UNITED STATES
SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 10-K
(Mark One)
☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal
year ended December 31, 2024
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File
Number 001-41364
TENON MEDICAL,
INC.
(Exact name of
registrant as specified in its charter)
104 Cooper Court
Los Gatos, CA95032
(Address of principal
executive offices) (Zip Code)
(408)649-5760
(Registrant’s
telephone number, including area code)
Securities registered
pursuant to Section 12(b) of the Act:
Title of Each Class Trading Symbol Name of Each Exchange on Which Registered
Common stock, par value $0.001 per share TNON The Nasdaq Stock Market LLC
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 (§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.
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
Emerging growth company ☒
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check
mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (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 the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐
No ☒
The aggregate market
value of voting and non-voting common equity held by non-affiliates of the registrant on June 30, 2024 (the last business day of
the registrant’s most recently completed second quarter) was approximately $1,830,927, which is based on a closing price per share
of $4.88 on such date.
As of March 26, 2025, the registrant had a total
of 5,584,965 shares of its common stock, $0.001 par value per share, outstanding.
Tenon Medical,
Inc.
Annual Report
on Form 10-K
For the Fiscal
Year ended December 31, 2024
TABLE OF CONTENTS
PART I 1
Item 1 Business 1
Item 1A Risk Factors 16
Item 1B Unresolved Staff Comments 44
Item 1C Cybersecurity 45
Item 2 Properties 45
Item 3 Legal Proceedings 45
Item 4 Mine Safety Disclosures 45
Item 6 [Reserved] 47
Item 7A. Quantitative and Qualitative Disclosures about Market Risk 54
Item 8 Financial Statements and Supplementary Data F-1
Item 9A Controls and Procedures 55
Item 9B Other Information 56
Item 9C Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 56
PART III 57
Item 10 Directors, Executive Officers and Corporate Governance 57
Item 11 Executive Compensation 63
Item 14 Principal Accounting Fees and Services 67
Item 15 Exhibit and Financial Statement Schedules 68
i
CAUTIONARY STATEMENT
REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report
on Form 10-K contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of
1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements largely on our current expectations
and projections about future events and financial trends impacting the financial condition of our business. Forward-looking statements
should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at,
or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time
those statements are made and/or management’s good faith belief as of that time with respect to future events and are subject to
risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the
forward-looking statements.
Forward-looking
statements include all statements that are not historical facts. In some cases, you can identify forward-looking statements by terms
such as “may,” “will,” “should,” “could,” “would,” “expect,”
“intend,” “seek,” “plan,” “anticipate,” “believe,” “estimate,”
“project,” “predict,” “potential,” “might,” “forecast,” “continue,”
or the negative of those terms, and similar expressions and comparable terminology intended to reference future periods. Forward-looking
statements include, but are not limited to, statements about:
● Our ability to effectively operate our business segments;
Should one or more
of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly
from those anticipated, believed, estimated, expected, intended or planned.
Factors or events
that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We
cannot guarantee future results, levels of activity, performance or achievements. Accordingly, the forward-looking statements in this
Annual Report on Form 10-K should not be regarded as representations that the results or conditions described in such statements will
occur or that our objectives and plans will be achieved, and we do not assume any responsibility for the accuracy or completeness of
any of these forward-looking statements.
Use of Certain
Defined Terms
Except where the
context otherwise requires and for the purposes of this report only:
● “year” or “fiscal year” means the year ending December 31st;
● “Exchange Act” refers the Securities Exchange Act of 1934, as amended;
● “SEC” refers to the Securities and Exchange Commission; and
● “Securities Act” refers to the Securities Act of 1933, as amended.
ii
Risk Factors
Summary
Our
business is subject to numerous risks and uncertainties, any one of which could materially adversely affect our results of operations,
financial condition or business. These risks include, but are not limited to, those listed below. This list is not complete, and should
be read together with Item 1A, “Risk Factors” and should not be relied upon as an exhaustive summary of the material risks
we face.
iii
iv
PART I
Item 1. Business
Introduction
Tenon Medical,
Inc. (the “Company”), was incorporated in the State of Delaware on June 19, 2012 and was headquartered in San Ramon, California
until June 2021 when it relocated to Los Gatos, California. The Company is a medical device company that has developed The CatamaranTM
SI Joint Fusion System (“The Catamaran System”) that offers a novel, less invasive approach to the sacroiliac joint (the
“SI Joint”) using a single, robust, titanium implant for treatment of the most common types of SI Joint disorders that cause
lower back pain. The Company received U.S. Food and Drug Administration (“FDA”) clearance in 2018 for The Catamaran System
and is currently focused on the US market. Since the national launch of The Catamaran System in October 2022, the Company is focused
on three commercial opportunities: 1) Primary SI Joint procedures, 2) Revision procedures of failed SI Joint implants and 3) SI Joint
fusion adjunct to a spine fusion construct.
The Opportunity
We estimate that
over 30 million American adults have chronic lower back pain. Published clinical studies have shown that 15% to 30% of all chronic lower
back pain is associated with the SI-Joint. For patients whose chronic lower back pain stems from the Sacroiliac Joint (“SI-Joint”),
our experience in both clinical trials and commercial settings indicates the system to be introduced by Tenon could be beneficial for
patients who are properly diagnosed and screened for surgery by trained healthcare providers.
In 2019, approximately
475,000 patients in the United States were estimated to have received an aesthetic injection to temporarily alleviate pain emanating
from the SI-Joint and/or to diagnose SI-Joint pain. Additionally, several non-surgical technologies have been introduced in the past
10 years to address patients who do not respond to conservative options, including systemic oral medications, opioids, physical therapy
and injection therapy.
To date, the penetration
of a surgical solution for this market has been relatively low (5-7%). We believe this is due to complex surgical approaches and suboptimal
implant design of existing options. The penetration of this market with an optimized surgical solution is Tenon’s focus.
We believe the
SI-Joint is the last major joint to be successfully addressed by the spine implant industry. Studies have shown that disability resulting
from disease of the SI-Joint is comparable to the disability associated with a number of other serious spine conditions, such as knee
and hip arthritis and degenerative disc disease, each of which has surgical solutions where an implant is used, and a multi-billion-dollar
market exists.
The SI-Joint
The SI-Joint is
a strong weight bearing synovial joint situated between the lumbar spine and the pelvis and is aligned along the longitudinal load bearing
axis of the human spine when in an upright posture. It functions as a force transfer conduit where it transfers axial loads bi-directionally
from the spine to the pelvis and lower extremities and allows forces to be transmitted from the extremities to the spine. It also provides
load sharing between the hip and spine to contribute towards attenuation of impact shock and stress from activities of daily living.
1
The SI-Joint is
a relatively immobile joint that connects the sacrum (the spinal segment that is attached to the base of the lumbar spine at the L5 vertebra)
and the ilium of the pelvis. Each SI-Joint is approximately 2-4mm wide and irregularly shaped.
Motion of the SI-Joint
features vertical shear and rotation. Although the rotational forces about the SI-Joint are relatively low, repetitive motions created
by daily activities such as walking, jogging, twisting at the hips, and jumping can increase the stresses on the SI-Joint. If the SI-Joint
is compromised through injury or degeneration, the load bearing and motion restraints from the surrounding anatomical structures of the
SI-Joint will be compromised resulting in abnormal stress transfers across the joint to these structures, thereby further augmenting
the degenerative cascade of the SI-Joint. Eventual pain and cessation of an individual’s normal activities due to a painful and
unstable SI-Joint have led to an increase in the recent development of SI-Joint stabilization devices.
Non-Surgical Treatment
of Sacroiliac Joint Disease
Several non-surgical treatments
exist for suspected sacroiliac joint pain. These conservative steps often provide desired relief for the patient. Non-surgical treatments
include:
When
conservative steps fail to deliver sustained pain relief and return to quality of life, specific diagnostic protocols are utilized to
explore if a surgical option should be considered.
Diagnosis
Historically, diagnosing
pain from the SI-Joint was not routinely a focus of orthopedic or neurosurgery training during medical school or residency programs.
Due to its invasiveness, post-operative pain, and muscle disruption along with a difficult procedure overall, the open SI-Joint fusion
procedure was rarely taught in these settings.
The emergence of
various SI-Joint surgical technologies has generated a renewed discussion of SI-Joint issues. Of particular focus is the diagnostic protocol
utilized to properly select patients for SI-Joint surgery. Patients with low back pain typically start with primary care physicians who
often refer to pain specialists. Here, the patient will undergo traditional physical therapy combined with oral medications (anti-inflammatory,
narcotic, etc.). If the patient fails to respond to these steps the pain specialist may move to therapeutic injections of the SI-Joint.
These injections may serve to lessen inflammation to the point that the patient is satisfied. However, the impact from these injections
is often transient. In this case the patient is often referred to a clinician to determine if the patient may be a candidate for surgical
intervention. A series of provocative tests in clinic, combined with a specific injection protocol to isolate the SI-Joint as the pain
generator is then utilized to confirm the need for surgical intervention. Published literature has shown this technique to be a very
effective step to determine the best treatment to alleviate pain.
Limitations
of Existing Treatment Options
Surgical fixation
and fusion of the SI-Joint with an open surgical technique was first reported in 1908, with further reports in the 1920s. The open procedure
uses plates and screws, requires a 6 to 12-inch incision and is extremely invasive. Due to the high invasiveness
and associated morbidity, the use of this procedure is limited to cases involving significant trauma, tumor, etc.
Less invasive surgical
options along with implant design began to emerge over the past 15 years. These options feature a variety of approaches and implant designs
and have been met with varying degrees of adoption. Lack of a standard and accepted diagnostic approach, complexity of approach, high
morbidity of approach, abnormally high complication rates and inability to radiographically confirm fusion have all been cited as reasons
for low adoption of these technologies.
2
Commercialization
Tenon initiated
its national commercial launch of The Catamaran System in October 2022 to address what we believe is a large market opportunity. The
Catamaran System includes instruments and implants designed to prepare and fixate the SI-Joint for fusion. The Catamaran System is distinct
from other competitive offerings in the following ways:
● Transfixes the SI-Joint
● Inferior / Posterior Sacroiliac Fusion Approach
● Reduced Approach Morbidity
● Direct And Visualized Approach to the SI-Joint
● Single Implant Technique
● Insertion Trajectory Away from the Neural Foramen
● Insertion Trajectory Away from Major Lateral Vascular Structures
● Autologous Bone Grafting in the Ilium, Sacrum and Bridge
● Radiographic Confirmation of Bridging Bone Fusion of the SI-Joint
The
fixation device and its key features are shown below:
The Catamaran System
is a singular implant designed with several proprietary components which allow for it to be explicitly formatted to address the SI-Joint
with a single approach and implant. This contrasts with several competitive implant systems that require multiple approach pathways and
implants to achieve fixation. In addition, the inferior-posterior approach is designed to be direct to the joint and through limited
anatomical structures which may minimize the morbidity of the approach. The implant features a patented dual pontoon open cell design
which enables the clinician to pack the pontoons with the patient’s own autologous bone designed to promote bone fusion across
the joint. The Catamaran System is designed specially to resist vertical shear and rotation of the joint in which it was implanted, helping
stabilize the joint in preparation for eventual fusion.
The instruments
we have developed are proprietary to The Catamaran System and specifically designed to transfix the SI-Joint and facilitate an inferior-posterior
approach that is unique to the system.
Tenon also has
developed a proprietary 2D placement protocol as well as a protocol for 3D navigation utilizing the latest techniques in spine surgery.
These Tenon advancements are intended to further enhance the safety of the procedure and encourage more physicians to adopt the procedure.
In October 2022,
we received Institutional Review Board (“IRB”) approval from WCG IRB for two separate Tenon-sponsored post market clinical
studies of The Catamaran System. The approval by WCG allows designated Catamaran study centers to begin recruiting and enrolling patients
into the clinical studies. The first approval from WCG IRB supports a prospective, multi-center, single arm post market study that
will evaluate the clinical outcomes of patients with sacroiliac joint disruptions or degenerative sacroiliitis treated with The Catamaran
System. Patients will be followed out to 24 months assessing various patient reported outcomes, radiographic assessments, and adverse
events. The second prospective, multi-center, Catamaran study will evaluate 6-to-12-month radiographic outcomes to assess fusion of patients
that have already undergone treatment with The Catamaran System. In addition, retrospective and prospective clinical outcomes will be
evaluated.
The Market
Based on market
research and internal estimates, Tenon believes the potential market for surgical intervention of the SI-Joint to be 279,000 procedures
annually in the U.S. alone, for a potential annual market of approximately $2.0 billion. These estimates are driven by coding data for
SI-Joint injections to treat pain and informed assumptions relative to surgical intervention candidacy
3
Based on public
information, we believe that the largest clinical device supplier in this market does approximately 16,000 SI-Joint fixations a year
representing the largest market share. The other competitive devices that are offered are all products generally part of much larger
companies with a variety of orthopedic devices and as such do not specifically call out the number of specific SI-Joint procedures performed
with their products. It is our belief that all other competitive devices represent approximately another 5,000 potential SI-Joint procedures.
Based on this analysis
we believe the market is vastly underserved and only penetrated 5-7%, leaving tremendous upside for a next generation device that meets
the needs of this market.
Competitive
Landscape
We believe Tenon
is the first company to develop and manufacture a novel Inferior-Posterior approach featuring a dual pontoon fixation technology cleared
by the FDA expressly for SI-Joint fusion. The approach, referred to as Inferior Posterior Sacroiliac Fusion is focused on these critical
aspects of the surgical procedure:
Note the trajectory
used in the Inferior Posterior approach:
The following are the primary factors
on which companies compete in our industry:
● product and clinical procedure effectiveness;
● ease of surgical technique and use of associated instruments;
● safety;
● published clinical outcomes and evidence;
● sales force knowledge and service levels;
● product support and service, and customer service;
● comprehensive training, including disease, anatomy, diagnosis, and treatment;
4
● product innovation and the speed of innovation;
● intellectual property;
● accountability and responsiveness to customers’ demands;
● pricing and reimbursement;
● scientific (biomechanics) data; and
● attracting and retaining key personnel.
Tenon believes
that refined approaches and improved implant design will open the door to enhanced adoption and further penetration of this important
market.
The CatamaranTM
SI-Joint Fusion System Solution
Until October 2022,
Tenon sold The Catamaran System to a limited number of clinician advisors to refine the product for a full commercial launch. In October
2022, Tenon initiated a full commercial launch at the NASS meeting in Chicago. The Catamaran System includes instruments and implants
designed to prepare and fixate the SI-Joint for fusion. We believe The Catamaran System will address a large market opportunity with
a superior product and is distinct from other competitive offerings in the following ways:
● Transfixes the SI joint
● Inferior-Posterior Sacroiliac Fusion Approach
● Reduced Approach Morbidity
● Direct And Visualized Approach to the SI-Joint
● Single Implant Technique
● Insertion Trajectory Away from the Neural Foramen
● Insertion Trajectory Away from Major Vascular Structures
● Autologous Bone Grafting in the Ilium, Sacrum and Bridge
● Radiographic Confirmation of Bridging Bone Fusion of the SI-Joint
The fixation device
and its key features are shown below:
The Catamaran System
is a singular implant designed with several proprietary components which allow for it to be explicitly formatted to transfix the SI-Joint
with a single approach and implant. This contrasts with several competitive implant systems that require multiple approach pathways and
implants to achieve fixation. In addition, the Inferior-Posterior approach is designed to be direct to the joint and through limited
anatomical structures which may minimize the morbidity of the approach. The implant features a patented dual pontoon open cell design
which enables the clinician to pack the pontoons with the patient’s own autologous bone designed to promote bone fusion across
the joint. The Catamaran System is designed specially to resist vertical shear and rotation of the joint in which it was implanted, helping
stabilize the joint in preparation for eventual fusion.
The instruments
we have developed are proprietary to The Catamaran System and specifically designed to facilitate an Inferior Posterior approach that
is unique to the system.
5
Tenon also has
developed a proprietary 2D placement protocol as well as a protocol for 3D navigation utilizing the latest techniques in spine surgery.
These Tenon advancements are intended to further enhance the safety of the procedure and encourage more physicians to adopt the procedure.
The Catamaran System,
as mentioned previously, is placed in the densest aspect of the SI-Joint as confirmed by the pre-op planning images below:
The Procedure
We believe The
Catamaran System and its differentiated characteristics allow for an efficient and effective procedure designed to deliver short-term
stabilization and long-term fusion that can be confirmed radiographically. Shown below is an illustration demonstrating the unique placement
of The Catamaran System inserted Inferior-Posterior and coming directly down to and transfixing the joint
6
The Catamaran System
procedure is typically performed under general anesthesia using a specially designed instrument set we provide to prepare for the Inferior-Posterior
access to the SI-Joint. Specially designed imaging and navigation protocols are designed to ensure the clinician has the proper entry
point, trajectory, angle and depth so that the pontoons of The Catamaran System are placed for maximum fixation. The Catamaran System
incorporates two pontoons and is designed so that when the system is impacted into the bone one pontoon is on the Illum side and the
other is in the Sacrum side with the bridge spanning the joint, preventing shear and rotation of the joint. The device also features
an open cell design where the patient’s own (autologous) bone is packed into the pontoons and the bridge to facilitate fusion across
the joint. The leading edge of the bridge is designed to act as an osteotome, providing a self-created deficit upon insertion. These
features are designed to create an ideal environment for bone ingrowth and fusion. Below is a fluoroscopic image of an implanted Catamaran
Fixation Device spanning the SI-Joint.
Tenon believes
the surgical approach and implant design it has developed, along with the 2D and 3D protocols for proper implantation will be received
well by the clinician community who have been looking for a next generation device. Our initial clinical results indicate that The Catamaran
System is promoting fusion across the joint as evidenced by post-op CT scans (the recognized gold standard widely accepted by the Clinical
community).
A preliminary 18
case series (Michael Joseph Chaparro, MD, F.A.A.N.S., F.A.C.S.) has documented that The Catamaran System does in fact promote fusion
across the SI-Joint, which many of our competitors have not been able to demonstrate. While products from some of our competitors use
screws and triangular wedges to treat the SI-Joint, most do not effectively resist the vertical shear and twisting within the joint.
This 18 patient series was presented at the North American Spine Society Annual Meeting in Chicago, IL in October 2022.
An independent
biomechanical study (Lisa Ferrara, Ph.D. OrthoKinetic Technologies, LLC now part of Element) demonstrated that a single Catamaran SIJ
Fixation Device was superior to predicate device in the areas of Fixation Strength, Shear Stiffness, Dynamic Endurance and Pullout Strength.
We hold issued patents on The Catamaran System and its unique features including the dual pontoons and the open cell structure for bone
graft packing. We also hold an issued patent for the method of placing The Catamaran System into the SI-Joint where one pontoon is in
the ilium and the other in the sacrum.
The Catamaran System’s
unique design has already demonstrated radiographically confirmed fusion in initial patients. We believe that this beneficial advantage
along with a simpler, safer, and less painful procedure will make this the procedure of choice for most physicians. Tenon has initiated
post market, IRB controlled clinical trials to demonstrate this technology delivers on these advantages.
Coverage and Reimbursement
When a Tenon procedure
utilizing The Catamaran System is performed, the healthcare facility, either a hospital (inpatient or outpatient clinic), and the
clinician submit claims for reimbursement to the patient’s insurer. Generally, the facility obtains a lump sum payment, or facility
fee, for SI-Joint fusions. Our products are purchased by the facility, along with other supplies used in the procedure. The facility
must also pay for its own fixed costs of operation, including certain operating room personnel involved in the procedure, ICD and other
medical services care. If these costs exceed the facility reimbursement, the facility’s managers may discourage or restrict clinicians
from performing the procedure in the facility or using certain technologies, such as The Catamaran System, to perform the procedure.
The Medicare 2023
national average hospital inpatient payment for SI-Joint procedures ranges from approximately $25,661 to approximately $46,437 depending
on the procedural approach and the presence of Complication and Comorbidity/Major Complication and Comorbidity.
7
The Medicare 2023
national average hospital outpatient clinic payment is $17,756. We believe that insurer payments to facilities are generally adequate
for these facilities to offer The Catamaran System procedure.
Physicians are
reimbursed separately for their professional time and effort to perform a surgical procedure. Depending on the surgical approach, the
incision size, type and extent of imaging guidance, indication for procedure, and the insurer, The Catamaran System procedure may be
reported by the physician using any one of the applicable following CPT® codes 27279, 27280, 27299. The Medicare 2022 national average
payment for CPT® 27279 is $807 and $1,352 for 27280. CPT® 27299 has no national valuation. Clinicians, however, can present a
crosswalk to another procedure believed to be fairly equivalent and/or comparison to a code for which there is an existing valuation.
For some governmental
programs, such as Medicaid, coverage and reimbursement differ from state to state, and some state Medicaid programs may not pay an adequate
amount for the procedures performed with our products, if any payment is made at all. Similar to Medicaid, many private payors’
coverage and payment may differ from one payer to another.
We believe that
some clinicians view the current Medicare reimbursement amount as insufficient for current SI-Joint procedures, given the work effort
involved with the procedure, including the time to diagnose the patient and obtain prior authorization from the patient’s health
insurer when necessary. Many private payors require extensive documentation of a multi-step diagnosis before authorizing SI-Joint fusion
for a patient. We believe that some private payors apply their own coverage policies and criteria inconsistently, and clinicians may
experience difficulties in securing approval and coverage for sacroiliac fusion procedures. Additionally, many private payors limit coverage
for open SI-Joint fusion to trauma, tumors or extensive spine fusion procedures involving multiple levels.
We believe the
unique design of The Catamaran System and the fact The Catamaran System may be placed both via an open procedure based on the clinician’s
determination of trauma induced SI-Joint pain or as a minimally invasive approach provides a unique and differentiated approach for the
clinician to determine the reimbursement code that best fits the clinical problem. We believe this is a significant advantage over competitive
devices by providing the clinician the clinical flexibility of offering the best clinical solution and approach for patients.
Sales and Marketing
We market and sell
The Catamaran System primarily through independent distributors and sales representatives specializing in orthopedics and spine sales.
Our target customer base includes approximately 12,000 physicians who perform spine and/or pelvic surgical procedures.
We provide general
sales and marketing training to our independent sales representative along with comprehensive, hands-on cadaveric and dry-lab training
sessions focusing on the clinical benefits of The Catamaran System and the importance of using the 2D and 3D protocols we have developed.
We believe many clinicians have already been trained using one of the alternative products but have not been satisfied with the approach
and technology. This provides us with an opportunity to demonstrate to an already-trained-clinician the unique attributes of The Catamaran
System.
Our business objective
is to introduce the Next Generation Implant for SI-Joint Fixation. The past 10 years has seen an acceleration in recognition and discussion
of the SI-Joint as a cause of pain that can be treated. However, adoption has been hindered by complexity of the procedure as evidenced
by the significant number of reported Medical Device Records (MDR’s). The need for multiple implants and resulting post-op pain
has also contributed to low adoption numbers. Our strategy is to provide a safer, faster, and better surgical experience and a significant
pain reduction benefit for the patient. Our goals are simple but impactful and as such we plan on the following:
8
● Continue to grow our existing intellectual property portfolio.
Regulatory Status
We have received
FDA 510(k) clearance to market and sell The Catamaran System for sacroiliac joint fusion for conditions including sacroiliac joint disruptions
and degenerative sacroiliitis.
Research & Development
Our initial development
of The Catamaran System has incorporated several differentiating features which we believe will make an important contribution for many
patients suffering from SI-Joint pain. To our knowledge, no other competitive product incorporates these Next Generation features:
● Dual Pontoon implant that transfixes the targeted joint;
● Bridge design between the dual pontoons for enhanced strength;
Our development
plan is to expand The Catamaran System offering by introducing a series of progressively longer pontoons so that the clinician has a
full complement of sized implants to choose from depending on the patient’s anatomy. These product enhancements will enable the
clinician to optimize the size of each implant to ensure full fixation based on anatomy. We believe, based on literature searches of
prior SI-Joint fixation technologies, that adverse event incidence where the implant has loosened or been misplaced thereby requiring
a revision surgery could reach 20%. We believe that our ability to make The Catamaran System a specifically sized fixation device will
benefit many patients requiring a revision surgery.
The Catamaran System
shown below has been cleared by the FDA for commercialization. This patented titanium implant incorporates the Catamaran SI-Joint Fixation
Device pontoon design and the open cell configuration which we believe, when filled with the patient’s autologous bone, promotes
fusion. The two images below show a comparison of a competitive implant requiring three implants and The Catamaran System unique pontoon
design showing the need of only one implant to cover the same amount of the SI-Joint.
The CatamaranTM SIJ Fusion System Single Implant SI Bone iFuse® Three Implants
Our mission will
be to continue developing enhancements to The Catamaran System to meet our customers’ changing needs and to improve the surgery’s
effectiveness. This includes revision surgery options as well as options as an adjunct to long fusion constructs in the lumbar spine.
9
Additionally, we
will initiate various post marketing clinical studies in accordance with FDA cleared indications for use. Since we have already received
FDA 510(k) clearance to market The Catamaran System, our clinical study activities will be focused on capturing post-market safety and
efficacy data. Tenon has received IRB approval for two post-market trials, including a 50 patient, 10 center multi-center trial and a
prospective CT trial to demonstrate fusion in patient who have already been treated with The Catamaran System. Clinical study endpoints
may include but are not limited to; pain scoring, length of surgical procedure, blood loss, post-op pain, length of stay, duration of
non-weight-bearing post-op, radiographic confirmation of fusion and surgical complication rates. Statistical analysis plans may be designed
to demonstrate non-inferiority to historical control, as reported in published literature, which may be used for submission to peer reviewed
articles / posters / presentations and the like.
Intellectual
Property
Developing and
maintaining a strong intellectual property position is an important element of our business. We maintain the intellectual property through
a combination of patent protection, trademarks, and trade secrets. We have sought, and will continue to seek, patent protection for our
technology, for improvements to our technology, as well as for any of our other technologies where we believe such protection will be
advantageous.
As of March 26, 2025, we own eight issued U.S. utility patents, 21
pending U.S. utility patent applications, four issued foreign utility patents in Australia, Canada, Japan and Israel, and two pending
foreign utility patent applications in the European Community, Brazil and Japan. We also have thirteen registered trademarks (seven U.S.
and six foreign) and twelve pending trademark applications in the U.S.
Our utility patents
and patent applications are directed to several different aspects of our sacroiliac (SI) joint stabilization technology and related patent
platform. By way of example, our granted patents and pending patent applications cover various structural features of our unique Catamaran
SI-Joint prosthesis and means for employing same to stabilize a dysfunctional SI-Joint.
The term of individual
patents depends on the legal term for patents in the countries in which they are granted. In most countries, including the United States,
the patent term for a utility patent is generally 20 years from the earliest claimed filing date of a nonprovisional patent application
in the applicable country. Our issued U.S. and foreign utility patents are anticipated to naturally expire around 2031, and our U.S.
pending utility patent applications, if issued into patents, are similarly anticipated to naturally expire around 2031, excluding any
additional patent term adjustment(s) or extension(s), and assuming payment of all applicable maintenance or annuity fees. Once a patent
expires, patent protection ends and an invention enters the public domain allowing anyone to commercially exploit the invention without
infringing the patent.
We cannot guarantee
that patents will be issued from any of our pending applications or that issued patents will be of sufficient scope or strength to provide
meaningful protection for our technology. Notwithstanding the scope of the patent protection available to us, a competitor could develop
methods or devices that are not covered by our patents or circumvent these patents. Furthermore, although, at present, we are unaware
of any patent applications that may result in one or more issued patents that our existing products or technologies may be alleged to
infringe, since U.S. and foreign applications can take many months to publish, there may be applications unknown to us that may result
in one or more issued patents that our existing products or technologies may be alleged to infringe.
As of March 26, 2025, we also have priority rights in and to several
significant trademarks that support our products and brand, including seven registered U.S. trademarks, twelve U.S. trademark applications
and six foreign trademark applications in the European Community (excluding the United Kingdom), Australia and Japan.
Regulation
Domestic
Regulation of Our Products and Business. Our research, development and clinical programs, as well as our manufacturing and marketing
operations, are subject to extensive regulation in the United States and other countries. Most notably, all of our products sold in the
United States are subject to the federal Food, Drug and Cosmetic Act (the “FDCA”), as implemented and enforced by the FDA.
The FDA governs the following activities that we perform or that are performed on our behalf, to ensure that medical products distributed
domestically or exported internationally are safe and effective for their intended uses:
● product design, development, and manufacture;
● product safety, testing, labeling, and storage;
● record keeping procedures;
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● product marketing, sales, distribution and export; and
There are numerous
FDA regulatory requirements governing the clearance or approval and marketing of our products. These include:
● regulations pertaining to voluntary recalls; and
● notices of corrections or removals.
The FDA has broad
post-market and regulatory enforcement powers. We and our contract manufacturers are subject to announced and unannounced inspections
by the FDA to determine our compliance with the QSR and other regulations and these inspections may include the manufacturing facilities
of our suppliers. Tenon has a robust Supplier Qualification and Audit process as part of our quality system that ensures contract manufacturers,
and their suppliers meet all requirements.
An FDA pre-approval
inspection is not required for The Catamaran System due to its lower device classification, class II versus the higher class III. As
is the case for most medical device firms, Tenon is subject to routine and “for cause” FDA inspections. Routine inspectionsare
mandated by law every 2 years for class II and class III device manufacturers and make up the majority of FDA’s inspections. If a serious
public health risk is identified during a routine inspection, the inspection may convert to a “for cause” inspection. In
the current environment, FDA has limited compliance resources and has not been able to perform routine inspections in accordance with
the 2-year mandate. Therefore, FDA uses a risk-based approach when deciding which firms should be selected for a routine inspection.
Using the Establishment Registration and Device Listing databases, FDA identifies who manufactures and/or distributes which devices.
The firms are then prioritized by risk, class III > class II > class I. Firms that have recently introduced a new device to the
market also are given higher priority, as well as those that have had significant prior violations and complaints. At present, Tenon
has not been selected for an FDA inspection. Tenon uses best practices to secure and maintain regulatory compliance by engaging
with suppliers and contract manufacturing firms that are ISO 13485 (or equivalent) compliant and by periodically performing internal,
external, and third-party inspections and audits of the facilities and systems to assess compliance.
FDA Premarket
Clearance and Approval Requirements. Unless an exemption applies, each medical device we wish to commercially distribute in the
United States will require either premarket notification, or 510(k), clearance or approval of a PMA from the FDA. The FDA classifies
medical devices into one of three classes. Devices deemed to pose lower risks are placed in either Class I or II, which typically
requires the manufacturer to submit to the FDA a premarket notification requesting permission to commercially distribute the device.
This process is generally known as 510(k) clearance. Some low-risk devices are exempted from this requirement. Devices deemed by the
FDA to pose the greatest risks, such as life-sustaining, life- supporting or implantable devices, or devices deemed not substantially
equivalent to a previously cleared 510(k) device, are placed in Class III, requiring a PMA. 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 the FDA determines that the device is “not substantially equivalent” to a previously cleared device, the device is automatically
designated as a Class III device. The device sponsor must then fulfill more rigorous PMA requirements or can request a risk-based
classification determination for the device in accordance with the “de novo” process, which is a route to market for novel
medical devices that are low to moderate risk and are not substantially equivalent to a predicate device. All of our currently marketed
products are Class II devices, subject to 510(k) clearance.
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After a device
receives 510(k) marketing clearance, any modification that could significantly affect its safety or effectiveness, or that would constitute
a major change or modification in its intended use, will require a new 510(k) marketing clearance or, depending on the modification,
PMA approval. The determination as to whether or not a modification could significantly affect the device’s safety or effectiveness
is initially left to the manufacturer using available FDA guidance. Many minor modifications today are accomplished by a “letter
to file” in which the manufacture documents the rationale for the change and why a new 510(k) is not required. However, the FDA
may review such letters to file to evaluate the regulatory status of the modified product at any time and may require the manufacturer
to cease marketing and recall the modified device until 510(k) clearance or PMA approval is obtained. The manufacturer may also be subject
to significant regulatory fines or penalties.
Clinical
Trials. Clinical trials are generally required to support a PMA application and are sometimes required for 510(k) clearance.
Such trials for implanted devices such as the Catamaran SIJ Fixation Device generally require an investigational device exemption application,
or IDE, approved in advance by the FDA for a specified number of subjects and study sites, unless the product is deemed a nonsignificant
risk device eligible for more abbreviated IDE requirements. Clinical trials are subject to extensive monitoring, recordkeeping, and reporting
requirements. Clinical trials must be conducted under the oversight of an institutional review board, or IRB, for the relevant clinical
trial sites and must comply with FDA regulations, including but not limited to those relating to good clinical practices. To conduct
a clinical trial, we also are required to obtain the subjects’ informed consent in form and substance that complies with both FDA
requirements and state and federal privacy and human subject protection regulations. We, the FDA, or the institutional review board,
or IRB, could suspend a clinical trial at any time for various reasons, including a belief that the risks to study subjects outweigh
the anticipated benefits. Even if a trial is completed, the results of clinical testing may not adequately demonstrate the safety and
effectiveness of the device or may otherwise not be sufficient to obtain FDA clearance or approval to market the product in the United
States.
Pervasive
and Continuing Regulation. After a device is placed on the market, numerous regulatory requirements continue to apply. These
include:
● regulations pertaining to voluntary recalls; and
● notices of corrections or removals.
The FDA has broad
post-market and regulatory enforcement powers. We are subject to unannounced inspections by the FDA to determine our compliance with
the QSR and other regulations, and these inspections may include the manufacturing facilities of some of our subcontractors. Failure
by us or by our suppliers to comply with applicable regulatory requirements can result in enforcement action by the FDA or other regulatory
authorities, which may result in sanctions including, but not limited to:
● unanticipated expenditures to address or defend such actions
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● customer notifications for repair, replacement, refunds;
● recall, detention, or seizure of our products;
● operating restrictions or partial suspension or total shutdown of production;
● operating restrictions;
● withdrawing 510(k) clearances or PMA approvals that have already been granted:
● refusal to grant export approval for our products; or
● criminal prosecution.
The FDA has not yet inspected our contract
manufacturer’s manufacturing facilities.
Promotional
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