UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-K
(MARK
ONE)
FOR
THE FISCAL YEAR ENDED DECEMBER 31, 2022
OR
FOR
THE TRANSITION PERIOD FROM TO
COMMISSION
FILE NUMBER 001-36159
STEREOTAXIS,
INC.
(Exact
name of the Registrant as Specified in its Charter)
710
North Tucker Boulevard, Suite 110
St.
Louis, MO63101
(Address
of Principal Executive Offices including Zip Code)
(314)678-6100
(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, par value $0.001 per share STXS NYSE American
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. 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 “See 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.
Emerging growth company ☐
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (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 Act). Yes ☐ No ☒
The
aggregate market value of the registrant’s common stock held by non-affiliates of the registrant on the last business day of the
registrant’s most recently completed second fiscal quarter (based on the closing sales prices on the NYSE American on June 30,
2022) was approximately $110.7 million.
The
number of outstanding shares of the registrant’s common stock on February 28, 2023 was 75,045,484.
DOCUMENTS
INCORPORATED BY REFERENCE
Portions
of the Proxy Statement for the registrant’s 2023 Annual Meeting of Shareholders are incorporated by reference in Part III, Items
10, 11, 12, 13 and 14.
STEREOTAXIS,
INC.
INDEX
TO ANNUAL REPORT ON FORM 10-K
STEREOTAXIS,
INC.
INDEX
TO FORM 10-K
Page
Part I
Item 1. Business 3
Item 1A. Risk Factors 16
Item 1B. Unresolved Staff Comments 33
Item 2. Properties 34
Item 3. Legal Proceedings 34
Item 4. Mine Safety Disclosures 34
Part II
Item 6. Selected Financial Data 34
Item 8. Financial Statements and Supplementary Data 42
Item 9A. Controls and Procedures 64
Item 9B. Other Information 65
PART III
Item 10. Directors and Executive Officers of the Registrant 65
Item 11. Executive Compensation 65
Item 14. Principal Accounting Fees and Services 66
PART IV
Item 15. Exhibits and Financial Statement Schedules 66
PART
I
ITEM 1. BUSINESS
In
this report, “Stereotaxis”, the “Company”, “Registrant”, “we”, “us”, and
“our” refer to Stereotaxis, Inc. and its wholly owned subsidiaries. Genesis RMN®, Niobe®, Navigant®,
Odyssey®, Odyssey CinemaTM, Vdrive®, Vdrive DuoTM, V-CASTM,
V-LoopTM, V-SonoTM, QuikCASTM and Cardiodrive® are trademarks of Stereotaxis,
Inc. All other trademarks that appear in this report are the property of their respective owners.
FORWARD-LOOKING
STATEMENTS
This
annual report on Form 10-K, including the sections entitled “Business” and “Management’s Discussion and Analysis
of Financial Condition and Results of Operations,” contains forward-looking statements. These statements relate to, among other
things:
● our business, operating, sales and marketing, and regulatory strategies;
● our value proposition;
● the impact of the coronavirus (“COVID-19”) pandemic and our responses to it;
● our overall liquidity and our ability to fund operations;
● our ability to convert backlog to revenue;
● the adoption of our products by hospitals and physicians;
● the success of our business partnerships and strategic relationships;
● our industry generally, and overall economic conditions;
● our estimates regarding our capital requirements;
● our plans for hiring additional personnel; and
These
statements relate to future events or future financial performance, and involve known and unknown risks, uncertainties, and other factors
that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results,
levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify
forward-looking statements by terminology such as “may”, “will”, “should”, “could”, “expects”,
“plans”, “intends”, “anticipates”, “believes”, “estimates”, “predicts”,
“potential”, or “continue”, or the negative of such terms or other comparable terminology. Although we believe
that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity,
performance, or achievements. These statements are only predictions.
Factors
that may cause our actual results to differ materially from our forward-looking statements include, among others, changes in general
economic and business conditions and the risks and other factors set forth in “Item 1A—Risk Factors” and elsewhere
in this annual report on Form 10-K.
Our
actual results may be materially different from what we expect. We undertake no duty to update these forward-looking statements after
the date of this annual report, even though our situation may change in the future. We qualify all of our forward-looking statements
by these cautionary statements.
OVERVIEW
Stereotaxis
is a pioneer and global leader in surgical robotics for minimally invasive endovascular intervention. We design, manufacture and market
robotic systems, instruments and information systems for the interventional laboratory. Our proprietary robotic technology, Robotic Magnetic
Navigation, fundamentally transforms endovascular interventions using precise computer-controlled magnetic fields to directly control
the tip of flexible interventional catheters or devices. Direct control of the tip of an interventional device, in contrast to all manual
hand-held devices that are controlled from their handle, can improve the precision, stability, reach and safety of these devices during
procedures.
Our
primary clinical focus has been electrophysiology, specifically cardiac ablation procedures for the treatment of arrhythmias. Cardiac
ablation has become a well-accepted therapy for arrhythmias and a multi-billion-dollar medical device market with expectations for substantial
long-term growth. We have shared our aspiration and a product strategy to expand the clinical focus of our technology to several additional
endovascular indications including coronary, neuro, and peripheral interventions.
There
is substantial real-world evidence and clinical literature for Robotic Magnetic Navigation in electrophysiology. Hundreds of electrophysiologists
at over one hundred hospitals globally have treated over 100,000 arrhythmia patients with our robotic technology. Clinical use of our
technology has been documented in over 400 clinical publications. Robotic Magnetic Navigation is designed to enable physicians to complete
more complex interventional procedures with greater success and safety by providing image-guided delivery of catheters through the blood
vessels and chambers of the heart to treatment sites. This is achieved using externally applied computer-controlled magnetic fields that
govern the motion of the working tip of the catheter, resulting in improved navigation. The more flexible atraumatic design of catheters
driven using magnetic fields may reduce the risk of patient harm and other adverse events. Performing the procedure from a control cockpit
enables physicians to complete procedures in a safe location protected from x-ray exposure, with greater ergonomics, and improved efficiency.
We believe these benefits can be applicable in other endovascular indications where navigation through complex vasculature is often challenging
or unsuccessful and generates significant x-ray exposure.
Our
primary products include the Genesis RMN System, the Odyssey Solution, and other related devices. We also offer to our
customers the Stereotaxis Imaging Model S x-ray System and other accessory devices.
The
Genesis RMN System is designed to enable physicians to complete more complex interventional procedures by providing image-guided
delivery of catheters through the blood vessels and chambers of the heart to treatment sites. This is achieved using externally applied
magnetic fields that govern the motion of the working tip of the catheter, resulting in improved navigation, efficient procedures, and
reduced x-ray exposure.
The
Odyssey Solution consolidates lab information onto one large integrated display, enabling physicians to view and control all the
key information in the operating room. This is designed to improve lab layout and procedure efficiency. The system also features a remote
viewing and recording capability called Odyssey Cinema, which is an innovative solution that delivers synchronized content for
optimized workflow, advanced care, and improved productivity. This tool includes an archiving capability that allows clinicians to store
and replay entire procedures or segments of procedures. This information can be accessed from locations throughout the hospital local
area network and over the global Odyssey Network providing physicians with a tool for clinical collaboration, remote consultation, and
training.
The
Stereotaxis Imaging Model S provides an integrated complete solution for a robotic interventional operating room. It is a single-plane,
full-power x-ray system and includes the c-arm, powered table, motorized boom, and large high-definition monitors. Stereotaxis Imaging
Model S incorporates modern fluoroscopy technology to support high quality imaging while minimizing radiation exposure for patients and
physicians. The combination of RMN Systems with Stereotaxis Imaging Model S is designed to reduce the cost of acquisition, the ongoing
cost of ownership, and the complexity of installation of a robotic electrophysiology practice.
We
promote our full suite of products in a typical hospital implementation, subject to regulatory approvals or clearances. This implementation
requires a hospital to agree to an upfront capital payment and recurring payments. The upfront capital payment typically includes equipment
and installation charges. The recurring payments typically include disposable costs for each procedure, equipment service costs beyond
the warranty period, and ongoing software updates. In hospitals where our full suite of products has not been implemented, equipment
upgrade or expansion can be implemented upon purchasing of the necessary upgrade or expansion.
We
have received regulatory clearances and registration necessary for us to market the Genesis RMN System in the U.S. and Europe,
and we are in the process of obtaining necessary registrations for extending our markets in other countries. Our prior generation robotic
magnetic navigation system, the Niobe System, and the Odyssey Solution, Cardiodrive, and various disposable interventional
devices have received regulatory clearance in the U.S., Europe, Canada, China, Japan and various other countries. We have received the
regulatory clearance, licensing and/or CE Mark approvals that allow us to market the Vdrive and Vdrive Duo Systems with
the V-CAS, V-Loop and V-Sono devices in the U.S., Canada and Europe. The Stereotaxis Imaging Model S x-ray System
is CE marked and cleared by the FDA.
Not
all products have and/or require regulatory clearance in all of the markets we serve. Please refer to “Regulatory Approval”
in Item 1 for a description of the regulatory clearance, licensing, and/or approvals we currently have or are pursuing.
As
of December 31, 2022, we had approximately $14.8 million of backlog, consisting of outstanding purchase orders and other commitments
for these systems. Of the December 31, 2022 backlog, we expect approximately 89% to be recognized as revenue over the course of 2023.
We had backlog of approximately $10.1 million as of December 31, 2021. There can be no assurance that we will recognize such revenue
in any particular period or at all because some of our purchase orders and other commitments are subject to contingencies that are outside
our control. These orders and commitments may be revised, modified or canceled, either by their express terms, as a result of negotiations
or by project changes or delays. In addition, the sales cycle for the robotic magnetic navigation system is lengthy and generally involves
construction or renovation activities at customer sites. Consequently, revenues and/or orders resulting from sales of our robotic magnetic
navigation system can vary significantly from one reporting period to the next.
We
have strategic relationships with technology leaders and innovators in the global interventional market. Through these strategic relationships
we provide compatibility between our robotic magnetic navigation system and digital imaging and 3D catheter location sensing technology,
as well as disposable interventional devices. The maintenance of these strategic relationships, or the establishment of equivalent alternatives,
is critical to our commercialization efforts. There are no guarantees that any existing strategic relationships will continue, and efforts
are ongoing to ensure the availability of integrated systems and devices and/or equivalent alternatives. We cannot provide assurance
as to the timeline of the ongoing availability of such compatible systems or our ability to obtain equivalent alternatives on competitive
terms or at all.
We
were incorporated in Delaware in June, 1990 as Stereotaxis, Inc. Our principal executive offices are located at 710 North Tucker Boulevard,
Suite 110, St. Louis, Missouri 63101, and our telephone number is (314) 678-6100.
THE
STEREOTAXIS VALUE PROPOSITION
Although
great strides have been made in manual interventional devices and techniques, significant challenges remain that reduce interventional
productivity and limit both the number of complex procedures and the types of diseases that can be treated manually. These challenges
primarily involve the inherent mechanical limitations of manual instrument control and the lack of integration of the information systems
used by physicians in the interventional lab as well as a significant amount of training and experience required to ensure proficiency.
As a result, many complex cases in electrophysiology are treated with palliative drug therapy, and many procedures are still performed
as invasive surgeries rather than as minimally invasive endovascular interventions.
Our
systems address the current challenges in the interventional lab by providing precise computerized control of the working tip of the
interventional instrument and by integrating this control with the visualization technology and information systems used during electrophysiology
and endovascular interventional procedures, on a cost-justified basis.
We
believe that our technology can:
PRODUCTS
Robotic
Magnetic Navigation
Our
proprietary robotic magnetic navigation systems (“RMN”) include the Genesis RMN and the prior generation Niobe
Systems. These systems are designed to enable physicians to complete more complex interventional procedures by providing image-guided
delivery of catheters and guidewires through the blood vessels and chambers of the heart to treatment sites. This is achieved using externally
applied magnetic fields that govern the motion of the working tip of the catheter or guidewire, resulting in improved navigation, efficient
procedures and reduced x-ray exposure. Our systems provide physicians with precise remote digital instrument control in combination with
sophisticated image integration. It can be operated either from an adjacent room and outside the x-ray fluoroscopy field or beside the
patient table, as in traditional interventional procedures. The RMN system allows the operator to navigate disposable interventional
devices to the treatment site through complex paths in the blood vessels and chambers of the heart to deliver treatment by using computer
controlled, externally applied magnetic fields to directly govern the motion of the working tip of these devices, each of which has a
magnetically sensitive tip that predictably responds to magnetic fields generated by our system. Because the working tip of the disposable
interventional device is directly controlled by these external magnetic fields, the physician has the same degree of control regardless
of the number or type of turns, or the distance traveled by the working tip to arrive at its position in the blood vessels or chambers
of the heart. This results in highly precise digital control of the working tip of the disposable interventional device while still giving
the physician the option to manually advance the device.
Through
our arrangements with fluoroscopy system manufacturers and providers of catheters and electrophysiology mapping systems, we provide compatibility
between the robotic magnetic navigation system and the visualization and information systems used during electrophysiology and endovascular
procedures in order to provide the physician with a comprehensive information and instrument control system. In addition, we have integrated
the robotic magnetic navigation system with 3D catheter location sensing technology to provide accurate real-time information as to the
3D location of the working tip of the instrument.
The
components of therobotic magnetic navigation system
are identified and described below:
Robotic
Magnetic Navigation System. Our robotic magnetic navigation systems utilize two permanent magnets mounted on articulating and pivoting
arms with one magnet on either side of the patient table. These magnets generate magnetic navigation fields that are less than the strength
of fields typically generated by MRI equipment and therefore require significantly less shielding, and cause significantly less interference,
than MRI equipment. The robotic magnetic navigation system is indicated for use in cardiac, peripheral and neurovascular applications.
Cardiodrive®
Automated Catheter Advancement System. As the physician conducts the procedure from the adjacent control room, the Cardiodrive
Automated Catheter Advancement System (“Cardiodrive”) in conjunction with the QuikCAS automated catheter advancement
system is used to remotely advance and retract the electrophysiology catheter in the patient’s heart while the robotic magnetic
navigation system magnets precisely steer the working tip of the device.
Odyssey®
Solution
The
Odyssey Solution offers a fully integrated, real-time information solution to manage, control, record and share procedures across
networks or around the world. We believe that the Odyssey Solution enhances the physician workflow in interventional labs through
a consolidated user interface of multiple systems on a single display to enable greater focus on the case and improve the efficiency
of the lab. Through the use of a single mouse and keyboard, the Odyssey Solution allows the user to command multiple systems in
the lab from a single point of control. In addition, the Odyssey Solution acquires a real-time, remote view of the lab, capturing
synchronized procedure data for review of important events during cases. The Odyssey Solution enables physicians to access recorded
cases and create snapshots following procedures for enhanced clinical reporting, auditing and presentation. The Odyssey Solution
enables physicians to establish a comprehensive master archive of procedures performed in the lab providing an excellent tool for training
new staff on the standard practices. The Odyssey Solution further enables procedures to be observed remotely around the world
with high speed Internet access over a hospital VPN, even wirelessly using a standard laptop or Windows tablet computer.
Stereotaxis
Imaging Model S X-ray System
Developed
in collaboration with Omega Medical Imaging, and designed to be specifically available with RMN Systems, the Stereotaxis Imaging Model
S provides an integrated complete solution for a robotic interventional operating room. It is a single-plane, full-power x-ray system
and includes the c-arm, powered table, motorized boom, and large high-definition monitors. Stereotaxis Imaging Model S incorporates modern
fluoroscopy technology to support high quality imaging while minimizing radiation exposure for patients and physicians. The combination
of RMN Systems with Stereotaxis Imaging Model S is designed to reduce the cost of acquisition, the ongoing cost of ownership, and the
complexity of installation of a robotic electrophysiology practice.
Disposables
and Other Accessories
Our
robotic magnetic navigation systems are designed to use a toolkit of associated disposable interventional devices. The toolkit currently
consists of:
Revenue
from sales of disposable products is recognized when control is transferred to the customers, which generally occurs at the time of shipment,
but can also occur at the time of delivery depending on the customer arrangement. Disposable products are covered by an assurance type
warranty that provides for the return of defective products. Warranty costs were not material for the periods presented.
We
also manufacture and market various disposable (the V-Loop, V-Sono, and V-CAS) components which can be manipulated
by our VdriveTM Robotic Navigation System a complimentary product that provides navigation and stability for diagnostic and therapeutic
devices designed to improve interventional procedures. In addition, we also market and distribute other disposable and related devices
that can be use with our robotic magnetic navigation systems.
Other
Recurring Revenue
Other
recurring revenue includes revenue from product maintenance plans, other post warranty maintenance, and the implied obligation to provide
software enhancements if and when available for a specified period, typically one year following installation of our systems. Revenue
from services and software enhancements is deferred and amortized over the service or update period, which is typically one year. Revenue
related to services performed on a time-and-materials basis is recognized when performed.
Regulatory
Approval
We
have received regulatory clearance, licensing and/or CE Mark approvals necessary for us to market the Genesis RMN System in the
U.S. and Europe, and we are in the process of obtaining necessary registrations for extending our markets in other countries.
We
have received regulatory clearance, licensing and/or CE Mark approvals necessary for us to market the Niobe System, Cardiodrive,
and various disposable devices in the U.S., Canada, Europe, China, Japan, and various other countries. The Stereotaxis Imaging Model
S x-ray System is CE marked and cleared by the FDA.
We
have received regulatory clearance, licensing and/or CE Mark approvals necessary for us to market the Vdrive and Vdrive Duo
Systems with the V-CAS, V-Loop and V-Sono devices in the U.S., Canada and Europe.
Biosense
Webster has received FDA approval, and CE Mark for the CARTO® RMT navigation system for use with the Niobe System,
the 4mm CELSIUS® RMT Diagnostic/Ablation Steerable Tip Catheter, the 4mm NAVISTAR® RMT Diagnostic/Ablation
Steerable Tip Catheter, the 8mm Navistar RMT DS Diagnostic/Ablation Steerable Tip Catheter, and the 3.5mm NAVISTAR® RMT
THERMOCOOL® Irrigated Tip Catheter. In addition, Biosense Webster has received FDA approval and CE Mark for the 3.5mm
CELSIUS® RMT THERMOCOOL® Irrigated Tip Catheter. Biosense Webster also received China CFDA approval and
Japan PMDA approval for the CARTO® RMT navigation system for use with the Niobe System, and the 3.5mm NAVISTAR®
RMT THERMOCOOL® Irrigated Tip Catheter. Our strategic relationship with Biosense Webster provided for co-development
of catheters that can be navigated with our system, both with and without Biosense Webster’s 3D catheter location sensing technology.
In addition, we can utilize technology which allows our system to recognize specific disposable interventional devices in order to prevent
unauthorized use of our system. See “Strategic Relationships” below for a description of our arrangements with Biosense Webster.
FINANCIAL
INFORMATION ABOUT CUSTOMERS
No
single customer accounted for more than 10% of total revenue for the years ended December 31, 2022 and 2021. Revenue from customers in
China accounted for $3.7 million, or 10%, of total revenue for the year ended December 31, 2021. No other single country, other than
the U.S., accounted for more than 10% of total revenue for the years ended December 31, 2022 and 2021.
CLINICAL
APPLICATIONS
We
have focused our clinical and commercial efforts on applications of our products primarily in electrophysiology procedures for the treatment
of arrhythmias and secondarily in complex interventional cardiology procedures for the treatment of coronary artery disease. Our system
potentially has broad applicability in other areas, such as structural heart repair, interventional neurosurgery, interventional neuroradiology,
peripheral vascular, renal denervation, pulmonology, urology, gynecology and gastrointestinal medicine, and some of our patents may be
applicable in these areas as well.
Electrophysiology
The
rhythmic beating of the heart results from the transmission of electrical impulses. When these electrical impulses are mistimed or uncoordinated,
the heart fails to function properly, resulting in symptoms that can range from fatigue to stroke or death. Over 5.0 million people in
the U.S. currently suffer from abnormal heart rhythms, which are known as arrhythmias. The prevalence of arrhythmias is expected to continue
to rise as the population ages, life expectancy increases, and lifestyle factors such as obesity become more prevalent. Arrhythmias are
a major physical and economic burden and are associated with stroke, heart failure, and adverse symptoms causing patients to be motivated
to seek treatment. The combination of symptoms, prevalence and comorbidities make arrhythmias a major economic factor in healthcare.
Drug
therapies for arrhythmias often have limited efficacy, poor compliance, and side effects. Consequently, physicians have increasingly
sought more permanent, non-pharmacological, solutions for arrhythmias. The most common interventional treatment for arrhythmias is an
ablation procedure in which the diseased tissue giving rise to the arrhythmia is isolated or destroyed. Prior to performing an electrophysiology
ablation, a physician typically performs a diagnostic procedure in which the electrical signal patterns of the heart wall are “mapped”
to identify the heart tissue generating the aberrant electrical signals. Following the mapping, the physician may then use an ablation
catheter to eliminate the aberrant signal or signal path, restoring the heart to its normal rhythm. These procedures may be performed
separately but are more commonly performed at the same time.
We
believe more than 5,000 interventional labs around the world are currently conducting over one million cardiac ablation procedures annually.
The market has grown rapidly over the last decade with annualized procedure growth of approximately 10%.
We
believe that Robotic Magnetic Navigation is particularly well-suited for these electrophysiology procedures which are time consuming,
or which can only be performed by highly experienced physicians. These procedures include:
We
believe that our system can address the current challenges in electrophysiology by permitting the physician to remotely navigate disposable
interventional devices from a control room outside the x-ray field. Additionally, we believe that our system allows for more predictable
and efficient navigation of these devices to the treatment site and enables catheter contact to be consistently maintained to efficiently
apply energy on the wall of the beating heart. We also believe that our system will significantly lower the skill barriers required for
physicians to perform complex electrophysiology procedures and, additionally, improve interventional lab efficiency and reduce disposable
interventional device utilization.
Interventional
Cardiology
More
than half a million people die annually from coronary artery disease, a condition in which the formation of plaque in the coronary arteries
obstructs the supply of blood to the heart, making this the leading cause of death in the U.S. Despite various attempts to reduce risk
factors, each year over one million patients undergo interventional procedures in an attempt to open blocked vessels and another one
half million patients undergo open heart surgery to bypass blocked coronary arteries.
Blockages
within a coronary artery, often called lesions, are categorized by degree of obstruction as partial occlusions, non-chronic total occlusions
and chronic total occlusions. Lesions are also categorized by the degree of difficulty with which they can be opened as simple or complex.
Complex lesions, such as chronic total occlusions, longer lesions, and lesions located within smaller diameter vessels, are often very
difficult or time consuming to open with manual interventional techniques.
We
believe approximately 11,000 interventional labs worldwide are currently capable of conducting interventional cardiology. Over 4 million
interventional cardiology procedures are performed annually in the U.S. alone. We estimate that approximately 10-15% of these interventional
cardiology procedures currently being performed are complex and therefore require longer procedure times and may have sub-optimal outcomes.
We believe that our system can substantially benefit this subset of complex interventional cardiology procedures.
Interventional
Neuroradiology, Neurosurgery and Other Interventional Applications
Physicians
used a predecessor to our Niobe System to conduct a number of procedures for the treatment of brain aneurysms, a condition in
which a portion of a blood vessel wall balloons and which can result in debilitating or fatal bleeding and strokes. We believe the robotic
magnetic navigation system also has a range of potential applications in minimally invasive neurosurgery, including biopsies and the
treatment of tumors, treatment of vascular malformations and fetal interventions.
STRATEGIC
RELATIONSHIPS
We
have entered into business arrangements with technology leaders in the global interventional market, including manufacturers of fluoroscopy
systems, ablation catheters, and electrophysiology mapping systems, that we believe aid us in commercializing our robotic magnetic navigation
system. These arrangements are important to us as they provide for the integration of our system with digital imaging and 3D catheter
location sensing technology, as well as catheters compatible with our system.
Imaging
We
have successfully integrated our robotic magnetic navigation system with digital fluoroscopy systems to provide advanced interventional
lab visualization and instrument control through user-friendly computerized interfaces. The maintenance of these arrangements, or the
establishment of equivalent alternatives, is critical to our commercialization efforts. There are no guarantees that any existing strategic
relationships will continue, and efforts are ongoing to ensure the availability of integrated next generation systems and/or equivalent
alternatives. We cannot provide assurance as to the timeline of the ongoing availability of such compatible systems or our ability to
obtain equivalent alternatives on competitive terms or at all.
Disposables
Devices
We
have entered into strategic relationships and successfully integrated with diagnostic mapping and imaging technologies to provide an
ecosystem where physicians and patients benefit from the integration of procedure data.
With
Biosense Webster, we have jointly developed associated location and non-location sensing electrophysiology mapping and ablation catheters
that are navigable with our robotic magnetic navigation system. We believe that these products provide physicians with the elements required
for effective complex electrophysiology procedures: highly accurate information as to the exact location of the catheter in the body
and highly precise control over the working tip of the catheter.
The
co-developed catheters are manufactured and distributed by Biosense Webster, and both of the parties contributed to the resources required
for their development. Biosense Webster’s distribution rights for co-developed catheters were nonexclusive until December 31, 2022.
We received royalty payments from Biosense Webster during the term of the agreement. The royalty payments were payable quarterly based
on net revenues from sales of the co-developed catheters. Royalty revenue from the co-developed catheters represented 7% of revenue for
the years ended December 31, 2022 and 2021. Upon the expiration or termination of the agreement, other than due to a change of control
of Stereotaxis, the agreement provided for a continuation of supply by Biosense Webster of the co-developed catheters to us or our customers
for three years.
Additionally,
we have entered into a broad strategic collaboration with Osypka AG. This collaboration includes the development of a next-generation
magnetic ablation catheter to be navigated using Stereotaxis’ robotic technology. Stereotaxis is funding the development and will
be the sole owner of the catheter.
The
maintenance of these arrangements, or the establishment of equivalent alternatives, is critical to our commercialization efforts. There
are no guarantees that any existing strategic relationships or collaborations will continue.
RESEARCH
AND DEVELOPMENT
We
have assembled an experienced group of engineers and physicists with recognized expertise in magnetics, software, control algorithms,
mechanics, electronics, systems integration and disposable interventional device design.
Our
research and development efforts are focused in the following areas:
● development and enhancement of Robotic Magnetic Navigation Systems;
Our
research and development team collaborates with strategic third parties to integrate our robotic magnetic navigation system’s open
architecture platform with key imaging, location sensing and information systems in the interventional lab. We have also collaborated
with a number of highly regarded interventional physicians in key clinical areas and have entered into agreements with a number of universities
and teaching hospitals, which serve to increase our access to world class physicians and to expand our name recognition in the medical
community.
CUSTOMER
SERVICE AND SUPPORT
We
provide worldwide maintenance and support services to our customers for our integrated products directly or with the assistance of outsourced
product and service representatives. By utilizing these relationships, we provide direct, on-site technical support activities, including
call center, customer support engineers and service parts logistics and delivery. In certain situations, we use these third parties as
a single point of contact for the customer, allowing us to focus on providing installation, training, and back-up technical support.
Our
back-up technical support includes a combination of on-line, telephone and on-site technical assistance services 24 hours a day, seven
days a week. We employ service and support engineers with networking and medical equipment expertise and outsource a portion of our installation
and support services. We offer different levels of support to our customers, including basic hardware and software maintenance, extended
product maintenance, and rapid response capability for both parts and service.
We
have established a call center in our St. Louis facilities, which provides real-time clinical and technical support to our customers
worldwide.
MANUFACTURING
Robotic
Magnetic Navigation Systems and Odyssey Solution
Our
manufacturing strategy for our Robotic Magnetic Navigation Systems and Odyssey Solution is to sub-contract many of the
manufacture of major subassemblies of our systems to maximize manufacturing flexibility and lower fixed costs. We maintain quality control
for all of our systems by completing final system assembly and inspection in-house.
We
purchase both custom and off-the-shelf components from a large number of suppliers and subject them to quality specifications and processes.
Some of the components necessary for the assembly of our products are currently provided to us by sole-sourced suppliers (the only recognized
supply source available to us) or single-sourced suppliers (the only approved supply source for us among other sources). We purchase
the majority of our components and major assemblies through purchase orders rather than long-term supply agreements and generally do
not maintain large volumes of finished goods.
Disposable
Interventional Devices
Our
manufacturing strategy for disposable interventional devices is to outsource their manufacture through subcontracting and to expand partnerships
for other interventional devices. We work closely with our contract manufacturers and have strong relationships with component suppliers.
We have entered into manufacturing agreements to provide high volume capability for devices other than catheters.
Software
The
software components of the robotic magnetic navigation system and Odyssey Solution, including control and application software,
are developed both internally and with integrated modules we purchase or license. We perform final testing of software products in-house
prior to their commercial release.
General
Our
manufacturing facility operates under processes that meet the FDA’s requirements under the Quality System Regulation (QSR).
Our ISO registrar and European notified British Standard Institution (BSI) has audited our facility annually since 2001 and found
the facility to be in compliance with relevant requirements. The most recent ISO 13485 and MDSAP Certificate of Registration were
issued in 2022 and are valid through September 2025.
SALES
AND MARKETING
We
market our products in the U.S and internationally through a direct sales force of senior sales specialists, distributors and sales agents,
supported by account managers and clinical specialists who provide training, clinical support, and other services to our customers.
Our
sales and marketing efforts include two important elements: (1) selling robotic magnetic systems, Odyssey Solutions, and
Stereotaxis Imaging Model S x-ray Systems directly and through distributors; and (2) leveraging our
installed base of systems to drive recurring sales of disposable interventional devices, software and service.
REIMBURSEMENT
We
believe that substantially all of the procedures, whether commercial or in clinical trials, conducted in the U.S. with the robotic
magnetic navigation systems have been reimbursed to date. We expect that third-party payors will reimburse, under existing
billing codes, procedures in which compatible ablation catheters are used. We expect healthcare facilities in the U.S. to bill
various third-party payors, such as Medicare, Medicaid, other government programs and private insurers, for services performed with
our products. We believe that procedures performed using our products, or targeted for use by products that do not yet have
regulatory clearance or approval, are generally already reimbursable under government programs and most private plans. Accordingly,
we believe providers in the U.S. will generally not be required to obtain new billing authorizations or codes in order to be
compensated for performing medically necessary procedures using our products on insured patients. We cannot guarantee that
reimbursement policies of third-party payors will not change in the future with respect to some or all of the procedures using the
robotic magnetic navigation system.
In
countries outside the United States, reimbursement is obtained from various sources, including governmental authorities, private
health insurance plans, and labor unions. In most foreign countries, private insurance systems may also offer payments for some
therapies. Additionally, health maintenance organizations are emerging in certain European countries. In Europe, we believe that
substantially all of the procedures, whether commercial or in clinical trials, conducted with the robotic magnetic navigation
systems have been reimbursed to date. In Japan, the Ministry of Health, Labor and Welfare (MHLW) has classified the Niobe
System as a C2 medical device (the highest reimbursement category) and has established a “technical fee” of Japanese Yen
50,000 per procedure. In other foreign countries, we may need to seek international reimbursement approvals, and we do not know if
these required approvals will be obtained in a timely manner or at all.
See
“Item 1A—Risk Factors” for a discussion of various risks associated with reimbursement from third-party payors.
INTELLECTUAL
PROPERTY
The
proprietary nature of, and protection for, our products, processes and know-how are important to our business. We seek patent protection
in the United States and internationally for our systems and other technology where available and when appropriate.
We
have an extensive patent portfolio that we believe protects the fundamental scope of our technology and systems, including our robotic
magnetic technology, navigational methods, mapping system and procedural workflows, 3D integration technology, and disposable interventional
devices. As of December 31, 2022, we had 50 issued U.S. patents and 2 pending U.S. patent applications. In addition, we had 15 issued
foreign patents and 2 pending foreign patent applications. The key patents that protect our technology and systems extend until 2028
and beyond.
We
also have a number of invention disclosures under consideration and several applications that are being prepared for filing. We cannot
be certain that any patents will be issued from any of our pending patent applications, nor can we be certain that any of our existing
patents or any patents that may be granted in the future will provide us with protection.
It
would be technically difficult and costly to reverse engineer our robotic magnetic navigation system, which contains numerous complex
algorithms that control our disposable devices inside the magnetic fields generated by the robotic magnetic navigation system. We further
believe that our patent portfolio is broad enough in scope to enable us to obtain legal relief if any entity not licensed by us attempted
to market disposable devices in the U.S. that can be navigated by the robotic magnetic navigation system. We can also utilize security
keys, such as embedded smart chips or associated software that could allow our system to recognize specific disposable interventional
devices in order to prevent unauthorized use of our system.
We
have also developed substantial expertise in magnet design, magnet physics and magnetic instrument control that was developed in connection
with the development of the robotic magnetic navigation system, which we maintain as trade secrets. This expertise centers around our
proprietary magnet design, which is a critical aspect of our ability to design, manufacture and install a cost-effective magnetic navigation
system that is small enough to be installed in a standard interventional lab. Our Odyssey Solution contains numerous complex algorithms
and proprietary software and hardware configurations, and requires substantial knowledge to design and assemble, which we maintain as
trade secrets. This proprietary software and hardware, some of which is owned by Stereotaxis, and some of which is licensed to Stereotaxis,
is a material aspect of the ability to design, manufacture and install a cost-effective and efficient information integration, storage,
and delivery platform.
In
addition, we seek to protect our proprietary information by entering into confidentiality, assignment of invention or license agreements
with our employees, consultants, contractors, advisers and other third parties. However, we believe that these measures afford only limited
protection.
COMPETITION
The
markets for medical devices are intensely competitive and are characterized by rapid technological advances, frequent new product introductions,
evolving industry standards and price erosion.
In
electrophysiology we consider the primary competition to our robotic magnetic navigation system to be traditional catheter-based electrophysiology
ablation approaches including RF (radiofrequency) ablation and non-RF therapies. To our knowledge, we are the only company that has commercialized
remote, digital and direct control of the working tip of catheters for use in RF ablation procedures. Our success depends in part on
convincing hospitals and physicians to convert traditional interventional procedures to procedures using our robotic magnetic navigation
system.
We
face competition from companies that are developing and marketing new products for use in electrophysiology. These products include next
generation mapping systems and RF ablation devices with which our robotic magnetic navigation system is not currently compatible, as
well as non-RF ablation devices including single-shot cryoablation devices and other new products, such as pulse field ablation, for
use in other interventional therapies. Some of these products are marketed by companies that may have an established presence in the
field of electrophysiology, including major imaging, capital equipment and disposables companies that are currently selling products
in the interventional lab. In addition, we face competition from companies that currently market or are developing drugs, gene or cellular
therapies to treat the conditions for which our products are intended.
We
also face competition from companies that are developing robotic technologies for electrophysiology and non-electrophysiology interventional
procedures. We are aware of three companies that commercialized endovascular catheter navigation systems which have been cleared by the
FDA for electrophysiology procedures as well as two companies with electromagnetic catheter navigation systems that received CE Mark
approval in Europe. None of these companies seem to be active with any current commercial activities. Outside of electrophysiology, there
are at least two companies that have commercialized robotic systems for guidewire manipulation and can be viewed as potential competitors