in the market, numerous regulatory requirements will apply. These include,
but are not limited to QSR, labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or “off
label” uses, medical device reporting regulations and post-market surveillance regulations, and laws and regulations that govern
the development, testing, manufacturing, advertising, marketing and distribution of medical devices, including our devices and our customers’
drug-device combination products, and/or compatible products, that may utilize our device. The FDA has broad post-market and regulatory
enforcement powers.
In the European Union (“EU”), we are required to comply with
the new Medical Device Regulation (“MDR” or “EU MDR”) effective May 2021, which will supersedes the prior Medical
Device Directives. Medical devices which have a valid CE certificate to the current Medical Device Directives (issued before May
2021) can continue to be sold until May 2024 or until the CE certificate expires, whichever comes first, providing there are no significant
changes as defined in Article 120 of EU MDR. The MDR was published in May 2017 with a 3-year transition period. That transition
period was extended to May 2021 due to the COVID-19 pandemic. The CE mark required to sell medical devices in the EU is affixed
following conformity assessment and either approval from an appointed independent notified body or through self-certification by the manufacturer.
The selected pathway to CE marking is based on product risk classification. CE marking indicates conformity to the applicable
essential requirements of the relevant Medical Device Directives and in the future to the general safety and performance requirements
for the new MDR. The MDR will change multiple aspects of the existing regulatory framework for CE marking, such as increased clinical
evidence requirements and other new requirements, including Unique Device Identification (“UDI”) as well as many other post-market
obligations. MDR also significantly modifies and increases the compliance requirements for the industry and will require significant
investment in the near future to implement.
If our devices are commercialized as part of a drug-delivery combination
product we, as the manufacturer of the device component of that combination product, we are subject to unannounced and preapproval inspections
by the FDA of our manufacturing facility to determine our compliance with QSR and cGMP.
Failure to comply with applicable regulatory requirements can result in
an enforcement action by the FDA or other regulatory authority, which may include any or all of the following sanctions: fines, injunctions,
consent decrees and civil penalties, recall or seizure of our products or our customers’ drug-device combination products, operating
restrictions, partial suspensions or total shutdown of production, refusing our customers’ requests for regulatory approvals of
their drug-device combination products or new intended uses, as applicable, refusing our requests for regulatory approval of our devices,
withdrawing our customers’ or our regulatory approvals that may be granted and criminal prosecution.
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The therapeutic efficacy of certain of our customers’ drug-device
combination products, and/or compatible products, that may utilize our device are either unproven in humans or has only been proven in
limited circumstances, and we may not be able to successfully develop and sell our products in combination with our customers’ drug-or-drug-device
combination products.
While some of our customers use our products with established, approved
drugs, in certain instances, the benefits of those drugs as injectable therapies are either unproven or have only been proven in limited
circumstances. Our ability to generate revenue from our products will depend heavily on the successful development, commercialization
and sales of our customers’ drug products or drug-device combination products, which is subject to many potential risks. For
example, data developed in clinical trials or following the commercialization of our customers’ drugs or drug-device combination
products may show that such therapies do not prove to be effective treatments for the targets they are being designed to act against (or
as effective as other treatments available). In clinical trials or following commercialization, it may be shown that those drugs interact
with human biological systems in unforeseen, ineffective or harmful ways. If those drugs are associated with undesirable side effects
or have characteristics that are unexpected, the pharmaceutical companies that make those drugs may need to abandon clinical development
or discontinue commercial sales or limit clinical development or sales to certain uses or subpopulations in which the undesirable side
effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective. As a result
of these and other risks described herein that are inherent in the development and sale of therapeutic agents, pharmaceutical companies
may never successfully develop or successfully commercialize their drugs, or the commercialization of their drugs may be abandoned or
severely limited, which may limit our profitability with respect to customers with drugs or drug-device combination products including
those drugs and our device, and we may not be successful in achieving commercial scale production and sales of our injectable drug delivery
systems in combination with certain drugs.
Certain of the injectable therapies being targeted for use with our
products are not approved but are in various phases of clinical development. These injectable therapies may be independently terminated
by their makers prior to submission of a regulatory filing or even after regulatory approval, resulting in the cessation of any revenue
associated with that contract or program.
We work with pharmaceutical and biotechnology companies who are targeting
the use of our products with a variety of injectable therapies. Certain of those injectable therapies are not FDA approved and are
in various phases of clinical development. The clinical development of these pipeline therapies can be terminated by their developers
at any stage. Furthermore, these pharmaceutical companies could obtain regulatory approval for their injectable therapies and decide
for business reasons not to require or encourage utilization of our device. Prior investments we have made in manufacturing capacity
or research and development will then not result in the generation of revenue that would have previously been anticipated.
Our commercial success depends upon the attainment of significant
market acceptance of drug product candidates to be included in our customers’ drug-device combination and/or compatible products,
that may utilize our device, if approved, among physicians, patients, healthcare payers or the medical community.
Even if pharmaceutical companies obtain regulatory approval for their drug
product candidates, their product candidates may not gain sufficient levels of market acceptance among physicians, healthcare payers,
patients or the medical community to make them commercially feasible. Market acceptance of our customers’ product candidates, if
they receive approval, depends on a number of factors, including the:
• efficacy and safety of the product candidates;
• clinical indications for which the product candidates are approved;
• safety of the product candidates seen in a broader patient group;
• prevalence and severity of any side effects;
• cost of treatment in relation to alternative treatments;
• relative convenience and ease of administration; and
• effectiveness of the pharmaceutical companies’ sales and marketing efforts.
If pharmaceutical companies’ candidates are approved but fail to
achieve market acceptance among physicians, patients or healthcare payers, we may not be able to generate anticipated revenue. This
may limit our ability to generate anticipated revenue from our prior investments. Moreover, even if we achieve commercial scale
production and sales of our injectable drug delivery systems in combination with certain injectable therapies, the makers of such therapies
may face indirect competition from companies who develop and market other brand name, biosimilar or generic injectable therapies as well
as alternative treatments and delivery methods that compete with our customers’ drug-device combination products, and/or compatible
products, that may utilize our device, which may have a material adverse effect on our results of operations, our financial condition
and/or cash flows.
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Most brand name injectable therapies will face future competition
from generic or biosimilar therapies, which could significantly reduce their commercial viability.
Brand name injectable therapies will usually become exposed to competition
from generic or biosimilar rivals at some time after their regulatory approval and commercial launch. The average selling price
and market share of brand name injectable therapies can be significantly diminished following the introduction of generic or biosimilar
competition. These factors may result in our customers using our products with their brand name injectable therapies seeking to
withdraw such injectable therapy from the market or change market tactics in a way that makes the use of our products cost prohibitive.
This may result in reduction of revenues due to lower demand, termination of supply contracts, and other factors.
All of our components and raw materials are sourced from single suppliers.
If we are unable to obtain sufficient components or raw materials on a timely basis or for a cost-effective price, or if we experience
other supply difficulties, our business and results of operations may be adversely affected.
Our ability to meet customer demand depends, in part, on our ability to
obtain timely and adequate delivery of raw materials and components for our products. All of the materials and components that go
into the manufacturing of our products are single-sourced from third-party suppliers.
The price and supply of materials and components for our products may be
impacted or disrupted for reasons beyond our control. While we work with suppliers to ensure continuity of supply, no assurance can be
given that these efforts will be successful. Although we do carry strategic inventory and maintain insurance to help mitigate the
potential risk related to any supply disruption, there can be no assurance that such measures will be sufficient or effective. The
termination, reduction or interruption in supply of raw materials and components and an inability to quickly develop acceptable alternative
sources for such supply, could adversely impact our ability to manufacture and sell our products in a timely or cost-effective manner.
We do not have long-term agreements in place with any of our suppliers,
with the exception of a long-term agreement with our needle set subassembly supplier which we entered in 2020. Due to regulatory requirements
relating to the qualification of suppliers, we are not likely to be able to establish additional or replacement sources on a timely basis
or without excessive cost. We are in the process of establishing alternative sources of supply for our raw materials and components,
but there can be no assurance we will be able to do so.
Additionally, Command manufactures and supplies the Company’s subassemblies,
needle sets and tubing products in Nicaragua. There could be a delay in providing the products timely due to their climate and international
boundaries.
Additionally, volatility in our cost of energy, raw materials, components,
subassemblies, transportation/freight, and manufacturing and distribution could adversely affect our results of operations. Climate
change (including laws or regulations passed in response to it) could increase our costs, in particular our costs of supply, energy and
transportation/freight. Material or sustained increases in the price of oil and natural gas could have an adverse impact on the
cost of many of the plastic materials we use to make and package our products, as well as our transportation/freight costs. These
outcomes may in turn result in customers transitioning to available competitive products, loss of market share, negative publicity, reputational
damage, loss of customer confidence or other negative consequences (including a decline in stock price).
Our failure to comply with laws and regulations relating to reimbursement
of health care products may subject us to penalties and adversely impact our reputation, business, results of operations, financial condition
and cash flows.
Our devices are purchased principally by specialty pharmacies and ambulatory
service providers or hospitals that typically bill various third-party payers, such as governmental programs (e.g., Medicare, Medicaid
and comparable non-U.S. programs), private insurance plans and managed care plans, for the healthcare services provided to their patients.
The ability of those customers to obtain appropriate reimbursement from third-party payers for our products and the drugs they administer
is critical because it affects which products customers purchase and the prices they are willing to pay. As a result, our devices
are subject to regulation regarding quality and cost by U.S. governmental agencies, including the Centers for Medicare & Medicaid
Services (“CMS”), as well as comparable state and non-U.S. agencies responsible for reimbursement and regulation of health
care goods and services, including laws and regulations related to kickbacks, false claims, self-referrals and health care fraud. Many
states have similar laws that apply to reimbursement by state Medicaid and other funded programs, and in some cases to all payers. In
certain circumstances, insurance companies can attempt to bring a private cause of action against a manufacturer for causing a false claim
to be filed under the Federal Racketeer Influenced and Corrupt Organizations Act. In addition, as a manufacturer of FDA-approved devices
reimbursable by federal healthcare programs, we are subject to the Physician Payments Sunshine Act, which requires us to annually report
certain payments and other transfers of value we make to U.S.-licensed physicians or U.S. teaching hospitals. Any failure to comply
with these laws
and regulations could subject us or our officers and employees to criminal
and civil financial penalties. Similar reporting requirements applicable to medical device manufacturers have also been implemented
by some states. Failure to comply with these state requirements could result in civil monetary penalties being assessed against us.
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These laws and regulations, among other things, constrain our business,
marketing and other promotional activities by limiting the kinds of financial arrangements, including sales programs, we may have with
hospitals, physicians or other potential purchasers of our products. Due to the breadth of these laws, the narrowness of statutory exceptions
and regulatory safe harbors available, and the range of interpretations to which they are subject, it is possible that some of our current
or future practices might be challenged under one or more of these laws.
To enforce compliance with the healthcare regulatory laws, certain enforcement
bodies have recently increased their scrutiny of interactions between healthcare companies and healthcare providers, which has led to
a number of investigations, prosecutions, convictions and settlements in the healthcare industry. Responding to investigations can be
time-and resource-consuming and can divert management’s attention from the business. Additionally, as a result of these investigations,
healthcare providers and entities may have to agree to additional compliance and reporting requirements as part of a consent decree or
corporate integrity agreement. Any such investigation or settlement could increase our costs or otherwise have an adverse effect on our
business. Even an unsuccessful challenge or investigation into our practices could cause adverse publicity and be costly to respond
to. If our operations are found to be in violation of any of the healthcare laws or regulations described above or any other healthcare
regulations that apply to us, we may be subject to penalties, including administrative, civil and criminal penalties, damages, fines,
exclusion from participation in government healthcare programs, such as Medicare and Medicaid, imprisonment, contractual damages, reputational
harm, disgorgement and the curtailment or restructuring of our operations. In addition, we are subject to the U.S. Foreign Corrupt
Practices Act and similar anti-corruption laws outside the U.S. Actual or alleged violation of these laws by our employees, consultants,
sales agents or distributors could subject us to investigations by the U.S. or foreign governments, significant criminal or civil sanctions
and other liabilities, and damage our reputation.
We may need additional funding in the future, and if we are unable
to raise capital when needed, we may be forced to delay, reduce or eliminate our product development, commercial efforts, or sales efforts.
Producing and marketing our developed products is costly. Although
we believe we currently have adequate capital to fulfill our near-term funding needs, we may need to raise additional capital in the future
in order to execute our business plan and help us fund the development and commercialization of new products. We raised approximately
$26.6 million from the equity offering in 2020.
We may finance future cash needs through public or private equity offerings
and may also use debt financings or strategic collaboration and licensing arrangements. We may seek to access the public or private
equity markets whenever conditions are favorable, even if we do not have an immediate need for additional capital. To the extent
that we raise additional funds by issuing equity securities, our shareholders may experience additional dilution; any debt financing,
if available, may involve restrictive covenants and could result in high interest expense. If we raise additional funds through
collaboration and licensing arrangements, it may require us to relinquish certain enumerated rights to our product candidates, processes,
technologies, or development projects, or to enter into licenses on terms that are not favorable to us. We cannot be certain that
additional funding will be available on acceptable terms, or at all. If adequate funds are not available from the foregoing sources,
we may consider additional strategic financing options, or we may be required to delay, reduce the scope of, or eliminate our research
or development and/or some of our commercialization efforts.
We may experience difficulties resulting from our evolving management
structure and executive team.
We have made a number of changes to our management structure throughout
the organization since July 2018 and have filled a number of these positions while we are actively recruiting to fill others. Although,
we believe the persons who currently and will serve in these positions are and will be qualified to do so, they may take time to integrate
into the organization and with each other, if at all. Many of these persons have or will have had little to no experience with our
company prior to joining us, which may result in delays in our ability to implement our business plans. If we are unable to integrate,
motivate and retain the services of our new executives and other managers, or if integration takes longer than we expect, it may have
an adverse effect on our business and financial condition.
Changes in tax or labor laws or exposure to additional income tax
liabilities could increase our costs and reduce our margins.
Changes to the tax and labor laws in the U.S. or other countries in which
we operate could have an adverse effect on our operating results. Certain changes in tax rates, deductibility of interest, deductibility
of executive compensation expense, expensing of capital expenditures, the ability to use certain tax credits, taxation on earnings from
international business operations, and the system of taxation (from worldwide to territorial) could adversely affect our financial condition
and results of operations. Taxing authorities may audit us from time to time and disagree with certain positions we have taken in
respect of our tax liabilities. We regularly assess the likely outcomes of these audits in order to determine the appropriateness
of our tax provision. However, we may not accurately predict the outcome of these audits, and as a result the actual outcome of
these audits may have an adverse impact on our financial results.
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Prior to the U.S. presidential election, President Biden proposed an increase
in the U.S. corporate income tax rate from 21% to 28%, the creation of a 10% penalty on certain imports and a 15% minimum tax on worldwide
book income.
Our manufacturing operations depend on low-cost labor. Recent increases
in U.S. minimum wage requirements, as well as those imposed by the state of New York and New Jersey will increase our costs for employees
to support those operations, reduce our margins and negatively impact our profit.
A downturn in global economic conditions could adversely affect our
operations.