UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 10-K
☒ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
or
For the transition period from ________ to ________
Commission File Number 001-39678
SANARA MEDTECH INC.
(Exact name of Registrant as specified in its charter)
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
(Address of principal executive offices)
(817)529-2300
(Registrant’s telephone number, including area
code)
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, $0.001 par value SMTI The Nasdaq Capital Market
Securities registered pursuant to Section 12(g)
of the Exchange Act: None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐.
☐
Yes ☒ No
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes ☒
No
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. ☒Yes ☐ 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). ☒ Yes ☐ 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.
☐ ☐ ☒ ☒ ☐
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered
public accounting firm that prepared or issued its audit report. ☐
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate
by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The
aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 28, 2024 (the
last business day of the registrant’s most recently completed second fiscal quarter), based on the $28.22 closing price as of such
date, was approximately $118,175,765.
As
of March 18, 2025, 8,901,903 shares of the Issuer’s common stock, $0.001 par value per share, were issued and outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE
The
information required by Part III of this Annual Report on Form 10-K, to the extent not set forth herein, is incorporated by reference
to the registrant’s Definitive Proxy Statement on Schedule 14A relating to the 2025 Annual Meeting of Shareholders which will be
filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year to which this Annual Report on Form
10-K relates.
Table of Contents
SANARA MEDTECH INC.
Form 10-K
For the Year Ended December 31, 2024
Page
PART I.
ITEM 1 BUSINESS 4
ITEM 1A RISK FACTORS 18
ITEM 1B UNRESOLVED STAFF COMMENTS 39
ITEM 1C CYBERSECURITY 40
ITEM 2 PROPERTIES 40
ITEM 3 LEGAL PROCEEDINGS 40
ITEM 4 MINE SAFETY DISCLOSURES 40
PART II.
ITEM 6 RESERVED 41
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 55
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA F-1
ITEM 9A CONTROLS AND PROCEDURES 56
ITEM 9B OTHER INFORMATION 56
ITEM 9C DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS 56
PART III.
ITEM 10 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 57
ITEM 11 EXECUTIVE COMPENSATION 57
ITEM 14 PRINCIPAL ACCOUNTING FEES AND SERVICES 57
PART IV.
ITEM 15 EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 58
Sanara, Sanara MedTech, our logo and our other
trademarks or service marks appearing in this report are the property of Sanara MedTech Inc. Trade names, trademarks and service marks
of other companies appearing in this report are the property of their respective owners. Solely for convenience, the trademarks, service
marks and trade names included in this report are without the ®, TM or other applicable symbols, but such references are not
intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the
applicable licensors to these trademarks, service marks and trade names.
Unless otherwise indicated, “Sanara MedTech,”
“Sanara,” the “Company,” “our,” “us,” or “we,” refer to Sanara MedTech Inc.
and its consolidated subsidiaries.
Table of Contents
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS
This report contains forward-looking statements within
the meaning of the federal securities laws. Forward-looking statements generally relate to future events or our future financial or operating
performance, including topics such as our value-based wound and skincare services and Tissue Health Plus platforms. In some cases, you
can identify forward-looking statements because they contain words such as “aims,” “anticipates,” “believes,”
“contemplates,” “continue,” “could,” “estimates,” “expects,” “forecast,”
“guidance,” “intends,” “may,” “plans,” “possible,” “potential,”
“predicts,” “preliminary,” “projects,” “seeks,” “should,” “target,”
“will” or “would” or the negative of these words, variations of these words or other similar terms or expressions
that concern our expectations, strategy, plans, or intentions. Such forward-looking statements are subject to certain risks, uncertainties
and assumptions relating to factors that could cause actual results to differ materially from those anticipated in such statements, including,
without limitation, the following:
● shortfalls in forecasted revenue growth;
● our ability to meet our future capital requirements;
● our ability to maintain compliance with our debt obligations;
● our ability to retain and recruit key personnel;
● the failure of our products to obtain market acceptance;
● the effect of security breaches and other disruptions;
● our ability to maintain effective internal controls over financial reporting;
● the impact of competitors inventing products that are superior to ours;
All forward-looking statements speak only as of the
date on which they are made. For a more detailed discussion of these and other factors that may affect our business, see the discussion
in “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results
of Operations” in this report. We caution that the foregoing list of factors is not exclusive, and new factors may emerge, or changes
to the foregoing factors may occur, that could impact our business. We do not undertake any obligation to update any forward-looking
statement, whether written or oral, relating to the matters discussed in this report, except to the extent required by applicable securities
laws.
Table of Contents
PART I
Item 1. BUSINESS
Overview
We are a medical technology company focused on developing
and commercializing transformative technologies to improve clinical outcomes and reduce healthcare expenditures in the surgical, chronic
wound and skincare markets. Our products, services and technologies are designed to achieve our goal of providing better clinical outcomes
at a lower overall cost for patients regardless of where they receive care. Through our two operating segments, Sanara Surgical and Tissue
Health Plus (“THP”), we strive to be one of the most innovative and comprehensive providers of effective surgical, wound
and skincare solutions and are continually seeking to expand our offerings for patients requiring treatments across the entire continuum
of care in the United States.
Reportable Segments
Historically, we managed our business on the basis
of one operating and reportable segment. During the second quarter of 2024, we changed our reportable segments to reflect a change in
the manner in which the business is managed. Based on the growing importance of the value-based wound care program to our future outlook
and how our chief operating decision maker, our Chief Executive Officer, reviews operating results and makes decisions about resource
allocation, we now have two reportable segments: Sanara Surgical and THP.
Sanara Surgical
Our Sanara Surgical segment primarily markets and
sells soft tissue repair and bone fusion products for use in the operating room or other sterile environments. Sanara Surgical’s
soft tissue repair products include, among other products, our lead product, CellerateRX Surgical Activated Collagen (“CellerateRX
Surgical”), a hydrolyzed collagen that supports a local environment for surgical sites to aid in the natural wound healing process,
and BIASURGE Advanced Surgical Solution (“BIASURGE”), a sterile no-rinse, advanced surgical solution used for wound irrigation.
Sanara Surgical’s bone fusion products include, among other products, BiFORM Bioactive Moldable Matrix (“BiFORM”),
an osteoconductive, bioactive, porous implant that allows for bony ingrowth across the graft site, and ALLOCYTE Plus Advanced Viable
Bone Matrix (“ALLOCYTE Plus”), a human allograft cellular bone matrix containing bone-derived progenitor cells and conformable
bone fibers.
Our Sanara Surgical segment also includes an in-house
research and development team (Rochal Technologies) with an extensive pipeline of innovative products under development.
Tissue Health Plus
Our THP segment is focused on value-based wound care
services. Through THP, we plan to offer a first of its kind value-based wound care program to payers and risk-bearing entities, such
as accountable care organizations and value-based primary care companies, with Medicare Advantage payers as the initial target market
for this program.
THP’s programs are expected to enable
payers to divest wound care spend risk, reduce wound related hospitalizations and improve patient quality of life. THP plans to
coordinate delivery of community and home-based wound care for its managed patients. Community based care spans a variety of
settings including physician offices, skilled nursing facilities, assisted living facilities and senior living facilities. THP
programs are intended to integrate science and evidence-based medicine protocols to standardize wound prevention and treatment. We
are preparing to launch our first pilot program with a wound care provider group during the second quarter of 2025.
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Summary of Our Product, Service and Technology
Offerings and Development Programs
Sanara Surgical Products
Our Sanara Surgical segment markets and distributes
surgical, wound and skincare products to physicians, hospitals, clinics, and post-acute care settings. Our products are primarily sold
in the U.S. surgical tissue repair and advanced wound care markets. We believe we have the ability to drive our product pipeline from
concept to preclinical and clinical development while meeting quality and regulatory requirements. We are constantly seeking long-term
strategic partnerships with a focus on products that improve outcomes at a lower overall cost.
CellerateRX Surgical
CellerateRX Surgical is a medical hydrolysate of
Type I bovine collagen indicated for the management of surgical, traumatic, and partial and full-thickness wounds as well as first-
and second-degree burns. It is manufactured with a proprietary process. CellerateRX Surgical powder is sterilized and packaged for use in the operating room or other sterile environment. CellerateRX Surgical products are primarily
purchased by hospitals and ambulatory surgical centers for use by surgeons on surgical wounds. The majority of CellerateRX Surgical
products are used for a variety of surgical wounds, including those associated with orthopedic, spine, trauma and oncologic
procedures. Additional surgical wounds that may benefit from the use of CellerateRX Surgical include cardiovascular, gynecologic,
urologic, vascular and plastic/reconstructive related procedures.
CellerateRX Surgical is used in operative cases where
patients might have trouble healing normally due to underlying health complications. There is always a risk of complication with surgical
wounds. This is especially true in patients with certain comorbidities, including obesity, diabetes and hypertension. These complications
can include surgical wound infections, dehiscence (where an incision opens after primary closure) and necrosis. Surgeons use CellerateRX
Surgical to complement the body’s normal healing process. By supporting the body to heal normally without complications, improved
patient outcomes are achieved, thereby reducing downstream costs related to complications (such as re-operation, longer hospitalization,
re-admittance, extended rehabilitative care and other additional treatments). Surgical wound complications have become increasingly problematic
due to the high rates of surgical patient comorbidities and the financial strain on insurance payors as well as hospitals that suffer
exorbitant costs for readmission of these patients within 90 days of surgery.
BIASURGE
BIASURGE is a 510(k) cleared sterile no-rinse,
advanced surgical solution used for wound irrigation. It contains an antimicrobial preservative effective against a broad spectrum
of pathogenic microorganisms in the solution. BIASURGE is indicated for use in the mechanical cleansing and removal of debris, including
microorganisms, from surgical wounds. First sales of BIASURGE occurred in November 2023.
FORTIFY TRG
FORTIFY TRG Tissue Repair Graft (“FORTIFY TRG”)
is a freeze-dried, multi-layer small intestinal submucosa extracellular matrix sheet. The graft is 510(k) cleared for implantation to
reinforce soft tissue, is terminally sterilized, has a thin profile, is available in multiple sizes, and can be cut to size to accommodate
the patient’s anatomy. FORTIFY TRG is provided sterile and can be hydrated with autologous blood fluid. First sales of this product
occurred in the fourth quarter of 2021.
FORTIFY FLOWABLE
FORTIFY FLOWABLE Extracellular Matrix (“FORTIFY
FLOWABLE”) is an advanced wound care device that presents small intestine submucosa extracellular matrix technology in a way that
can fill irregular wound shapes and depths. FORTIFY FLOWABLE is indicated for the management of wounds, including partial and full-thickness
wounds, pressure ulcers, venous leg ulcers, diabetic foot ulcers, chronic vascular ulcers, tunneled/undermined wounds, surgical wounds
(donor sites/grafts, post-Mohs surgery, post-laser surgery, podiatric, wound dehiscence sites), traumatic wounds (abrasions, lacerations,
second-degree burns, and skin tears) and draining wounds. FORTIFY FLOWABLE is provided sterile and is intended for one-time use. It is
a 510(k) cleared product. First sales of this product occurred in the first quarter of 2022.
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Other Surgical Products
TEXAGEN Amniotic Membrane Allograft is a multi-layer
amniotic membrane allograft used as an anatomical barrier with robust handling that can be sutured for securement if needed. BiFORM is
an osteoconductive, bioactive, porous implant that allows for bony ingrowth across the graft site. It can be hydrated and used as a strip
or molded into a putty to fill a bone defect. ACTIGEN Verified Inductive Bone Matrix is a naturally derived, differentiated allograft
matrix with robust handling properties. ALLOCYTE Plus is a human allograft cellular bone matrices containing bone-derived progenitor
cells and conformable bone fibers. These viable cellular allografts are ready to use upon thawing and have fibrous handling properties.
Tissue Health Plus Services and Technology
Through our subsidiary, Tissue Health Plus (formerly
known as “WounDerm” and “United Wound and Skin Solutions, LLC”), we are seeking to simplify skin health, starting
with wound care through a refined business plan. Through THP, we plan to offer a first of its kind value-based wound care program to
payers and risk-bearing entities such as accountable care organizations and value-based primary care companies, with Medicare Advantage
payers as the initial target segment for this program.
THP’s programs are expected to enable
payers to divest wound care spend risk, reduce wound related hospitalizations and improve patient quality of life. THP plans to
coordinate delivery of community and home-based wound care for its managed patients. Community based care spans a variety of
settings including physician offices, skilled nursing homes, assisted living facilities and senior living facilities. THP programs
are intended to integrate science and evidence-based medicine protocols to standardize wound prevention and treatment. THP services
are not expected to directly involve telemedicine or virtual consult services, and such services are no longer a primary focus of THP.
We anticipate that THP’s customer contracts
will have three-to-five-year terms. These contracts are expected to incorporate a mix of value-based pricing methodologies including
episodic, “per member per month,” and “fee for value” pricing. We believe this approach is aligned with the financial
goals of the payers and will help deliver outstanding clinical outcomes for the patients.
Our vision for our comprehensive approach consists
of three key sets of planned capabilities:
We are seeking partners to facilitate commercialization
of THP and share in the cost of development of the program.
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SI Healthcare Technologies Joint Venture
In November 2022, we established a 50/50 joint venture,
SI Healthcare Technologies, LLC (“SI Technologies”) (formerly known as SI Wound Care, LLC), with InfuSystem Holdings, Inc.
(“InfuSystem”) focused on delivering a complete wound care solution targeted at improving patient outcomes, lowering the
cost of care, and increasing patient and provider satisfaction. The partnership is expected to enable InfuSystem to offer innovative
products, including our advanced wound care product line and Chemo Mouthpiece, a 510(k) cleared oral cryotherapy device that SI Technologies
currently has the right to distribute and sell in the United States.
Tufts University License Agreement
In December 2023, we signed an exclusive license
agreement with Tufts University (“Tufts”) to develop and commercialize patented technology covering 18 unique collagen peptides.
As part of this agreement, we formed a new subsidiary, Sanara Collagen Peptides, LLC (“SCP”) and issued 10% of SCP’s
outstanding units to Tufts. SCP has exclusive rights to develop and commercialize new products based on the licensed patents and patents
pending. SCP will pay royalties to Tufts based on net sales of licensed products and technologies. Pursuant to the exclusive license
agreement, royalties will be calculated at a rate of 1.5% or 3%, depending on the type of product or technology developed. SCP will pay
Tufts a minimum annual royalty of $50,000 on January 1 of the year following the first anniversary of the first commercial sale of the
licensed products or technologies. SCP will pay Tufts a $100,000 minimum annual royalty on January 1 of each subsequent year during the
royalty term specified in the exclusive license agreement.
Strategy
● Drive additional
market penetration as well as geographic expansion for our products. We are actively working to expand our geographic footprint across
the entire United States. We also intend to leverage our comprehensive product, services and technology-based offerings portfolio and
relationships with key constituents to deepen our presence in the surgical, wound and skincare markets. We believe the breadth and flexibility
of the products we offer allow us to address a wide variety of surgical site needs, wound types and sizes and offer significant new opportunities
for sales growth. In addition, we believe that as we continue to offer new products, services and technology-based offerings, our salesforce’s
ability to reach additional customers in new and existing geographic regions while penetrating further in existing customer accounts
will be enhanced.
● Launch new
innovative products. We are actively developing additional proprietary products for the surgical and chronic wound and skincare
markets. We expect these products and services to deepen our portfolio of technologies to improve surgical site outcomes and treat
chronic wounds. We are focused on offering additional products and services that are more efficacious than competing products and
services and provide a stronger value proposition (lower total cost to heal and less time to heal, leading to reduced costs to the
healthcare system).
● Seek and
establish partnerships and product, services and/or technology acquisitions. We plan to continue to seek and establish
partnerships in the United States and internationally to provide innovative products, services and technologies. We believe that
partnerships will be a key driver of our growth in the future. We also intend to selectively pursue acquisitions of businesses and
technologies that complement our existing strategy and footprint.
● Seek and
establish partnerships for THP with Medicare Advantage, at-risk payors and other types of healthcare at-risk models. We believe
we have assembled the products, services and technologies to offer a comprehensive strategy to help improve outcomes and lower wound
care costs across the continuum of care. Looking ahead, we plan to leverage these capabilities to partner with value-based care
models to aid in the treatment of their wound care patients who currently are a significant cost for the healthcare system and
challenging population to heal.
● Aid in the
treatment of patients throughout the entire continuum of care. We intend to continue expanding our platform to aid in treating
wound and skincare patients as they progress through the healing process in all care settings. We formed THP to hold certain
investments in technologies and operations in value-based wound and skincare services. We believe our service offerings will allow
us to collect and analyze large amounts of data on patient conditions and outcomes that will improve treatment protocols and
ultimately lead to more evidence-based healing formularies to improve outcomes in the future. We anticipate that this data will also
enable us to participate in the creation of new standards of care that promote patient compliance and enable direct dialogue between
patients, clinicians and payors, resulting in greater satisfaction for patients, their caregivers, clinicians and payors.
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Competitive Strengths
● Attractive
markets for surgical and wound care. We believe the surgical and wound care markets will continue to see accelerated growth
given favorable global tailwinds that include an aging population, extended life expectancies, increasing costs of health care,
recognition of difficult-to-treat infection threats such as biofilms, and the increasing prevalence of diabetes and obesity. We
believe there will be growing adoption of our products due to their clinical efficacy and cost effectiveness for all key
constituents compared to traditional wound care products.
● Comprehensive
solution for improved wound care outcomes. We are dedicated to offering a comprehensive portfolio of products, services and
technologies to improve wound care treatment outcomes. We believe we are the only company that will be able to provide a
comprehensive solution for wound care which includes a wound and skin specific electronic medical record, coordination of virtual
consult services with expert wound care providers and dermatologists, propriety diagnostics and highly efficacious proprietary
products allowing us to effectively treat wound care patients in any care setting.
● Wound care
products for all care settings. Our wound care product portfolio allows clinicians to personalize solutions to meet the needs of
individual wound care patients in all care settings including acute (hospitals and long-term acute care hospitals) and post-acute
(wound care clinics, physician offices, skilled nursing facilities (“SNFs”), home health, hospice, podiatrists and
retail).
● Innovative
pipeline and proven clinical performance. We have a robust pipeline of surgical, wound and skincare products that we expect to
market in the near term. We believe the efficacy of our offerings will be proven via statistically significant collected and
analyzed clinical and health economic outcomes data, resulting in expanded adoption of our products at a lower overall cost to
payors.
● Proven executive
leadership team with a long-term track record of value creation. We are led by a dedicated and seasoned management team with significant
industry experience who have successfully executed our strategic implementation to date by launching new products and technologies through
investment in new areas of growth. We believe our management team has the vision and experience to implement our future growth strategy.
Market Opportunities for Our Products, Services
and Technology-Based Offerings
According to a study published by the Value in
Health journal, roughly 15% of the Medicare beneficiary population has chronic nonhealing wounds. Chronic wounds do not advance through
the phases of healing in a normal progression and do not show significant progress toward healing in 30 days. Factors contributing to
the chronicity of the wound may include pressure/friction, trauma, insufficient blood flow and oxygenation in locations such as the lower
extremities, increased bacterial load, excessive proteases, degraded growth factors, matrix metalloproteinases, senescent/aberrant cells
or inappropriate treatment. Examples of chronic wounds include diabetic foot ulcers (“DFUs”), venous leg ulcers (“VLUs”),
arterial ulcers, pressure ulcers and hard-to-heal surgical/traumatic wounds. In each of the various wound types, the presence of biofilms
is a frequent cause for chronicity of wounds and the removal of biofilms is a crucial step to commence healing. Biofilms need to be eradicated
to prevent further deterioration of the wound that may result in additional negative patient outcomes. If not effectively treated, these
wounds can lead to potentially severe complications, including further infection, osteomyelitis, fasciitis, amputation and increased
mortality. Chronic wounds are primarily seen in the elderly population. For example, a 2019 study published in Advances in Wound Care
reported that in the United States, 3% of the population over the age of 65 had open wounds. According to the same study, in 2020,
the U.S. government estimated that the elderly population totaled 55 million people, suggesting that chronic wounds will continue to
be an increasingly persistent problem in this population. Four common chronic and other hard-to-heal wounds are:
● Surgical/traumatic
wounds. Surgical wounds form as a result of various types of surgical procedures such as investigative or corrective, minor or
major, open (traditional) or minimal access surgery, elective or emergency, and incisions (simple cuts) or excision (removal of
tissue), among others. Traumatic wounds form as a result of external forces causing tissue damage such as lacerations, puncture
wounds or tissue loss. Severe traumatic wounds may require surgical intervention to close the wound and stabilize the patient.
Surgical/traumatic hard-to-heal wounds develop for various reasons, such as local surgical complications, suboptimal closure
techniques, presence of foreign materials, exposed bones or tendons and infection. In the United States, millions of people receive
post-surgical wound care annually, and the typical operative patient has comorbidities that create challenges with post-operative
wound healing.
● Diabetic Foot
Ulcers. Diabetes can lead to a reduction in blood flow, which can cause patients to lose sensation in their feet and may prevent
them from noticing injuries, sometimes leading to the development of DFUs, which are open sores or ulcers on the feet that may take
several weeks to heal, if ever. Diabetes is associated with pathological changes that contribute to poor wound healing. These
changes may include peripheral vascular disease, neuropathy, excessive inflammation, and a disrupted cellular response to wound
healing. According to the 2020 National Diabetes Statistics Report by the Center for Disease Control and Prevention, in the United
States alone, over 34 million people, or approximately 10% of the population, suffer from diabetes, a chronic, life-threatening
disease.
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● Venous Leg
Ulcers. VLUs are the most common type of chronic wound in the lower extremity. VLUs develop as a result of vascular
insufficiency, or the inability for the vasculature of the leg to return blood back toward the heart properly and, according to a
2013 report published by the International Journal of Tissue Repair and Regeneration, VLUs affect approximately 600,000 people per
year in the United States alone. According to a 2023 report published by the Journal of Vascular Surgery, Venous and
Lymphatic Disorders, chronic venous disorders are common, with varicose veins occurring in ∼40% of the population. These ulcers
usually form on the sides of the lower leg, above the ankle and below the calf, and are slow to heal and often recur if preventative
steps are not taken. The presence of a VLU represents the sequela of progressive end-stage chronic venous disease, often related to
a previous blood clot. The risk of VLUs can be increased as a result of a blood clot forming in the deep veins of the legs, obesity,
smoking, lack of physical activity or work that requires many hours of standing.
● Pressure
Injury/Ulcers. Pressure injury/ulcers are injuries to the skin and underlying tissue resulting from prolonged pressure, or
pressure in combination with shear or friction. Constant pressure on an area of skin reduces blood supply to the area and over time
can cause the skin to break down and form an open ulcer. These often occur in patients who are hospitalized or confined to a chair
or bed and most often form on the skin over bony areas, where there is little cushion between the bone and the skin, such as heels,
ankles, hips and the tailbone. Annually, more than 2.5 million people develop pressure ulcers in the United States according to a
2019 study published in the National Library of Medicine.
Recent Published Studies on CellerateRX Surgical
An animal study model by the Indiana University Center
for Regenerative Medicine and Engineering and the McGowan Institute for Regenerative Medicine was published in Advances in Wound Care
in September of 2023. The study, titled “Hydrolyzed Collagen Powder Dressing Improves Wound Inflammation, Perfusion, and Breaking
Strength of Repaired Tissue,” demonstrated the effects of CellerateRX Surgical powder on resolution of wound inflammation, perfusion,
closure, and breaking strength of the repaired skin. Moreover, the study provided translational research validating published clinical
case series and further highlighting mechanistic effects of hydrolyzed collagen. Future empirical and clinical research revealing the
unique support hydrolyzed collagen provides the wound environment is currently ongoing.
Several research findings involving CellerateRX Surgical
powder have been noted in scientific literature. For example, in November 2021, Dr. William Hotchkiss published a retrospective study
of 154 patients in JSM Neurosurgery and Spine, in which patients underwent spinal surgery and CellerateRX Surgical was utilized in the
surgical wound. The study found a lower wound dehiscence rate in a high-risk patient population when compared to previously published
wound complication rates in the literature. Another retrospective case study regarding the use of CellerateRX Surgical was published
by Dr. Alex Gitelman in November 2022. This study of 54 patients undergoing spinal surgery demonstrated no incidence of surgical wound
complication.
In a retrospective study published in the Journal
of Surgery in October 2023, the impact of CellerateRX Surgical collagen on surgical site infection rates in elective multispecialty
surgical procedures was case matched 1:3 for a total of 5,335 patients and demonstrated an overall reduction of 59% in surgical site
infection rates. This reduction was most pronounced in the clean cases with a 69% decrease in surgical site infection rates.
Intellectual Property
Since the acquisition of assets from Rochal Industries,
LLC (“Rochal”) in July 2021, the acquisition of Precision Healing in April 2022, and the acquisition of assets from The Hymed
Group Corporation (“Hymed”) and Applied Nutritionals, LLC (“Applied”) in August 2023 (the “Applied Asset
Purchase”), our research and development activities have included internally developing additional proprietary products, services
and technologies for the surgical and chronic wound and skincare markets and actively working with third-party research and development
partners. For our internally developed products, we seek patent protection for our inventions in order to protect and differentiate our
products and technologies and establish a defense against third-party infringement claims. With the aim of optimizing commercial and
regulatory success, our proprietary technology and innovative applications thereof are protected by product, system, process, and method-of-use
patent claims. We believe that our granted patents and pending applications collectively protect our internally developed intellectual
property, both in terms of our existing products, as well as our anticipated pipeline of new offerings.
In July 2021, we acquired certain assets from Rochal,
including intellectual property. With respect to the assets we acquired from Rochal and products developed following the Rochal acquisition,
our patent portfolio includes, among others, eight issued U.S. patents, including U.S. Patent No. 8,829,053 entitled “Biocidal
Compositions and Methods of Using the Same” (expiring December 7, 2031) relating to BIASURGE Surgical Irrigation, BIAKŌS
Antimicrobial Skin & Wound Cleanser and BIAKŌS Antimicrobial Wound Gel, as well as over 100 issued patents in foreign jurisdictions.
Following our acquisition by merger of Precision Healing in April 2022, our patent portfolio now includes, among others, five pending
U.S. patent applications as well as one pending international patent application. Following the Applied Asset Purchase in August 2023,
our portfolio also now includes, among others, nine additional U.S. patent applications, five trademarks, four 510(k) clearances and
various domain names.
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In 2024, our research and development team submitted
11 provisional patent applications covering innovations in proprietary antimicrobial technologies and hydrolyzed collagen, including
novel formulations, treatment applications and key component advancements.
Our pending patent applications and new filings are
representative of our ongoing efforts to broaden our portfolio as we continue developing new products for the surgical and wound and
skincare markets. We intend to further grow our patent portfolio by continuing to patent new products as they are developed, to defend
intellectual property as we believe necessary by actively pursuing any infringements, to pursue the commercial opportunities our patents
provide for our innovations, and to continue to develop our brands and trademarks.
Sales and Marketing
As of December 31, 2024, we employed 40 U.S.
based field sales representatives. Our field sales representatives are recruited based on their previous industry experience and professional
performance. We constantly evaluate new markets and sales opportunities to add to our sales teams as warranted.
Our surgical products are sold through a growing network of surgical specialty distributors and Company representatives
who are credentialed to demonstrate the products in surgical settings. Field sales representatives are initially trained
through an internal learning management system, “SanaraU,” which gives them further product and surgical specialty training
including wound etiology, operating room etiquette and credentialing requirements. After completing their internal training, new hire
field sales representatives participate in field training with experienced field trainers to get insights into best practice as well
as real world training. The initial training period lasts approximately eight weeks. Field sales representatives are supported by regular
updated training modules on product information and best practices.
A key component of our sales and marketing efforts
involves working with physicians and clinicians to champion our products in their facilities. We work closely with surgeons and health
system stakeholders to demonstrate the efficacy and beneficial impact of our surgical products and successfully navigate the hospital
value analysis committee approval process, allowing our products to be sold in those facilities. If our sales and marketing efforts are
successful, the clinicians then advocate for the use of our products when medically necessary.
Manufacturing, Supply and Production
We do not own or operate our own manufacturing facilities.
We rely on contract manufacturers to supply our products. Our contract manufacturing strategy is intended to drive cost leverage through
scale and avoid high capital outlays and fixed costs associated with constructing and operating manufacturing facilities. Our manufacturing
partners have internal compliance processes to maintain the high quality and reliability of our products.
Reimbursement, Clinical Validation and Clinical
Utility
We do not promote our products based on their reimbursement
status, however, we are mindful of the benefits of a favorable reimbursement coverage status to increase patient access and support our
research and development efforts to supply the highest efficacy solutions.
We anticipate that our THP strategy, once launched,
will provide a significant amount of patient data to help us measure our products’ effectiveness on improving patient outcomes
while simultaneously reducing healthcare costs. We believe our reimbursement strategy, including establishing the clinical validation,
clinical utility and health economics of our products, will allow us to drive improved reimbursement coverage for our products and technologies.
Competition
The surgical wound care market is served by several
large, multi-product line companies as well as a number of small companies. Our products compete with primary dressings, advanced wound
care products, collagen matrices, surgical wound irrigation products and other biopharmaceutical products. Manufacturers and distributors
of competitive products include Medline Industries, Inc., ConvaTec Group plc, 3M Company, Integra LifeSciences
Holdings Corporation and numerous others. Many of our competitors are significantly larger than we are and have greater financial and
personnel resources.
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With respect to our comprehensive value-based care
strategy, THP plans to offer a comprehensive wound care and dermatology strategy to expand cost-effective, high-quality wound and skincare
to all patients throughout the care setting continuum. Although novel in its comprehensive offerings and solutions, there are existing
competitors for each of the verticals in which THP plans to offer services and solutions. Any clinical wound care or dermatology physician
provider group that has incorporated telemedicine into their practice could be considered competitive. However, most of these groups
are not offering value-based care contracts to payers, integrating prevention into their programs, or enabling continuity across the
different settings of care. Examples of large wound care specialty practices may include Vohra Physician Group, Healogics Specialty Physicians
and WoundTech.
Government Regulation
Our operations are subject to comprehensive federal,
state and local laws and regulations in the jurisdictions in which we or our research and development partners or affiliates do business.
The laws and regulations governing our business and interpretations of those laws and regulations are subject to frequent change. Our
ability to operate profitably will depend in part upon our ability, and that of our research and development partners and affiliates,
to operate in compliance with applicable laws and regulations. The laws and regulations relating to medical products and healthcare services
that apply to our business and that of our partners and affiliates continue to evolve, and we must, therefore, devote significant resources
to monitoring developments in legislation, enforcement, and regulation in such areas. As the applicable laws and regulations change,
we are likely to make conforming modifications in our business processes from time to time. We cannot provide assurance that a review
of our business by courts or regulatory authorities will not result in determinations that could adversely affect our operations or that
the regulatory environment will not change in a way that restricts our operations.
FDA Regulation
Our medical products and operations are regulated
by the FDA and other federal and state agencies. Most of the products we currently market are regulated as medical devices in the United
States under the Federal Food, Drug, and Cosmetic Act (“FDCA”), as implemented and enforced by the FDA. The FDA regulates
the development, testing, manufacturing, labeling, packaging, storage, installation, servicing, advertising, promotion, marketing, distribution,
import, export and market surveillance of our medical devices.
In addition, we market certain products for use in
surgical wound care regulated by the FDA under Section 361 of the Public Health Service Act (“PHSA”) (42 U.S.C. § 264)
and 21 C.F.R. Part 1271.
Device Premarket Regulatory Requirements
Before being introduced into the U.S. market, each
medical device must obtain marketing clearance from the FDA through the 510(k) premarket notification process, the de
novo classification process (summarized below), or the premarket approval application (“PMA”) process, unless they are
determined to be Class I devices or to otherwise qualify for an exemption from one of these available forms of premarket review and authorization
by the FDA. Under the FDCA, medical devices are classified into one of three classes—Class I, Class II or Class III—depending
on the degree of risk associated with each medical device and the extent of control needed to provide reasonable assurance of safety
and effectiveness. Classification of a device is important because the class to which a device is assigned determines, among other things,
the necessity and type of FDA review required prior to marketing the device. Class I devices are those for which reasonable assurance
of safety and effectiveness can be assured by adherence to general controls that include compliance with the applicable portions of the
FDA’s Quality System Regulation (“QSR”), as well as regulations requiring facility registration and product listing,
reporting of adverse medical events, and appropriate, truthful and non-misleading labeling, advertising and promotional materials. The
Class I designation also applies to devices for which there is insufficient information to determine that general controls are sufficient
to provide reasonable assurance of the safety and effectiveness of the device or to establish special controls to provide such assurance,
but that are not life-supporting or life-sustaining or for a use which is of substantial importance in preventing impairment of human
health, and that do not present a potential unreasonable risk of illness or injury.
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Class II devices are those for which general controls
alone are insufficient to provide reasonable assurance of safety and effectiveness and there is sufficient information to establish “special
controls.” These special controls can include performance standards, post-market surveillance requirements, patient registries
and FDA guidance documents describing device-specific special controls. While most Class I devices are exempt from the 510(k) premarket
notification requirement, most Class II devices require a 510(k) premarket notification prior to commercialization in the United States;
however, the FDA has the authority to exempt Class II devices from the 510(k) premarket notification requirement under certain circumstances.
As a result, manufacturers of most Class II devices must submit 510(k) premarket notifications to the FDA under Section 510(k) of the
FDCA (21 U.S.C. § 360(k)) in order to obtain the necessary clearance to market or commercially distribute such devices. To obtain
510(k) clearance, manufacturers must submit to the FDA adequate information demonstrating that the proposed device is “substantially
equivalent” to a predicate device already on the market. A predicate device is a legally marketed device that is not subject to
PMA, meaning, (i) a device that was legally marketed prior to May 28, 1976 (“preamendment device”) and for which a PMA is
not required, (ii) a device that has been reclassified from Class III to Class II or I, or (iii) a device that was found substantially
equivalent through the 510(k) process. If the FDA agrees that the device is substantially equivalent to a predicate device currently
on the market, it will grant 510(k) clearance to commercially market the device. If there is no adequate predicate to which the manufacturer
can compare its proposed device, the proposed device is automatically classified as a Class III device. In such cases, the device manufacturer
must then fulfill the more rigorous PMA requirements or can request a risk-based classification determination for the device in accordance
with the de novo classification process.
The de novo classification process allows
a manufacturer whose novel device is automatically classified into Class III to request down-classification of its device to Class I
or Class II on the basis that the device presents low or moderate risk, rather than requiring the submission and approval of a PMA. Under
the Food and Drug Administration Safety and Innovation Act of 2012 (“FDASIA”), the FDA is required to classify a device within
120 days following receipt of the de novo classification request. If the manufacturer seeks reclassification into Class II, the
classification request must include a draft proposal for special controls that are necessary to provide a reasonable assurance of the
safety and effectiveness of the medical device. The FDA may reject the classification request if it identifies a legally marketed predicate
device that would be appropriate for a 510(k) or determines that the device is not low to moderate risk or that general controls would
be inadequate to control the risks and special controls cannot be developed.
Devices that are intended to be life sustaining or
life supporting, devices that are implantable, devices that present a potential unreasonable risk of harm or are of substantial importance
in preventing impairment of health and devices that are not substantially equivalent to a predicate device are placed in Class III and
generally require FDA approval through the PMA process, unless the device is a preamendment device not yet subject to a regulation requiring
premarket approval. The PMA process is more demanding than the 510(k) premarket notification process. For a PMA, the manufacturer must
demonstrate through extensive data, including data from preclinical studies and clinical trials, that the device is safe and effective.
The PMA must also contain a full description of the device and its components, a full description of the methods, facilities and controls
used for manufacturing, and proposed labeling. Following receipt of a PMA, the FDA determines whether the application is sufficiently
complete to permit a substantive review. If the FDA accepts the application for review, it has 180 days under the FDCA to complete its
review of a PMA, although in practice, the FDA’s review often takes significantly longer, and can take up to several years. Before
approving a PMA, the FDA generally also performs an on-site inspection of manufacturing facilities for the product to ensure compliance
with the QSR.
Clinical trials are almost always required to support
PMAs and are sometimes required to support 510(k) submissions. All clinical investigations of devices to determine safety and effectiveness
must be conducted in accordance with the FDA’s investigational device exemption (“IDE”) regulations that govern investigational
device labeling, prohibit promotion of the investigational device and specify recordkeeping, reporting and monitoring responsibilities
of study sponsors and study investigators. If the device presents a “significant risk,” as defined by the FDA, the agency
requires the device sponsor to submit an IDE application to the FDA, which must become effective prior to commencing human clinical trials.
The IDE will automatically become effective 30 days after receipt by the FDA, unless the FDA denies the application or notifies the company
that the investigation is on hold and may not begin until the sponsor provides supplemental information about the investigation that
satisfies FDA’s concerns. If the FDA determines that there are deficiencies or other concerns with an IDE that require modification
of the study, the FDA may permit a clinical trial to proceed under a conditional approval. In addition, the study must be approved by,
and conducted under the oversight of, an institutional review board (“IRB”), for each clinical site. If the device presents
a non-significant risk to the patient according to criteria established by the FDA as part of the IDE regulations, a sponsor may begin
the clinical trial after obtaining approval for the trial by one or more IRBs without separate authorization from the FDA, but must still
comply with abbreviated IDE requirements, such as monitoring the investigation, ensuring that the investigators obtain informed consent,
and labeling and record-keeping requirements.
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Device Postmarket Regulatory Requirements
After a device is cleared or approved for commercialization,
and prior to marketing, numerous regulatory requirements apply to the various entities responsible for preparing a device for distribution,
including the manufacturer (including specification developer), contract manufacturers, relabelers/repackagers, sterilizers and initial
importer, as applicable. These include:
● establishment registration and device listing;
We and our research and development partners and
contract manufacturers are subject to periodic scheduled or unscheduled inspections by the FDA. If the FDA believes we or any of our
research and development partners or contract manufacturers are not in compliance with the QSR, or other postmarket requirements, it
has broad authority to take significant enforcement actions to compel compliance. Specifically, if the FDA determines that we or our
research and development partners or contract manufacturers failed to comply with applicable regulatory requirements, the agency can
take a variety of compliance or enforcement actions, which may result in any of the following sanctions:
● customer notifications or repair, replacement or refunds;
● operating restrictions or partial suspension or total shutdown of production;
● reclassifying a 510(k)-cleared device or withdrawing PMA approval;
● refusal to grant export approvals for our products; or
● pursuing criminal prosecution.
Any such enforcement action by the FDA would have
a material adverse effect on our business. In addition, these regulatory controls, as well as any changes in FDA policies, can affect
the time and cost associated with the development, introduction, and continued availability of new products.
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HCT/P Regulatory Requirements
Some of the products we currently market are regulated
as biologics, more specifically as human cells, tissues, and cellular and tissue-based products (“HCT/Ps”). They include
(i) TEXAGEN, (ii) ACTIGEN, and (iii) ALLOCYTE Plus. HCT/Ps are regulated by the FDA’s Center for Biologics Evaluation
and Research (“CBER”) or Center for Devices and Radiological Health (“CDRH”) depending on the type of product,
how it is manufactured and its intended uses. HCT/Ps that meet all of the criteria described in 21 C.F.R. § 1271.10(a) are regulated
by the CBER under Section 361 of the PHSA (42 U.S.C. § 264) and 21 C.F.R. Part 1271 only (“361 products”). Although
361 products do not require premarket review by the FDA prior to commercialization, manufacturers of 361 products must register with
the FDA, submit a list of HCT/Ps manufactured, and comply with current good tissue practices (“cGTP”), among other things.
Federal Trade Commission Regulatory Oversight
Our advertising for our products and services is
subject to federal truth-in-advertising laws enforced by the Federal Trade Commission (the “FTC”), as well as comparable
state consumer protection laws. Under the Federal Trade Commission Act (“FTC Act”), the FTC is empowered, among other things,
to (a) prevent unfair methods of competition and unfair or deceptive acts or practices in or affecting commerce; (b) seek monetary redress