sibn-20211231

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2021

Commission File Number 001-38701

SI-BONE, Inc.

(Exact name of Registrant as specified in its Charter)

471 El Camino Real, Suite 101, Santa Clara, California95050

(Address of principal executive offices including zip code)

Registrant’s telephone number, including area code: (408) 207-0700

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Trading Symbol(s) Name of each exchange on which registered

Common Stock, par value $0.0001 per share SIBN The Nasdaq Global Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yesx No ☐

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐Nox

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (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 90 days. Yesx No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yesx No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 7(a)(2)(B) of the Securities 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 (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b‐2 of the Exchange Act). Yes ☐ No x

The aggregate market value of the shares of common stock held by non-affiliates of the registrant as of June 30, 2021, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $1.00 billion, calculated based on the closing price of the registrant’s common stock as reported by the Nasdaq Global Market. Shares of common stock held by each officer and director, and each entity affiliated with a director, have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not a conclusive determination for other purposes.

The number of shares of Registrant’s Common Stock outstanding as of February 22, 2022 was 33,840,570 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s Definitive Proxy Statement relating to the Annual Meeting of Shareholders, which will be filed with the Securities and Exchange Commission within 120 days after the end of the Registrant’s fiscal year ended December 31, 2021, are incorporated by reference into Part III of this Report.

TABLE OF CONTENTS

Page

PART I

Item 1 Business 5

Item 1A Risk Factors 29

Item 1B Unresolved Staff Comments 60

Item 2 Properties 60

Item 3 Legal Proceedings 60

Item 4 Mine Safety Disclosures 60

PART II

Item 6 [Reserved] 61

Item 7A Quantitative and Qualitative Disclosures about Market Risk 74

Item 8 Financial Statements and Supplementary Data 75

Item 9A Controls and Procedures 105

Item 9B Other Information 105

Item 9C Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 106

PART III

Item 10 Directors, Executive Officers and Corporate Governance 106

Item 11 Executive Compensation 106

Item 14 Principal Accountant Fees and Services 106

PART IV

Item 15 Exhibits and Financial Statement Schedules 107

In this Annual Report on Form 10-K, “we,” “our,” “us,” “SI-BONE,” and “the Company” refer to SI-BONE, Inc. and its consolidated subsidiaries. The SI-BONE logo and other trade names, trademarks or service marks of SI-BONE are the property of SI-BONE, Inc. This report contains references to our trademarks and to trademarks belonging to other entities. Trade names, trademarks and service marks of other companies appearing in this report are the property of their respective holders. We do not intend our use or display of other companies’ trade names or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

RISK FACTOR SUMMARY

Investing in our securities involves a high degree of risk. Below is a summary of material factors that make an investment in our securities speculative or risky. Importantly, this summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, as well as other risks that we face, can be found under the heading “Item 1A. Risk Factors” below.

•We have incurred significant operating losses since inception, we expect to continue to incur operating losses in the future, and we may not be able to achieve or sustain future profitability;

•Epidemic diseases, or the perception of their effects, may have (or, in the case of the COVID-19 pandemic, will continue to have during its duration) an adverse effect on our business, financial condition, results of operations, or cash flows;

•Prolonged inflation and supply chain disruptions could result in delayed product launches, lost revenue, higher costs and decreased profit margins;

•If hospitals, surgeons, and other healthcare providers are unable to obtain and maintain adequate or any coverage and reimbursement from third-party payors for procedures performed using our products, further adoption of our products may be delayed, and it is unlikely that they will gain further acceptance, and the prices paid for our implants may decline;

•If healthcare payors reverse decisions to cover minimally invasive sacroiliac joint fusion exclusively when performed with iFuse and choose to reimburse for procedures performed with competitive products, our market share could decline, adversely affecting our revenues;

•We may not be able to convince physicians that iFuse is an attractive alternative to our competitors’ products and that our procedure is an attractive alternative to existing surgical and non-surgical treatments of the sacroiliac joint;

•Surgeons and payors may not find our clinical evidence to be compelling, which could limit our sales and revenue, and on-going and future research may prove our products to be less safe and effective than currently thought;

•Pricing pressure from our competitors, changes in third-party coverage and reimbursement, healthcare provider consolidation, payor consolidation and the presence of “physician-owned distributorships” may impact our ability to sell our product at prices necessary to support our current business strategies;

•Practice trends or other factors, including the COVID-19 pandemic, may cause procedures to shift from the hospital environment to ambulatory surgical centers, or ASCs, where pressure on the prices of our products is generally more acute;

•We operate in a very competitive business environment and if we are unable to compete successfully against our existing or potential competitors, our sales and operating results may be adversely affected;

•We are highly dependent on revenue from the sale of a single family of products focused on procedures, the goal of which is to stabilize and fuse the sacroiliac joint. Reliance on a single family of products and single family of procedures could negatively affect our results of operations and financial condition;

•If clinical experience with our iFuse Bedrock technique does not result in positive outcomes for patients, or if clinical trials involving the use of iFuse Bedrock fail to show meaningful patient benefit, sales of our iFuse implants could be adversely impacted;

•If we are unable to maintain our network of direct sales representatives and third-party distributors, we may not be able to generate anticipated sales;

•Our business could suffer if we lose the services of key members of our senior management, key advisors or personnel;

•If use of our products results in adverse events, this may require them to be taken off the market, require them to include safety warnings or otherwise limit their sales;

•Various factors outside our direct control may adversely affect manufacturing, sterilization, and distribution of our products;

•We are dependent on a limited number of third-party suppliers, some of them single-source and some of them in single locations, for most of our products and components, and the loss of any of these suppliers, or their inability to provide us with an adequate supply of materials in a timely and cost-effective manner, could materially adversely affect our business;

•We, our suppliers, and our third-party manufacturers are subject to extensive governmental regulation both in the U.S. and abroad, and failure to comply with applicable requirements could cause our business to suffer;

•We and our sales representatives must comply with U.S. federal and state fraud and abuse laws, including those relating to healthcare provider kickbacks and false claims for reimbursement, and other applicable federal and state healthcare laws, as well as equivalent foreign laws, and failure to comply could negatively affect our business;

•If we or our licensors fail to adequately protect or enforce our intellectual property rights or secure rights to patents of others, the value of our intellectual property rights would diminish and our ability to successfully commercialize our products may be impaired;

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10‐K contains forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these identifying words. These forward-looking statements speak only as of the date of this Annual Report on Form 10-K and are subject to a number of risks, uncertainties and assumptions, including those described under the sections in this Annual Report on Form 10-K entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These forward-looking statements include, but are not limited to, statements about the following:

•the impact the COVID-19 pandemic and governmental actions taken to combat the COVID-19 pandemic will have on us, including our operations, financial results, liquidity and capital resources, the existence and duration of state and local orders temporarily prohibiting elective procedures including procedures using our products, the ability and desire of patients and physicians to undergo and perform such procedures, the duration and any potential resurgence of the COVID-19 pandemic, and whether the COVID-19 pandemic will recur in the future;

•the impact the COVID-19 pandemic has on the global supply chain and our third-party manufacturers and suppliers, which could adversely impact the availability or cost of materials, which could disrupt our supply chain related to implants and instruments.

•our ability to maintain a healthy workforce in light of the ongoing COVID-19 pandemic;

•our expectation that a significant portion of our revenues will be derived from sales of the iFuse Implant System, or iFuse;

•our ability to develop additional revenue opportunities, including new indications for use and new devices;

•our ability to retain and grow our sales team based on the demand for our products;

•our ability to identify, train, and retain surgeons to perform procedures using our products;

•our ability to obtain and maintain favorable coverage and reimbursement determinations from third-party payors;

•our estimates of our market opportunity;

•our expectations regarding the scope of protection from intellectual property rights covering our products;

•developments or disputes concerning our intellectual property or other proprietary rights;

•timing of and results from clinical and other trials;

•marketing clearances and authorization from the FDA and regulators in other jurisdictions;

•timing of regulatory filings and feedback;

•competition in the markets we serve;

•our expectations of the reliability and performance of our products;

•our expectations of the benefits to patients, providers, and payors of our products;

•factors impacting the supply chains we rely on, including the availability of raw materials and skilled labor serving our suppliers, and the cost of these factors of production which may in turn impact the prices we pay for our devices;

•our reliance on a limited number of suppliers, including sole source suppliers, which may impact the availability of instruments and materials;

•our ability to sustain or increase demand for our products;

•our estimates regarding our costs and risks associated with our international operations and expansion;

•our expectations regarding our ability to retain and recruit key personnel;

•our ability to attract and retain employees, including those with specialized skills and experience;

•our expectations regarding acquisitions and strategic operations;

•our ability to fund our working capital requirements;

•our compliance with, and the cost of, federal, state, and foreign regulatory requirements;

•the factors that may impact our financial results; and

•anticipated trends and challenges in our business and the markets in which we operate.

Forward-looking statements are based on management’s current expectations, estimates, forecasts, and projections about our business and the industry in which we operate, and management’s beliefs and assumptions are not guarantees of future performance or development and involve known and unknown risks, uncertainties, and other factors that are in some cases beyond our control. As a result, any or all of our forward-looking statements in this report may turn out to be inaccurate. Furthermore, if the forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Annual Report on Form 10-K, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under “Risk Factors” and elsewhere in this report. These statements, like all statements in this report, speak only as of their date. We caution investors that our business and financial performance are subject to substantial risks and uncertainties. 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, except as may be required by law.

PART I

Item 1. Business.

Overview

We are a medical device company dedicated to solving musculoskeletal disorders of the sacropelvic anatomy. We have pioneered a proprietary minimally invasive surgical system with a family of implants, which we call iFuse, to address sacroiliac joint dysfunction and degeneration, adult deformity, pelvic ring traumatic fractures. Since we introduced our first generation iFuse implant in 2009, as of December 31, 2021, approximately 65,000 procedures have been performed of which over 18% were performed in 2021 by over 2,600 surgeons in the United States and more than 36 other countries.

The sacroiliac joint, which is the largest joint in the human body, can cause debilitating pain. Clinical studies have shown that 15% to 30% of all chronic lower back pain is associated with the sacroiliac joint. Studies have also shown that the disability that results from disease of the sacroiliac joint is comparable to the disability associated with a number of other serious orthopedic conditions, such as knee and hip arthritis and degenerative disc disease, each of which has surgical solutions in which an implant is used and a multi-billion dollar market exists. We believe that the iFuse Implant System is currently the market leading surgical system used in minimally invasive fusions of the sacroiliac joint in the United States.

Our iFuse Implant System includes a series of patented titanium implants and the instruments we have developed to enable surgeons to perform procedures using different surgical approaches for different indications. Surgeons place our implants across the sacroiliac joint, either from a lateral approach through the iliac, or hip, bones into the sacrum, or from a posterior approach through the sacrum and into the iliac bones. Surgeons typically use three iFuse implants to fuse a sacroiliac joint in the lateral procedure, and one iFuse implant in each sacroiliac joint, typically alongside another device crossing the joint and joining to the spinal construct in the Bedrock technique.

Our first-generation iFuse implant has a triangular cross section that resists twisting or rotation of the implant within the bone within which it is implanted, regardless of the surgical approach and technique used to place the implants. The triangular shape of our implants helps stabilize the joint, and the implants’ porous surface facilitates biologic fixation of the bone onto the implant, or bony ongrowth and ingrowth, that results in fusion. The iFuse implant has at least three times the strength of a typical eight-millimeter cannulated surgical screw, and the large porous surface area of our implants allows for bony ingrowth. We hold issued patents on implants with cross-sections of many non-round shapes, including the triangular shape of our first generation iFuse implant. We also hold issued patents for the method of placing those implants across the sacroiliac joint, as well as other parts of the spine and pelvis.

We introduced iFuse-3D, our second-generation implant, in 2017. This patented titanium implant combines the triangular cross-section of the iFuse Classic implant with the proprietary 3D-printed porous surface and a fenestrated design. This design also allows the surgeon to fill the implant with ground-up bone before implantation, which some surgeons believe accelerates bone through-growth and biological fixation. iFuse-3D implants have shown positive bony ingrowth, ongrowth and through-growth in cell culture and animal studies, whether or not ground-up bone is used. We hold issued patents on 3D-printed triangular implants with fenestrations, or holes, which allow bone to grow into and through the implants.

In April 2019, we received clearance from the United States Food and Drug Administration, or FDA, to promote the use of our iFuse for fusion of the sacroiliac joint in conjunction with multi-level spinal fusion procedures to provide further stabilization and immobilization of the sacroiliac joint. For this indication, surgeons typically use the posterior approach, through the sacrum and into the iliac bones, which we call the Bedrock technique. We received CE marking and began marketing iFuse for this indication and surgical technique in Europe in December 2019. In March 2020, we received FDA 510(k) clearance for an expanded indication for our triangular iFuse implants to support our trauma program. In January 2021, we received CE marking for a similarly expanded indication for use to support our trauma program in Europe.

In February 2021, we received clearance from the FDA for iFuse-TORQ, a set of 3D-printed threaded implants designed to treat fractures of the pelvis and for minimally invasive sacroiliac joint fusion. We believe there were previously unmet clinical needs in the treatment of pelvic ring fractures and chronic sacroiliac joint pain associated with pelvic ring trauma. iFuse-TORQ also provides an opportunity for us to expand our share in the minimally invasive sacroiliac joint fusion market by offering a device which is threaded, rather than impacted, into the pelvis, addressing a preference of some surgeons in this segment.

We market our products primarily with a direct sales force as well as a number of distributors in the United States, and with a combination of a direct sales force and distributors in other countries. We generate substantially all of our revenues from the sale of iFuse implants.

In 2021 and 2020, we generated revenue of $90.2 million and $73.4 million, respectively, representing a growth rate of 23% from 2020 to 2021, and incurred net losses of $56.6 million and $43.7 million, respectively. Our gross margins were 88% for 2021 and 2020.

In October 2018, we completed our initial public offering (“IPO”) with net proceeds to us of $113.4 million. In January and February 2020, we received a total of $63.0 million of net proceeds from our first follow-on public offering of our common stock. In October 2020, we received a total of $71.6 million of net proceeds from our second follow-on offering of our common stock.

Market Opportunity

Over 30 million American adults are estimated to have chronic lower back pain. Our experience in both clinical trials and commercial settings indicates that at least 30% of patients whose chronic lower back pain stems from the sacroiliac joint may be candidates for surgical treatment with our implants. Based on our market experience and internal estimates, and the assumption that the average person suffering from sacroiliac joint dysfunction has been in pain for five years, we estimate that the potential market for sacroiliac joint fusion in the United States could be 279,000 patients annually, for a potential annual market in the United States of approximately $2.5 billion.

We believe that approximately 65% of people who suffer from sacroiliac pain are women. Sacroiliac joint patients may have experienced one or more of the following events that have contributed to disruption and/or degeneration of the sacroiliac joint: pregnancy, falls, previous lumbar surgery, automobile accidents, and aging, which may cause degeneration of the cushioning in the joint much like other joints.

We have FDA clearance to promote the use of our triangular iFuse implant for fusion of the sacroiliac joint in conjunction with multi-level spinal fusion procedures to provide further stabilization and immobilization of the sacroiliac joint. Based on the number of long level spinal constructs requiring spinopelvic fixation, we estimate the addressable market opportunity to be approximate $200 million annually.

We have FDA clearance for expanded indications for the use of our triangular iFuse implant in the treatment of pelvic trauma, including for stabilization of the sacroiliac joint in conjunction with the treatment of fractures involving the sacroiliac joint. In 2021, we introduced our iFuse-TORQ implant, which is specifically targeted for the pelvic trauma market which we estimate to be an approximately $350 million market opportunity.

We continue to invest in the development of products and techniques to help surgeons improve the treatment of these patients, and anticipate continuing to build products and pursue additional indications.

Since the introduction of our implants to the market in 2009, the number of procedures performed globally increased to approximately 65,000 from 53,000 as of December 31, 2021 and 2020, respectively.

Diagnosis

It is often difficult to identify the source of lower back pain. As a result, some surgical procedures performed on the spine have a sub-optimal success rate. For example, published studies of lumbar fusion have shown success rates of only approximately 60%. Unsuccessful spine surgery may result in failed back surgery syndrome, which has been shown to result in high healthcare costs with poor overall relief of pain. Published studies have shown that the sacroiliac joint is a cause of the pain in 32% to 43% of patients who have previously had lumbar fusion surgery and are experiencing recurrent low back pain. We believe low success rates of lumbar fusion are likely related, in many cases, to failure to diagnose the sacroiliac joint as the correct cause of pain.

Since we launched iFuse, we have made considerable investments in teaching healthcare professionals to accurately diagnose sacroiliac joint disorders. We provide instruction and training on how to perform the provocative maneuvers in a physician’s office that can help establish the sacroiliac joint as the source of pain. If provocative tests are positive, surgeons confirm the diagnosis by injecting a small amount of local anesthetic into the joint under fluoroscopic guidance. The sacroiliac joint is confirmed as a pain source if the local anesthetic produces immediate and significant pain reduction. In addition to the differentiated characteristics of our procedure and triangular iFuse implants, we believe that more accurate diagnosis is part of the reason for the high success and patient satisfaction rates of our procedure.

Surgical Treatment of Sacroiliac Joint Disease

Patients with sacroiliac joint dysfunction frequently experience significant pain simply from sitting, standing, or rolling over in bed. These activities result in small movements of the sacroiliac joints and pressure transferred across the joints. The pain can be exacerbated with activity - when a patient walks or runs, for example, the shock from each step is transmitted up the leg, through the iliac bones of the pelvis to the sacroiliac joint. The initial goal in fusion of the sacroiliac joint is to immediately stabilize the joint which rapidly reduces the pain. Following initial stabilization of the sacroiliac joint, the goal is to permanently fuse the joint. We believe our proprietary triangular implants stabilize the joint better and more quickly than competing technologies.

Surgical fusion of the sacroiliac joint with an open surgical technique was first reported in 1908, with further reports in the 1920s. The open procedure uses plates and screws, requires a 6- to 12-inch incision and is extremely invasive. The iFuse procedure involves a 1- to 2-inch incision and is much less invasive. Due to its infrequent use and invasive nature, resulting in post-operative pain and lengthy recovery, the open sacroiliac joint fusion procedure was rarely taught in medical school or residency programs. Prior

to our launch of iFuse, most spine surgeons were unfamiliar with the sacroiliac joint and had never performed a sacroiliac joint fusion. As a result, when patients presented with lower back pain, spine surgeons often did not include evaluation of the sacroiliac joint in their diagnostic work-up. Surgeons who did recognize the condition typically told their patients they had nothing to offer surgically.

Non-Surgical Treatment of Sacroiliac Joint Disease

Although a number of non-surgical treatments exist for sacroiliac joint pain, they did not provide the level of pain or disability relief seen with the iFuse procedure for the patients participating in our randomized controlled clinical trials. Non-surgical treatments include:

•Medical therapy, including opiates and non-steroidal anti-inflammatory medications.

•Physical therapy, which can involve exercises as well as massage.

•Intra-articular injections of steroid medications, which are typically performed by physicians who specialize in pain treatment or anesthesia.

•Radiofrequency ablation, or the cauterizing, of the lateral branches of the sacral nerve roots.

Our Solution - The iFuse Implant System

Our iFuse Implant System, which includes implants and instruments, is used with different surgical approaches for different indications. The iFuse system is designed to address the shortcomings of alternative treatments, including open surgery, non-surgical management, traditional screw-based and other minimally invasive stabilization and fusion procedures. Our implants are made of titanium and have a porous surface.

Our first-generation iFuse product is a triangular implant that is at least three times the strength of a typical eight-millimeter surgical screw, and the large porous surface area allows adherence of the bone to the implants. Three implants are typically used in each procedure. We introduced the original iFuse implants in 2009, and our second-generation iFuse-3D implants in 2017.

The iFuse procedure is typically performed under general anesthesia. The surgeon uses a custom instrument set we provide to prepare a triangular channel for each implant through the ilium, across the sacroiliac joint, and into the sacrum. An iFuse implant is then pressed into the triangular channel, which is slightly smaller than the implant, creating what is known as an interference fit. The triangular cross section of our iFuse implants, prevents them from rotating. Our triangular iFuse implants cross the sacroiliac joint and provide immediate joint stability, which is why we believe pain diminishes soon after the iFuse procedure. Over time, bone grows onto, and in the case of iFuse-3D into, the implants and across the joint, permanently stabilizing or fusing the joint.

By contrast, open and other techniques for sacroiliac joint fusion typically use screws, plates and/or bone graft for fixation. When placed across the sacroiliac joint, standard orthopedic screws, which lack features to encourage biologic fixation, tend to rotate and loosen over time. Because of the triangular shape, porous surface, strength, and other differentiating factors of our triangular iFuse implants, we believe that our published clinical data do not apply to other minimally invasive solutions. Little published evidence of safety, clinical effectiveness, durability, or economic utility currently exists for sacroiliac fusion devices other than our triangular iFuse implants. We are unaware of any data to show that our competitors’ sacroiliac joint screws, with features allowing biologic fixation, have a lower rate of loosening than standard orthopedic screws. In addition, placement of plates for open fusion procedures typically requires larger incisions and more invasive dissection, which results in longer recovery times and increased morbidity. We believe that the differences between our iFuse implants and other products, as well as the substantial published clinical evidence showing the safety and effectiveness, are the reason why a growing number of payors have recommended that our triangular iFuse implants be reimbursed for sacroiliac surgery to the exclusion of other technologies that are designed for the procedure.

Typically, surgeons recommend protected weight-bearing for three weeks. However, post-operative instructions are patient-specific and some patients are allowed to perform weight-bearing activities sooner. Follow-up studies have shown that bony bridging across the sacroiliac joint is present in the majority of cases five years after the iFuse procedure.

Three implants are used in most lateral iFuse procedures. Each implant crosses the joint from the iliac bone into the sacrum. Placing each implant requires three or four basic steps:

•Pin. The surgeon inserts a guide pin through the iliac bone, across the sacroiliac joint and into the sacrum.

•Drill or Tapping. Surgeons drill or tap (manually create a channel) over the guide pin, through the iliac bone, across the sacroiliac joint and just into the sacrum.

•Broach. When triangular implants are used, the surgeon impacts a broach, or sharp cutting tool, over the pin which prepares a triangular channel that is slightly smaller than the iFuse implant.

•Placement. In the case of triangular iFuse implants, the surgeon impacts the implant into the triangular channel across the sacroiliac joint, docking the implant in the sacrum. The channel is slightly smaller than the implant, which produces an interference fit. In the case of iFuse-TORQ, the surgeon threads the implant into the patients ilium, across the sacroilac joint and into the sacrum, providing fixation to the bone on either side of the joint.

iFuse is a cannulated system, which means that the drill, broach and implants have hollow channels which fit over the pin for guidance purposes. As is typical in many orthopedic procedures, a member of our team is normally present in the operating suite during surgery to provide technical assistance for the use of iFuse.

We offer three custom instrument sets for surgical placement of our triangular iFuse implants in the body. The standard set comprises largely stainless steel materials; the XL (Extra Long) set is the same as the standard set but most instruments are elongated by three inches for treatment of larger patients; and the radiolucent set comprises instruments made with more radiolucent (transparent to X-rays) materials, such as PEEK and aluminum, to improve visualization under fluoroscopy during an iFuse procedure. The iFuse-TORQ system includes its own set of instruments designed for the threaded implants.

In addition to our iFuse platform technologies, we also provide enabling technologies for our surgeons.We introduced an instrument set that is cleared for use with Medtronic’s surgical navigation system, allowing the surgeon to visualize the 3D positioning of certain instruments and implants intra-operatively. In March 2018, we introduced surgical pins cleared for use with the Medtronic Mazor surgical robot, allowing the surgeon to robotically place the guide pin according to a computer-generated surgical plan. In early 2019, we introduced our decortication and graft delivery systems that allow surgeons to remove intra-articular cartilage and deliver flowable bone graft materials.

In April 2019, we received clearance from the United States Food and Drug Administration, or FDA, to promote the use of our triangular iFuse implants for fusion of the sacroiliac joint in conjunction with multi-level spinal fusion procedures to provide further stabilization and immobilization of the sacroiliac joint. For this indication, surgeons typically use the posterior approach, through the sacrum and into the iliac bones, which we call the Bedrock technique. We received CE marking and began marketing our triangular iFuse implants for this indication and surgical technique in Europe in December 2019. The Bedrock technique utilizes our proprietary iFuse implants, with one implant placed across each sacroiliac joint (for a total of two implants per case) using a posterior approach, through the sacrum, across the sacroiliac joint, and into the ilium. The Bedrock technique differs from our traditional iFuse procedure, in which three iFuse implants are placed across one sacroiliac joint via a lateral transarticular approach through the ilium and into the sacrum. The Bedrock technique is performed to increase the overall strength and stability at the base of a long construct for multilevel spinal fusion. Biomechanical testing has shown that iFuse implants placed in this position reduce sacroiliac joint motion by approximately 30% in conjunction with a long construct. In late-2019, we introduced iFuse Bone, an implantable bone product manufactured from sterilized recovered cadaveric bone tissue, to meet the demand of some of our surgeon customers to use implantable bone products to support and augment the patient's own bone tissue in orthopedic procedures. In March 2020, we received FDA 510(k) clearance for an expanded indication for our triangular iFuse implants to support our trauma program. In-early 2021, we introduced iFuse-TORQ in early 2021. Surgeons who prefer to use a screw technique to stabilize the sacroiliac joint can use our iFuse-TORQ, which includes options for implants with lags and washers for improved compression

Our Published Studies

Our triangular iFuse implants are the only minimally invasive products for sacroiliac joint fusion commercially available in the United States that, to our knowledge, are supported by substantial high-quality published evidence of safety, clinical effectiveness, durability, and economic utility.

The safety, effectiveness and cost-effectiveness of our triangular iFuse implants are supported by more than 100 publications and several large prospective clinical studies, including two randomized trials, two large prospective multicenter trials and one long-term follow-up study. Additional long-term independent studies have reported follow-up data as far out as six years.

INSITE

INSITE is a prospective randomized controlled trial conducted in the US. 148 patients with chronic SI joint pain were randomly assigned to immediate SI joint fusion using iFuse implants or individually tailored non-surgical management. In the SI joint fusion group, large improvements were seen in pain, disability related to pain and quality of life. In contrast, in the control group, only small, clinically unimportant improvements in these parameters were observed. Moreover, after six months, more than 90% of subjects still participating in the non-surgical group decided to cross over to SI joint fusion surgery, indicating that non-surgical treatment provided ineffective relief of pain and disability related to pain. Two-year follow-up, published in International Journal of Spine Surgery in August 2016, showed sustained improvements in pain, disability and quality of life in the surgery group, with high levels of satisfaction. An embedded cost-effectiveness analysis within INSITE, Clinicoeconomics and Outcomes Research in December 2015, showed the procedure to be highly cost-effective for the treatment of chronic SI joint pain.

iMIA

iMIA iFuse Implant System Minimally Invasive Arthrodesis (“iMIA”) is a second prospective, randomized controlled trial of sacroiliac joint fusion using iFuse compared to non-surgical management with a design very similar to that of INSITE. iMIA was conducted at nine centers in Europe. Results, published in Journal of Bone and Joint Surgery in March 2019, were very similar to INSITE, with large, clinically important and statistically significant improvements in the SI joint fusion group and very few, clinically unimportant changes in the non-surgical control group. Improvements in the surgery group were sustained at 24 months.

SIFI

Sacroiliac Joint Fusion with iFuse Implant System (“SIFI”), is a prospective, multicenter single-arm clinical trial conducted at 26 centers in the US. Eligibility criteria and endpoints were identical to INSITE. Results from SIFI, published in International Journal of Spine Surgery in April 2016, showed marked, immediate and sustained improvements in pain, disability and quality of life similar to the above two studies. Like the other studies, improvements were sustained at 24 months.

LOIS Clinical Trial

Subjects participating in INSITE and SIFI were enrolled in a long-term follow-up study ("LOIS"). Five-year results, published in Medical Devices Evidence and Research in April 2018, showed sustained improvements in pain, disability and quality of life as well as a high satisfaction rate. Moreover, independent radiographic analysis showed a high rate of bony apposition to implants on both the sacral and iliac sides (98%) as well as a high rate of SI joint fusion (88% bridging bone) at five years. There were no reported adverse events related to the study device or procedure at five years.

SALLY Clinical Trial

Study of Bone Growth in the Sacroiliac Joint After Minimally Invasive Surgery with Titanium Implants (“SALLY”) is another prospective single-arm clinical study of the same patient population (chronic SI joint pain) who underwent SI joint fusion using iFuse-3D. Two-year results, published in Medical Devices Evidence and Research in June 2021, showed similar improvements in pain, disability and quality of life compared to prior studies of iFuse-3D as well as CT evidence of earlier fusion of the SI joint. The study also showed marked reduction in opioid use and improvement in objective functional tests.

SILVIA Clinical Trial

We are currently enrolling subjects in SI Joint Stabilization in Long Fusion to the Pelvis: Randomized Controlled Trial ("SILVIA"). SILVIA is an ongoing prospective randomized trial of iFuse-3D placement during multilevel spine fusion with fixation to the pelvis. This target patient population of this trial is patients undergoing multilevel spine fusion surgery primarily for degenerative scoliosis of the spine. All participants undergo pelvic fixation. At random, approximately 50% of participants are assigned to additional placement of iFuse-3D in the sacroalar-iliac trajectory (termed “Bedrock”). The goal of this study is to show that placement of iFuse-3D in the Bedrock configuration reduces the rate of postoperative SI joint pain and improves the longevity of pelvic fixation hardware, failures of which are fairly common. Follow-up results from the SILVIA trial have not been fully collected or published as of the date of this report.

Much of our clinical data, including INSITE, iMIA, SIFI and LOIS were developed using our first-generation iFuse implants. However, due to the consistent shape, implantation and method of action, as well as the consistent results observed in SALLY, we believe that the results observed in the prior studies can be generalized to include iFuse-3D, but cannot be generalized to include other minimally invasive sacroiliac joint fusion products, including screws, plants and implantable structural allograft products.

Other Published Clinical Studies

To date, several independent clinical studies have provided evidence to support the long-term safety and effectiveness of iFuse for SI joint fusion. These studies demonstrated pain reduction and/or ODI improvement that is statistically significant and clinically important and a safety profile that was similar to that observed in prospective studies. One study showed marked reduction in opioid use after SI joint fusion compared to similar subjects who underwent non-surgical treatment, and in whom opioid use increased.

Coverage and Reimbursement

Coverage and reimbursement for procedures using iFuse vary by setting of care, payor type and region. In the United States, healthcare providers that purchase iFuse products look to various third-party payors, such as Medicare, Medicaid, private commercial insurance companies, health maintenance organizations, accountable care organizations, and other healthcare-related organizations, to cover and pay for all or part of the costs of these procedures. Outside the United States, reimbursement levels vary significantly by country and by region within some countries. Reimbursement is obtained from a variety of sources, including government-sponsored and private health insurance plans, and combinations of both. Sales volumes and prices of company products will continue to depend in large part on the availability of coverage and reimbursement from such third-party payors for both the surgeon's professional fee and the facility fee which covers, among other things, the cost of implants used in iFuse procedures. Payors continually review the clinical evidence for new technologies and can change their coverage policies without notice or deny payment if the product was not used in accordance with the payor’s coverage policy. Payors also review and challenge the prices charged for products and procedures.

Third-party payors, whether governmental or commercial, are also developing increasingly sophisticated methods of controlling healthcare costs. No uniform policy of coverage and reimbursement for medical device products and services exists among third-party payors in the United States. Therefore, coverage and reimbursement for medical device products and services 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 products and procedures. As a result, the coverage determination process is often a time-consuming and costly process that requires us to provide scientific and clinical support for the use of our products to each payor separately, with no assurance that coverage and adequate reimbursement will be obtained or maintained if obtained.

In addition to uncertainties surrounding coverage policies, there are periodic changes to reimbursement. Third-party payors regularly update reimbursement amounts and sometimes revise the methodologies used to determine reimbursement amounts. This includes annual updates to payments to physicians, hospitals, and ambulatory surgical centers for procedures during which our products are used. Even if favorable coverage and reimbursement status is attained for iFuse procedures, less favorable coverage policies and reimbursement rates may be implemented in the future.

There is near universal coverage of minimally invasive SI joint fusion with an estimate of over 300 million covered lives. Private payors representing more than approximately 160 million covered lives have adopted coverage policies exclusive to our triangular iFuse implants as of December 31, 2021.

Note that because many individuals are covered by more than one health insurance plan or may switch plans during the year, the total number of covered lives reported by the payors represented above may be larger than the number of individuals who have access to the iFuse procedure through their health insurance provider at any given time.

We believe that it generally takes between six and 24 months for a surgeon to fully incorporate sacroiliac joint diagnosis and treatment into his or her practice after payors initiate coverage and the surgeon is trained. Further, the administrative burden on surgical practices can be substantial for patients where reimbursement coverage is new, and some surgeons do not believe that the current average surgeon reimbursement is yet adequate to compensate them. However, as reimbursement coverage has improved, surgeon interest in learning to diagnose the sacroiliac joint and perform iFuse procedures has been increasing.

Medical Affairs and Education

Our medical affairs team provides high quality educational programs internally and externally. Internally, specialized medical knowledge, and practical experience with iFuse are used to help educate our sales, marketing, quality, reimbursement, clinical, regulatory, engineering, and product development teams. This same specialized medical knowledge and practical iFuse experience provides the foundation for a wide variety of educational programs provided to healthcare practitioners in various medical specialties, such as surgeons, pain management physicians, nurse practitioners/physician’s assistants and physical therapists, to help educate healthcare professionals about the sacroiliac joint as a component of lower back pain, proper diagnosis of SI joint dysfunction, non-surgical treatment options and surgical treatment with iFuse.

Our surgeon training programs are for orthopedic spine surgeons, neurosurgeons, general orthopedic surgeons, and orthopedic trauma surgeons. As of December 31, 2021 and 2020, in the U.S., more than 1,800 surgeons and 1,600 surgeons, respectively, have been trained on our products and have treated at least one patient. Outside the U.S., as of December 31, 2021 and 2020, more than 700 surgeons and 600 surgeons, respectively, have been trained on iFuse and have treated at least one patient. We will continue to pursue the remainder of the approximately 7,500 target surgeons in the United States, as well as international surgeons for training in the future.

The COVID-19 pandemic has challenged our traditional method of hands-on cadaveric and dry-lab training. In early 2020, the medical affairs team implemented a virtual education series for surgeons and mid-level practitioners. In July 2020, we began using the Si-BONE SImulator; an innovative, fully portable surgeon training simulator. This training platform allows us to train surgeons without need for an operating room or a fluoroscope.The computer-based surgeon training simulator provides quality haptics, or the realistic feel during the surgeon’s use of the instruments, and the training is performed without any radiation. Onekey advantage of this surgeon training simulator is that the surgeon can now be trained locally in their office or a hospital conference room in two to three hours, and the surgeon does not need to travel to a cadaver lab, which sometimes requires being away from their practice for as much as a day and a half. The simulator uses the same instruments and implants as those that are used during surgery.The simulator is used to train surgeons to perform SI joint injections and iFuse sacroiliac joint fusions, as well as the iFuse Bedrock procedure. The simulators are deployed to cover all US regions and European subsidiaries and we currently have 24 simulators. We plan to expand the use of simulators for training purposes both in the United States and internationally. We will utilize the simulators and our existing programs to train new surgeons, increase the knowledge and proficiency of existing iFuse surgeons, and re-engage inactive surgeons.

We conduct a large number of educational programs for the broader medical community including primary care physicians, pain management physicians and other healthcare practitioners that may manage a sacroiliac joint patient non-surgically, such as physical therapists and chiropractors. In addition to these general educational programs, we provide continuing education programs focused on SI joint diagnosis and treatment to physical therapists and case managers. We are able to provide these programs for both groups in all 50 states and the District of Columbia. We have trained over 7800 physical therapists through our continuing education program as of December 31, 2021. Case managers, who typically are nurses, work in facilities where the iFuse procedure is performed, such as hospitals, or for payors or health plans. Case managers help patients navigate the healthcare system so that they receive the most appropriate treatment. As of December 31, 2021, we have trained over 1300 case managers in the United States through our continuing education program. Our medical affairs team works with leading spine surgeons to educate other orthopedic and neurosurgeons on the differential diagnosis of sacroiliac joint disorders and the use of iFuse. We also work closely with medical specialty societies to raise the awareness of and teach the appropriate diagnosis of sacroiliac joint dysfunction and the associated treatment options.

Sales and Marketing

We market and sell our implants primarily through a direct sales force and a small number of third-party distributors. Our target customer base includes approximately 7,500 surgeons who perform spine and/or pelvic surgery, including orthopedic spine surgeons, neurosurgeons, general orthopedic surgeons, and orthopedic trauma surgeons.

Our direct sales organization in the United States covered sixteen sales regions as of December 31, 2021. In each region, a number of territory sales managers act as the primary customer contact. Our territory sales managers have extensive training and experience selling medical devices for spine problems and pain management, generally focusing on emerging technologies and markets. For large and/or high volume territories, we also employ territory associate representatives who cover cases. As of December 31, 2021, our U.S. sales force consisted of 85 territory sales managers and 65 clinical specialists directly employed by us, and 59 third-party distributors. As of December 31, 2021, we had 40 employees working in our European operations, and have established operations in Italy (2010), Germany (2014), the United Kingdom (2015) and France (2019). As of December 31, 2021, our international sales force consisted of 20 sales representatives directly employed by us and 32 exclusive third-party distributors, which together had sales in 36 countries through December 31, 2021.

We have built a valuable sales team and have made it a top priority to support and retain our sales force through the COVID-19 pandemic. We limited new sales force hiring in the second and third quarter of 2020 due to uncertainty from the COVID-19 pandemic and focused on sales force productivity during this period, but resumed hiring of salespeople in the fourth quarter of 2020 and throughout 2021. Due to the COVID-19 pandemic, we focused on protecting key investments in our field force while curtailing most other areas of sales and marketing spend during the second and third quarters of 2020. For example, we guaranteed certain levels of incentive compensation to members of our field sales organization in order to retain these employees and partially mitigate the impact of the pandemic to their compensation. In contrast, we reduced certain other spending during the COVID-19 pandemic, such as travel and related expenses, regional surgeon training, trade shows, and discretionary marketing. As revenue growth returned to the levels that we were experiencing prior to the pandemic, we increased our sales and marketing expense accordingly in the third and fourth quarters of 2020 and into 2021.

We intend to continue to grow our specialized sales force to foster relationships with surgeons and support revenue growth. Our territory sales managers are senior representatives who educate surgeons on the sacroiliac joint as a primary cause of lower back pain. The territory sales manager identifies new surgeons who are interested in learning more about the sacroiliac joint and the iFuse procedure and/or the Bedrock technique. They work closely with our medical affairs team to train surgeons on the anatomy, diagnosis, and surgical technique. Once trained, the sales representative works with the surgeon to incorporate into their practices the diagnosis of sacroiliac joint pain and the iFuse procedure to treat patients suffering from sacroiliac joint pain. Our clinical support specialists assist the territory sales managers to identify surgeons interested in training. The clinical support specialists also regularly cover cases, bringing our implants and instrument trays into the operating room for use by surgeons.

Over 30 million American adults are estimated to have chronic lower back pain. It is often difficult to identify the source of the pain and traditional methods of spine surgery do not have high success rates. We believe it is essential to raise awareness among lower back pain sufferers that their symptoms may be the result of sacroiliac joint disorders and that minimally invasive surgical treatments are available. We have implemented targeted marketing, education and direct outreach programs. We continually update our social media initiatives and post content to educate and engage patients who may be candidates for our procedures. We plan to make additional investments to further increase patient awareness, primarily through digital and broadcast marketing, including TV and radio ads, paid search, display advertising, social media and public relations.

Our business is affected by seasonal variations. For instance, we have historically experienced lower sales in the summer months and higher sales in the last quarter of the fiscal year as patients have more time in the winter months to have the procedure completed or want to take advantage of their annual insurance coverage limits. However, taken as a whole, seasonality does not have a material impact on our financial results.

Research and Development

We are committed to developing enhancements to iFuse to meet our customers’ changing needs and improve the surgery’s effectiveness. Our development team, in consultation with surgeons, has a pipeline of products in various stages to provide solutions that respond to the needs of our surgeon customers and their patients. We plan to seek regulatory clearances for additional indications as required.

We continued our research and development activities during the COVID-19 pandemic. During 2020, timing of enrollment for clinical trials was impacted by reduced access to hospitals and clinical sites caused by the COVID-19 pandemic, but we believe enrollment is back on schedule. We anticipate that research and development expenses will continue to increase in the future.

Competition

We believe that we were the first company to develop, manufacture, and market a minimally invasive implant cleared by the FDA expressly for sacroiliac joint fusion other than a modified screw. Over the past several years, other companies have subsequently recognized the opportunity and have entered the minimally invasive sacroiliac joint fusion market. We expect more competitors to enter into the market and an increased number of new product introductions by existing competitors. Many of our competitors are large, publicly traded companies that can dedicate far greater resources to the minimally invasive sacroiliac joint market than we can. These companies often have wide product offerings for spine and orthopedic surgery, which allow them to bundle products in order to win large hospital group contracts and can create a barrier to entry for us. For example, some of our competitors offer sacroiliac joint fusion products which integrate with their surgical navigation and robotics platforms, enabling navigation of their procedures or performance of aspects of these procedures by surgical robots. Many of these companies also have much larger sales forces than ours, which allow them to reach more surgeons. Other competitors have entered the market with allograft bone implants intended for sacroiliac fusion and marketed as human tissue products.Many of these competitors are smaller companies and target interventional pain and other physicians not trained as orthopedic and neurological surgeons for use of these products.We also expect there to be a continued push for non-surgical alternatives.

In the United States, we believe that our primary competitors currently are Globus Medical, Inc. and Medtronic plc. Our primary competitors in Europe are Globus Medical and SIGNUS Medizintechnik GmbH. However, these competitors sell screw-based products, which we believe to be weaker and less able to resist rotation than our triangular iFuse implants. We also compete against non-hardware products, such as allograft bone implants. These allograft products comprise human cells or tissues and are generally regulated by the FDA differently from implantable medical devices made of metallic or other non-tissue based materials, unless these competitors' allograft products fail to meet the FDA's criteria for regulation as a human cell or tissue product.

Based on our commercial experience and market research, we believe iFuse is currently used in the majority of minimally invasive surgical fusions of the sacroiliac joint in the United States. Our triangular titanium implant is differentiated from other screw-based technologies on the market. Our triangular iFuse is the only minimally invasive product for sacroiliac joint fusion commercially available in the United States that, to our knowledge, is supported by published clinical evidence including randomized controlled studies that demonstrate the safety, clinical effectiveness, durability, and economic utility. These benefits are supported by more than published papers. We have received exclusive reimbursement coverage in the United States by certain payors based upon our differentiated product and quality of our evidence. We believe these factors provide competitive advantages to us in the market. The following are the primary competitive factors on which companies compete in our industry:

•product and clinical procedure effectiveness;

•ease of surgical technique and use of associated instruments;

•safety;

•published clinical outcomes and evidence;

•sales force knowledge;

•product support and service, and customer service;

•comprehensive training, including disease, anatomy, diagnosis and treatment;

•product innovation and the speed of innovation;

•intellectual property;

•accountability and responsiveness to customers’ demands;

•pricing and reimbursement;

•scientific (biomechanics) data; and

•attracting and retaining key personnel.

Intellectual Property

We protect our intellectual property through our pending patent applications and issued patents. As of December 31, 2021, we had been issued 44 issued U.S. patents and had 33 pending U.S. patents applications, and we owned 15 issued foreign patents and had nine pending foreign patent applications. We have focused the majority of our foreign patent efforts in China, Europe, and Japan. Our current U.S. patents on iFuse, including the triangular shape, expire in November 2024. Competitors may market similar triangular shaped devices upon the expiration of the patents in late 2024. Our current U.S. patents on iFuse-3D, including the fenestrated design, expire in September 2035. Our foreign patents will expire between August 2025 and September 2035.

As of December 31, 2021, we have 15 registered trademarks in the United States and have filed for 12 more. We have sought protection for at least two of these trademarks in 60 countries including the 27 European member countries of the Madrid Protocol.

We also rely upon trade secrets, know-how and continuing technological innovation, and may rely upon licensing opportunities in the future, to develop and maintain our competitive position. We may 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 agreements.

The term of individual patents depends on the legal term for patents in the countries in which they are granted. In most countries, including the United States, the patent term is generally 20 years from the earliest claimed filing date of a non-provisional patent application in the applicable country. There can be no assurance that patents will be issued from any of our pending applications or that, if patents are issued, they will be of sufficient scope or strength to provide meaningful protection for our technology. Notwithstanding the scope of the patent protection available to us, a competitor could develop treatment methods or devices that are not covered by our patents but that compete with our proprietary technology and products. Furthermore, numerous U.S. and foreign issued patents and patent applications owned by third parties exist in the fields in which we are developing products. Because patent applications can take many years to issue, there may be applications currently unknown to us, which may later result in issued patents that our existing or future products or proprietary technologies may be alleged and/or found to infringe.

There has been substantial litigation regarding patent and other intellectual property rights in the medical device industry. In the future, we may need to engage in litigation to enforce patents issued or licensed to us, to protect our trade secrets or know-how and brands, to defend against claims of infringement of the rights of others or to determine the scope and validity of the proprietary rights of others. Litigation could be costly and could divert our attention from other functions and responsibilities. Adverse determinations in litigation could reduce the barriers to entry that we have established for iFuse, or subject us to significant liabilities to third parties, require us to seek licenses from third parties or prevent us from manufacturing, selling or using iFuse, any of which could severely harm our business.

Regulation

Domestic Regulation of Our Products and Business

Our research, development and clinical programs, as well as our manufacturing and marketing operations, are subject to extensive regulation in the United States and other countries. Most notably, all of our products sold in the United States are subject to the Federal Food, Drug, and Cosmetic Act (“FDCA”) as implemented and enforced by the FDA. The processes for obtaining regulatory approvals in the United States and in foreign countries and jurisdictions, along with subsequent compliance with applicable statutes and regulations and other regulatory authorities, require the expenditure of substantial time and financial resources. The FDA governs the following activities that we perform or that are performed on our behalf, to ensure that medical products distributed domestically or exported internationally are safe and effective for their intended uses:

•product design, research, development, and manufacture;

•product safety, testing, labeling, and storage;

•record keeping procedures;

•product marketing, promotion, advertising, sales, distribution, export, and import; and

•post-marketing surveillance, complaint handling, medical device reporting, reporting of deaths, serious injuries or device malfunctions, and repair or recall of products.

There are numerous FDA regulatory requirements governing the clearance or approval and marketing of our products. These include:

•product listing and establishment registration, which helps facilitate FDA inspections and other regulatory action;

•investigational device exemptions to conduct premarket clinical trials, which include extensive monitoring, recordkeeping, and reporting requirements;

•Quality System Regulation (“QSR”), which requires manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the manufacturing process;

•labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or off-label use or indication;

•clearance of product modifications that could significantly affect safety or effectiveness or that would constitute a major change in intended use of one of our cleared devices;

•approval of product modifications that affect the safety or effectiveness of one of our approved devices;

•medical device reporting regulations, which require that manufacturers comply with FDA requirements to report if their device may have caused or contributed to a death or serious injury, or has malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction of the device or a similar device were to recur;

•post-approval restrictions or conditions, including post-approval study commitments;

•post-market surveillance regulations, which apply when necessary to protect the public health or to provide additional safety and effectiveness data for the device;

•the FDA’s recall authority, whereby it can ask, or under certain conditions order, device manufacturers to recall from the market a product that is in violation of governing laws and regulations;

•regulations pertaining to voluntary recalls; and

•notices of corrections or removals.

FDA Premarket Clearance and Approval Requirements

Unless an exemption applies, each medical device we wish to commercially distribute in the United States will require either premarket notification, or 510(k), clearance or approval of a pre-market approval (“PMA”) from the FDA. The FDA classifies medical devices into one of three classes. Devices deemed to pose lower risks are placed in either Class I or II, which typically requires the manufacturer to submit to the FDA a premarket notification requesting permission to commercially distribute the device. This process is generally known as 510(k) clearance. Some low risk devices are exempted from this requirement. Devices deemed by the FDA to pose the greatest risks, such as life-sustaining, life-supporting or implantable devices, or devices deemed not substantially equivalent to a previously cleared 510(k) device, are placed in Class III, requiring a PMA.

Class I devices are those for which safety and effectiveness can be assured by adherence to FDA’s “general controls” for medical devices, which include compliance with the applicable portions of the FDA’s Quality System Regulation, or QSR, facility registration and product listing, reporting of adverse medical events, and appropriate, truthful and non-misleading labeling, advertising, and promotional materials. Some Class I devices also require premarket clearance by the FDA through the 510(k) premarket notification process described below.

Class II devices are subject to FDA’s general controls, and any other “special controls” deemed necessary by FDA to ensure the safety and effectiveness of the device, such as performance standards, product-specific guidance documents, special labeling requirements, patient registries or post-market surveillance. Premarket review and clearance by the FDA for Class II devices is accomplished through the 510(k) premarket notification procedure, though certain Class II devices are exempt from this premarket review process. When a 510(k) is required, the manufacturer must submit to the FDA a premarket notification submission demonstrating that the device is “substantially equivalent” to a legally marketed device, which in some cases may require submission of clinical data. Unless a specific exemption applies, 510(k) premarket notification submissions are subject to user fees. If the FDA determines that the device, or its intended use, is not substantially equivalent to a legally marketed device, the FDA may place the device, or the particular use of the device, into Class III, and the device sponsor must then fulfill much more rigorous premarketing requirements.

Class III devices, consisting of devices deemed by the FDA to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices, or devices deemed not substantially equivalent to a predicate device. The safety and effectiveness of Class III devices cannot be assured solely by general or special controls. Submission and FDA approval of a premarket approval, or PMA, application is required before marketing of a Class III device can proceed. As with 510(k) submissions, unless subject to an exemption, PMA submissions are subject to user fees. The PMA process is much more demanding than the 510(k) premarket notification process. A PMA application, which is intended to demonstrate that the device is safe and effective, must be supported by extensive data, typically including data from preclinical studies and human clinical trials.

510(k) Clearance

To obtain 510(k) clearance for a medical device, an applicant must submit to the FDA a premarket notification submission demonstrating that the proposed device is “substantially equivalent” to a legally marketed device, known as a “predicate device.” A legally marketed predicate device may include a device that was legally marketed prior to May 28, 1976 for which a PMA is not required (known as a “pre-amendments device” based on the date of enactment of the Medical Device Amendments of 1976), a device that has been reclassified from Class III to Class II or Class I, or a device that was found substantially equivalent through the 510(k) process. A device is substantially equivalent if, with respect to the predicate device, it has the same intended use and has either (i) the same technological characteristics, or (ii) different technological characteristics, but the information provided in the 510(k) submission demonstrates that the device does not raise new questions of safety and effectiveness and is at least as safe and effective as the predicate device. A showing of substantial equivalence sometimes, but not always, requires clinical data.

Before the FDA will accept a 510(k) submission for substantive review, the FDA will first assess whether the submission satisfies a minimum threshold of acceptability. If the FDA determines that the 510(k) submission is incomplete, the FDA will issue a “Refuse to Accept” letter which generally outlines the information the FDA believes is necessary to permit a substantive review and to reach a determination regarding substantial equivalence. An applicant must submit the requested information before the FDA will proceed with additional review of the submission. By regulation, the FDA has 90 days from acceptance of the 510(k) submission for review to review and issue a determination. As a practical matter, clearance often takes longer. The FDA may require additional information, including clinical data, to make a determination regarding substantial equivalence.

After a device receives 510(k) marketing clearance, any modification that could significantly affect its safety or effectiveness, or that would constitute a major change or modification in its intended use, will require a new 510(k) marketing clearance or, if the modification changes the classification of the product to Class III, PMA approval. The determination as to whether or not a modification could significantly affect the device’s safety or effectiveness is initially left to the manufacturer using available FDA

guidance. Many minor modifications today are accomplished by a “letter to file” in which the manufacturer documents the rationale for the change and why a new 510(k) is not required. However, the FDA may review such letters to file to evaluate the regulatory status of the modified product at any time and may require the manufacturer to cease marketing and recall the modified device until 510(k) clearance is obtained. The manufacturer may also be subject to significant regulatory fines or penalties.

Regulation of Human Cell and Tissue Based Products

Our iFuse Bone products are derived from human tissue (demineralized bone tissue). The FDA has specific regulations governing human cells, tissues, and cellular and tissue-based products ("HCT/Ps"). HCT/Ps regulated by the FDA under the authority of section 361 of the Public Health Service Act must be not more than minimally manipulated and be for homologous use. They are subject to requirements relating to registering facilities and listing products with the FDA, screening and testing for tissue donor eligibility, Good Tissue Practice when processing, storing, labeling and distributing HCT/Ps, including required labeling information, stringent record keeping and adverse event reporting. Our bone tissue products are regulated as 361 HCT/Ps.

The AATB has issued operating standards for tissue banking. Accreditation is voluntary, but compliance with these standards is a requirement to become an AATB-accredited tissue establishment. In addition, some states have their own tissue banking regulations. We are licensed or have permits for tissue banking in California, Florida, New York, Maryland, and other states that require specific licensing or registration.

Procurement of certain human organs and tissue for transplantation is subject to the restrictions of the National Organ Transplant Act (NOTA), which prohibits the transfer of certain human organs, including bone tissue for valuable consideration, but permits reasonable payments associated with removal, transportation, implantation, processing, preservation, quality control and storage.

Clinical Trials

Clinical trials are generally required to support a PMA application and are sometimes required for 510(k) clearance. Such trials for implanted devices such as iFuse generally require an investigational device exemption application (“IDE”), approved in advance by the FDA for a specified number of subjects and study sites, unless the product is deemed a nonsignificant risk device eligible for more abbreviated IDE requirements. Clinical trials are subject to extensive monitoring, recordkeeping and reporting requirements. Clinical trials must be conducted under the oversight of an institutional review board (“IRB”), and the relevant clinical trial sites and must comply with FDA regulations, including but not limited to those relating to good clinical practices. To conduct a clinical trial, we also are required to obtain the subjects’ informed consent in form and substance that complies with both FDA requirements and state and federal privacy and human subject protection regulations. We, the FDA, or the IRB, could suspend a clinical trial at any time for various reasons, including a belief that the risks to study subjects outweigh the anticipated benefits. Even if a trial is completed, the results of clinical testing may not adequately demonstrate the safety and effectiveness of the device or may otherwise not be sufficient to obtain FDA clearance or approval to market the product in the United States. Similarly, in Europe the clinical study must be approved by a local ethics committee and in some cases, including studies with high- risk devices, by the ministry of health in the applicable country.

Pervasive and Continuing Regulation

After a device is placed on the market, numerous regulatory requirements continue to apply. These include:

•Product listing and establishment registration, which helps facilitate FDA inspections and other regulatory action;

•QSR, which requires manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation, and other quality assurance procedures during all aspects of the manufacturing process;

•labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or off-label use or indications;

•clearance of product modifications that could significantly affect safety or effectiveness or that would constitute a major change in intended use of one of our cleared devices;

•approval of product modifications that affect the safety or effectiveness of one of our approved devices;

•post-approval restrictions or conditions, including post-approval study commitments;

•post-market surveillance regulations, which apply when necessary to protect the public health or to provide additional safety and effectiveness data for the device;

•regulations pertaining to voluntary recalls; and

•notices of corrections or removals.

We have registered our facility with the FDA as a medical device manufacturer. The FDA has broad post-market and regulatory enforcement powers. We are subject to announced and unannounced inspections by the FDA to determine our compliance with the QSR and other regulations, and these inspections may include the manufacturing facilities of some of our subcontractors. Failure by us or by our suppliers to comply with applicable regulatory requirements can result in enforcement action by the FDA or other regulatory authorities, which may result in sanctions including, but not limited to:

•untitled letters, warning letters, fines, injunctions, consent decrees, and civil penalties;

•unanticipated expenditures to address or defend such actions;

•customer notifications for repair, replacement, refunds;

•recall, detention or seizure of our products;

•operating restrictions or partial suspension or total shutdown of production;

•refusing or delaying our requests for 510(k) clearance or PMA approval of new products or modified products;

•operating restrictions;

•withdrawing 510(k) clearances or PMA approvals that have already been granted;

•refusal to grant export approval for our products; or

•criminal prosecution.

Promotional Materials - “Off-Label” Promotion

Advertising and promotion of medical devices, in addition to being regulated by the FDA, are also regulated by the Federal Trade Commission and by state regulatory and enforcement authorities. If the FDA determines that our promotional materials or training constitutes promotion of an unapproved use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcement actions, including the issuance of an untitled letter, a warning letter, injunction, seizure, civil fine, or criminal penalties. It is also possible that other federal, state, or foreign enforcement authorities might take action if they consider our promotional or training materials to constitute promotion of an unapproved use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting false claims for reimbursement. In that event, we could be subject to additional significant penalties, such as exclusion from participation in federal healthcare programs, and our reputation could be damaged and adoption of the products would be impaired.

In addition, under the federal Lanham Act and similar state laws, competitors, and others can initiate litigation relating to advertising claims.

International Regulation of Our Products

Our research, development and clinical programs, as well as our manufacturing and marketing operations, are subject to extensive regulation in other countries. For example, in the European Economic Area (“EEA”) our devices are currently required to comply with the Medical Device Regulation (Regulations 2017/745) in the EU Member States, Iceland, Lichtenstein and Norway. The Medical Device Regulation is, among other things, 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 Medical Device Regulation, among other things:

•strengthens the rules on placing medical devices on the market and reinforce surveillance once they are available;

•establishes explicit provisions on manufacturers’ responsibilities for the follow-up of the quality, performance and safety of devices placed on the market;

•improves the traceability of medical devices throughout the supply chain to the end-user or patient through a unique identification number;

•sets up a central database to provide patients, healthcare professionals and the public with comprehensive information on products available in the European Union; and

•strengthens the rules for the assessment of certain high-risk devices, such as implants, which may have to undergo an additional check by experts before they are placed on the market.

The Medical Device Regulation substantially augments those aspects of the Medical Device Directive governing clinical investigations of medical devices. In addition to detailed provisions concerning the authorization and conduct of clinical investigations, the Regulation imposes on non-EU sponsors a responsibility to appoint a legal representative established in the EU and an obligation on EU Member States to ensure that systems exist to compensate clinical investigation participants who are harmed in that jurisdiction due to their participation.

Further, the advertising and promotion of our products in the EEA is currently subject to the provisions of Directive 2006/114/EC concerning misleading and comparative advertising, Directive 2005/29/EC on unfair commercial practices, and the Medical Device Regulation, as well as other national legislation in the EEA countries governing the advertising and promotion of medical devices. These laws may limit or restrict the advertising and promotion of our products to the general public and may impose limitations on our promotional activities with healthcare professionals.

Regulatory Status

In November 2008, we received 510(k) clearance to market our first generation iFuse implant from the FDA. Since 2008, we have received additional FDA 510(k) clearances for new instruments, additional implant sizes and labeling changes. In the United States, our first-generation iFuse implants and our iFuse-3D implants are intended for sacroiliac fusion for the following conditions: sacroiliac joint dysfunction that is a direct result of sacroiliac joint disruptions and degenerative sacroiliitis, which includes conditions where symptoms began during pregnancy or in the peripartum period and have persisted postpartum for more than six months; to augment immobilization and stabilization of the sacroiliac joint in skeletally mature patients undergoing sacropelvic fixation as part of a lumbar or thoracolumbar fusion; and acute, non-acute, and non-traumatic fractures involving the sacroiliac joint. In the future, we plan to pursue additional 510(k) clearances for new products and changes to the current indication for iFuse.

In February 2021, we received 510(k) clearance to market our iFuse-TORQ from the FDA. In the United States, iFuse-TORQ is intended for fusion of the sacroiliac joint for sacroiliac joint dysfunction including sacroiliac joint disruption and degenerative sacroilitis; and for fracture fixation of small and large bones of the pelvis.

In November 2010, we obtained a CE Certificate of Conformity and affixed a CE mark to our iFuse Implant System to allow commercialization of our triangular iFuse implants in the EEA. In the EEA and Switzerland, iFuse is intended for sacroiliac joint fusion, including use in high and low energy fractures of the pelvic ring. Since 2010, we have added additional instruments, implant sizes and labeling updates and iFuse-3D, our second generation iFuse implant, to our product offerings in Europe. We plan to continue to work with our Notified Body to incorporate new products and labeling updates in our Technical Files for CE marking in Europe.

As of May 26, 2021, the European Union no longer applies the Mutual Recognition Agreement between the EEA and Switzerland. Accordingly, manufacturers outside of Switzerland are required to appoint a Swiss authorized representative in compliance with the Swiss Medical Device Ordinance. As a consequence, we have appointed an authorized representative in Switzerland and continue to work to meet Swiss requirements for the import of medical devices.

Since July 2013, we have obtained approval for iFuse in regions beyond the United States and the EEA, including Australia, Canada, Hong Kong, Israel, Malaysia, New Zealand, Saudi Arabia, Singapore and Taiwan. We are currently collecting information to determine our regulatory strategy in Japan.

Environmental Regulations

We outsource substantially all the manufacturing of our products, therefore we have not incurred significant expenses relating to our compliance with federal, state, or local environmental laws and do not expect to incur significant expenses in the foreseeable future. However, due to the nature of our operations and the frequently changing nature of environmental compliance standards and technology, we cannot predict with any certainty that future material capital or operating expenditures will not be required in order to comply with applicable environmental laws and regulations.

Healthcare Fraud and Abuse

Federal and state governmental agencies and equivalent foreign authorities subject the healthcare industry to intense regulatory scrutiny, including heightened civil and criminal enforcement efforts. These laws constrain the sales, marketing and other promotional activities of medical device manufacturers by limiting the kinds of financial arrangements we may have with hospitals, physicians and other potential purchasers and prescribers of our products. Federal healthcare fraud and abuse laws apply to our business when a customer submits a claim for an item or service that is reimbursable under Medicare, Medicaid, or other federally funded healthcare programs. The laws that may affect our ability to operate include:

•the federal Anti-Kickback Statute, which prohibits, among other things, knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, lease, order, arrangement for, or recommendation of, items or services for which payment may be made, in whole or in part, under federal healthcare programs, such as the Medicare and Medicaid programs. The term “remuneration” has been broadly interpreted to include anything of value, and the government can establish a violation of the Anti-Kickback Statute without proving that a person or entity had actual knowledge of, or a specific intent to violate, the law;

•the federal civil False Claims Act, which prohibits, among other things, individuals or entities from knowingly presenting, or causing to be presented, false or fraudulent claims for payment of government funds; knowingly making, using, or causing to be made or used, a false record or statement to get a false claim paid or to avoid, decrease, or conceal an obligation to pay money to the federal government. A claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act. Actions under the False Claims Act may be brought by the government or as a qui tam action by a private individual in the name of the government and to share in any monetary recovery. There are also criminal penalties for making or presenting a false or fictitious or fraudulent claim to the federal government;

•the federal Health Insurance Portability and Accountability Act of 1996, which imposes criminal and civil liability for, among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program including private third-party payors, or knowingly and willfully falsifying, concealing, or covering up a material fact or making a materially false, fictitious, or fraudulent statement or representation, or making or using any false writing or document knowing the same to contain any materially false, fictitious, or fraudulent statement or entry in connection with the delivery of or payment for healthcare benefits, items, or services;

•the federal Physician Payment Sunshine Act, implemented by the Centers for Medicare & Medicaid Services (“CMS”) as the Open Payments program, which requires manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program to report annually to the CMS, information related to payments and other “transfers of value” made to physicians (currently defined to include doctors, dentists, optometrists, podiatrists and chiropractors), other healthcare professionals (including physician assistants and nurse practitioners), and teaching hospitals, and requires applicable manufacturers to report annually to CMS ownership and investment interests held by physicians and their immediate family members and payments or other “transfers of value” to such physician owners

•analogous state and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims laws, which may apply to items or services reimbursed by any third-party payor, including commercial insurers and patients; state laws that require device companies to comply with the industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state beneficiary inducement laws, and state laws that require device manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.

If we or our employees are found to have violated any of the above laws we may be subject to significant administrative, civil and criminal penalties, including imprisonment, exclusion from participation in federal health care programs, such as Medicare and Medicaid, significant fines, monetary penalties and damages, the restructuring or curtailment of our operations, imposition of compliance obligations and monitoring, and damage to our reputation. For a more detailed description of the federal and state health care fraud and abuse laws, see the risk factor “We and our sales representatives must comply with U.S. federal and state fraud and abuse laws, including those relating to healthcare provider kickbacks and false claims for reimbursement, and other applicable federal and state healthcare laws, as well as equivalent foreign laws, and failure to comply could negatively affect our business”in the Risks Related to Our Legal and Regulatory Environment section of Item 1A of this Annual Report on Form 10-K.

The U.S. Foreign Corrupt Practices Act (“FCPA”) and similar anti-bribery laws in other countries, such as the United Kingdom Bribery Act (“UKBA”), generally prohibit companies and their intermediaries from making improper payments to government officials and/or other persons for the purpose of obtaining or retaining business. Our policies mandate compliance with these anti-bribery laws.

Both the federal and state governments in the U.S. and foreign governments continue to propose and pass new legislation and regulations designed to contain or reduce the cost of healthcare. Such legislation and regulations may result in decreased reimbursement for medical devices, which may further exacerbate industry-wide pressure to reduce the prices charged for medical devices.

Data Privacy and Security Laws

We are also subject to various federal, state and foreign laws that protect the confidentiality of certain patient health information, including patient medical records, and restrict the use and disclosure of patient health information by healthcare providers, such as the Health Insurance Portability and Accountability Act, and its implementing regulations, as amended by Health Information Technology for Economic and Clinical Health Act enacted under the American Recovery and Reinvestment Act 2009 (“ARRA”) (collectively, “HIPAA”), in the United States.

HIPAA imposes obligations on “covered entities,” including certain healthcare providers, health plans, and healthcare clearinghouses, and their respective “business associates” that create, receive, maintain or transmit individually identifiable health information for or on behalf of a covered entity as well as their covered subcontractors, with respect to safeguarding the privacy, security and transmission of individually identifiable health information. HIPAA also requires the notification of patients, reporting to the U.S. Department of Health and Human Services (“HHS”), and other compliance actions, in the event of a breach of unsecured Protected Health Information (“PHI”). Required notification must be provided without unreasonable delay and in no event later than 60 calendar days after discovery of the breach, under HIPAA. In addition, if the PHI of 500 or more individuals is improperly used or disclosed, HHS would post the notification on its website, and we may be required to notify the media. Failure to comply with the HIPAA privacy and security standards can result in significant civil monetary penalties, and, in certain circumstances, criminal penalties, including imprisonment.

In addition, even when HIPAA does not apply other federal and state laws impose security obligations. For example, according to the Federal Trade Commission (“FTC”), failing to take appropriate steps to keep consumers’ personal information secure constitutes unfair acts or practices in or affecting commerce in violation of Section 5(a) of the FTCA, 15 U.S.C § 45(a). The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities. Medical data is considered sensitive data that merits stronger safeguards.

In the European Union (“EU”), we are subject to laws relating to our collection, control, processing and other use of personal data (i.e. data relating to an identifiable living individual). We process personal data in relation to our operations. We process data of our employees, consultants, certain individuals who may be affiliated with our customers, including physician users of our products and, in the context of clinical investigations, patients. The personal data may include sensitive personal data including health information. The data privacy regime in the EU includes the EU General Data Protection Regulation, or the GDPR, effective on May 25, 2018 and the E-Privacy Directive 2002/58/EC and the national laws implementing it. Each EU Member State may adopt additional legislation implementing these regulations into its own national data privacy regime and therefore the laws may differ by jurisdiction, sometimes significantly. We need to ensure compliance with the rules in each jurisdiction where we are established or are otherwise subject to local privacy laws.

The GDPR is directly applicable in each EU Member State. This should, in principle, result in a more uniform application of data privacy laws across the EU. The GDPR imposes onerous accountability obligations requiring data controllers and processors to maintain a record of their data processing and policies. It requires data controllers to be transparent and to disclose to data subjects (in a concise, intelligible and easily accessible form) how their personal information is to be used, imposes limitations on retention of information, increases requirements pertaining to pseudonymized (i.e., key-coded) data, introduces mandatory data breach notification requirements and sets higher standards for data controllers to demonstrate that they have obtained valid consent for certain data processing activities. Fines for non-compliance with the GDPR will be significant-the greater of € 20 million or 4% of global turnover. The GDPR provides that EU Member States may introduce further conditions, including limitations, to the processing of genetic, biometric, or health data, which could limit our ability to collect, use and share personal data, or could cause our compliance costs to increase, ultimately having an adverse impact on our business. Each EU Member State may also adopt additional related legislation and guidance in its own national data privacy regime and therefore the laws may differ by jurisdiction, sometimes significantly. We need to ensure compliance with the rules in each jurisdiction where we are established or are otherwise subject to local privacy laws.

We are subject to the supervision of local data protection authorities in those jurisdictions where we are established or otherwise subject to applicable law. We depend on a number of third parties in relation to our provision of our services, a number of which process personal data on our behalf. With each such provider we enter into contractual arrangements to ensure that they only process personal data according to our instructions and applicable laws, and that they have sufficient technical and organizational security measures in place to fulfil their related obligations. Where we transfer personal data outside the EEA, we do so in compliance with the relevant data export requirements. We take our data protection obligations seriously, as any improper disclosure, particularly with regard to our customers’ sensitive personal data, could negatively impact our business and/or our reputation.

Manufacturing and Supply

We use third-party manufacturers to produce our implants and instruments. Our primary supplier for implants is rms Company (“RMS”) for iFuse-3D. To mitigate supply risk, we use a rolling twelve month forecast and take into consideration production lead times to maintain adequate levels of inventory for both our iFuse-3D and iFuse. Most of our instruments have secondary manufacturing suppliers and we continually work with additional manufacturers as our secondary suppliers. Substantially all of our products, including all of our implants, are manufactured in the United States.

We entered into a non-exclusive Manufacturing, Quality and Supply Agreement with RMS in January 2017, which was amended in July 2020, and amended and restated in June 2021. Pursuant to this agreement, RMS manufactures certain of our implants in accordance with our specifications, including both purchased and sterilized iFuse-3D implants, as well as uncoated machined implants which are subsequently coated to become our finished first generation iFuse implants. While the agreement provides that we are required to purchase the amounts forecasted in a blanket purchase order, we are not required to purchase product in excess of such forecasted amounts. The prices we pay for products are fixed under the agreement provided that if order volumes deviate from forecasted amounts beyond certain thresholds, we or RMS may request to negotiate further price changes. The agreement automatically renews for successive one-year periods; provided, however, the agreement may be terminated early by either party, as specified in the agreement. RMS is currently our only supplier of iFuse-3D implants.

We believe that our manufacturing operations, and those of our suppliers, comply with regulations mandated by the FDA, as well as Medical Devices Directive regulations in the EEA. Manufacturing facilities that produce medical devices or component parts intended for distribution world-wide are subject to regulation and periodic planned and unannounced inspection by the FDA and other domestic and international regulatory agencies.

In the United States, products we sell are required to be manufactured in compliance with the FDA's Quality System Regulation, codified at 21 CFR Part 820, which covers the methods used in, and the facilities used for, the design, testing, control, manufacturing, labeling, quality assurance, packaging, storage, and shipping. In international markets, we are required to obtain and maintain various quality assurance and quality management certifications, including those issued by DEKRA Certification, B.V., our notified body. DEKRA has issued the following international certifications: Quality Management System ISO13485:2016 for our locations in Santa Clara, California, and Gallarate Italy; Full Quality Assurance Certification for the design and manufacture of iFuse; and a Design Examination certificate for iFuse.

We are required to demonstrate continuing compliance with applicable regulatory requirements to maintain these certifications and will continue to be periodically inspected by international regulatory authorities for certification purposes. Further, we and certain of our suppliers are required to comply with all applicable regulations and current good manufacturing practices. As set forth above, these FDA and international regulations cover, among other things, the methods and documentation of the design, testing, production, control, quality assurance, labeling, packaging, sterilization, storage, and shipping of our products. Compliance with applicable regulatory requirements is subject to continual review and is monitored rigorously through periodic inspections. If we or our manufacturers fail to adhere to current good manufacturing practice requirements, this could delay production of our products and lead to fines, difficulties in obtaining regulatory approvals, recalls, enforcement actions, including injunctive relief or consent decrees, or other consequences, which could, in turn, have a material adverse effect on our financial condition or results of operations.

Product Liability and Insurance

The manufacture and sale of our products subjects us to the risk of financial exposure to product liability claims. Our products are used in situations in which there is a risk of serious injury or death. We carry insurance policies which we believe to be customary for similar companies in our industry. We cannot assure you that these policies will be sufficient to cover all or substantially all losses that we experience.

We endeavor to maintain executive and organization liability insurance in a form and with aggregate coverage limits that we believe are adequate for our business purposes, but our coverage limits may prove not to be adequate in some circumstances.

Human Capital Resources

Maintaining a sufficient number of skilled employees in each respective department is a key focus of our human capital efforts. Our ability to recruit, develop and retain highly skilled talent is a significant determinant of our success. To facilitate talent attraction, retention, and development, we strive to make SI-BONE an inclusive, diverse, and safe workplace with opportunities for our employees to grow and develop in their careers, supported by strong compensation, benefits, and health and wellness programs, as well as by programs that build connections between our employees and the communities in which they live and work.In response to

intensifying competition in the labor markets in which we compete and a general increase in employee turnover experienced by many companies in the last twelve months, we have begun to more actively track and manage voluntary and involuntary employee turnover.

As of December 31, 2021, we had 352 employees, including sales and marketing, product development, general administrative and accounting, both domestically and internationally. As of December 31, 2021, we had a direct field sales organization of 150 in the United States and 20 in Europe. During 2021, our turnover rate was less than 20%.

Diversity and Inclusion

In order to realize our mission and vision, we are committed to actively fostering workforce diversity and an environment of cultural inclusion throughout the company. In 2020, we adopted a Diversity and Inclusion Plan, overseen by our Nominating and Corporate Governance Committee. Our program goal is to increase gender and ethnic diversity in our workforce and leadership over three years, while continuing to provide equal employment opportunities to all candidates and employees without regard to any protected status. Accordingly, we track gender diversity among our global and U.S. workforce, the percentage of employees above director level who are female, the representation of women and underrepresented communities on our Board of Directors and the diversity of our U.S. workforce.

We aim to maintain a mix of backgrounds, skills and experiences in our board composition to understand and reflect the needs of our diverse stakeholders. Currently, four of our nine board members are women and two of our board members self-identify as Asian American.

Health, Safety, and Wellness

The health, safety, and wellness of our employees is a priority in which we have always invested and intend to continue to do. We provide our employees and their families with access to a variety of innovative, flexible, and convenient health and wellness programs. These benefits are intended to provide protection and security, so employees can have peace of mind concerning events that may require time away from work or that may impact their financial well-being. Additionally, we offer programs to help support employee physical and mental health by providing tools and resources to help them improve or maintain their health status, encourage engagement in healthy behaviors, and offer choices where possible so they are customized to meet their needs and the needs of their families.

In light of the COVID-19 pandemic, the prioritization of employee health, safety, and wellness took on particular significance in 2020 and 2021. We implemented significant changes that we determined were in the best interest of our employees, as well as the communities in which we operate, in compliance with government regulations. We have implemented health and safety measures that include maximizing personal workspaces, providing personal protective equipment and holding on-site vaccinations events.

Compensation and Benefits

We provide compensation and benefits programs to help meet the needs of our employees. In addition to base compensation, these programs, which vary by country, include annual bonuses, restricted stock unit awards, an Employee Stock Purchase Plan, 401(k), healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, and flexible work schedules, among many others. As a response to the COVID-19 pandemic, we supported employees with standard merit increases, paid full-time wages to hourly employees when they were not able to access our facilities, and guaranteed certain commissions to our salespeople. We did not furlough or terminate any of our employees due to economic concerns arising from COVID-19 in 2020 or 2021.

Ensuring fair and equitable pay is integral to our commitment to our employees. Our executive team and Board of Directors strongly support this commitment. In 2020, we conducted our first pay equity review with the assistance of an independent consulting firm. The consultant reviewed our employee compensation to determine whether any statistically significant pay differences existed between women and men and between minorities and non-minorities performing similar job functions. The review provided information to help us understand whether our compensation structure was appropriate and to identify what improvements can be made. In areas where pay disparities were identified, we conducted further evaluation to determine where adjustments were appropriate.

As part of our Diversity and Inclusion Program, we implemented an applicant tracking system in 2021. In addition to automating our recruiting and onboarding processes, the applicant tracking system also helps us determine whether there is a mix of new hire candidates in the system from different genders and ethnicities for open positions.

Talent Development

We value our employees and the passion, commitment, and professional depth they provide. To enhance employee retention and job satisfaction, we offer ongoing learning and leadership training opportunities that support growth.

Our human resources and sales enablement teams transitioned much of our leadership training from in-person sessions to remote learning due to COVID-19. Our scaled learning platforms of on-demand and virtual classroom learning eliminates travel and allows employees to access development at their convenience.

We have robust annual performance review processes for reviewing employees’ performance and pay. To support our managers, we train them on conducting effective performance reviews and making compensation recommendations, which take into consideration market pay data and performance, as well as experience in an employee’s respective role.

Community Programs

We believe that building connections between our employees, their families, and our communities creates a more meaningful, fulfilling, and enjoyable workplace. Through our engagement programs, our employees can pursue their interests and hobbies, connect to volunteering and giving opportunities, and enjoy unique recreational experiences with family members.

Our employees engage in a variety of activities to support their local communities. We acknowledge that community involvement is important to our employees and we support their interests in the communities in which they live. Prior to COVID-19, we hosted events at our corporate campus, including food, clothing, and toy drives. During 2020 and 2021, we organized employee cash donations to food banks to support the neediest individuals in San Francisco Bay Area communities.

We encourage you to review our ESG Shareholder Letter in the Governance Documents of the Corporate Governance section of our Investor website for more detailed information regarding our human capital programs and initiatives. Nothing on our website, including our ESG Shareholder Letter, shall be deemed part of or incorporated by reference into this Annual Report.

Emerging Growth Company Status

Prior to December 31, 2021, we were an emerging growth company, as defined in the Jumpstart Our Business Startups Act (JOBS Act). As a result of our public float (the market value of our common shares held by non-affiliates) exceeding $700 million as of June 30, 2021, we became a large accelerated filer as of December 31, 2021 and therefore no longer qualified as an “emerging growth company" as defined in the JOBS Act, and have ceased to be a “smaller reporting company” as defined in the Exchange Act. However, we are not required to reflect the change in our smaller reporting company status and comply with the associated increased disclosure obligations until our quarterly report for the three-month period ended March 31, 2022. Additionally, we are no longer able to use the extended transition period for complying with new or revised accounting standards available to emerging growth companies and therefore we are required to adopt new or revised accounting standards as of the effective dates for public companies. All new accounting pronouncements recently adopted as discussed in Note 2 - Summary of Significant Accounting Policies, in the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K were adopted in the fourth quarter of 2021 with an effective date of January 1, 2021. However, we are not required to reflect the change in our smaller reporting company status and comply with the associated increased disclosure obligations until our quarterly report for the three-month period ended March 31, 2022.

Company History

SI-BONE was founded in 2008 by the main inventor of iFuse, orthopedist Mark A. Reiley, M.D., our then President and Chief Executive Officer, Jeffrey W. Dunn, and orthopedic surgeon Leonard Rudolf, M.D. Dr. Reiley previously invented balloon kyphoplasty and founded Kyphon Inc., which was sold to Medtronic plc in 2007. Dr. Reiley also invented the INBONE total ankle replacement system, which was sold to Wright Medical Technology, Inc. in 2008.

Corporate Information

We were incorporated in March 2008 in Delaware. Our principal executive offices are located at 471 El Camino Real, Suite 101, Santa Clara, California 95050 and our telephone number is (408) 207-0700. Our website address is www.si-bone.com. We completed our initial public offering in October 2018, and our common stock is listed on the Nasdaq Global Market under the symbol “SIBN.”

Our Annual Report on Form 10-K, Quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available free of charge on our website. The information contained on or that can be accessed through our website is not incorporated by reference into this report, and you should not consider information on our website to be part of this report.

Item 1A. Risk Factors

Investing in our common stock involves a high degree of risk. Investors should carefully consider the risks described below, as well as the other information in this Annual Report on Form 10-K, including our consolidated financial statements and the related notes and the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before deciding whether to invest in our common stock. The occurrence of any of the events or developments described below could materially and adversely affect our business, financial condition, results of operations, and growth prospects. In such an event, the market price of our common stock could decline, and our stockholders may lose all or part of their investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations.

Risks Related to Our Business and Our Industry

We have incurred significant operating losses since inception, we expect to continue to incur operating losses in the future, and we may not be able to achieve or sustain future profitability.

We have incurred net losses since our inception in 2008. For the years ended December 31, 2021 and 2020, we had net losses of $56.6 million and $43.7 million, respectively. As of December 31, 2021, we had an accumulated deficit of $295.8 million. We have financed our operations primarily through the net proceeds of our public offerings of our common stock, private placements of equity securities, certain debt-related financing arrangements, and from sales of our products. We have devoted substantially all of our resources to research and development of our products, sales and marketing activities, investments in training and educating surgeons and other healthcare providers, and clinical and regulatory matters for our products. There can be no assurances that we will be able to generate sufficient revenue from our existing products or from any of our product candidates in development, and to transition to profitability and generate consistent positive cash flows, and even if we are able to do so, our ability to do so has been delayed by the COVID-19 pandemic. We expect that our operating expenses will continue to increase as we continue to build our commercial infrastructure, develop, enhance, and commercialize our existing and new products. As a result, we expect to continue to incur operating losses for the foreseeable future and may never achieve profitability. Furthermore, even if we do achieve profitability, we may not be able to sustain or increase profitability on an ongoing basis. If we do not achieve profitability, it will be more difficult for us to finance our business and accomplish our strategic objectives.

Our expected future capital requirements may depend on many factors including expanding our surgeon base, the expansion of our sales force, investment in implants and instruments, and the timing and extent of spending on the development of our technology to increase our product offerings. We may need additional funding for our operations, but additional funds may not be available to us on acceptable terms on a timely basis, if at all. We may seek funds through borrowings or through additional rounds of financing, including private or public equity or debt offerings. If we raise additional funds by issuing equity securities, our stockholders may experience dilution. Any future debt financing into which we enter may impose upon us additional covenants that restrict our operations, including limitations on our ability to incur liens or additional debt, pay dividends, repurchase our common stock, make certain investments, and engage in certain merger, consolidation or asset sale transactions. Any future debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders. Furthermore, we cannot be certain that additional funding will be available on acceptable terms, if at all. If we are unable to raise additional capital or generate sufficient cash from operations to adequately fund our operations, we will need to curtail planned activities to reduce costs, which will likely harm our ability to execute on our business plan and continue operations.

Epidemic diseases, or the perception of their effects, may have (or, in the case of the COVID-19 pandemic, will continue to have during its duration) an adverse effect on our business, financial condition, results of operations, or cash flows.

Outbreaks of infectious diseases, such as COVID-19, and historically, the Ebola virus, Middle East Respiratory Syndrome, Severe Acute Respiratory Syndrome, or the H1N1 influenza virus, could divert medical resources and priorities towards the treatment of that disease. An outbreak of an infectious disease, or continued escalation of the COVID-19 pandemic could also negatively affect hospital admission rates and the decision by patients to undergo elective surgery, which could decrease demand for procedures using our implants and cause other disruptions to our business. Business disruptions could include disruptions or restrictions on our ability to travel or to distribute our products, government orders suspending the performance of elective surgical procedures, inability of our customers to meet their financial commitments due to strain on the healthcare system, as well as temporary closures of our facilities or the facilities of our suppliers and their contract manufacturers, and a reduction in the business hours of hospitals and ambulatory surgery centers. Any disruption of our suppliers and their contract manufacturers or our customers would likely impact our sales and operating results. In addition, a significant outbreak of an infectious disease in the human population could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could affect demand for our products. Any of these events could negatively impact the number of procedures using our implants that are performed and have a material adverse effect on our business, financial condition, results of operations, or cash flows.

To date, COVID-19 has had, and we expect will continue to have, an adverse impact on our operations as a result of preventive and precautionary measures that we, other businesses, health systems and governments are taking. Due to these measures, we have experienced and expect to continue to experience significant and unpredictable reductions in the demand for our products, negative impact on hospital admission rates and delay in the decision by patients to undergo elective surgery, each of which has decreased and may continue to impact the demand for procedures using our implants. There are numerous uncertainties associated with the COVID-19 pandemic, including the number of individuals who will become infected, the effectiveness of vaccines or one or more therapies that mitigate the effect of the virus, the availability of vaccines and the vaccination rates in the U.S. and worldwide, the emergence of variants of the COVID-19 virus such as the delta and omicron variants, the extent of the protective and preventative measures that have been put in place by both governmental entities and other businesses and those that may be put in place in the future, the effect that testing for COVID-19 and antibodies will enable relaxation of protective measures for a subset of the population, and numerous other uncertainties. We intend to continue to execute on our strategic plans and operational initiatives during the COVID-19 pandemic. However, these uncertainties may result in delays or modifications to these plans and initiatives.

Travel restrictions, and the risk that countries may continue to close borders, impose prolonged quarantines, and further restrict travel, limit our ability to reach surgeons with our goal of increasing surgeon activity by providing education and support.

In addition, the COVID-19 pandemic has adversely affected, and may continue to adversely affect, the economies and financial markets of many countries, which may result in a period of regional, national, and global economic slowdown or regional, national, or global recessions that could curtail or delay spending by hospitals and affect demand for our products as well as increase risk of customer defaults or delays in payments. These market disruptions could impair our ability to raise capital, should our business experience a prolonged period of reduced revenue requiring additional capital to sustain the business. COVID-19 and the current financial, economic, and capital markets environment, and future developments in these and other areas present material uncertainty and risk with respect to our performance, financial condition, results of operations, and cash flows. Due to the uncertain scope and duration of the pandemic and uncertain timing of global recovery and economic normalization, we are unable to estimate the long-term impacts on our operations and financial results.

The existence and further duration of the COVID-19 pandemic may also further exacerbate certain of the risks described below.

Prolonged inflation and supply chain disruptions could result in delayed product launches, lost revenue, higher costs and decreased profit margins.

A majority of our products are manufactured and sold inside of the United States, which increases our exposure to domestic inflation and fuel price increases. Recent inflationary pressures have resulted in increased fuel, raw materials and other costs which, if they continue for a prolonged period, may adversely affect our results of operations. We have experienced shortages in certain raw materials and component inputs of our products, primarily surgical instruments, suppliers have been unable to meet delivery schedules due to excess demand and labor shortages, and lead times have lengthened throughout our supply chain. Our efforts to mitigate supply chain weaknesses may not be successful or may have unfavorable effects. For example, efforts to purchase raw materials in advance for product manufacturing may result in increased storage costs or excess supply. If our costs rise due to continuing significant inflationary pressures or supply chain disruptions, we may not be able to fully offset such higher costs through price increases. In addition, delays in obtaining materials, components or instruments from our suppliers could delay product launches or result in lost opportunities to sell our products due to their availability. Increased costs and decreased product availability due to supply chain issues could adversely impact our revenue and/or gross margin, and could thereby harm our business, financial condition, and results of operation.

If hospitals, surgeons, and other healthcare providers are unable to obtain and maintain adequate or any coverage and reimbursement from third-party payors for procedures performed using our products, further adoption of our products may be delayed, and it is unlikely that they will gain further acceptance, and the prices paid for our implants may decline.

Maintaining and growing sales of our products depends on the availability of adequate coverage and reimbursement from third-party payors, including government programs such as Medicare and Medicaid, private insurance plans, and managed care programs. Hospitals, surgeons, and other healthcare providers that purchase or use medical devices generally rely on third-party payors to pay for all or part of the costs and fees associated with the procedures performed with these devices. When a procedure using our implants is performed, both the surgeon and the healthcare facility, either a hospital or ambulatory surgical center, submit claims for reimbursement to the healthcare payor. We may be unable to sell our products on a profitable basis if third-party payors deny coverage or reduce their current levels of payment, or if reimbursement levels are insufficient to support use of our products by healthcare facilities or to compensate surgeons for their time spent diagnosing patients and performing procedures using our products.

While all Medicare Administrative Contractors are regularly reimbursing for minimally invasive sacroiliac joint fusion, some private payors still have policies that treat the procedure as experimental or investigational and do not regularly reimburse for the procedure. Future action by the Centers for Medicare & Medicaid Services (“CMS”) or third-party payors may further reduce the availability of payments to physicians, outpatient surgery centers, and/or hospitals for procedures using our products.

The healthcare industry in the United States has experienced a trend toward cost containment as government and private insurers seek to control healthcare costs. Payors are imposing lower payment rates and negotiating reduced contract rates with service providers and being increasingly selective about the technologies and procedures they chose to cover. Payors may adopt policies in the future restricting access to medical technologies like ours and/or the procedures performed using such technologies. Therefore, we cannot be certain that the procedures performed with each of our products will be reimbursed. There can be no guarantee that, should we introduce additional products in the future, payors will cover those products or the procedures in which they are used.

Effective January 1, 2022, the Medicare physician fee reimbursement for minimally invasive fusion with our iFuse implants, described as CPT Code 27279, is $860. Commercial payors generally set their physician fee reimbursement with reference to Medicare reimbursement rates. We believe that some surgeons may continue to view the Medicare and commercial reimbursement amounts as insufficient for the procedure, given the work effort involved with the procedure, including the time to diagnose the patient and obtain prior authorization from the patient’s health insurer if necessary. We believe that some private payors apply their own coverage policies and criteria inconsistently, and surgeons may not be able to consistently have minimally invasive sacroiliac fusions approved and covered. The perception by physicians that the reimbursement for minimally invasive sacroiliac joint fusion is insufficient to compensate them for the work required, including diagnosis, documentation, obtaining payor approval for the procedure, and burden on their office staff, may negatively affect the number of procedures performed and may therefore adversely affect our revenues.

The American Medical Association (AMA) develops and maintains Current Procedural Terminology (CPT) codes that are used by third-party payors to determine the amount of reimbursement that a healthcare provider and facility will receive for a particular service. CPT codes are divided into three categories: Category I codes represent existing services or procedures that are widely used.Category II codes are supplemental tracking codes, and Category III codes are temporary codes that represent new technologies, services, and procedures. A Category III code does not have a payment rate established and reimbursement is at the payor’s discretion. CPT Code 27279, which describes minimally-invasive surgical fusion of the sacroiliac joint performed with our iFuse implants, is a Category I CPT code. As the number of products and surgical procedures to address sacroiliac joint dysfunction has expanded and diversified, we are aware that certain medical societies have requested that the AMA create a Category III CPT code representing some of these unproven technologies. If either the current or future procedures performed with our products are determined to be best described by a Category III CPT code, or if the levels of reimbursement for, and consistency of coverage associated with, procedures performed with our medical devices, either under the existing Category I CPT Code or under any newly created Category III CPT Code, could decrease which could make our devices less attractive to healthcare professionals using our products.

Recent political, economic, and regulatory influences are subjecting the healthcare industry to fundamental changes that can impact coverage and reimbursement from third-party payors. We expect that the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2011, as currently enacted or as it may be amended in the future, and other healthcare reform measures that may be adopted in the future, could have a material adverse effect on our industry generally and on our ability to maintain or increase sales of our existing products.CMS budget neutrality requirements may impose cuts to the Medicare physician fee schedule, which may be mitigated by acts of Congress or other changes to regulations. Other federal laws, known as budget sequestration, further reduce Medicare’s payments to providers by two percent through 2030. However, COVID-19 relief support legislation suspended the 2% Medicare reductions from May 1, 2020 through April 2022, and reduced the Medicare reductions to 1% from April 1 to June 30, 2022. These reductions may reduce reimbursement for procedures performed using our products, which could potentially negatively impact our revenue, and may reduce providers’ revenues or profits, which could affect their ability to purchase new technologies. Both the federal and state governments in the U.S. and foreign governments continue to propose and pass new legislation and regulations designed to contain or reduce the cost of healthcare. Such legislation and regulations may result in decreased reimbursement for medical devices, which may further exacerbate industry-wide pressure to reduce the prices charged for medical devices. This could harm our ability to market our products and generate sales, which could adversely affect our business, results of operations and financial condition.

Market acceptance of our products in foreign markets may depend, in part, upon the availability of coverage and reimbursement within prevailing healthcare payment systems. Reimbursement and healthcare payment systems in international markets vary significantly by country and include both government-sponsored healthcare and private insurance. We may not obtain additional international coverage and reimbursement approvals in a timely manner, if at all. Our failure to receive such approvals would negatively impact market acceptance of our products in the international markets in which those approvals are sought.

If healthcare payors reverse decisions to cover minimally invasive sacroiliac joint fusion exclusively when performed with iFuse and choose to reimburse for procedures performed with competitive products, our market share could decline, adversely affecting our revenues.

As of December 31, 2021, 36 of the largest 65 U.S. payors that we track and target have issued positive coverage policies covering the patented design of our triangular iFuse implants and excluding coverage of other products that are intended to fuse the sacroiliac joint because of the clinical evidence supporting the use of triangular titanium implants and the lack of clinical evidence supporting the use of other products. We believe that payors have adopted these exclusive coverage decisions due to the strength of our clinical evidence and in part due to recommendations of specialty benefit managers and healthcare technology assessment organizations. Clinical trials of the type and size necessary to offer evidence of the safety and efficacy of competing products could be performed and could show that other products for sacroiliac joint fusion are as effective as, or more effective than, our triangular iFuse implants. Payors could also abandon their decisions to cover triangular implants exclusively for other reasons.If healthcare payors covering a significant number of covered lives reverse their policies of covering minimally invasive sacroiliac joint fusion exclusively when performed with triangular titanium implants, sales of our triangular iFuse implants could decline or fail to grow, which could adversely affect our business, results of operations and financial condition.

We may not be able to convince physicians that iFuse is an attractive alternative to our competitors’ products and that our procedure is an attractive alternative to existing surgical and non-surgical treatments of the sacroiliac joint.

Surgeons, in consultation with their patients, play the primary role in determining the course of treatment and, ultimately, any product that will be used in treatment. In order for us to sell our iFuse system successfully, we must demonstrate to surgeons through education and training that treatment with iFuse is beneficial, safe, and cost-effective for patients as compared to our competitors’ products. If we are not successful in demonstrating the merits of iFuse to surgeons, their use of our products may decline, adversely affecting our revenues and profitability.

Historically, most spine surgeons did not include an evaluation of the sacroiliac joint in their diagnostic work-up because they did not have an adequate surgical procedure to perform for patients diagnosed with sacroiliac joint dysfunction. We believe that educating surgeons and other healthcare professionals about the clinical merits and patient benefits of iFuse is an important element of building our business. If we fail to effectively educate surgeons and other medical professionals, they may not include a sacroiliac joint evaluation as part of their diagnosis and, as a result, those patients may continue to receive unnecessary surgical procedures or only non-surgical treatment.

Surgeons may also hesitate to change their medical treatment practices for other reasons, including the following:

•lack of experience with minimally invasive procedures;

•perceived liability risks generally associated with the use of new products and procedures;

•costs associated with the purchase of new products; and

•time commitment that may be required for training.

Furthermore, we believe surgeons will not widely use iFuse unless they determine, based on experience, clinical data, and published peer-reviewed publications, that surgical intervention provides benefits or is an attractive alternative to non-surgical treatments of sacroiliac joint dysfunction. In addition, we believe support of our products relies heavily on long-term data showing their benefits. If we are unable to provide that data, surgeons may not use our products. In such circumstances, we may not achieve expected sales and may be unable to achieve profitability.

Many patients with sacroiliac joint dysfunction are cared for by pain physicians, who are generally trained as anesthesiologists or physical medicine and rehabilitation specialists. Pain physicians often offer a variety of non-surgical and surgical interventions to sacroiliac joint dysfunction patients, including, but not limited to, steroid injections, radiofrequency ablation of the nerves serving the sacroiliac joint and implantation of neurostimulation devices, allografts, and other products intended to treat the sacroiliac joint or the pain it can cause. Our professional education program seeks to teach pain physicians, and other health care providers, about the benefits of iFuse, in order to prompt these providers to refer their patients with sacroiliac joint dysfunction to surgeons who have been trained to perform the iFuse procedure. These providers may, however, prefer to continue to treat these patients with the interventions they offer because they feel these interventions are superior or because they have a financial interest in offering additional treatments to these patients. If we are unable to demonstrate to potential referring health care providers the comparative benefits of iFuse, and we are therefore unable to prompt sufficient numbers of these providers to refer their patients with sacroiliac joint dysfunction for treatment by surgeons trained to perform the iFuse procedure, sales of our iFuse implants could decline or fail to grow, which could adversely affect our business, results of operations and financial condition.

Surgeons and payors may not find our clinical evidence to be compelling, which could limit our sales and revenue, and on-going and future research may prove our products to be less safe and effective than currently thought.

The products we currently market in the United States have either received premarket clearance under Section 510(k) of the United States. Federal Food, Drug, and Cosmetic Act (“FDCA”), or are exempt from premarket review. Those marketed in the European Union (“EU”) have been the subject of a CE Certificate of Conformity. The 510(k) clearance process of the U.S. Food and Drug Administration (“FDA”) requires us to document that our product is “substantially equivalent” to another 510(k)-cleared product. The 510(k) process is shorter and typically requires the submission of less supporting documentation than other FDA approval processes, such as a premarket approval (“PMA”), and does not usually require pre-clinical or clinical studies. As a result, while there are a number of published studies relating to iFuse and minimally invasive sacroiliac joint surgery that support the safety and effectiveness of our products and the benefits they offer, our clinical studies may lack the size and scope of randomized controlled clinical trials required to support approval of a PMA. For these reasons, surgeons may be slow to adopt our products, third-party payors may be slow to provide coverage, and we may be subject to greater regulatory and product liability risks. Further, future patient studies or clinical experience may indicate that treatment with our products does not improve patient outcomes. Such results would slow the adoption of our products by surgeons, significantly reduce our ability to achieve expected sales, and could prevent us from achieving profitability.

Pricing pressure from our competitors, changes in third-party coverage and reimbursement, healthcare provider consolidation, payor consolidation and the presence of “physician-owned distributorships” may impact our ability to sell our product at prices necessary to support our current business strategies.

If competitive forces drive down the prices we are able to charge for our product, our profit margins will shrink, which will adversely affect our ability to invest in and maintain and grow our market share. The sacroiliac joint fusion market has attracted numerous new companies and technologies. As a result of this increased competition, we believe there will be continuing increased pricing pressure, resulting in lower gross margins, with respect to our products.

Even to the extent our product and procedures using our product are currently covered and reimbursed by third-party private and public payors, adverse changes in coverage and reimbursement policies that affect our products, discounts, and number of implants used may also drive our prices and revenue down and harm our ability to market and sell our products.

Consolidation in the healthcare industry, including both third-party payors and healthcare providers, could lead to demands for price concessions or to the exclusion of some suppliers from certain of our markets, which could have an adverse effect on our business, results of operations, or financial condition. Because healthcare costs have risen significantly over the past several years, numerous initiatives and reforms initiated by legislators, regulators, and third-party payors to curb these costs have resulted in a consolidation trend in the healthcare industry to aggregate purchasing power. As the healthcare industry consolidates, competition to provide products and services to industry participants has become and will continue to become more intense. This in turn has resulted and will likely continue to result in greater pricing pressures and the exclusion of certain suppliers from important market segments as group purchasing organizations, independent delivery networks, and large single accounts continue to use their market power to consolidate purchasing decisions for hospitals. We expect that market demand, government regulation, third-party coverage, and reimbursement policies and societal pressures will continue to change the worldwide healthcare industry, resulting in further business consolidations and alliances among our customers, which may reduce competition, exert further downward pressure on the prices of our products, and adversely impact our business, results of operations, or financial condition. As we continue to expand into international markets, we will face similar risks relating to adverse changes in coverage and reimbursement procedures and policies in those markets.

Practice trends or other factors, including the COVID-19 pandemic, may cause procedures to shift from the hospital environment to ambulatory surgical centers, or ASCs, where pressure on the prices of our products is generally more acute.

To protect health care professionals involved in surgical care and their patients, we anticipate that more outpatient eligible procedures will be performed in ASCs during the COVID-19 pandemic, and as its acuity declines and the healthcare system returns to a more normalized state.We anticipate that this trend will nevertheless continue as a cost control measure with the healthcare system. Since patients do not stay overnight in ASCs and COVID-19 patients would not otherwise be treated in ASCs, it is likely that the ASC will be viewed as a safer site of service for patients and health care providers, where the risk of transmission of the novel coronavirus can be more effectively controlled. In addition, ASC are generally more economically favorable site of service, and surgeons performing the procedures sometimes have ownership interests in the ASC. Because ASC facility fee reimbursement is typically less than facility fee reimbursement for hospitals and due to surgeons’ economic interest in ASCs, we typically experience more pressure on the pricing of our products by ASCs than by hospitals, and the average price for which we sell our products to ASCs is less than the average prices we charge to hospitals. In addition, some surgeons may choose to use fewer implants due to their interest in the profitability of the ASC. An accelerated shift of procedures using our products to ASCs as a result of the COVID-19 pandemic could adversely impact the average selling prices of our products and our revenues could suffer as a result.

We operate in a very competitive business environment and if we are unable to compete successfully against our existing or potential competitors, our sales and operating results may be adversely affected.

Our currently marketed products are, and any future products we commercialize will likely be, subject to intense competition. Our field is subject to rapid change and highly sensitive to the introduction of new products or other market activities of industry participants. Our ability to compete successfully will depend on our ability to develop proprietary products that reach the market in a timely manner, receive adequate coverage and reimbursement from third-party payors, and are safer, less invasive, and more effective than alternatives available for similar purposes as demonstrated in peer-reviewed clinical publications. Because of the size of the potential market, we anticipate that other companies will dedicate significant resources to developing competing products.

SIBN US Equity

SIBN · 10-K · period ended 2021-12-31

Item 1. Business.

Item 1A. Risk Factors

SIBN US Equity☆

SIBN · 10-K · period ended 2021-12-31

Item 1. Business.

Item 1A. Risk Factors

SIBN US Equity