Item
1. Business.
Overview
We
are a medical device company focusing on the development and commercialization of our proprietary MicroNet™ stent platform for
the treatment of carotid artery disease and other vascular disease. A stent is an expandable “scaffold-like” device, usually
constructed of a metallic material, that is inserted into the lumen of the artery to create patency and revascularization of blood flow.
MicroNet, a micron mesh sleeve, is attached over a stent to provide embolic protection both during and after stenting procedures.
Our
CGuard™ carotid embolic prevention system (“CGuard EPS™”) combines MicroNet and a unique self-expandable nitinol
stent in a single device for use in carotid artery revascularization. Our CGuard EPS originally received CE mark approval under Medical
Device Directive 93/42/EEC (“MDD”) in the European Union (“EU”) in March 2013 and was fully launched in Europe
in September 2015. Subsequently, we launched CGuard EPS in over 30 countries and on February 3, 2021, we executed a distribution agreement
with Chinese partners for the purpose of expanding our presence in the Asian markets. Currently, we are seeking strategic partners for
a potential launch of CGuard EPS in Japan and other Asian countries.
Our
CE mark for CGuard EPS under the MDD expired on November 12, 2022 and we are in the final stages of technical documentation review
by the Notified Body auditor to meet the Medical Device Regulation (“MDR”) (MDR 2017/745) requirements (which replaced
the MDD) for recertification. In the meantime, on February 14, 2023, we received a derogation per Article 97 paragraph 1 of
Regulation 2017/745 from the Agency for Medicines and Health Products (FAMHP) allowing us to continue marketing CGuard EPS in the EU
until August 15, 2023 subject to certain procedural requirements. Subsequently, on March 20, 2023, Regulation (EU) 2023/607 was
published allowing us to continue marketing CGuard EPS in EU countries under the MDD directive until December 31, 2027. As a result
of the foregoing, we may market and sell CGuard EPS in the EU and certain other jurisdictions subject to certain procedural
requirements while our MDR CE recertification is pending. We continue to expedite the review process for recertification under the
MDR.
On
September 8, 2020, we received approval from the U.S. Food and Drug Administration (“FDA”) of our Investigation Device Exemption
(“IDE”), thereby allowing us to proceed with a pivotal study of our CGuard™ Carotid Stent System, C-Guardians, for
prevention of stroke in patients in the United States. C-Guardians is a prospective, multicenter, single-arm, pivotal study to evaluate
the safety and efficacy of the CGuard™ Carotid Sten System when used to treat symptomatic and asymptomatic carotid artery stenosis
in patients undergoing carotid artery stenting. The trial was designed to enroll approximately 315 subjects in a maximum of 40 study
sites located in the United States and Europe. Study sites in Europe may contribute a maximum of approximately 50% of the total enrollees.
The primary endpoint of the study will be the composite of incidence of death (all-cause mortality), all stroke, and myocardial infarction
(DSMI) through 30-days post-index procedure, based on the clinical events committee (CEC) adjudication and ipsilateral stroke from 31-365
day follow-up, based on Clinical Events Committee (CEC) adjudication. The composite index will be compared to a performance goal based
on the observed rate of the two components of the primary endpoint from previous pivotal stent trials which are considered industry standard.
The performance goal will be considered met if the upper bound of the two-sided 95% confidence interval calculated from the observed
primary endpoint rate is < 11.6% and the p-value is less than 0.025.
On
July 23, 2021, we announced the initiation of enrollment and successful completion of the first cases of our C-Guardian trial of CGuard
EPS. These are 315 patients who are expected to be enrolled in the trial and receive CGuard EPS in the treatment of carotid artery stenosis
in symptomatic and asymptomatic patients undergoing carotid artery stenting. We are currently continuing with the enrolment phase at
approximately 20 trial sites and expect it to be completed approximately at the end of the second quarter of 2023.
Additionally,
we intend to continue to invest in current and future potential new indications, products and manufacturing enhancements for CGuard EPS
that are expected to reduce cost of goods and/or provide the best-in-class performing delivery systems, such as CGuard Prime™for
transfemoral access. In furtherance of our strategy that focuses on establishing CGuard EPS as a viable alternative to vascular surgery,
we are developing a new transcarotid artery revascularization (TCAR) delivery system, SwitchGuard™, for transcarotid access and
neuro protection. In addition, we intend to explore new indications for CGuard EPS to leverage the advantages of stent design and mesh
protection, well suited in labels such as acute stroke with tandem lesions.
We
consider our current addressable market for our CGuard EPS to be individuals with diagnosed, symptomatic high-grade carotid artery stenosis
(HGCS, ≥70% occlusion) for whom intervention is preferable to medical (drug) therapy. This group includes not only carotid artery
stenting patients but also individuals undergoing carotid endarterectomy, as the two approaches compete for the same patient population.
Assuming full penetration of the intervention caseload by CGuard EPS, we estimate that the addressable market for CGuard EPS will be
approximately $1.3 billion in 2023 (source: Health Research International Personal Medical Systems, Inc. September 13, 2021 Results of
Update Report on Global Carotid Stenting Procedures and Markets by Major Geography and Addressable Markets and internal estimates). According
to this same report, and internal estimates, assuming full penetration of the caseload for all individuals diagnosed with high-grade
carotid artery stenosis, we estimate that the total available market for CGuard EPS in 2022 will be approximately $9.3 billion. Our mission
is to offer a comprehensive set of delivery solutions (TCAR and Transfemoral) in order to deliver best in class results through patient
outcomes by way of stent performance with CGuard EPS.
We
were organized in the State of Delaware on February 29, 2008.
Our
Industry
Carotid
Carotid
arteries are located on each side of the neck and provide the primary blood supply to the brain. Carotid artery disease, also called
carotid artery stenosis, is a type of atherosclerosis (hardening of the arteries) that is one of the major risk factors for ischemic
stroke. In carotid artery disease, plaque accumulates in the artery walls, narrowing the artery and disrupting the blood supply to the
brain. This disruption in blood supply, together with plaque debris breaking off the artery walls and traveling to the brain, are the
primary causes of stroke. According to the World Health Organization (https://www.who.int/cardiovascular_diseases/resources/atlas/en/)
every year, 15 million people worldwide suffer a stroke, and nearly six million die and another five million are left permanently disabled.
According to the same source, stroke is the second leading cause of disability, after dementia.
In
2022, 3.0 million people between the age of 50 and 89 years old were estimated to be diagnosed with high grade carotid artery disease,
of which, approximately 394,000 of those diagnosed required intervention for carotid artery disease (according to the Health Research
International Personal Medical Systems, Inc. September 13, 2021 Results of Update Report on Global Carotid Stenting Procedures and Markets
by Major Geography and Addressable Markets). There are three current intervention treatments used for carotid artery disease. The first
is a carotid endarterectomy where a surgeon accesses the blocked carotid artery though an incision in the neck, and then surgically removes
the plaque. The second is transcarotid artery revascularization where a surgeon accesses the blocked carotid artery though an incision
in the neck, and then surgically removes the plaque while combining high-rate blood flow reversal to protect the brain. The third is
carotid artery stenting, which is a minimally invasive endovascular treatment for carotid artery disease and an alternative to carotid
endarterectomy. Endovascular techniques using stents and carotid embolic prevention system protect against plaque and debris traveling
downstream, blocking off the vessel and disrupting blood flow. We believe that the use of a stent with an embolic protection system should
increase the number of patients being treated since it would avoid the need for complex surgery.
Our
Products and Product Candidates
MicroNet
Mesh Platform Technology
MicroNet
is our proprietary circular knitted mesh which wraps around a stent to protect patients from plaque debris flowing downstream upon deployment.
MicroNet is made of a single fiber from a biocompatible polymer widely used in medical implantations. The size, or aperture, of the current
MicroNet ‘pore’ is only 150-180 microns in order to maximize protection against the potentially dangerous plaque and thrombus.
The MicroNet mesh is the core technology around which we have developed products for specific applications.
CGuard
EPS – Carotid Artery Applications
Our
CGuard EPS combines our MicroNet mesh and a self-expandable nitinol stent (a stent that expands without balloon dilation pressure or
need of an inflation balloon) in a single device for use in carotid artery applications. MicroNet is placed over and attached to an open
cell nitinol metal stent platform which is designed to trap debris and emboli that can dislodge from the diseased carotid artery and
potentially travel to the brain and cause a stroke. This danger is one of the greatest limitations of carotid artery stenting with conventional
carotid stents and stenting methods. The CGuard EPS technology is a highly flexible stent system that conforms to the carotid anatomy.
We
believe that our CGuard EPS design provides advantages over existing therapies in treating carotid artery stenosis, such as conventional
carotid stenting and surgical endarterectomy, given the superior embolic protection characteristics provided by the MicroNet. We believe
the MicroNet will provide acute embolic protection at the time of the procedure, but more importantly, we believe that CGuard EPS will
provide post-procedure protection against embolic dislodgement, which can occur up to 48 hours post-procedure. It is in this post-procedure
time frame that embolization is the source of post-procedural strokes in the brain. Schofer, et al. (“Late cerebral embolization
after emboli-protected carotid artery stenting assessed by sequential diffusion-weighted magnetic resonance imaging,” Journal
of American College of Cardiology Cardiovascular Interventions, Volume 1, 2008) have shown that the majority of the incidents of
embolic showers associated with carotid stenting occur post-procedure.
Our
CGuard EPS original received CE mark approval in the EU in March 2013 and was fully launched in Europe in September 2015. Subsequently,
we launched CGuard EPS in 30 plus countries and on February 3, 2021, we executed a distribution agreement with Chinese partners for the
purpose of expanding our presence in China. On October 13, 2021, we announced that our CGuard EPS stent system received a positive opinion
regarding reimbursement in France. Currently, we are seeking strategic partners for a potential launch of CGuard EPS in Japan and other
Asian countries.
Our
CE mark for CGuard EPS under the MDD expired on November 12, 2022 and we are in the final stages of technical documentation review by
the Notified Body auditor to meet the MDR requirements for recertification. In the meantime, on February 14, 2023, we received a derogation
per Article 97 paragraph 1 of Regulation 2017/745 from the Agency for Medicines and Health Products (FAMHP) allowing us to continue marketing
CGuard EPS in the EU until August 15, 2023, subject to certain procedural requirements. Subsequently, on March 20, 2023, Regulation (EU) 2023/607 was published allowing us to continue
marketing CGuard EPS in EU countries under the MDD directive until December 31, 2027. As a result of the foregoing, we may market and sell CGuard EPS in
the EU and certain other jurisdictions subject to certain procedural requirements while our MDR CE recertification is pending. We continue to expedite the
review process for recertification under the MDR.
On
September 8, 2020, we received approval from the FDA of our IDE, thereby allowing us to proceed with a pivotal study of our CGuard™
Carotid Stent System, C-Guardians, for prevention of stroke in patients in the United States. C-Guardians is a prospective, multicenter,
single-arm, pivotal study to evaluate the safety and efficacy of the CGuard™ Carotid Stent System when used to treat symptomatic
and asymptomatic carotid artery stenosis in patients undergoing carotid artery stenting. The trial was designed to enroll approximately
315 subjects in a maximum of 40 study sites located in the United States and Europe. Study sites in Europe may contribute a maximum of
approximately 50% of the total enrollees. The primary endpoint of the study will be the composite of incidence of death (all-cause mortality),
all stroke, and myocardial infarction (DSMI) through 30-days post-index procedure, based on the clinical events committee (CEC) adjudication
and ipsilateral stroke from 31-365 day follow-up, based on Clinical Events Committee (CEC) adjudication. The composite index will be
compared to a performance goal based on the observed rate of the two components of the primary endpoint from previous pivotal stent trials
which are considered industry standard. The performance goal will be considered met if the upper bound of the two-sided 95% confidence
interval calculated from the observed primary endpoint rate is < 11.6% and the p-value is less than 0.025.
On
July 23, 2021, we announced the initiation of enrollment and successful completion of the first cases of our C-Guardian trial of
CGuard EPS. Since then we have continue to enroll subjects in the trial at approximately 20 trial sites and expect to complete
enrollment approximately at the end the second quarter of 2023.
CGuard
Prime Delivery System
The
CGuard Prime™ System is a mesh-covered self-expanding carotid stent that is loaded into a transfemoral rapid exchange (Rx) delivery
system that we are developing and that is subject to regulatory approval.
The
CGuard Prime Carotid Stent is a self-expanding nitinol stent covered with a MicroNet bio-stable sleeve woven from a single strand of
23 μm Polyethylene Terephthalate (PET). The MicroNet sleeve is designed to trap and seal thrombus and plaque against the vessel wall,
providing continuous embolic prevention. The CGuard Prime Carotid Stent is available in diameters ranging from 6.0mm to 10mm and in lengths
of 20, 30, 40 and 60mm. The CGuard Prime Delivery System is a rapid exchange (Rx), delivery system with a 6Fr profile that can accommodate
all stent sizes from 6mm to 10mm. The CGuard Prime Rx Delivery Systems are available in two lengths: 80 cm and 135 cm.
CGuard
Prime™ advances the first generation CGuard transfemoral delivery system with new handle design for deployment accuracy, new catheter
design for more flexible navigation of tortuous anatomy especially in acute revascularize settings as well as two lengths, 135cm and
80cm for booth transfemoral and trans ,carotid access.
Switchguard
SwitchGuard
is a Class IIa, non-invasive transcarotid artery revascularization (TCAR) device that we are developing and that is subject to regulatory
approval that is composed of medical grade tubing with male Luer lock connectors at each end and an in-line 200-micron blood filter.
The device is intended as an external arterial-venous (A-V) shunt, allowing arterial blood to flow into the venous system, while filtering
particulate before returning blood to the patient on the venous side.
The
SwitchGuard arterio-venous extension line with filter is intended for flow circuit and particle removal when connecting arterial and/or
venous introducers during interventional procedures.
SwitchGuard
is being developed to answer a need of flow reversal for cerebral protection in CAS since symptomatic distal embolization, caused by
the release of material (thrombotic, necrotic, or atherosclerotic) from the site of the lesion during the intervention, is the most frequent
and important complication of CAS. Reversing blood flow has been shown to reduce stroke risk during carotid artery procedures.
Physicians
frequently use extension lines constructed from blood filter transfusion sets during interventional procedures for the purpose of A-V
shunting.
NGuard
EPS – Acute Stroke with Tandem Lesions
In
approximately 20% of acute strokes, the carotid artery is included in the cerebral occlusion pathway. Currently there is no indicated
use of CAS for these lesions during stroke treatment. We believe CGuard EPS is optimally suited for intervention in this acute setting
by way for design (flexible / low metal structure) as well as MicroNet mesh offering embolic protection both during and post procedural
implantation. Our goal is to develop CGuard EPS to mitigate strokes in this acute setting.
MGuard
Prime
We
historically developed and sold MGuard Prime embolic protection system (“MGuard Prime EPS”) which was marketed for use in
patients with acute coronary syndromes, notably acute myocardial infarction (heart attack) and saphenous vein graft coronary interventions,
or bypass surgery. Over the past years there has been a shift in industry preferences away from bare-metal stents, such as MGuard Prime
and as a result of declining sales and practical market utilization of the MGuard Prime EPS, which we believe was largely driven by the
predominant industry preferences favoring drug-eluting or drug-coated, stents, during the second quarter of 2022 we ceased sales of our
MGuard Prime EPS following a phase out period.
Completed
Clinical Trials for CGuard EPS
CARENET
The
CARENET trial was the first multi-center study of CGuard EPS following the receipt of CE mark of this device in March 2013. The CARENET
trial was designed to evaluate feasibility and safety of CGuard EPS in treatment of carotid lesions in consecutive patients suitable
for coronary artery stenting (“CAS”) in a multi-operator, real-life setting. The acute, 30 day, magnetic resonance imaging
(“MRI”), ultrasound and six month clinical event results were presented at the LINC conference in Leipzig, Germany in February,
2015. In the third quarter of 2015, the results of the CGuard CARENET trial were published in the Journal of the American College of
Cardiology. In November 2015, positive twelve month follow-up data from the CGuard CARENET trial was presented at the 42nd Annual Symposium
on Vascular and Endovascular Issues, documenting the benefits of the CGuard MicroNet technology as well as the patency benefits (maintaining
the artery open) of the internal and external carotid arteries at twelve months. In September 2022, the results of the CGuard CARENET
trial five year follow up were published in the Journal of the American College of Cardiology: Cardiovascular Interventions Vol. 15,
No 18, 2022 September 26, 2022:1883-1891. There was no ipsilateral stroke or ipsilateral stroke-related death which occurred throughout
the five years. In addition, no stent restenosis or external carotid artery occlusion occurred in CARENET by 5 years, indicating normal
healing and uncompromised side-branch patency.
MACCE
(myocardial infarction (“MI”), stroke or death) rate was 0.0% at 30 days. At six months, there was one death, which was not
device or procedure-related but did result in a MACCE rate of 3.6% at six months. At twelve months there were two additional deaths,
which were not device or procedure-related resulting in a MACCE rate of 10.7% at one year.
| |
30 days
(n=30) | | |
6 months
(n=28) | | |
12 months
(n=28) | |
MACCE (MI, stroke, death) | |
| (0) 0.0 | % | |
| (1) 3.6 | % | |
| (3) 10.7 | % |
MI | |
| (0) 0.0 | % | |
| (0) 0.0 | % | |
| (0) 0.0 | % |
stroke | |
| (0) 0.0 | % | |
| (0) 0.0 | % | |
| (0) 0.0 | % |
death | |
| (0) 0.0 | % | |
| (1) 3.6 | % | |
| (3) 10.7 | % |
CAS
carries the risk of cerebral embolization during and following the procedure, leading to life-threatening complications, mainly cerebral
ischemic events. Diffusion-weighted magnetic resonance imaging (DW-MRI) is a sensitive tool used to identify cerebral emboli during CAS
by measuring “lesions” within the brain which are areas that are ischemic and do not receive oxygenated blood due to cerebral
emboli. In the CARENET trial, 37.0% of patients treated with CGuard EPS had new ischemic lesions at 48 hours after the procedure, with
an average volume of 0.039 cm3. Of these lesions, there was only one that remained at 30 days following the procedure and all others
had resolved. Complete details appear in the following table. Where there is a second number shown below after a ± symbol, it
indicates the potential error in the measurement.
| |
48 hours n=27 | | |
30 days n=26 | |
Subjects with new Acute Ischemic Lesions (“AIL”) | |
| 10 | | |
| 1 | |
Incidence of new lesions | |
| 37.0 | % | |
| 4.0 | % |
Total number new AIL | |
| 83 | | |
| 1 | |
Avg. number new AIL per patient | |
| 3.19 ± 10.33 | | |
| 0.04 ± 0.20 | |
Average lesion volume (cm3) | |
| 0.039 ± 0.08 | | |
| 0.08 ± 0.00 | |
Maximum lesion volume (cm3) | |
| 0.445 | | |
| 0.116 | |
Permanent AIL at 30 days | |
| — | | |
| 1 | |
The
healing process of the tissue and in-stent restenosis can be measured by a non-invasive form of ultrasound called duplex ultrasound.
This type of ultrasound measures the velocity of the blood that flows within the carotid arteries, which increases exponentially as the
lumen of the internal carotid artery narrows and the percent stenosis increases. One of the measurements is called PSV (peak systolic
volume) and is known to be highly correlated to the degree of in-stent restenosis; PSV values higher than 300 cm/sec are indicative of
>70% stenosis, while PSV values lower than 104 cm/sec are indicative of <30% restenosis and healthy healing. In the CARENET trial,
duplex ultrasound measurements done at 30 days, 6 months and 12 months following the stenting procedure all attest to healthy normal
healing without restenosis concerns, as the PSV values were 60.96 cm/sec ± 22.31, 85.24 cm/sec ± 39.56, and 90.22 cm/sec
± 37.72 respectively. The internal carotid artery was patent in all patients (100%).
The
conclusions of the CARENET trial were:
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The
CARENET trial demonstrated safety of the CGuard EPS stent, with a 30 day MACCE rate of 0%. |
|
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|
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Incidence
of new ipsilateral lesions (percent of patients with new lesions on the ipsilateral side (same side where the stent was employed))
at 48 hours was reduced by almost half compared to published data, and volume was reduced almost tenfold. |
|
|
|
|
● |
All
but one lesion had resolved completely by 30 days. |
|
|
|
|
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Twelve
month data showed no stroke or stroke-related deaths, and no cardiac adverse events. |
|
|
|
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Five
year data showed no ipsilateral stroke or ipsilateral stroke-related deaths, and no stent restenosis or external carotid artery occlusion
occurred in CARENET by 5 years, indicating normal healing and uncompromised side-branch patency. |
|
|
|
|
● |
CGuard
EPS offers enhanced benefits for patients undergoing CAS with unprecedented safety. |
Physician-Sponsored
Clinical Trials for CGuard—PARADIGM-101 and PARADIGM -500 Studies
PARADIGM-101
(Prospective evaluation of All-comer peRcutaneous cArotiD revascularization
In symptomatic and increased-risk asymptomatic carotid artery stenosis, using CGuard™ Mesh-covered
embolic prevention stent system-101) was an investigator-led, single center study with the objective of evaluating feasibility and outcome
of routine use of CGuard EPS in 101 consecutive unselected all-comer patients referred for carotid revascularization, initiated in 2015.
In May 2016, the 30-day results were presented at the EuroPCR 2016 Late-Breaking Clinical Trial Session in Paris, and in the Journal
of EuroIntervention. In Dec 2020, the 12 month results were presented in the Official Journal of the EuroPCR and the European Association
of Percutaneous Coronary Interventions, EuroIntervention 2020;16:e950-e952. DOI: 10.4244/EIJ-D-19-01014) Key findings from the PARADIGM-101
study and the follow-up data are as follows.
|
● |
CGuard
EPS delivery success was 99.1%. The clinical evaluation also found no device foreshortening or elongation; |
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Angiographic
diameter stenosis or vessel narrowing was reduced from 83±9% to only 6.7±5% (p<0.001); |
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Periprocedural
death/major stroke/ myocardial infarction (“MI”) rates were 0%; |
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| ● | Between
30 days and 12 months, there were no strokes or stroke-related deaths. There were four non
-device related deaths (heart failure exacerbation, urosepsis, pulmonary embolism and microcellular
pulmonary cancer). |
The
results of the PARADIGM-101 study demonstrated that CGuard EPS can safely be used in a high risk, all-comer population of patients with
carotid artery stenosis and indicated that routine use of CGuard EPS may prevent cerebral events, such as strokes, by holding plaque
against the vessel wall, preventing emboli from being released into the blood stream. The PARADIGM-101 study found that CGuard EPS is
applicable in up to 90% of all-comer patients with carotid stenosis.
PARADIGM-101
was subsequently increased to include 500 consecutive patients with symptomatic or increased stroke risk asymptomatic atherosclerotic
carotid stenosis patients. The new study is known as PARADIGM -500. In June 2022, the 1 year results were presented at the EuroPCR in
Leipzig, Germany.
Key
findings from the PARADIGM-500 study are as follows.
|
● |
30
Day Death/Stroke rate of 0.75%; 30 day death/stroke/myocardial infarction rate of 0.94%; |
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12
month freedom from ipsilateral stroke, in stent restenosis and target lesion revascularization rate of 99.6%. |
Clinical
Results and Mechanical Properties of the Carotid CGUARD Double-Layered Embolic Prevention Stent Study
“Clinical
Results and Mechanical Properties of the Carotid CGUARD Double-Layered Embolic Prevention Stent Study” was an investigator-led,
prospective single-center study which evaluated CGuard EPS in 30 consecutive patients with internal carotid artery stenosis disease with
the objective of reporting early clinical outcomes with a novel MicroNet covered stent for the internal carotid artery and the in vitro
investigation of the device’s mechanical properties. In October 2016, the 30-day positive results were published online-ahead-of-print
in the Journal of Endovascular Therapy.
Key
findings from the study are as follows:
|
● |
100%
success in implanting CGuard EPS without residual stenosis; |
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|
● |
No
peri- or post-procedural complications; |
|
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|
● |
No
deaths, major adverse events, minor or major strokes, or new neurologic symptoms during the six months following the procedure; |
|
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|
● |
Modified
Rankin Scale improved for the symptomatic patients from 1.56 prior to the procedure to 0 afterwards; |
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|
● |
All
vessels treated with CGuard EPS remained patent (open) at six months; and |
|
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|
● |
DW-MRI
performed in 19 of 30 patients found no new ipsilateral lesions after 30 days and after six months compared with the baseline DW-MRI
studies. |
Additionally,
based on engineering evaluations, the study concluded that CGuard EPS provides a high radial force and strong support in stenotic lesions.
The stent is easy to use and safe to implant because it does not foreshorten and its structure adapts well to changes in diameter and
direction of tortuous vascular anatomies. The MicroNet mesh of CGuard did not cause any changes to specific mechanical parameters of
the underlying stent.
Safety
and Efficacy of the New Micromesh-Covered Stent CGuard in Patients Undergoing Cartoid Artery Stenting: Early Experience From a Single
Center
“Safety
and Efficacy of the New Micromesh-Covered Stent CGuard in Patients Undergoing Carotid Artery Stenting: Early Experience From a Single
Center” was an investigator-led, single-center study which evaluated CGuard EPS in 82 consecutive patients. The aim of the study
was to evaluate the safety (technical success) and efficacy (clinical success) of the CGuard stent system – a new nitinol stent
covered by a closed-cell polyethylene and terephthalate mesh designed to prevent embolic events. In 2017, the 30-day positive results
were published online-ahead-of-print in the European Journal of Vascular and Endovascular Surgery (2017), https://doi.org/10.1016/j.ejvs.2017.09.015.
Key
findings from the study are as follows:
|
● |
100%
success in implanting CGuard EPS; |
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|
● |
One
case of acute stent thrombosis occurred within 4 hours of the procedure: |
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|
● |
One
minor stroke was recorded within the peri-operative period following the acute stent thrombosis, mentioned above; |
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|
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No
new adverse neurological events were recorded at the post-operative period. |
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DW-MRI
was performed to assess the occurrence of new ischaemic brain lesions from the target vessel following placement of the CGuard stent
peri- (48-72 hours) and post-operatively (30 days) in 21 and 11 patients, respectively. Five of 21 patients (23.8%) had new ischaemic
brain lesions peri-operatively (48-72 hours) on the ipsilateral side, for a total number of 30 lesions, with an average lesion volume
of 0.039 +/- 0.025 cm3. Four patients (19.1%) had new ischaemic brain lesions on the contralateral side, for a total number
of nine lesions, with an average lesion volume of 0.019 +/- 0.011 cm3 (range 0.016-0.034 cm3). At the postoperative period,
spontaneous resolution was noted in all the lesions recorded in the peri-operative period in the 11 patients participating. Only
one symptomatic patient had two new ischaemic brain lesions (1 ipsilateral and 1 contralateral). |
CGUARD
Mesh-Covered Stent in Real World: The IRON-Guard Registry
“CGUARD
Mesh-Covered Stent in Real World: The IRON-Guard Registry using CGuard EPS” was a physician initiated prospective multi-center
registry that included 200 patients from 12 medical centers in Italy. The objective of the study was to report 30-day outcomes (including
MACCE) in a prospective series of patients who were treated with CGuard EPS between April 2015 and June 2016. In January 2017, 30-day
results were presented at the Leipzig Interventional Course (LINC) 2017 and published in the Journal of EuroIntervention in May 2017.
The 12 month follow-up was published in the Journal of EuroIntevention in October 2018.
Key
30-day results presented were:
|
● |
100%
success in implanting CGuard EPS; |
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|
● |
No
MI, major stroke or death at 30 days; |
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● |
There
were two transient ischemic attacks and five periprocedural minor strokes, including one thrombosis solved by surgery. |
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Total
elimination of post-procedural neurologic complications by 30 days; |
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DW-MRI
performed pre-procedure and between 24 and 72 hours post-procedure in 61 patients, indicated that 12 patients had new micro emboli
(19%). |
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At
12 months, there were no new major neurological adverse events, thrombosis or external carotid occlusion recorded; |
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One
myocardial infarction occurred at 12 months. |
Initial
Clinical Study of the New CGuard EPS MicroNet Covered Carotid Stent: “One Size Fits All”
“Initial
Clinical Study of the New CGuard EPS MicroNet Covered Carotid Stent: ‘One Size Fits All’” was an investigator-led,
single-center study, which evaluated CGuard EPS in 30 consecutive patients with symptomatic stenosis of the internal carotid artery with
the objective of evaluating the CGuard EPS MicroNet covered stent for its ability to adjust to different vessel diameters. The results
of the study were published in the Journal of Endovascular Therapy in May 2019. The conclusion of the study as reported was that CGuard
EPS has high conformability combined with an almost equivalent outward radial force at expansion diameters ranging from 5.5 to 9.0 mm.
The first clinical results demonstrate the “One Size Fits All” stent can be implanted in internal carotid arteries with reference
diameters within this range.
Key
findings from the study were as follows:
|
● |
100%
technical success in implanting CGuard EPS; |
|
|
|
|
● |
No
neurological events within 30 days; |
|
|
|
|
● |
The
chronic outward force normalized by stent length demonstrated a near-equivalent radial force outcome; and |
|
|
|
|
● |
The
stent displayed only a minor difference between the minimal radial force at 9.0 mm (0.195 N/mm) and the maximal radial force at 5.5
mm (0.330 N/mm). |
Preliminary
Results from a Prospective Real-World Multicenter Clinical Practice of Carotid Artery Stenting Using the CGuard Embolic Prevention System:
The IRONGUARD 2 Study
“Preliminary
Results From a Prospective Real-World Multicenter Clinical Practice of Carotid Artery Stenting Using the CGuard Embolic Prevention System:
The IRONGUARD 2 Study” is a physician initiated prospective multi-center registry enrolling 733 patients from 20 medical centers
in Italy, from January 2017 to June 2019. The objective of the study is to evaluate periprocedural (24 hours), post-procedural (up to
30 days), and 12-month outcomes in a largest, prospective, multicenter series of patients submitted for protected carotid artery stenting
with the CGuard Embolic Prevention System. The 24-hour, 30-day and 12-month preliminary results (data available on 726 patients out of
the 733 treated) were presented at the Leipzig Interventional Course (LINC) in January 2021. The study’s preliminary results from
the IRONGUAURD 2 study suggested in a real-world evaluation of carotid artery stenting, Cguard EPS can be safely used for treatment of
extracranial carotid artery stenosis, allowing a low rate of post procedural adverse events by 12 months.
Key
findings from the study are as follows:
|
● |
100%
procedural success in implanting CGuard EPS; |
|
|
|
|
● |
1
death from hemorrhagic stroke (patient was admitted for immediate treatment of CAS due to stroke), 2 minor strokes, 6 TIAs and one
nonfatal AMI at 24 hours; |
|
|
|
|
● |
1
minor stroke, 2 TIAs, three AMIs, no deaths and no stent thrombosis/occlusions between 24 hours and 30 days; and |
|
|
|
|
● |
1
minor stroke, 4 TIAs, 2 AMIs and 8 deaths (the 2 mentioned AMIs, 4 malignancies, 1 suicide and 1 undefined complication in Guillain-Barré
Syndrome) between 30 days and 1 year. |
Thirty-Day
Results of the Novel CGuard-Covered Stent in Patients Undergoing Carotid Artery Stenting
“Thirty-Day
Results of the Novel CGuard-Covered Stent in Patients Undergoing Carotid Artery Stenting” was an investigator-led, prospective
single-center study which evaluated CGuard EPS in 103 patients that underwent carotid artery stenting procedures. The aim of the study
was to provide early-term evaluation, safety, and efficacy of the novel CGuard micromesh self-expanding stent with embolic protection
system (EPS). In April 2021, the 30-day positive results were published in the Journal of Endovascular Therapy, DOI: 10.1177/15266028211007466.
Key
findings from the study are as follows:
|
● |
100%
technical success was achieved in all patients: |
|
|
|
|
● |
No
major adverse events (death, stroke, or myocardial infarction) at 30 days. |
The
SIBERIA Trial for Carotid Artery Stenosis: A Randomized Controlled Trial of Conventional Versus Micronet™-Covered Stent Use in
Percutaneous Neuroprotected Carotid Artery Revascularization: Peri-procedural and 30-day Diffusion-Weighted Magnetic Resonance Imaging
and Clinical Outcomes (RCT trial)
“The
SIBERIA Trial for Carotid Artery Stenosis: A Randomized Controlled Trial of Conventional Versus Micronet™-Covered Stent Use in
Percutaneous Neuroprotected Carotid Artery Revascularization: Peri-procedural and 30-day Diffusion-Weighted Magnetic Resonance Imaging
and Clinical Outcomes” was an investigator-initiated randomized clinical trial, single-center study, which evaluated one hundred
patients who qualified for carotid revascularization with high risk for surgery and were randomized 1:1 to either CGuard EPS or AcculinkTM.
The primary endpoints were incidence and volume of new cerebral embolic post-procedural lesions (24-48 hours) as determined by diffusion
weighted magnetic resonance imaging (DW-MRI). The principal secondary endpoints included incidence of periprocedural or postprocedural
stroke, myocardial infarction and death at 30 days. The 30 day results of the study were presented in a late-breaking session at the
EuroPCR in June 2020 and published (Randomized Controlled Trial of Conventional Versus MicroNet-Covered Stent in Carotid Artery Revascularization,
JACC Cardiovascular Interventions, Vol. 14, November 21, 2021). The conclusion of the study was that the CGuard™ Micronet™-covered
stent use in consecutive unselected patients subjected to neuroprotected carotid artery stenting was associated with a greater than three-fold
reduction in the procedure-generated mean cerebral lesion volume, and with zero post-procedural cerebral embolisms observed. The MicroNet
covered stent significantly reduced periprocedural and abolished post procedural cerebral embolism in relation to a conventional carotid
stent. This is consistent with the MicroNet covered stent’s sustained embolism prevention, translating into cerebral protection
not only during but after carotid artery stenting. The incidence of restenosis and vessel occlusion according to the ICA (internal carotid
artery) ultrasound and the incidence of strokes, myocardial infarctions or deaths between the study arms at 365 days were presented at
the LINC conference in Leipzig, Germany in June , 2022. The 12 month outcomes demonstrated a significantly higher prevalence of the combined
endpoint of death, stroke or myocardial infarctions and in-stent restenosis and vessel occlusion rate in the first generation (single
layer) carotid stent, AcculinkTM, versus the MicroNet-Covered Stent, CGuard™.
Key
findings from the study are as follows:
|
● |
Peri
Procedure, the CGuard™ arm was observed to have a 57% reduction in new cerebral lesion average volume per patient (171 mm3
vs. 73 mm3), a statistically significant improvement (p=0.017) and 222 mm3 vs. 84 mm3 (p=0.038); |
|
|
|
|
● |
Post
Procedure (24-48 hours), the CGuard™ arm was observed to have a 78% reduction in the average volume of new cerebral lesions
(157 mm3 vs. 700 mm3), a statistically significant improvement (p=0.007); |
|
|
|
|
● |
At
30 days, DW-MRI showed zero new cerebral lessons in the CGuard™ arm versus six in the Acculink™ arm (p=0.03); |
|
|
|
|
● |
At
30 days, there were zero strokes, myocardial infarctions or deaths in the CGuard arm and two events the Acculink™ arm (two
strokes); |
|
● |
At
365 there were zero cases of restenosis and vessel occlusion in the CGuard™ arm versus 3 cases of restenosis and 1 case of
vessel occlusion in the Acculink™ arm; |
|
|
|
|
● |
At
365 days, there were one event in the CGuard arm (one death) and five events the Acculink™ arm (two strokes, two deaths and one
myocardial infarction). |
Future
Clinical Trials
Pre
and post-marketing clinical trials (outside the United States) could be conducted to further evaluate the safety and efficacy of CGuard
EPS in specific indications and new products, such as SwitchGuard. These trials would be designed to facilitate market acceptance and
expand the use of the product.
Growth
Strategy
Our
primary business objective is to utilize our proprietary MicroNet technology and products to become the industry standard for treatment
of stroke and complex vascular disease and to provide a superior solution to the common acute problems caused by current stenting procedures,
such as restenosis, embolic showers and late thrombosis. We are pursuing the following business strategies to achieve this objective.
● |
Widen
the adoption of CGuard EPS. We are seeking to expand the population of CGuard EPS patients in those countries in which CGuard
EPS is commercially available. In particular, our focus is on establishing CGuard EPS as a viable alternative (in appropriate cases)
to conventional carotid stents and vascular surgery within the applicable medical communities. We intend to accomplish this goal
by continuing to publish and present our clinical data, support investigator-initiated clinical registries and exploring addition
of a procedural protection device to our portfolio incorporating the principal of reverse flow of the carotid artery as an adjunctive
alternative to femoral access. We have partnered and will continue to seek out partnerships with organizations focused on the treatment
of stroke. We will also continue to engage advisory boards and to develop a network of key opinion leaders to assist us in our efforts
to widen the adoption of CGuard EPS. We aim to be the only company focusing on the broadest category of sub specialists
treating Carotid Artery Disease, both surgeons and interventional sub specialists and the only company offering both a TCAR and TFEM
delivery option. |
|
|
● |
Portfolio
expansion and pipeline development We plan to continue to invest in advancing our portfolio with new delivery system alternatives
to facilitate the use of CGuard by all physicians. We believe our delivery systems, if approved, will enable all endovascular access
points including accessory devices for trans carotid artery revascularization. |
|
|
● |
Grow
our presence in existing and new markets for CGuard EPS. We have launched CGuard EPS in most European and Latin American countries
through a comprehensive distributor sales organizations network. We are continuing to focus on larger growing markets through this
network by supporting our distributors with a comprehensive marketing and clinical education programs. In additional we have begun
to sell direct to hospitals in certain markets and continue to evaluate the transition to a direct selling to hospitals model in
certain currently served distributor markets, increasing our control on the market and gross profit margins. We are pursuing additional
product registrations and distribution contracts with local distributors in other countries in Europe, Asia and Latin America. In
February 2021, we executed a distribution agreement with Chinese partners for the purpose of expanding our presence in China. Currently,
we are seeking strategic partners for a potential launch of CGuard EPS in Japan and other Asian countries. In addition, we are conducting
a pivotal study of our CGuard™ Carotid Stent System, C-Guardians, for prevention of stroke in patients in the United States. |
● |
CMS
approval of National Coverage Determination – During January 2023, CMS approved the first step of reimbursement of a national
Coverage Decision for standard risk stent intervention of carotid disease. This decision has the potential to profoundly increase
the available market to endovascular procedures as payment is pending for approval for a much boarder definition of surgical risk.
Currently, only high-risk patients to surgery are paid through the CMS coverage, NCA - Percutaneous Transluminal Angioplasty (PTA)
of the Carotid Artery Concurrent with Stenting (CAG-00085R8) - Tracking Sheet (cms.gov) |
● |
Continue
to leverage our MicroNet technology to develop additional applications for interventional cardiologists and vascular surgeons. In
addition to the applications described above, we believe that we will eventually be able to utilize our proprietary MicroNet technology
to address imminent market needs for new product innovations to significantly improve patients’ care. We continue to broadly
develop and protect intellectual property using our mesh technology. Examples of some areas include peripheral vascular disease and
neurovascular disease. |
|
|
● |
Establish
relationships with collaborative and development partners to fully develop and market our existing and future products. We are
seeking strategic partners for collaborative research, development, marketing, distribution, or other agreements, which could assist
with our development and commercialization efforts for CGuard EPS and other potential products that are based on our MicroNet technology. |
Competition
The
markets in which we compete are highly competitive, subject to change and impacted by new product introductions and other activities
of industry participants.
Carotid
With
respect to competition for our carotid embolic prevention system, CGuard EPS™, the manufacturers of products used in connection
with CAS procedures in the United States, is comprised of a number of large companies, including Abbott Laboratories, Boston Scientific
Corporation, Covidien Ltd. (currently part of Medtronic, Inc.) and Cordis Corporation. In Europe, in addition to the above mentioned
manufacturers, Terumo Medical Corporation is also a market participant that has a share of the market for products used in connection
with CAS procedures. As we develop and seek regulatory approval in the United States and Europe for our new TCAR delivery system, SwitchGuard™,
and continue to seek greater market share for CGuard EPS™, we expect to compete with Silk Road Medical in the total carotid artery
revascularization market that comprises both CAS and carotid endarterectomy (“CEA”).
Many
of these companies are larger companies or divisions of publicly-traded companies that have certain competitive advantages, including
greater capital resources, larger customer bases, broader product lines, larger sales forces, greater marketing and management resources,
larger research and development staffs and larger facilities than ours and have established reputations, relationships with our target
customers and worldwide distribution methods that are more effective than ours. However, while there are currently many market participants
in the U.S. carotid stent market, we believe that the European market is somewhat more fragmented for CEA and CAS products, and, in our
opinion, smaller competitors may be able to gain market share with greater flexibility and more efficiently than in the United States.
We
believe the principal competitive factors in our market include the following:
| ● | Patient
outcomes and adverse event rates; |
| ● | Patient
experience; |
| ● | Acceptance
by treating physicians and referral sources; |
| ● | Physician
learning curve; |
| ● | Ease-of-use
and reliability; |
| ● | Patient
recovery time and level of discomfort; |
| ● | Economic
benefits and cost savings; |
| ● | Availability
of reimbursement; and |
| ● | Strength
of clinical evidence. |
Sales
and Marketing
Sales
and Marketing
Based
on the positive CGuard EPS clinical data, we initiated the commercial launch of CGuard EPS in CE marked countries in early 2015. In September
2015, we announced full market launch of CGuard EPS in Europe. Since 2017 we are focusing on sales of our products through local distribution
partners and our own internal sales initiatives to gain greater reach into all the relevant clinical specialties and to expand our geographic
coverage. Our current strategy seeks to broaden our sales efforts to increase CGuard EPS penetration within the community of interventionalists.
In parallel, we aim at transitioning vascular surgeons from carotid endarterectomy procedures to carotid stenting with CGuard EPS and
accessory devices, which we believe can greatly expand our customer base. We have focused and we plan to continue to focus our marketing
efforts primarily on key growth markets and to evaluate opportunities in new territories if and when they become available. In addition,
we are using international trade shows and industry conferences to gain market exposure and brand recognition. We continue to work with
leading physicians to enhance our marketing effort and are developing relationships with new key opinion leaders to champion our technology
and work with us in clinical studies. In additional we have begun to sell direct to hospitals in certain markets, such as France and
the United Kingdom, in order to increase our growth in the market and gross profit margins.
Product
Positioning
When
treating carotid artery disease, we believe that CGuard has potential to become the standard of care in treading carotid artery disease.
It is a second-generation stent with positive patient outcomes demonstrating significant reduction in post-procedural neurological events.
Additionally,
we intend to continue to evaluate potential product enhancements and manufacturing enhancements for CGuard EPS expected to reduce cost
of goods or provide the best-in-class performing delivery system and accessory solutions. We believe these improvements may allow us
to reduce cost of goods and increase penetration in our existing geographies and better position us for entry into new markets. Finally,
we do not expect that it would be crucial to use a drug-eluting stent platform to compete in certain new markets such as the neurovascular
market, and hence, we plan to continue to explore this area of opportunity.
Insurance
Reimbursement
In
most countries, a significant portion of a patient’s medical expenses is covered by third-party payors. Third-party payors can
include both government-funded insurance programs and private insurance programs. While each payor develops and maintains its own coverage
and reimbursement policies, payors, in many instances, have similarly established policies, and in the U.S., for example, coverage policies
and reimbursement rates of private payors are often influenced by those established by the U.S. Department of Health and Human Services
Centers for Medicare and Medicaid Services (CMS). The CGuard product sold to-date in applicable foreign countries have been designed
and labeled to facilitate the utilization of existing reimbursement codes for such countries, and we intend to continue to design and
label our present and future products in a manner consistent with this goal.
While
most countries have established reimbursement codes for stenting procedures, certain countries may require additional clinical data before
recognizing coverage and/or to obtain a certain level of reimbursement for one or more of our products. In these situations, we intend
to complete the required clinical studies to obtain reimbursement approval in countries where it makes economic sense to do so.
Intellectual
Property
Patents
We
have 58 issued patents, including 16 patents issued in the U.S., and 17 pending patent applications, 6 of which are pending in the United
States. Many of these patents and applications cover aspects of our CGuard and MGuard technology. Patents outside the U.S. have been
filed in Canada, China, Europe, Israel, India, Japan, Australia, and South Africa. The patents and applications fall into a number of
patent families, as listed below:
Base
Title of Patent Family |
|
Pending
patent
applications
(Countries) |
|
Issued
patents
(Country
and Patent No.) |
|
Issue
Date |
Bifurcated
Stent Assemblies |
|
|
|
US 8,961,586
China ZL200780046676.2 |
|
02/24/2015
9/26/2012 |
Deformable
Tip for Stent Delivery and Methods of Use |
|
|
|
US
10,258,491
Israel 260,945 |
|
4/16/2019
07/01/2020 |
Handle
for Two-Stage Deployment of a Stent |
|
US
EP
CN
JP
IN |
|
|
|
|
Shunts
with Blood-Flow Indicators
|
|
US
PCT |
|
|
|
|
Device
for Shunting Blood Between the Arterial and Venous Systems |
|
PCT |
|
|
|
|
Devices
for shunting blood |
|
US
|
|
|
|
|
|
|
|
|
|
|
|
In
Vivo Filter Assembly |
|
|
|
US
9,132,261 |
|
09/15/2015 |
|
|
|
|
|
|
|
Knitted
Stent Jackets |
|
|
|
Canada
2,666,728
Canada 2,887,189
China ZL200780046697.4
China ZL201210320950.3
EP 2076212
Germany, France, & UK
US
10,137,015
India
323792 |
|
6/23/2015
5/1/2018
10/10/2012
12/2/2015
3/29/2017
11/27/2018
10/28/2019 |
Optimized
Stent Jacket |
|
US |
|
Canada
2,670,724
Canada 3,013,758
China ZL201210454357.8
China ZL200780043259.2
India 297,257
Israel 230,922
US 9,132,003
US 9,526,644
US 9,782,281
US 10,070,976
US 10,406,006
US 10,406,008
US 11,051,959
EP 2088962
(BE, CH, DE, FR, UK, IT, IE, LX, NL)
EP3292837
(UK,
DE, FR, IE) |
|
12/11/2018
09/14/2021
12/09/2015
01/02/2013
05/30/2018
10/01/2020
09/15/2015
10/10/2017
12/27/2016
09/11/2018
09/10/2019
09/10/2019
07/06/2021
10/11/2017
11/09/2022
|
Stent
Apparatuses for Treatment Via Body Lumens and Methods of Use |
|
US
EPO |
|
South
Africa 2007/10751
Canada 2,609,687
Canada 2,843,097
EP 1885281
(CH, DE, FR, GB, IE, IT)
US 10,932,926
US 10,058,440
US 10,070,977 |
|
10/27/2010
4/22/2014
10/27/2015
2/13/2019
03/02/2021
8/28/2018
9/11/2018 |
Stent
Thermoforming Apparatus and Methods |
|
|
|
JP
6553178
US 9,527,234
US 10,376,393
Australia 2015326517
Canada 2962713 |
|
7/12/2019
12/27/2016
8/13/2019
05/21/2020
02/19/2019 |
Methods
or using a self-adjusting stent assembly and kits including the same |
|
US
(allowed)
EP
IN
CN (div)
JP |
|
China
ZL 2019800679437 |
|
05/03/2022 |
The
patents and patent applications listed above cover various aspects of our products, specifically focusing on the mesh sleeve covering
our stents, as well as methods for production and delivery mechanisms of the stents. We believe that our patents, in particular those
covering the use of a knitted micron-level mesh sleeve over a stent for various indications, as well as our pending patent applications
(if issued as patents with claims substantially in their present form), create a significant barrier against other companies seeking
to use similar technology. We believe these patents and patent applications collectively cover all our existing products and may be useful
in protecting our future technological developments. We intend to aggressively continue patenting new technologies and to actively pursue
any infringement of our key patents.
Trade
Secrets
We
also rely on trade secret protection to protect our interests in proprietary know-how and/or for processes for which patents are difficult
to obtain or enforce. As part of our trade secret policy, we rely on non-disclosure and confidentiality agreements with employees, consultants
and other parties to protect trade secrets and other proprietary technology.
Trademarks
We
have registered or applied to register the following trademarks, which we use in connection with our products:
|
● |
InspireMD®
(US, European Union, and UK) |
|
● |
MGuard®
(European Union, and UK) |
|
● |
CGuard®
(US, European Union, and UK) |
|
● |
MGuard
Prime® (European Union, and UK) |
|
● |
NGuard®
(European Union and UK) |
|
● |
PVGuard®
(European Union, and UK) |
|
● |
Micronet®
(US) |
|
● |
(MNP
Micronet Protection logo) (European Union and UK) |
|
● |
Carenet®)European
Union and UK) |
|
● |
SmartFit™
(US, UK and CN) |
|
● |
SmartFit
Logo (EP, UK, CN) |
|
● |
CGuard
Prime (EP, UK, US, CN, JP) |
|
● |
SwitchGuard
(EP, UK, US, JP) |
| ● | True
North Medical (US, EP, UK) |
| ● | MicroMesh
(US) |
| ● | MicroMesh
logo (US, EP, UK CN, JP) |
| ● | Micronet
logo (updated version) (US, EP, UK, CN, JP) |
The
trademarks are renewable indefinitely, so long as we continue using the marks and make the appropriate filings when required. We also
use and may have common-law rights to various trademarks, trade names, and service marks.
Government
Regulation
The
manufacture and sale of our products are subject to regulation by numerous governmental authorities, principally the European Union CE
mark and other corresponding foreign agencies.
Sales
of medical devices outside the United States are subject to foreign regulatory requirements that vary widely from country to country.
These laws and regulations range from simple product registration requirements in some countries to complex approval process, clinical
trials and production controls in others. As a result, the processes and time periods required to obtain foreign marketing approval may
be longer or shorter than those necessary to obtain FDA market authorization. These differences may affect the timeliness of international
market introduction of our products. For the European Union nations, medical devices must obtain a CE mark before they may be placed
on the market. In order to obtain and maintain the CE mark, we must comply with EU law on medical devices, which, until May 26, 2021
was governed by the MDD, by presenting comprehensive technical files for our products demonstrating safety and efficacy of the product
to be placed on the market and passing initial and annual quality management system audit as per ISO 13485 standard by a European Notified
Body. We have obtained ISO 13485 quality system certification and CGuard EPS that we currently distribute into the European Union, displays
the required CE mark. In order to maintain certification, we are required to pass an annual surveillance audit conducted by Notified
Body auditors. The European Union replaced the MDD with the new MDR regulation. The MDR entered into force after a transitional period
of three years and a one year extension of that transition period due to the COVID-19 pandemic on May 26, 2021 and which changes several
aspects of the regulatory framework in the European Union. Manufacturers had the duration of the transition period to update their technical
documentation and processes to meet the new requirements in order to obtain a CE Mark.
In
our specific case, our CE mark for CGuard EPS under the MDD expired on November 12, 2022, and we are in the final stages of technical
documentation review by the Notified Body auditor to meet the MDR requirements for recertification. In the meantime, on February 14,
2023, we received a derogation per Article 97 paragraph 1 of Regulation 2017/745 from the Agency for Medicines and Health Products (FAMHP)
allowing us to continue marketing CGuard EPS in the EU until August 15, 2023, subject to certain procedural requirements. Subsequently, on March 20, 2023, Regulation (EU) 2023/607
was published allowing us to continue marketing CGuard EPS in EU countries under the MDD directive until December 31, 2027. As a result of the foregoing, we may market and sell CGuard EPS in the EU and certain other jurisdictions subject to certain procedural requirements while our MDR CE recertification is
pending. We continue to expedite the review process for recertification under the MDR.
We
have or had regulatory approval and made sales of CGuard EPS either through distributors pursuant to distribution agreements or
directly, in the countries listed in the table below. While each of the European Union member countries accepts the CE mark as its
sole requirement for marketing approval, some of these countries still require us to take additional steps in order to gain
reimbursement rights for our products. Furthermore, while we believe that certain of the below-listed countries that are not members
of the European Union and accept the CE mark as a primary requirement for marketing approval, each such country requires additional
regulatory requirements for final marketing approval of our products. Furthermore, we are currently targeting additional countries
in Europe, Asia, and Latin America; however, even if all governmental regulatory requirements are satisfied in each such country, we
anticipate that obtaining marketing approval in each country could take as few as three months or as many as twelve months or more,
due to the nature of the approval process in each individual country, including typical wait times for application processing and
review, as discussed in greater detail below.
Please
refer to the table below setting forth the approvals and sales made for CGuard EPS on a country-by-country basis
Approvals
and Sales of CGuard EPS on a Country-by-Country Basis*
Countries |
|
CGuard
EPS
Approval |
|
CGuard
EPS
Sales |
|
Argentina |
|
Y |
|
Y |
|
Australia |
|
N |
|
Y |
(2)
|
Austria |
|
Y |
|
Y |
|
Belarus |
|
Y |
|
Y |
|
Belgium |
|
Y |
|
Y |
|
Brazil |
|
Y |
|
Y |
|
Bulgaria |
|
N |
|
N |
|
Chile |
|
N |
|
N |
|
Colombia |
|
Y |
|
Y |
|
Croatia |
|
Y |
|
N |
|
Cyprus |
|
Y |
|
Y |
|
Czech
Republic |
|
Y |
|
Y |
|
Denmark |
|
Y |
|
N |
|
Dominican
Republic |
|
N |
|
N |
|
Ecuador |
|
Y |
|
N |
|
Estonia |
|
Y |
|
Y |
|
Finland |
|
Y |
|
Y |
|
France |
|
Y |
|
Y |
|
Germany |
|
Y |
|
Y |
|
Greece |
|
Y |
|
Y |
|
Netherlands |
|
Y |
|
Y |
|
Hong
Kong |
|
N |
|
N |
|
Hungary |
|
Y |
|
Y |
|
Iceland |
|
Y |
|
N |
|
India |
|
Y |
|
Y |
|
Ireland |
|
Y |
|
Y |
|
Israel |
|
Y |
|
Y |
|
Italy |
|
Y |
|
Y |
|
Kazakhstan |
|
Y |
|
Y |
|
Latvia |
|
Y |
|
Y |
|
Lithuania |
|
Y |
|
Y |
|
Liechtenstein |
|
Y |
|
N |
|
Luxembourg |
|
Y |
|
N |
|
Malaysia |
|
N |
|
N |
|
Malta |
|
Y |
|
N |
|
Mexico |
|
Y |
|
Y |
|
Montenegro |
|
N |
|
N |
|
New
Zealand |
|
N |
|
N |
|
Norway |
|
Y |
|
N |
|
Peru |
|
N |
|
Y |
(2)
|
Poland |
|
Y |
|
Y |
|
Portugal |
|
Y |
|
Y |
|
Romania |
|
Y |
|
Y |
|
Russia |
|
Y |
|
Y |
|
Saudi
Arabia |
|
N |
|
N |
|
Serbia |
|
Y |
|
Y |
|
Slovakia |
|
N |
|
N |
|
Slovenia |
|
Y |
|
Y |
|
South
Africa |
|
Y |
|
Y |
|
Spain |
|
Y |
|
Y |
|
Sweden |
|
Y |
|
Y |
|
Switzerland |
|
Y |
|
Y |
|
Turkey |
|
N |
|
N |
|
Taiwan |
|
Y |
|
Y |
|
Venezuela |
|
N |
|
N |
|
Vietnam |
|
N |
|
Y |
(2)
|
Ukraine |
|
Y |
|
Y |
|
United
Kingdom |
|
N(3) |
|
Y |
(2)
|
United
States |
|
N |
|
Y |
(1) |
| * | As discussed elsewhere, our CE mark for the marketing and sale of CGuard EPS in the EU under the MDD expired
on November 12, 2022 and was reinstated during March 2023. |
|
(1) |
Refers
to units used in our ongoing FDA trial. |
|
(2) |
CGuard
EPS approval to sell expired during prior twelve months. |
|
(3) |
The
FAMHP derogation does not apply. |
FDA
Government Regulation of Medical Devices for Human Subjects
Many
of our activities are subject to regulatory oversight by the FDA under provisions of the Federal Food, Drug, and Cosmetic Act and regulations
thereunder, including regulations governing the development, marketing, labeling, promotion, manufacturing, and export of medical devices.
FDA
Approval/Clearance Requirements
In
the United States, most Class II or III medical devices must be cleared or approved by the FDA prior to commercialization. Unless an
exemption applies, each medical device that we market or wish to market in the United States must receive 510(k) clearance or
premarket approval. Medical devices that are class II devices receive 510(k) clearance are “cleared” by the FDA to
market, distribute, and sell in the United States. Medical devices that are class III devices obtain a premarket approval by the FDA
are “approved” to market, distribute, and sell in the United States. We anticipate filing a premarket approval
application, or PMA, in the future for our product and do not anticipate filing a 510(k) premarket notification, provided that the
FDA will not instruct us otherwise. We cannot guarantee that we will obtain premarket approval, which will likely include clinical
testing. Descriptions of the premarket approval and 510(k) clearance processes are provided below.
Class
I devices are those for which safety and effectiveness can be assured by adherence to the FDA’s general regulatory controls
for medical devices, or the General Controls, which include compliance with the applicable portions of the FDA’s quality system
regulations, facility registration and product listing, reporting of adverse medical events, and appropriate, truthful and non-misleading
labeling, advertising, and promotional materials. Some Class I devices also require premarket clearance by the FDA through the 510(k)
process described below.
Class
II devices are subject to the FDA’s General Controls, and any other special controls as deemed necessary by the FDA to ensure
the safety and effectiveness of the device. Premarket review and clearance by the FDA for Class II devices is accomplished through the
510(k) process. Pursuant to the Medical Device User Fee and Modernization Act of 2002 (MDUFMA), as of October 2002, unless a specific
exemption applies, 510(k) submissions are subject to user fees. Certain Class II devices are exempt from this premarket review process.
The FDA has recently indicated that it intends to modernize the 510(k) process and has issued new guidance documents that may change
the way that devices are cleared by the FDA.
Class
III includes devices with the greatest risk. Devices in this class must meet all of the requirements in Classes I and II. In addition,
Class III devices cannot generally be marketed until they receive a premarket approval. The safety and effectiveness of Class III devices
cannot be assured solely by the General Controls and the other requirements described above. These devices require formal clinical studies
to demonstrate safety and effectiveness. Under MDFUMA, PMAs (and supplemental PMAs) are subject to significantly higher user fees than
510(k) applications, and they also require considerably more time and resources.
The
FDA decides whether a device line must undergo either the 510(k) clearance or premarket approval based on statutory criteria that utilize
a risk-based classification system. Premarket approval is the FDA process of scientific and regulatory review to evaluate the safety
and effectiveness of Class III medical devices and, in many cases, Class II medical devices. Class III devices are those that support
or sustain human life, are of substantial importance in preventing impairment of human health, or which present a potential, unreasonable
risk of illness or injury. The FDA uses these criteria to decide whether a premarket approval or a 510(k) is appropriate, including the
level of risk that the agency perceives is associated with the device and a determination by the agency of whether the product is a type
of device that is similar to devices that are already legally marketed. Devices deemed to pose relatively less risk are placed in either
Class I or II. In many cases, the FDA requires the manufacturer to submit a 510(k) requesting clearance (also referred to as a premarket
notification), unless an exemption applies. The 510(k) must demonstrate that the manufacturer’s proposed device is “substantially
equivalent” in intended use and in safety and effectiveness to a legally marketed predicate device. A “predicate device”
is a pre-existing medical device to which equivalence can be drawn, that is either in Class I, Class II, or is a Class III device that
was in commercial distribution before May 28, 1976, for which the FDA has not yet called for submission of a PMA. A product that lacks
a predicate device will default to a Class III device, although a company may seek to submit a De Novo classification request, rather
than a PMA. The De Novo request allows a regulatory pathway to classify novel medical devices for which general controls alone, or general
and special controls, provide reasonable occurrence of safety and effectiveness for the intended use, but for which there is no legally
marketed predicate device.
We
expect that unless an exemption applies, each medical device that we market or wish to market in the United States must receive 510(k)
clearance or premarket approval. Medical devices that receive 510(k) clearance are “cleared” by the FDA to market, distribute,
and sell in the United States. Medical devices that obtain a premarket approval by the FDA are “approved” to market, distribute,
and sell in the United States. We anticipate that each device that we wish to commercialize will be considered a Class III device by
the FDA and therefore we anticipate filing a PMA in the future and do not anticipate filing a 510(k) premarket notification, provided
that the FDA will not instruct us otherwise. We cannot guaranty that we will obtain a premarket approval. Descriptions of the premarket
approval and 510(k) clearance processes are provided below.
Premarket
Approval Pathway
We
expect that current and future applications of our technology will result in medical devices that are considered Class III devices subject
to premarket approval. A PMA must be submitted if a device cannot be cleared through the 510(k) process, unless FDA permits a De Novo
application. A PMA must be supported by extensive data including, but not limited to, analytical, preclinical, clinical trials, manufacturing,
statutory preapproval inspections, and labeling to demonstrate to the FDA’s satisfaction the safety and effectiveness of the device
for its intended use. Before a premarket approval application is submitted, a manufacturer must apply for an Investigational Device Exemption
(IDE) to conduct clinical trials. If the device presents a “significant risk,” as defined by the FDA, to human health, the
FDA requires the device sponsor to file an IDE application with the FDA and obtain IDE approval prior to initiation of enrollment of
human subjects for clinical trials. The IDE provides the manufacturer with a legal pathway to perform clinical trials on human subjects
where without the IDE, only approved medical devices may be used on human subjects.
The
IDE application must be supported by appropriate data, such as analytical, animal and laboratory testing results, manufacturing information,
and an Investigational Review Board (IRB) approved protocol showing that it is safe to test the device in humans and that the testing
protocol is scientifically sound, as well as ensuring patient informed consent is obtained. If the clinical trial design is deemed to
have “non-significant risk,” the clinical trial may be eligible for “abbreviated” IDE requirements.
A
clinical trial may be suspended by either the FDA or the IRB at any time for various reasons, including a belief that the risks to the
study participants outweigh the benefits of participation in the study. Even if a study is completed, clinical testing results may not
demonstrate the safety and efficacy of the device, or they may be equivocal or otherwise insufficient to obtain approval of the product
being tested. After the clinical trials have been completed, if at all, and the clinical trial data and results are collected and organized,
a manufacturer may complete a premarket approval application.
After
a PMA is sufficiently complete, the FDA will accept the application and begin an in-depth review of the submitted information. By statute,
the FDA has 180 days to review the “accepted application,” although, generally, review of the application can take between
one and three years, but it may take significantly longer. During this review period, the FDA may request additional information or clarification
of information already provided. Also, during the review period, an advisory panel of experts from outside the FDA may be convened to
review and evaluate the application and provide recommendations to the FDA as to the approvability of the device. The preapproval inspections
conducted by the FDA include an evaluation of the manufacturing facility to ensure compliance with the Quality Systems Regulations, as
well as inspections of the clinical trial sites by the Bioresearch Monitoring group to evaluate compliance with good clinical practice
and human subject protections. New premarket approval applications or premarket approval supplements are required for modifications that
affect the safety or effectiveness of the device, including, for example, certain types of modifications to the device’s indication
for use, manufacturing process, labeling and design. Significant changes to an approved premarket approval require a 180-day supplement,
whereas less substantive changes may utilize a 30-day notice, or a 135-day supplement. Premarket approval supplements often require submission
of the same type of information as a premarket approval application, except that the supplement is limited to information needed to support
any changes from the device covered by the original premarket approval application, and it may not require as extensive clinical data
or the convening of an advisory panel.
510(k)
Clearance Pathway
We
do not currently market, distribute, or sell any products that have market clearance by the FDA under its 510(k) process. If, in the
future, we develop products where 510(k) clearance is required, we would be required to submit a 510(k) demonstrating that such proposed
devices are substantially equivalent to a respective previously cleared 510(k) device or a device that was in commercial distribution
before May 28, 1976, for which the FDA has not yet called for the submission of 510(k). The FDA’s 510(k) clearance pathway usually
takes from three to twelve months but could take longer. In some cases, the FDA may require additional information, including clinical
data, to make a determination regarding substantial equivalence.
If
a device receives 510(k) clearance, any modification that could significantly affect its safety or effectiveness, or that would constitute
a new or major change in its intended use, will require a new 510(k) clearance or, depending on the modification, a premarket approval.
The FDA requires each device manufacturer to determine whether the proposed change requires submission of a new 510(k) or a premarket
approval, but the FDA can review any such decision and can disagree with a manufacturer’s determination. If the FDA disagrees with
a manufacturer’s determination, the FDA can require the manufacturer to cease marketing and/or recall the modified device until
510(k) clearance or premarket approval of the modified device is obtained.
Pervasive
and Continuing FDA Regulation
A
host of regulatory requirements apply to our approved devices, including the quality system regulation (which requires manufacturers
to follow elaborate design, testing, control, documentation and other quality assurance procedures), the Medical Device Reporting
regulations (which require that manufacturers report to the FDA specified types of adverse events involving their products),
labeling regulations, and the FDA’s general prohibition against promoting products for unapproved or “off-label”
uses. Class II devices also can have special controls such as performance standards, post-market surveillance, patient registries,
and certain FDA guidelines do apply to Class I devices.
A
noncomprehensive list of the regulatory requirements that apply to our approved products classified as medical devices include:
|
● |
product
listing and establishment registration, which helps facilitate FDA inspections and other regulatory action; |
|
|
|
|
● |
Quality
Systems Regulations, which requires manufacturers, including third-party manufacturers, to follow stringent design, testing, control,
documentation and other quality assurance procedures during all aspects of the development and manufacturing process; |
|
● |
labeling
regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or off-label use or indication; |
|
|
|
|
● |
clearance
of product modifications that could significantly affect safety or efficacy or that would constitute a major change in intended use
of one of our cleared devices (if obtained); |
|
|
|
|
● |
approval
of product modifications that affect the safety or effectiveness of one of our cleared devices (if obtained); |
|
|
|
|
● |
medical
device reporting regulations, which require that manufacturers comply with FDA requirements to report if their device may have caused
or contributed to a death or serious injury, or has malfunctioned in a way that would likely cause or contribute to a death or serious
injury if the malfunction of the device or a similar device were to recur; |
|
|
|
|
● |
post-approval
restrictions or conditions, including post-approval study commitments; |
|
|
|
|
● |
post-market
surveillance regulations, which apply when necessary to protect the public health or to provide additional safety and effectiveness
data for the device; |
|
|
|
|
● |
the
FDA’s recall authority, whereby it can ask, or under certain conditions order, device manufacturers to recall from the market
a product that is in violation of governing laws and regulations; |
|
|
|
|
● |
regulations
pertaining to voluntary recalls; and, |
|
|
|
|
● |
notices
of corrections or removals. |
We
do not currently have a registered establishment with the FDA. If we are approved or cleared to manufacture, prepare, or process a device
in the United States, we and any third-party manufacturers that we may use will be required to register our establishments with the FDA.
As such, we and our manufacturing facilities will be subject to FDA inspections for compliance with the FDA’s Quality System Regulation.
Additionally, some of our subcontractors may also be subject to FDA announced and unannounced inspections for compliance with the FDA’s
Quality System Regulation. These regulations will require that we manufacture our products and maintain our documents in a prescribed
manner with respect to design, manufacturing, testing and quality control activities. As a medical device manufacturer, we will further
be required to comply with FDA requirements regarding the reporting of adverse events associated with the use of our medical devices,
as well as product malfunctions that would likely cause or contribute to death or serious injury if the malfunction were to recur. FDA
regulations also govern product labeling and prohibit a manufacturer from marketing a medical device for unapproved applications.
Our
CGuard EPS is classified as a Class III medical device by the FDA. Class III medical devices are generally the highest risk devices and
are therefore subject to the highest level of regulatory control by the FDA, since the FDA process of premarket approval involves scientific
and regulatory review to evaluate the safety and effectiveness of Class III medical devices for the purpose(s) intended. The FDA will
either approve or deny a premarket approval application and we cannot market a device unless or until the FDA approves a premarket approval
application.
We
expect the approval process in the U.S. to take a significant amount of time, require the expenditure of significant resources, involve
rigorous clinical investigations and testing, and potentially require changes to products. The approval process may result in limitations
on the indicated uses of the medical devices for which we are able to obtain approval (since the FDA can take action against a company
that promotes off-label uses) and will also require increased post-market surveillance.
U.S.
Healthcare Laws and Regulations
In
addition to the FDA regulations, there are a variety of other healthcare laws and regulations to which we may be subject if any of our
products are marketed, sold, distributed, and/or utilized in the United States. In the United States, we may be subject to the oversight
of FDA, Office of the Inspector General within the Department of Health and Human Services (OIG), the Center for Medicare/Medicaid Services
(CMS), the Department of Justice (DOJ), in addition to others. We supply products that may be reimbursed by federally funded programs
such as Medicare. As a result, our activities may be subject to regulation by CMS and enforcement by OIG and DOJ. Of specific note are
federal and state fraud and abuse laws, which prohibit the payment or receipt of kickbacks, bribes or other remuneration, including the
offer or solicitation of such payment, intended to induce or reward the purchase, recommendation or generation of business involving
healthcare products any item or service payable by a health-care program. Other provisions of federal and state laws prohibit presenting,
or causing to be presented, to third party payors (including, government programs, such as Medicare and Medicaid) for reimbursement,
claims that are false or fraudulent, or which are for items or services that were not provided as claimed. In addition, other healthcare
laws and regulations may apply, such as transparency and reporting requirements, and privacy and security requirements. Violations of
these laws can lead to civil and criminal penalties, including exclusion from participation in federal and state healthcare programs,
any of which could have a material adverse effect on our business. These laws are potentially applicable to manufacturers of products
regulated by the FDA as medical devices, such as us, and hospitals, physicians and other institutional or individual providers that may
refer or purchase such products. The healthcare laws that may be applicable to our business or operations include, but are not limited
to:
|
● |
The
federal Anti-Kickback Statute, which prohibits a person from knowingly and willfully offering, soliciting or receiving any remuneration,
directly or indirectly, overtly or covertly, in cash or in kind, in return for or to induce referring or recommending an individual
to another person to receive items or services or to purchase, lease, order, or arrange for any good, facility, item or service payable
in whole or in part under a Federal health care program; |
|
● |
Federal
false claims laws and civil monetary penalty laws, including the False Claims Act, prohibit, among other things, individuals or entities
from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid or other government healthcare
programs that are false or fraudulent, or making a false statement to avoid, decrease or conceal an obligation to pay money to the
federal government. The False Claims Act imposes liability on any person or entity that, among other things, knowingly presents,
or causes to be presented, a false or fraudulent claim for payment by a federal health care program, knowingly makes, uses or causes
to be made or used, a false record or statement material to a false or fraudulent claim, or knowingly makes a false statement to
avoid, decrease or conceal an obligation to pay money to the U.S. federal government. The federal Civil Monetary Penalties Law prohibits,
among other things, the offering or transferring of remuneration to a Medicare or Medicaid beneficiary that the person knows or should
know is likely to influence the beneficiary’s selection of a particular supplier of Medicare or Medicaid payable items or services; |
|
|
|
|
● |
The
federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), which includes provisions that prohibit
knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means
of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control
of, any healthcare benefit program, and for knowingly and willfully falsifying, concealing or covering up a material fact or making
any materially false statements in connection with the delivery of or payment for healthcare benefits, items or services; |
|
|
|
|
● |
HIPAA,
as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, and its implementing regulations, also
imposes obligations and requirements on healthcare providers, health plans, and healthcare clearinghouses as well as their respective
business associates that perform certain services for them that involve the use or disclosure of individually identifiable health
information, with respect to safeguarding the privacy and security of certain individually identifiable health information; |
|
|
|
|
● |
The
federal transparency requirements under the Affordable Care Act, including the provision commonly referred to as the Open Payments
Act or Physician Payments Sunshine Act, which requires certain manufacturers of drugs, devices, biologics and medical supplies that
are reimbursable under Medicare, Medicaid or Children’s Health Insurance Program to report annually to Centers for Medicare
and Medicaid Services, or CMS, information related to payments and other transfers of value to physicians and teaching hospitals,
and ownership and investment interests held by physicians and their immediate family members; and |
|
|
|
|
● |
Analogous
state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may be broader in scope and apply
to referrals and items or services reimbursed by both governmental and non-governmental third-party payors, including private insurers,
many of which differ from each other in significant ways and often are not preempted by federal law, thus complicating compliance
efforts. |
Customers
Our
customer base is varied. We currently have distribution agreements for our CE mark-approved CGuard EPS with medical product distributors
based in Europe, the Middle East, Asia Pacific and Latin America. We are currently in discussions with additional distribution companies
in Europe, Asia, and Latin America.
Most
of our current agreements with our distributors stipulate that, and we expect our future agreements with our distributors to stipulate
that, while we shall assist in training by providing training materials, marketing guidance, marketing materials, and technical guidance,
each distributor will be responsible for carrying out local registration, sales and marketing activities. In addition, in most cases,
all sales costs, including sales representatives, incentive programs, and marketing trials, will be borne by the distributor. Under current
agreements, distributors purchase stents from us at a fixed price. Our current agreements with distributors are generally for a term
of two to three years.
On
February 3, 2021, we entered into a Distribution Agreement with three China-based partners, pursuant to which the Chinese partners will
be responsible for conducting the necessary registration trials for commercial approval of our products in China, followed by an exclusive
distribution right to sell our products in China. Under the Distribution Agreement, the China-based partners will be subject to minimum
purchase obligations.
We
have also engaged in direct sales in certain geographic markets such as United Kingdom and France.
Manufacturing
and Suppliers
The
polymer fiber for MicroNet is supplied by Biogeneral, Inc., a San Diego, California-based specialty polymer manufacturer for medical
and engineering applications.
Our
catheter supplier for CGuard EPS supplies us with catheters that help create the base for our CGuard EPS stents. Our agreement with with
the supplier may be terminated by us upon eight months’ notice. On September 17, 2019, we amended the agreement with the supplier
so that we are responsible for purchasing and handling inventory of CGuard EPS delivery system, and they are responsible for the manufacturing
process.
Our
catheter supplier for CGuard Prime supplies us with catheters that help create the base for our CGuard Prime. Our agreement with the
supplier which may be terminated by us upon 9 months’ notice, calls for non-binding minimum orders.
We
manufacture our CGuard EPS and our CGuard Prime at our own facility. The self-expanding bare-metal stents for our CGuard EPS and our
CGuard Prime are being manufactured and supplied by a supplier. Our agreement with the supplier for the production of electro polished
L605 bare-metal stents for CGuard EPS and CGuard Prime is priced on a per-stent basis, subject to the quantity of stents ordered. The
complete assembly process for CGuard EPS and CGuard Prime, including knitting and securing the sleeve to the stent and the crimping of
the sleeve stent on to a delivery catheter, is done at our Israel manufacturing site. Once CGuard EPS and CGuard Prime have been assembled,
they are sent for sterilization in a third-party facility in Israel, and then back to our facility for final packaging and distribution.
A
CGuard EPS and CGuard Prime consists of a CGuard stent and the delivery system. Each CGuard stent is manufactured from two main components,
a self-expending nickel-titanium stent and the mesh polymer. This material is readily available and we acquire it in the open market.
The mesh is made from polyethylene terephthalate (polyester). We have patent rights that cover the proposed CGuard stent with mesh. During
the last year our mesh supplier informed us that it will not be able to supply the polymer fiber in the future due to issues with raw
materials, therefore we purchased inventory which should be sufficient to support our production needs in the next 2.5 years. We are
currently in the process of finding and qualifying another supplier or other material source which could take up to a year. The delivery
system for CGuard is made out of polymer tubes we acquire from an original equipment manufacturer. In the event that our supplier can
no longer supply this material, we would need to qualify another supplier, which could take up to a year. In addition, in order to retain
the approval of the CE mark, we are required to perform periodic audits of the quality control systems of our key suppliers in order
to ensure that their products meet our predetermined specifications.
Item
1A. Risk Factors.
There
are numerous and varied risks, known and unknown, that may prevent us from achieving our goals. You should carefully consider the risks
described below and the other information included in this Annual Report on Form 10-K, including the consolidated financial statements
and related notes. If any of the following risks, or any other risks not described below, actually occur, it is likely that our business,
financial condition, and/or operating results could be materially adversely affected. The risks and uncertainties described below include
forward-looking statements and our actual results may differ from those discussed in these forward-looking statements.
Summary
Risk Factors
Our
business is subject to numerous risks and uncertainties, including those highlighted in the section titled “Risk Factors”
immediately following this prospectus summary. These risks include, among others, the following:
|
● |
we
have a history of net losses and may experience future losses; |
|
|
|
|
● |
our
history of recurring losses and negative cash flows from operating activities, significant future commitments and the uncertainty regarding
the adequacy of our liquidity to pursue our complete business objectives, and substantial doubt regarding our ability to continue as
a going concern; |
|
● |
we
will need to raise additional capital to meet our business requirements in the future, and such capital raising may be costly or difficult
to obtain and could dilute our stockholders’ ownership interests; |
|
|
|
|
● |
failure to satisfy regulatory requirements of the
new European Medical Device Regulation may prevent us from marketing CGuard EPS in countries requiring the CE mark.
|
|
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|
● |
we may become subject to claims by much larger and better capitalized competitors
enforcing their intellectual property rights against us or seeking to invalidate our intellectual property or our rights thereto; |
|
|
|
|
● |
completing
clinical trials for CGuard EPS in the United States require meeting a number of regulatory requirements and must be conducted in
compliance with the FDA’s IDE regulations. Failure to maintain compliance with IDE regulations could have a material adverse
effect on our business; |
|
|
|
|
● |
clinical trials necessary to support a pre-market
approval application will be lengthy and expensive and will require the enrollment of a large number of patients, and suitable patients
may be difficult to identify and recruit. Any such delay or failure of clinical trials could prevent us from commercializing our stent
products, which would materially and adversely affect our results of operations and the value of our business;
|
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|
● |
the results of our clinical trials may be insufficient
to obtain regulatory approval for our product candidates;
|
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|
● |
our products may in the future be subject to product notifications, recalls,
or voluntary market withdrawals that could harm our reputation, business and financial results; |
|
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|
● |
we
may be subject, directly or indirectly, to applicable U.S. federal and state anti-kickback, false claims laws, physician payment
transparency laws, fraud and abuse laws or similar healthcare and security laws and regulations, which could expose us to criminal
sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings; |
|
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|
● |
we
may be exposed to product liability claims and insurance may not be sufficient to cover these claims; |
|
● |
even
if one or more of our products are approved by the FDA, we may fail to obtain an adequate level of reimbursement for our products
by third party payors, such that there may be no commercially viable markets for our products or the markets may be much smaller
than expected; |
|
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● |
in
the United States and European Union, our business could be significantly and adversely affected by healthcare reform initiatives
and/or other legislation or judicial interpretations of existing or future healthcare laws and/or regulations; |
|
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|
● |
if
we are unable to obtain and maintain intellectual property protection covering our products, others may be able to make, use or sell
our products, which would adversely affect our revenue; |
|
● |
we
are an international business, and we are exposed to various global and local risks that could have a material adverse effect on
our financial condition and results of operations venue; |
|
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|
● |
our business, operating results and growth rates may
be adversely affected by current or future unfavorable economic and market conditions and adverse developments with respect to financial
institutions and associated liquidity risk;
|
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|
● |
there are inherent limitations in all control systems, and misstatements
due to error or fraud may occur and not be detected; |
|
● |
we
anticipate being subject to fluctuations in currency exchange rates because we expect a substantial portion of our revenues will
be generated in Euros and U.S. dollars, while a significant portion of our expenses will be incurred in New Israeli Shekels; |
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● |
if
there are significant shifts in the political, economic and military conditions in Israel and its neighbours, it could have a material
adverse effect on our business relationships and profitability; |
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● |
it
may be difficult for investors in the United States to enforce any judgments obtained against us or some of our directors or officers; |
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|
● |
the market prices of our common stock and our publicly
traded warrants are subject to fluctuation and have been and may continue to be volatile, which could result in substantial losses for
investors; and
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|
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our common stock could be delisted from the Nasdaq Stock Market if we fail
to meet its continued listing requirements, including requirements with respect to the market value of publicly-held-shares, market value
of listed shares, minimum bid price per share, and minimum stockholder’s equity, among others, and requirements relating to board
and committee independence. |
Risks
Related to Our Financial Condition
We
have a history of net losses and may experience future losses.
We
have yet to establish any history of profitable operations. We reported a net loss of $18.5 million for the fiscal year ended December
31, 2022, and had a net loss of approximately $14.9 million during the fiscal year ended December 31, 2021. As of December 31, 2022,
we had an accumulated deficit of $202 million. We expect to incur additional operating losses for the foreseeable future. There can be
no assurance that we will be able to achieve sufficient revenues throughout the year or be profitable in the future.
Management
has concluded that there is substantial doubt about our ability to continue as a going concern, and the report of our independent registered
public accounting firm contains an explanatory paragraph as to our ability to continue as a going concern, which could prevent us from
obtaining new financing on reasonable terms or at all.
Because
we have had recurring losses and negative cash flows from operating activities, substantial doubt exists regarding our ability to remain
as a going concern at the same level at which we are currently performing. Accordingly, the report of Kesselman & Kesselman, our
independent registered public accounting firm, with respect to our financial statements for the year ended December 31, 2022, includes
an explanatory paragraph as to our potential inability to continue as a going concern. The doubts regarding our potential ability to
continue as a going concern may adversely affect our ability to obtain new financing on reasonable terms or at all.
We
will need to raise additional capital to meet our business requirements in the future, and such capital raising may be costly or difficult
to obtain and could dilute our stockholders’ ownership interests.
In
order for us to pursue our business objectives without materially curtailing our operations, we will need to raise additional capital,
which additional capital may not be available on reasonable terms or at all. For instance, we will need to raise additional funds to
accomplish the following:
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furthering
our efforts to ultimately seek the FDA approval for commercial sales of CGuard EPS in the United States; |
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development
of our current and future products, including CGuard EPS enhancements; |
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pursuing
growth opportunities, including more rapid expansion and funding regional distribution systems; |
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making
capital improvements to improve our infrastructure; |
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hiring
and retaining qualified management and key employees; |
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responding
to competitive pressures; |
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complying
with regulatory requirements such as licensing and registration; and |
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maintaining
compliance with applicable laws. |
Any
additional capital raised through the sale of equity or equity-backed securities may dilute our stockholders’ ownership percentages
and could also result in a decrease in the market value of our equity securities.
The
terms of any securities issued by us in future capital transactions may be more favorable to new investors, and may include preferences,
superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders
of any of our securities then outstanding.
In
addition, we may incur substantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting
fees, securities law compliance fees, printing and distribution expenses and other costs. We may also be required to recognize non-cash
expenses in connection with certain securities we issue, such as convertible notes and warrants, which may adversely impact our financial
condition.
Risk
Related to Commercialization of Our Products
While
we derive most of our revenue from the sale of CGuard EPS in CE marked countries, our ability to generate significant revenues and achieve
profitability depends, among other things, on our ability to receive FDA approval of CGuard EPS and other products we may develop, such
as CGuard Prime™ and SwitchGuard™. If we fail to obtain FDA approval for CGuard EPS or any other products we may develop,
our results of operations and the value of our business would be materially and adversely affected.
We
derive most of our revenue from sales of our CGuard EPS in CE marked countries and certain other select jurisdictions. We have not received
approvals in the United States and other jurisdictions and there can be no assurance that we will be able to receive regulatory approvals
to commence marketing and sales for our CGuard EPS and other products we may develop, such as CGuard Prime™ and SwitchGuard™
in the United States or in such other jurisdictions. Our ability to generate significant revenues and achieve profitability depends on
our ability to successfully obtain required regulatory approvals in the U.S. as well as to demonstrate sufficient clinical evidence and
manufacture commercial quantities of our CGuard EPS or any other products we may develop at an acceptable cost. In addition, there may
be insufficient demand for CGuard EPS or any other products we develop, such as CGuard Prime™ and SwitchGuard™. If we fail
to generate sufficient revenues from these products, our results of operations and the value of our business and securities would be
materially and adversely affected.
The
future success of our business cannot be determined at this time, and we do not anticipate generating significant revenues from product
sales for the foreseeable future. In addition, we have no experience in commercializing our CGuard EPS on a mass scale and face a number
of challenges with respect to our commercialization efforts, including, among others, that:
| ● | we
may not have adequate financial or other resources to demonstrate adequate clinical results,
attain required regulatory approvals and licensures, and begin the commercialization efforts
for our CGuard EPS in our target markets; |
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| ● | we
may fail to obtain or maintain required regulatory approvals and licensures for our CGuard
EPS in our target markets or may face adverse regulatory or legal actions relating to our
products even if regulatory approval is obtained; |
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| ● | we
may not demonstrate adequate clinical safety and clinical effectiveness results from our
CGuard EPS, to support regulatory body approval or market acceptance and adoption; |
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| ● | we
may not be able to scale up the manufacture of our CGuard EPS to commercial quantities at
an adequate quality or at an acceptable cost; |
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| ● | we
may not be able to establish adequate sales, marketing and distribution channels; |
| ● | healthcare
professionals and patients may not accept our CGuard EPS; |
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| ● | other
technological may reduce the demand for our CGuard EPS; |
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| ● | new
alliances between existing market participants and the entrance of new market participants
may interfere with our market penetration efforts; |
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| ● | government
and private third-party payors may not agree to provide coding, coverage and payment adequate
to reimburse healthcare providers and patients for any or all of the purchase price of CGuard
EPS, which may adversely affect healthcare providers’ and patients’ willingness
to purchase our C-Scan system; |
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| ● | uncertainty
as to market demand may result in inefficient pricing of our CGuard EPS; |
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| ● | we
may not be able to adequately protect our intellectual property or may face third-party claims
of intellectual property infringement; and |
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are dependent upon the results of ongoing clinical studies relating to our CGuard EPS and
the products of our competitors. |
If
we are unable to meet any one or more of these challenges successfully, our ability to effectively commercialize our CGuard EPS system
could be limited, which in turn could have a material adverse effect on our business, financial condition and results of operations.
Although
we are nearing completion of enrollment in our C-Guardian trial of CGuard EPS study, the outcome of the study is inherently uncertain.
On
September 8, 2020, we received approval from the FDA of our IDE for C-Guardian trial of CGuard EPS and we expect to complete enrollment
in the second quarter of 2023. Clinical failure can occur at any stage of clinical development. Our clinical trials have been conducted
under differing protocols, while using specific inclusion criteria and we cannot assure you that its actual clinical performances will
be satisfactory to support proposed indications and regulatory approvals and clinical acceptance and adoption, or that its use will not
result in unanticipated complications. Furthermore, the results of our clinical trials are subject to human analyses and interpretation
of the data accumulated, which could be affected by various errors due to, among others, lack of sufficient clinical experience with
CGuard EPS, assumptions used in the statistical analysis of results, and interpretation errors in the analysis of the clinical trials
results. Failure can occur at any time during the clinical trial process. If CGuard EPS does not function as expected over time, we may
not achieve regulatory clearances, and may not be widely adopted by healthcare providers and patients.
Physicians
may not widely adopt our products unless they determine, based on experience, long-term clinical data and published peer reviewed journal
articles, among other standard-of-care considerations, that the use of our stents provides a safe and effective alternative to other
existing treatments for coronary artery disease and carotid artery disease.
We
believe that physicians will not widely adopt our products unless they determine, based on experience, long-term clinical data, published
peer reviewed journal articles and payor coverage policies, among other factors, that the use of our products provide a safe and effective
alternative to other existing treatments for the conditions we are seeking to address.
If
we fail to demonstrate safety and efficacy that is at least comparable to existing and future therapies available on the market, our
ability to successfully market our products will be significantly limited. Even if the data collected from clinical studies or clinical
experience indicate positive results, each physician’s actual experience with our products will vary. Clinical trials conducted
with our products may involve procedures performed by physicians who are technically proficient and are high-volume stent users of such
products. Consequently, both short-term and long-term results reported in these clinical trials may be significantly more favorable than
typical results of practicing physicians, which could negatively affect rates of adoptions of our products. We also believe that published
peer-reviewed journal articles and recommendations and support by influential physicians regarding our products will be important for
market acceptance and adoption, and we cannot assure you that we will receive these recommendations and support, or that supportive articles
will be published.
Failure
to satisfy regulatory requirements of the new European Medical Device Regulation may prevent us from marketing CGuard EPS in countries
requiring the CE mark.
For
the European Union nations, medical devices must obtain a CE mark before they may be placed on the market. In order to obtain and
maintain the CE mark, we must comply with EU law on medical devices, which, until May 26, 2021 was governed by the MDD, by
presenting comprehensive technical files for our products demonstrating safety and efficacy of the product to be placed on the
market and passing initial and annual quality management system audit as per ISO 13485 standard by a European Notified Body. We have
obtained ISO 13485 quality system certification and CGuard EPS that we currently distribute into the European Union, displays the
required CE mark. In order to maintain certification, we are required to pass an annual surveillance audit conducted by Notified
Body auditors. The European Union replaced the MDD with the new MDR regulations. The MDR entered into force after a transitional
period of three years and a one year extension of that transition period due to the COVID-19 pandemic on May 26, 2021 and which
changes several aspects of the regulatory framework in the European Union. Manufacturers had the duration of the transition period
to update their technical documentation and processes to meet the new requirements in order to obtain a CE Mark. In our specific
case, our CE mark for CGuard EPS under the MDD expired on November 12, 2022, and we are in the final stages of technical
documentation review by the Notified Body auditor to meet the MDR requirements for recertification. In the meantime, on February 14,
2023, we received a derogation per Article 97 paragraph 1 of Regulation 2017/745 from the Agency for Medicines and Health Products
(FAMHP) allowing us to continue marketing CGuard EPS in the EU until August 15, 2023, subject to certain procedural requirements. Subsequently, on March 20, 2023 Regulation
(EU) 2023/607 was published allowing us to continue marketing CGuard EPS in EU countries under the MDD directive until December 31,
2027. As a result of the foregoing, we may market and sell CGuard EPS in the EU and certain other jurisdictions subject to certain procedural requirements while our MDR CE
recertification is pending. We continue to expedite the review process for recertification under the MDR however no assurance can be
provided as to the length of time it will take to obtain recertification. If we are unable to obtain recertification in the future
then this could have a material adverse effect on our business, financial condition, results of operations or cash flows.
If
our manufacturing facilities are unable to provide an adequate supply of products, our growth could be limited and our business could
be harmed.
We
currently manufacture our CGuard EPS at our facility in Tel Aviv, Israel. If there were a disruption to our existing manufacturing facility,
we would have no other means of manufacturing our CGuard EPS stents until we were able to restore the manufacturing capability at our
facility or develop alternative manufacturing facilities. If we were unable to produce sufficient quantities of our CGuard EPS stents
to meet market demand or for use in our current and planned clinical trials, or if our manufacturing process yields substandard stents,
our development and commercialization efforts would be delayed.
To
manufacture our CGuard EPS in quantities to meet anticipated market demand if we were to receive FDA approval, we will need to increase
manufacturing capacity, which will involve significant challenges. In addition, the development of U.S. commercial-scale, regulation-compliant
manufacturing capabilities will require us to invest substantial additional funds and hire and retain the technical personnel who have
the necessary manufacturing experience. We may not successfully complete any required increase to existing manufacturing processes in
a timely manner, or at all.
Additionally,
any damage to or destruction of our Tel Aviv facility or its equipment, prolonged power outage or contamination at our facility would
significantly impair our ability to produce CGuard EPS stents.
Finally,
the production of our stents must occur in a highly controlled, clean environment to minimize particles and other yield and quality-limiting
contaminants. In spite of stringent quality controls, weaknesses in process control or minute impurities in materials may cause a substantial
percentage of defective products in a lot. If we are unable to maintain stringent quality controls, or if contamination problems arise,
our clinical development and commercialization efforts could be delayed, which would harm our business and results of operations.
CGuard
EPS is a complex medical device that requires training for qualified personal.
CGuard
EPS is a complex medical device that requires training for qualified personal, including physicians. Although our distributors will be
required to ensure that CGuard EPS is prescribed only by trained clinicians, the potential for misuse of CGuard EPS still exists due
to its complexity. Such misuse could result in adverse medical consequences for patients that could damage our reputation, subject us
to costly product liability litigation and otherwise have a material adverse effect on our business, financial condition and results
of operations.
We
operate in an intensely competitive and rapidly changing business environment, and there is a substantial risk our products could become
obsolete or uncompetitive.
The
medical device market is highly competitive. We compete with many medical device companies globally in connection with our current products
and products under development. We face intense competition from numerous pharmaceutical and biotechnology companies in the therapeutics
area, as well as competition from academic institutions, government agencies and research institutions. Abbott Laboratories, Boston Scientific
Corporation, Covidien Ltd. (currently part of Medtronic, Inc.), Cordis Corporation and Terumo Medical Corporation produce a polytetrafluoroethylene
mesh-covered stent and a double layer metal stent, respectively. Most of our current and potential competitors, including but not limited
to those listed above, have, and will continue to have, substantially greater financial, technological, research and development, regulatory
and clinical, manufacturing, marketing and sales, distribution and personnel resources than we do. There can be no assurance that we
will have sufficient resources to successfully commercialize our products, if and when they are approved for sale. The worldwide market
for stent products is characterized by intensive development efforts and rapidly advancing technology. For example, during the second
quarter of 2022 we ceased sales of our MGuard Prime EPS following a phase out period due to a shift in industry preferences. Our future
success will depend largely upon our ability to anticipate and keep pace with those developments and advances. Current or future competitors
could develop alternative technologies, products or materials that are more effective, easier to use or more economical than what we
or any potential licensee develop. If our technologies or products become obsolete or uncompetitive, our related product sales and licensing
revenue would decrease. This would have a material adverse effect on our business, financial condition and results of operations.
We
may become subject to claims by much larger and better capitalized competitors enforcing their intellectual property rights against us
or seeking to invalidate our intellectual property or our rights thereto.
Based
on the prolific litigation that has occurred in the stent industry and the fact that we may pose a competitive threat to some large and
well-capitalized companies that own or control patents relating to stents and their use, manufacture and delivery, we believe that it
is possible that one or more third parties will assert a patent infringement claim against the manufacture, use or sale of our stents
based on one or more of these patents. These companies also own patents relating to the use of drugs to treat restenosis, stent architecture,
catheters to deliver stents, and stent manufacturing and coating processes and compositions, as well as general delivery mechanism patents
like rapid exchange, which might be alleged to cover one or more of our products. In addition, it is possible that a lawsuit of which
we are not aware asserting patent infringement, misappropriation of intellectual property, or related claims may have already been filed
against us. As the number of competitors in the stent market grows and as the geographies in which we commercially market grow in number
and scope, the possibility of patent infringement by us, and/or a patent infringement or misappropriation claim against us, increases.
Our
competitors have maintained their positions in the market by, among other things, establishing intellectual property rights relating
to their products and enforcing these rights aggressively against their competitors and new entrants into the market. All the major companies
in the field of stents and related markets, including Boston Scientific Corporation, C.R. Bard, Inc., W.L. Gore & Associates, Inc.
and Medtronic, Inc., have been repeatedly involved in patent litigation relating to stents since at least 1997. The field of stents and
related markets have experienced rapid technological change and obsolescence in the past, and our competitors have strong incentives
to stop or delay the introduction of new products and technologies. We may pose a competitive threat to many of the companies in these
markets. Accordingly, these companies will have a strong incentive to take steps, through patent litigation or otherwise, to prevent
us from distributing our products. Such litigation or claims would divert attention and resources away from the development and/or commercialization
of our products and could result in an adverse court judgment that would make it impossible or impractical to sell our products in one
or more territories.
If
we fail to maintain or establish satisfactory agreements or arrangements with suppliers or if we experience an interruption of the supply
of materials from suppliers, we may not be able to obtain materials that are necessary to develop our products.
We
depend on outside suppliers for certain raw materials. These raw materials or components may not always be available at our standards
or on acceptable terms, if at all, and we may be unable to locate alternative suppliers or produce necessary materials or components
on our own.
Some
of the components of our products are currently provided by only one vendor, or a single-source supplier. We may have difficulty obtaining
similar components from other suppliers that are acceptable to the FDA or foreign regulatory authorities if it becomes necessary. During
the last year our mesh supplier informed us that it will not be able to supply the polymer fiber in the future due to issues with raw
materials, therefore we purchased inventory which should be sufficient to support our production needs in the next 2.5 years. We are
currently in the process of finding and qualifying another supplier or other material source which could take up to a year.
If
we have to switch to a replacement supplier, we will face additional regulatory delays and the interruption of the manufacture and delivery
of our stents for an extended period of time, which would delay completion of our clinical trials or commercialization of our products.
In addition, we will be required to obtain prior regulatory approval from the FDA or foreign regulatory authorities to use different
suppliers or components that may not be as safe or as effective. As a result, regulatory approval of our products may not be received
on a timely basis or at all.
In
addition, we rely on a third-party vendor to perform the sterilization process. A third-party vendor’s failure to properly sterilize
a component may cause delays or disruptions in our manufacturing process.
The
COVID-19 pandemic has caused interruptions or delays of our business plan and if there is a renewed outbreak it may have a significant
adverse effect on our business.
In
the past, we have been impacted by the COVID-19 pandemic which has caused interruptions or delays of our business plan. In particular,
we experienced a significant COVID-19 related impact on our financial condition and results of operations, primarily during the year
ended December 31, 2020, which we primarily attribute to the postponement of CGuard EPS procedures (non-emergency procedures), as hospitals
shifted resources to patients affected by COVID-19. If there is a renewed outbreak of COVID-19 it may result in restrictions and safety
measures that could cause fluctuations in sales of our products, ability to manufacture, as well as potential disruptions to our supply
chain.
In
addition, if there is a renewed outbreak of COVID-19, this may cause disruptions that could have a material adverse impact on our FDA
clinical trial plans and timelines, including:
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Delays
in receiving authorizations from local regulatory authorities, ethics committees and institutional review boards to initiate planned
clinical trials; |
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Delays
or difficulties in enrolling patients in our clinical trials; |
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Delays
or difficulties in clinical site initiation, including difficulties in recruiting clinical site investigators and clinical site staff; |
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Delays
in clinical sites receiving the supplies and materials needed to conduct our clinical trials, including interruptions in global shipping
that may affect the transport of clinical trial materials; |
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Changes
in local regulations as part of a response to the COVID-19 pandemic which may require us to change the ways in which our clinical trials
are conducted, which may result in unexpected costs, or to discontinue the clinical trials altogether; |
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Diversion
of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial
sites and hospital staff supporting the conduct of our clinical trials; |
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Diversion
of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial
sites and hospital staff supporting the conduct of our clinical trials; |
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Interruption
of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel imposed or recommended by federal
or state governments, employers and others, or interruption of clinical trial subject visits and study procedures, the occurrence of
which could affect the integrity of clinical trial data; |
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Risk
that participants enrolled in our clinical trials will acquire COVID-19 while the clinical trial is ongoing, which could impact the results
of the clinical trial, including by increasing the number of observed adverse events; |
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Delays
in necessary interactions with local regulators, ethics committees and other third parties and contractors due to limitations in employee
resources or forced furlough of government employees; |
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Limitations
in employee resources that would otherwise be focused on the conduct of our clinical trials, including because of sickness of employees
or their families or the desire of employees to avoid contact with large groups of people; and |
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Refusal
of the FDA to accept data from clinical trials in affected geographies. |
Any
of these occurrences may significantly harm our business, financial condition and prospects. In addition, many of the factors that cause,
or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the delay or denial of regulatory
approvals or clearances of our product.
The
extent to which any future outbreak of COVID-19 will impact our results will depend on future developments, which are highly uncertain
and cannot be predicted, including new information which may emerge concerning the severity of the virus.
Increasing
inflation could adversely affect our business, financial condition, results of operations or cash flows.
Inflation
and some of the measures taken by or that may be taken by the governments in countries where we operate in an attempt to curb inflation
may have negative effects on the economies of those countries generally. If the United States or other countries where we operate experience
substantial inflation in the future, our business may be adversely affected. This could have a material adverse impact on our business,
financial condition, results of operations or cash flows.
Risks
Related to our Clinical Trials and Regulatory Matters
Completing
clinical trials for CGuard EPS in the United States require meeting a number of regulatory requirements and must be conducted in compliance
with the FDA’s IDE regulations. Failure to maintain compliance with IDE regulations could have a material adverse effect on our
business.
Clinical
trials involve use of a medical device candidate (or drug, biological, or other product candidate, as applicable) on human subjects under
the supervision of qualified investigators in accordance with current Good Clinical Practices, including the requirement that all research
subjects provide informed consent for their participation in the clinical study. The FDA classifies medical device candidates into “significant
risk” and “non-significant risk” devices. Significant risk devices present a potential for serious risk to the health,
safety, or welfare of a subject. Examples may include implants, devices that support or sustain human life, and devices that are substantially
important in diagnosing, curing, mitigating, or treating disease or in preventing impairment to human health. If a medical device candidate
presents a significant risk, an IDE application must be submitted and approved prior to commencing any human clinical trials in the United
States in connection with such device. The FDA may approve, conditionally approve, or deny an IDE or it may require further information
and, thus, delay approval. On September 8, 2020, we received IDE approval for CGuard™ Carotid Stent System, CARENET-III.
In
addition to our IDE approval, we must apply for and obtain IRB approval in connection with each clinical site before commencing any study
activities. A written protocol with predefined end points, an appropriate sample size, and pre-determined patient inclusion and exclusion
criteria, is also required before we may initiate or conduct the trial.
Importantly,
the CGuard EPS clinical trial and any others that we may conduct in the future, must be conducted in accordance with the FDA’s
IDE regulations, which, among other things, establish requirements for investigational device labeling, prohibit pre-approval promotion
of a device candidate, and specify recordkeeping, reporting, and monitoring responsibilities of study sponsors and study investigators.
We
may not be able to obtain IRB approval to undertake clinical trials in the United States for any products we intend to market in the
United States in the future. If we do obtain such approvals, we may not be able to conduct studies which comply with the IDE and other
regulations governing clinical investigations or the data from any such trials may not support clearance or approval of the investigational
device. Failure to obtain such approvals or to comply with such regulations could have a material adverse effect on our business, financial
condition and results of operations.
Relatedly,
certainty that clinical trials will meet desired endpoints, produce meaningful or useful data, and be free of unexpected adverse effects,
or that the FDA will accept the validity of foreign clinical study data, as applicable, cannot be guaranteed, and such uncertainty could
preclude or delay regulatory approvals and commercialization, resulting in significant financial costs and reduced revenue. Moreover,
the timing of the commencement, continuation, and completion of any future clinical trial may be subject to significant delays attributable
to various causes, including, but not limited to, scheduling conflicts with participating clinicians and clinical institutions, difficulties
in identifying and enrolling patients who meet trial eligibility criteria, failure of patients to complete the clinical trial, delay
in or failure to meet regulatory and/or IRB requirements to conduct a clinical trial at a one or more prospective sites, and shortages
of supply in the investigational device.
Clinical
trials necessary to support a pre-market approval application are lengthy and expensive and require the enrollment of a large number
of patients, and suitable patients may be difficult to identify and recruit. Any such delay or failure of clinical trials could prevent
us from commercializing our stent products, which would materially and adversely affect our results of operations and the value of our
business.
Clinical
trials necessary to support a pre-market approval application to the FDA for our products, including CGuard EPS stent are expensive and
require the enrollment of a large number of patients, and suitable patients may be difficult to identify and recruit, which may cause
a delay in the development and commercialization of our product candidates. Patient enrollment in clinical trials and the ability to
successfully complete patient follow-up depends on many factors, including the size of the patient population, the nature of the trial
protocol, the proximity of patients to clinical sites, the eligibility criteria for the clinical trial and patient compliance. For example,
patients may be discouraged from enrolling in our clinical trials if the trial protocol requires them to undergo extensive post-treatment
procedures or follow-up to assess the safety and efficacy of our products, or they may be persuaded to participate in contemporaneous
clinical trials of competitive products. In addition, patients participating in our clinical trials may die before completion of the
trial or suffer adverse medical events unrelated to or related to our products. Delays in patient enrollment or failure of patients to
continue to participate in a clinical trial may cause an increase in costs and delays or result in the failure of the clinical trial.
In
addition, the length of time required to complete clinical trials for pharmaceutical and medical device products varies substantially
according to the degree of regulation and the type, complexity, novelty and intended use of a product, and can continue for several years
and cost millions of dollars. The commencement and completion of clinical trials for our products under development may be delayed by
many factors, including governmental or regulatory delays and changes in regulatory requirements, policy and guidelines or our inability
or the inability of any potential licensee to manufacture or obtain from third parties materials sufficient for use in preclinical studies
and clinical trials.
The
results of our clinical trials may be insufficient to obtain regulatory approval for our product candidates.
We
will only receive regulatory approval to commercialize a product candidate if we can demonstrate to the satisfaction of the FDA or the
applicable foreign regulatory agency, in well designed and conducted clinical trials, that the product candidate is safe and effective.
If we are unable to demonstrate that a product candidate is safe and effective in advanced clinical trials involving large numbers of
patients, we will be unable to submit the necessary application to receive regulatory approval to commercialize the product candidate.
We face risks that:
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the
product candidate may not prove to be safe or effective; |
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the
product candidate’s benefits may not outweigh its risks; |
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the
results from advanced clinical trials may not confirm the positive results from pre-clinical studies and early clinical trials; |
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the
FDA or comparable foreign regulatory authorities may interpret data from pre-clinical and clinical testing in different ways than
us; and |
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the
FDA or other regulatory agencies may require additional or expanded trials and data. |
Patients
may discontinue their participation in our clinical studies, which may negatively impact the results of these studies and extend the
timeline for completion of our development programs.
Clinical
trials for our product candidates require sufficient patient enrollment. We may not be able to enroll a sufficient number of patients
in a timely or cost-effective manner. Patients enrolled in our clinical studies may discontinue their participation at any time during
the study as a result of a number of factors, including withdrawing their consent or experiencing adverse clinical events, which may
or may not be judged to be related to our product candidates under evaluation. If a large number of patients in a study discontinue their
participation in the study, the results from that study may not be positive or may not support a filing for regulatory approval of the
product candidate.
In
addition, the time required to complete clinical trials is dependent upon, among other factors, the rate of patient enrollment. Patient
enrollment is a function of many factors, including the following:
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the
size of the patient population; |
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the
nature of the clinical protocol requirements; |
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the
availability of other treatments or marketed therapies (whether approved or experimental); |
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our
ability to recruit and manage clinical centers and associated trials; |
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the
proximity of patients to clinical sites; and |
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the
patient eligibility criteria for the study. |
Our
products may in the future be subject to product notifications, recalls, or voluntary market withdrawals that could harm our reputation,
business and financial results.
After
regulatory approval has been obtained for medical device products, the product and the manufacturer are subject to continual review,
including the review of adverse events and clinical results that are reported after our products are made available to patients,
and there can be no assurance that such approval will not be withdrawn or restricted. Regulators may also subject approvals to restrictions
or conditions or impose post-approval obligations on the holders of these approvals, and the regulatory status of such products may be
jeopardized if such obligations are not fulfilled. If post-approval studies are required, such studies may involve significant time and
expense.
The
manufacturing and marketing of medical devices involves an inherent risk that our products may prove to be defective and cause a health
risk even after regulatory clearances have been obtained. Medical devices may also be modified after regulatory clearance is obtained
to such an extent that additional regulatory clearance is necessary before the device can be further marketed. In these events, we may
voluntarily implement a recall or market withdrawal or may be required to do so by a regulatory authority.
In
the European Economic Area, we must comply with the EU Medical Device Vigilance System. Under this system, manufacturers are required
to take Field Safety Corrective Actions (“FSCAs”) to reduce a risk of death or serious deterioration in the state of health
associated with the use of a medical device that is already placed on the market. A FSCA may include the recall, modification, exchange,
destruction or retrofitting of the device. FSCAs must be communicated by the manufacturer or its legal representative to its customers
and/or to the end users of the device through Field Safety Notices.
Any
adverse event involving our products could result in other future voluntary corrective actions, such as recalls or customer notifications,
or agency action, such as inspection or enforcement action. Adverse events have been reported to us in the past, and we cannot guarantee
that they will not occur in the future. Any corrective action, whether voluntary or involuntary, as well as defending ourselves in a
lawsuit, would require the dedication of our time and capital, distract management from operating our business and could harm our reputation
and financial results.
We
have only limited experience in regulatory affairs, which may affect our ability, or the time required, to navigate complex regulatory
requirements and obtain necessary regulatory approvals, if such approvals are received at all. Regulatory delays or denials may increase
our costs, cause us to lose revenue and materially and adversely affect our results of operations and the value of our business.
Because
long-term success measures have not been completely validated for our products, especially CGuard EPS, regulatory agencies may take a
significant amount of time in evaluating product approval applications. Treatments may exhibit a favorable measure using one metric and
an unfavorable measure using another metric. Any change in accepted metrics may result in reconfiguration of, and delays in, our clinical
trials. Additionally, we have only limited experience in filing and prosecuting the applications necessary to gain regulatory approvals,
and our clinical, regulatory and quality assurance personnel are currently composed of only five employees. As a result, we may experience
delays in connection with obtaining regulatory approvals for our products.
In
addition, the products we and any potential licensees license, develop, manufacture and market are subject to complex regulatory requirements,
particularly in the United States, Europe and Asia, which can be costly and time-consuming. There can be no assurance that such approvals
will be granted on a timely basis, if at all. Furthermore, there can be no assurance of continued compliance with all regulatory requirements
necessary for the manufacture, marketing and sale of the products we will offer in each market where such products are expected to be
sold, or that products we have commercialized will continue to comply with applicable regulatory requirements. If a government regulatory
agency were to conclude that we were not in compliance with applicable laws or regulations, the agency could institute proceedings to
detain or seize our products, issue a recall, impose operating restrictions, enjoin future violations and assess civil and criminal penalties
against us, our officers or employees and could recommend criminal prosecution. Furthermore, regulators may proceed to ban, or request
the recall, repair, replacement or refund of the cost of, any device manufactured or sold by us. Furthermore, there can be no assurance
that all necessary regulatory approvals will be obtained for the manufacture, marketing and sale in any market of any new product developed
or that any potential licensee will develop using our licensed technology.
Even
if our products are approved by regulatory authorities, if we or our suppliers fail to comply with ongoing regulatory requirements, or
if we experience unanticipated problems with our products, these products could be subject to restrictions or withdrawal from the market.
Any
regulatory approvals that we receive for our products will require surveillance to monitor the safety and efficacy of the product and
may require us to conduct post-approval clinical studies. In addition, if a regulatory authority approves our products, the manufacturing
processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion, import, export and recordkeeping
for our products will be subject to extensive and ongoing regulatory requirements.
Moreover,
if we obtain regulatory approval for any of our products, we will only be permitted to market our products for the indication approved
by the regulatory authority, and such approval may involve limitations on the indicated uses or promotional claims we may make for our
products. In addition, later discovery of previously unknown problems with our products, including adverse events of unanticipated severity
or frequency, or with our suppliers or manufacturing processes, or failure to comply with regulatory requirements, may result in, among
other things:
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restrictions
on the marketing or manufacturing of our product candidates, withdrawal of the product from the market, or voluntary or mandatory
product recalls; |
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fines,
warning letters, or untitled letters; |
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holds
on clinical trials; |
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refusal
by the regulatory authority to approve pending applications or supplements to approved applications filed by us or suspension or
revocation of license approvals; |
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product
seizure or detention, or refusal to permit the import or export of our product candidates; and |
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injunctions,
the imposition of civil penalties or criminal prosecution. |
The
FDA also requires that our sales and marketing efforts, as well as promotions, be consistent with various laws and regulations. Approved
medical device promotions must be consistent with and not contrary to labeling, balanced, truthful and not false or misleading, adequately
substantiated (when required), and include adequate directions for use. In addition to the requirements applicable to approved products,
we may also be subject to enforcement action in connection with any promotion of an investigational new device. A sponsor or investigator,
or any person acting on behalf of a sponsor or investigator, may not represent in a promotional context that an investigational new device
is safe or effective for the purposes for which it is under investigation or otherwise promote the device.
If
the FDA investigates our marketing and promotional materials or other communications and finds that any of our investigational devices,
or future commercial products, if any, are being marketed or promoted in violation of the applicable regulatory restrictions, we could
be subject to the enforcement actions listed above, among others. Any enforcement action (or related lawsuit, which could follow such
action) brought against us in connection with alleged violations of applicable device promotion requirements, or prohibitions, could
harm our business and our reputation, as well as the reputation of any devices that may be approved for marketing in the U.S. in the
future.
The
applicable regulatory authorities’ policies may change, and additional government regulations may be enacted that could prevent,
limit or delay regulatory approval of our products. We cannot predict the likelihood, nature or extent of government regulation that
may arise from future legislation or administrative action, either in the United States or abroad. If we are slow or unable to adapt
to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance,
we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability.
Failure
to obtain regulatory approval in foreign jurisdictions will prevent us from marketing our products in such jurisdictions.
We
market our products in international markets. In order to market our products in other foreign jurisdictions, we must obtain separate
regulatory approvals from the appropriate governing body in each applicable country. The approval processes vary among countries and
can involve additional testing, and the time required to obtain approval may differ from that required to obtain CE mark or FDA approval.
Foreign regulatory approval processes may include all of the risks associated with obtaining CE mark or FDA approval in addition to other
risks. We may not obtain foreign regulatory approvals on a timely basis, if at all. CE mark approval or any future FDA approval does
not ensure approval by regulatory authorities in other countries. We may not be able to file for regulatory approvals and may not receive
necessary approvals to commercialize our products in certain markets.
We
are, or may be, subject to federal, state and foreign healthcare laws and regulations and implementation of or changes to such healthcare
laws and regulations could adversely affect our business and results of operations.
In
both the United States and certain foreign jurisdictions, there are laws and regulations specific to the healthcare industry which may
affect all aspects of our business, including development, testing, marketing, sales, pricing, and reimbursement. Additionally, there
have been a number of legislative and regulatory proposals in recent years to change the healthcare system in ways that could impact
our ability to sell our products. If we are found to be in violation of any of these laws or any other federal or state regulations,
we may be subject to administrative, civil and/or criminal penalties, damages, fines, individual imprisonment, exclusion from federal
healthcare programs and the restructuring of our operations. Any of these could have a material adverse effect on our business and financial
results. Since many of these laws have not been fully interpreted by the courts, there is an increased risk that we may be found in violation
of one or more of their provisions. Any action against us for violation of these laws, even if we ultimately are successful in our defense,
will cause us to incur significant legal expenses and divert our management’s attention away from the operation of our business.
We
may be subject, directly or indirectly, to applicable U.S. federal and state anti-kickback, false claims laws, physician payment transparency
laws, fraud and abuse laws or similar healthcare and security laws and regulations, which could expose us to criminal sanctions, civil
penalties, contractual damages, reputational harm and diminished profits and future earnings.
Healthcare
providers, physicians and others will play a primary role in the recommendation, ordering and utilization of any products for which we
obtain regulatory approval. If we obtain U.S. Food & Drug Administration approval for any of our products and begin commercializing
those products in the United States, our operations may be subject to various federal and state fraud and abuse laws, including, without
limitation, the federal Anti-Kickback Statute, the federal False Claims Act, and physician payment sunshine laws and regulations. These
laws may impact, among other things, our potential sales, marketing and education programs. In addition, we may be subject to patient
privacy regulation by both the federal government and the states in which we conduct our business. The laws that may affect our ability
to operate include:
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the federal Anti-Kickback Statute, which prohibits, among other things, knowingly and willfully soliciting, receiving, offering or paying
any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce,
or in return for, either the referral of an individual, or the purchase, lease, order or recommendation of any good, facility, item or
service for which payment may be made, in whole or in part, under a federal healthcare program, such as the Medicare and Medicaid programs;
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federal civil and criminal false claims laws and civil monetary penalty laws, including the False Claims Act, which may be pursued through
civil whistleblower or qui tam actions, impose criminal and civil penalties against individuals or entities for knowingly presenting,
or causing to be presented, to the federal government, claims for payment or approval from Medicare, Medicaid or other third-party payors
that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government;
●
federal criminal statutes created through the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), which
prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by
means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or
control of, any healthcare benefit program, regardless of the payor (e.g., public or private) and knowingly and willfully falsifying,
concealing or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery
of, or payment for, healthcare benefits, items or services relating to healthcare matters;
●
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 and their respective implementing
regulations, which imposes requirements on certain covered healthcare providers, health plans, and healthcare clearinghouses as well
as their respective business associates that perform services for them that involve the use, or disclosure of, individually identifiable
health information, relating to the privacy, security and transmission of individually identifiable health information;
●
the federal transparency requirements under The Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation
Act, enacted into law in the United States in March 2010 (known collectively as the “Affordable Care Act”), including the
provision commonly referred to as the Physician Payments Sunshine Act, which requires manufacturers of drugs, biologics, devices and
medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program to report annually
to the U.S. Department of Health and Human Services information related to payments or other transfers of value made to physicians and
teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members; and
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state and federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that
potentially harm consumers.
Additionally,
we may be subject to state and non-U.S. equivalents of each of the healthcare laws described above, among others, some of which may be
broader in scope and may apply regardless of the payor. Many U.S. states have adopted laws similar to the federal Anti-Kickback Statute,
some of which apply to the referral of patients for healthcare services reimbursed by any source, not just governmental payors, including
private insurers. Several states impose marketing restrictions or require medical device companies to make marketing or price disclosures
to the state. There are ambiguities as to what is required to comply with these state requirements, and if we fail to comply with an
applicable state law requirement, we could be subject to penalties.
Because
of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our
future business activities could be subject to challenge under one or more of such laws. In addition, healthcare reform legislation has
strengthened these laws. For example, the Affordable Care Act, among other things, amended the intent requirement of the federal Anti-Kickback
and criminal healthcare fraud statutes. As a result of such amendment, a person or entity no longer needs to have actual knowledge of
these statutes or specific intent to violate them in order to have committed a violation. Moreover, the Affordable Care Act provides
that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute
constitutes a false or fraudulent claim for purposes of the False Claims Act.
Violations
of fraud and abuse laws may be punishable by criminal and/or civil sanctions, including penalties, fines and/or exclusion or suspension
from federal and state healthcare programs such as Medicare and Medicaid and debarment from contracting with the U.S. government. In
addition, private individuals have the ability to bring actions on behalf of the U.S. government under the False Claims Act as well,
as under the false claim laws of several states.
Efforts
to ensure that our business arrangements with third parties comply with applicable healthcare laws and regulations will involve substantial
costs. It is possible that governmental authorities will conclude that our existing or future business practices do not comply with current
or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. Any such actions
instituted against us could have a significant adverse impact on our business, including the imposition of civil, criminal and administrative
penalties, damages, disgorgement, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare
programs, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of our operations, any of which
could adversely affect our ability to operate our business and our results of operations. Even if we are successful in defending against
such actions, we may nonetheless be subject to substantial costs, reputational harm and adverse effects on our ability to operate our
business. In addition, the approval and commercialization of any of our products outside the United States will also likely subject us
to non-U.S. equivalents of the healthcare laws mentioned above, among other non-U.S. laws.
If
any of our employees, agents, or the physicians or other providers or entities with whom we expect to do business are found to have violated
applicable laws, we may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare
programs, or, if we are not subject to such actions, we may suffer reputational harm for conducting business with persons or entities
found, or accused of being, in violation of such laws. Any such events could adversely affect our ability to operate our business and
our results of operations.
We
may be exposed to product liability claims and insurance may not be sufficient to cover these claims.
We
may be exposed to product liability claims based on the use of any of our products, or products incorporating our licensed technology,
in the market or clinical trials. We may also be exposed to product liability claims based on the sale of any products under development
following the receipt of regulatory approval. Product liability claims could be asserted directly by consumers, health-care providers
or others. We have obtained product liability insurance coverage; however ,such insurance may not provide full coverage for our future
clinical trials, products to be sold, and other aspects of our business. Insurance coverage is becoming increasingly expensive, and we
may not be able to maintain current coverage, or expand our insurance coverage to include future clinical trials or the sale of new products
or existing products in new territories, at a reasonable cost or in sufficient amounts to protect against losses due to product liability
or at all. A successful product liability claim, or series of claims brought against us could result in judgments, fines, damages and
liabilities that could have a material adverse effect on our business, financial condition and results of operations. We may incur significant
expense investigating and defending these claims, even if they do not result in liability. Moreover, even if no judgments, fines, damages
or liabilities are imposed on us, our reputation could suffer, which could have a material adverse effect on our business, financial
condition and results of operations.
Even
if one or more of our products are approved by the FDA, we may fail to obtain an adequate level of reimbursement for our products by
third party payors, such that there may be no commercially viable markets for our products, or the markets, may be much smaller than expected.
The
availability and levels of reimbursement by governmental and other third-party payors affect the market for our products. The efficacy,
safety, performance and cost-effectiveness of our products and of any competing products are factors that may impact the availability
and level of reimbursement. Reimbursement and healthcare payment systems in international markets vary significantly by country and include
both government sponsored healthcare and private insurance. To obtain reimbursement or pricing approval in some countries, we may be
required to produce clinical data, which may involve one or more clinical trials that compares the cost-effectiveness of our products
to other available therapies. We may not obtain international reimbursement or pricing approvals in a timely manner, if at all. Our failure
to receive international reimbursement or pricing approvals would negatively impact market acceptance of our products in the international
markets in which those approvals are sought.
We
believe that future reimbursement may be subject to increased restrictions both in the U.S. and in international markets. There is increasing
pressure by governments worldwide to contain healthcare costs by limiting both the coverage and the level of reimbursement for therapeutic
products and by refusing, in some cases, to provide any coverage for products that have not been approved by the relevant regulatory
agency. Future legislation, regulation or reimbursement policies of third party payors may adversely affect the demand for our products
and limit our ability to sell our products on a profitable basis. In addition, third party payors continually attempt to contain or reduce
the costs of healthcare by challenging the prices charged for healthcare products and services. If reimbursement for our products is
unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, market acceptance of our products would be
impaired, and future revenues, if any, would be adversely affected.
In
the United States and European Union, our business could be significantly and adversely affected by healthcare reform initiatives and/or
other legislation or judicial interpretations of existing or future healthcare laws and/or regulations.
The Affordable Care Act, signed
into law in the United States in March 2010, contains certain provisions which can be modified through the regulatory process and for
which it is unclear what the full impact and changes will be under the law.
The
law also focuses on a number of provisions aimed at improving quality, broadening access to health insurance, enhancing remedies
for fraud and abuse, adding transparency requirements, and decreasing healthcare costs, among others. Uncertainties remain regarding
what negative unintended consequences these provisions will have on patient access to new technologies, pricing and the market for our
products, and the healthcare industry in general. The Affordable Care Act includes provisions affecting the Medicare program, such as
value-based payment programs, increased funding of comparative effectiveness research, reduced hospital payments for avoidable readmissions
and hospital acquired conditions, and pilot programs to evaluate alternative payment methodologies that promote care coordination (such
as bundled physician and hospital payments). Additionally, the provisions include a reduction in the annual rate of inflation for hospitals
which started in 2011 and the establishment of an independent payment advisory board to recommend ways of reducing the rate of growth
in Medicare spending. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in
payments from private payors.
Since its enactment, there have
been judicial and Congressional challenges to certain aspects of the Affordable Care Act, to modify, repeal or otherwise invalidate all,
or certain provisions of, the Affordable Care Act. Following the enactment of the Tax Act, on December 14, 2018 in a case in the United
States District Court for the Northern District of Texas, a federal judge ruled that the individual mandate imposed by the Affordable
Care Act is unconstitutional and inseverable from the other provisions of the Affordable Care Act and, therefore, the remaining provisions
of the Affordable Care Act are invalid. On November 10, 2020, the United States Supreme Court heard arguments on whether the Affordable
Care Act is constitutional, in whole or in part, and determined that the case lacked standing.. The regulatory process of implementation
of the Affordable Care Act will remain ongoing and may also increase our regulatory burdens and operating costs. Litigation and legislation
related to the Affordable Care Act are likely to continue, with unpredictable and uncertain results. We cannot predict with certainty
what affect further changes to the Affordable Care Act, and other similar health care laws that are enacted, would have on our business.
In
addition, other legislative changes have been proposed and adopted since the Affordable Care Act was enacted. These changes included
aggregate reductions to Medicare payments to providers of up to two percent per fiscal year, which will remain in effect through 2027
unless additional Congressional action is taken. It is unclear what impact new quality and payment programs may have on our business,
financial condition, results of operations or cash flows. Individual states in the United States have also become increasingly aggressive
in passing legislation and implementing regulations designed to control product pricing, including price or patient reimbursement constraints,
and discounts, and require marketing cost disclosure and transparency measures. We believe that additional state and federal health care
reform measures may be adopted in the future that could have a material adverse effect on our industry generally and on our customers.
Any changes in, or uncertainty with respect to, future reimbursement rates could impact our customers’ demand for our products,
which in turn could have a material adverse effect on our business, financial condition, results of operations, or cash flows. Further,
the federal, state and local governments, Medicare, Medicaid, managed care organizations, and foreign governments have in the past considered,
are currently considering, and may in the future consider healthcare policies and proposals intended to curb rising healthcare costs,
including those that could significantly affect both private and public reimbursement for healthcare services. Future significant changes
in the healthcare systems in the United States or other countries, including changes intended to reduce expenditures along with uncertainty
about whether and how changes may be implemented, could have a negative impact on the demand for our products. We are unable to predict
with certainty whether other healthcare policies, including policies stemming from legislation or regulations affecting our business,
may be proposed or enacted in the future; what effect such policies would have on our business; or the effect ongoing uncertainty about
these matters will have on our customers’ purchasing decisions.
We
cannot predict the impact that such actions against the Affordable Care Act and other laws enacted after its enactment will have on
our business, and there is uncertainty as to what healthcare programs and regulations may be implemented or changed at the federal
and/or state level in the United States, or the effect of any future legislation or regulation. Furthermore, we cannot predict what
actions the Biden administration will implement in connection with laws impacting us. However, it is possible that such
initiatives could have an adverse effect on our ability to obtain approval and/or successfully commercialize products in the United
States in the future. For example, any changes that reduce, or impede the ability to obtain, reimbursement for the type of products
we intend to commercialize in the United States (or our products more specifically, if approved) or reduce medical procedure volumes
could adversely affect our business plan to introduce our products in the United States.
In May 2017, the European parliament
and the council of the European Union approved the MDR which has replaced the existing medical device directives (93/42/EEC). The new
regulations entered into full application in May 26, 2021. The new Medical Device Regulation imposes stricter requirements on medical
device manufacturers and strengthens the supervising competences of the competent authorities of European Union member states, the notified
bodies and the authorized representatives. If we fail to comply with the modified regulation and requirements, it can adversely affect
our business, operating results and prospects. Any new regulations or revisions or reinterpretations of existing regulations may impose
additional costs or lengthen review times of future products. See “Risk Factors – “Failure to satisfy regulatory requirements
of the new European Medical Device Regulation may prevent us from marketing CGuard EPS in countries requiring the CE mark.”
Risk
Factors Related to Our Intellectual Property
If
we are unable to obtain and maintain intellectual property protection covering our products, others may be able to make, use or sell
our products, which would adversely affect our revenue.
Our
ability to protect our products from unauthorized or infringing use by third parties depends substantially on our ability to obtain and
maintain valid and enforceable patents. Similarly, the ability to protect our trademark rights might be important to prevent third party
counterfeiters from selling poor quality goods using our designated trademarks, and trade names. Due to evolving legal standards relating
to the patentability, validity and enforceability of patents covering medical devices and pharmaceutical inventions and the scope of
claims made under these patents, our ability to enforce patents is uncertain and involves complex legal and factual questions. Accordingly,
rights under any of our pending patent applications and patents may not provide us with commercially meaningful protection for our products
or may not afford a commercial advantage against our competitors or their competitive products or processes. In addition, patents may
not be issued from any pending or future patent applications owned by or licensed to us, and moreover, patents that may be issued to
us now or in the future may later be found invalid or unenforceable. Further, even if valid and enforceable, our patents may not be sufficiently
broad to prevent others from marketing products like ours, despite our patent rights.
The
validity of our patent claims depends, in part, on whether prior art references exist that describe or render obvious our inventions
as of the filing date of our patent applications. We may not have identified all prior art, such as U.S. and foreign patents or published
applications or published scientific literature, that could adversely affect the patentability of our issued patents and pending patent
applications. For example, some material references may be in a foreign language and may not be uncovered during examination of our patent
applications. Additionally, patent applications in the United States are maintained in confidence for up to 18 months after their filing.
In some cases, however, patent applications remain confidential in the U.S. Patent and Trademark Office for the entire time prior to
issuance as a U.S. patent. Patent applications filed in countries outside the U.S. are not typically published until at least 18 months
from their first filing date. Similarly, publication of discoveries in the scientific or patent literature often lags behind actual discoveries.
Therefore, we cannot be certain that we were the first to invent, or the first to file patent applications relating to, our stent technologies.
Third parties may initiate adversarial proceedings, known as an inter-partes review (IPR) in the U.S. Patent and Trademark Office to
challenge the validity of our patent claims in the United States. It is possible that we may be unsuccessful in the proceedings, resulting
in a loss of some portion or all of our patent rights in the United States.
In
addition, statutory differences in patentable subject matter among jurisdictions may limit the protection we can obtain on certain of
the technologies we develop. The laws of some foreign jurisdictions do not offer the same protection to, or may make it more difficult
to effect the enforcement of, proprietary rights as in the United States. This risk may be exacerbated if we move our manufacturing to
certain countries in Asia. If we encounter such difficulties or are otherwise precluded from effectively protecting our intellectual
property rights in any foreign jurisdictions, our business prospects could be substantially harmed.
Our
initiation of litigation to enforce our patent rights may prompt adversaries in such litigation to challenge the validity, scope, ownership,
or enforceability of our patents. Third parties can sometimes bring challenges against a patent holder to resolve these issues, as well.
If a court decides that any such patents are not valid, not enforceable, not wholly owned by us, or are of a limited scope, we may not
have the right to stop others from using our inventions. Also, even if our patent rights are determined by a court to be valid and enforceable,
they may not be sufficiently broad to prevent others from marketing products similar to ours or designing around our patents, despite
our patent rights, nor do they provide us with freedom to operate unimpeded by the patent and other intellectual property rights of others
that may cover our products. We may be forced into litigation to uphold the validity of the claims in our patent portfolio, as well as
our ownership rights to such intellectual property, and litigation is often an uncertain and costly process.
We
may not be able to protect our trade secrets adequately. Although we rely on non-disclosure and confidentiality agreements with employees,
consultants and other parties to protect, in part, trade secrets and other proprietary technology, these agreements may be breached and
we may not have adequate remedies for such breach. Moreover, others may independently develop equivalent proprietary information, and
third parties may otherwise gain access to our trade secrets and proprietary knowledge. Any disclosure of confidential data into the
public domain or to third parties could allow competitors to learn our trade secrets and use the information in competition against us.
Intellectual
property rights of third parties could adversely affect our ability to commercialize our products and services, and we might be required
to litigate or obtain licenses from third parties in order to develop or market our product candidates. Such litigation or licenses could
be costly or not available on commercially reasonable terms.
It
is inherently difficult to conclusively assess our freedom to operate without infringing on third-party rights. Our competitive position
may be adversely affected if existing patents or patents resulting from patent applications issued to third parties or other third-party
intellectual property rights are held to cover our products or services or elements thereof, or our manufacturing or uses relevant to
our development plans. In such cases, we may not be in a position to develop or commercialize products or services or our product candidates
(and any relevant services) unless we successfully pursue litigation to nullify or invalidate the third-party intellectual property right
concerned or enter into a license agreement with the intellectual property right holder, if available on commercially reasonable terms.
There may also be pending patent applications that if they result in issued patents, could be alleged to be infringed by our new products
or services. If such an infringement claim should be brought and be successful, we may be required to pay substantial damages, be forced
to abandon our new products or services or seek a license from any patent holders. No assurances can be given that a license will be
available on commercially reasonable terms, if at all.
It
is also possible that we have failed to identify relevant third-party patents or applications. For example, U.S. patent applications
filed before November 29, 2000, and certain U.S. patent applications filed after that date that will not be filed outside the United States
remain confidential until patents issue. Patent applications in the United States and elsewhere are published approximately 18 months
after the earliest filing for which priority is claimed, with such earliest filing date being commonly referred to as the priority date.
Therefore, patent applications covering our new products or services could have been filed by others without our knowledge. Additionally,
pending patent applications which have been published can, subject to certain limitations, be later amended in a manner that could cover
our services, our new products or the use of our new products. Third-party intellectual property right holders may also actively bring
infringement claims against us. We cannot guarantee that we will be able to successfully settle or otherwise resolve such infringement
claims. If we are unable to successfully settle future claims on terms acceptable to us, we may be required to engage in or continue
costly, unpredictable and time-consuming litigation and may be prevented from or experience substantial delays in pursuing the development
of and/or marketing our new products or services. If we fail in any such dispute, in addition to being forced to pay damages, we may
be temporarily or permanently prohibited from commercializing our new products or services that are held to be infringing. We might,
if possible, also be forced to redesign our new products so that we no longer infringe the third-party intellectual property rights.
Any of these events, even if we were ultimately to prevail, could require us to divert substantial financial and management resources
that we would otherwise be able to devote to our business.
Patent
policy and rule changes could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement
or defense of any issued patents.
Changes
in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of any
patents that may issue from our patent applications or narrow the scope of our patent protection. The laws of foreign countries may not
protect our rights to the same extent as the laws of the United States. Publications of discoveries in the scientific literature often
lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until
18 months after filing, or in some cases not at all. We therefore cannot be certain that we were the first to file the invention claimed
in our owned and licensed patent or pending applications, or that we or our licensor were the first to file for patent protection of
such inventions. Assuming all other requirements for patentability are met, in the United States prior to March 15, 2013, the first to
make the claimed invention without undue delay in filing, is entitled to the patent, while generally outside the United States, the first
to file a patent application is entitled to the patent. After March 15, 2013, under the Leahy-Smith America Invents Act, or the Leahy-Smith
Act, enacted on September 16, 2011, the United States has moved to a first to file system. The Leahy-Smith Act also includes a number
of significant changes that affect the way patent applications will be prosecuted and may also affect patent litigation. In general,
the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications
and the enforcement or defense of any issued patents, all of which could have a material adverse effect on our business and financial
condition.
We
may be involved in lawsuits to protect or enforce our intellectual property, which could be expensive, time consuming, and unsuccessful.
Competitors
may infringe our intellectual property. If we were to initiate legal proceedings against a third-party to enforce a patent covering one
of our new products or services, the defendant could counterclaim that the patent covering our product candidate is invalid and/or unenforceable.
In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace. Grounds
for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness,
or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent
withheld relevant information from the United States Patent and Trademark Office, or USPTO, or made a misleading statement, during prosecution.
Under the Leahy-Smith Act, the validity of U.S. patents may also be challenged in post-grant proceedings before the USPTO. The outcome
following legal assertions of invalidity and unenforceability is unpredictable.
Derivation
proceedings initiated by third parties or brought by us may be necessary to determine the priority of inventions and/or their scope with
respect to our patent or patent applications or those of our licensors. An unfavorable outcome could require us to cease using the related
technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does
not offer us a license on commercially reasonable terms. Our defense of litigation or interference proceedings may fail and, even if
successful, may result in substantial costs and distract our management and other employees. In addition, the uncertainties associated
with litigation could have a material adverse effect on our ability to raise the funds necessary to continue our clinical trials, continue
our research programs, license necessary technology from third parties, or enter into development partnerships that would help us bring
our new products or services to market.
Furthermore,
because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some
of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements
of the results of hearings, motions, or other interim proceedings or developments. If securities analysts or investors perceive these
results to be negative, it could have a material adverse effect on the price of our shares of common stock.
Risks
Related to Our Business Operations
We
face risks associated with litigation and claims.
We
have in the past and may, in the future, be involved in one or more lawsuits, claims or other proceedings. These suits could concern
issues including contract disputes, employment actions, employee benefits, taxes, environmental, health and safety, fraud and abuse,
personal injury and product liability matters.
Our
business and operations would suffer in the event of computer system failures, cyber-attacks or deficiencies in our cyber-security.
In
the ordinary course of our business, we collect and store sensitive data, including intellectual property, research data, our proprietary
business information and that of our suppliers, technical information about our products, clinical trial plans and employee records.
Similarly, our third-party providers possess certain of our sensitive data and confidential information. The secure maintenance of this
information is critical to our operations and business strategy. Despite the implementation of security measures, our internal computer
systems, and those of third parties on which we rely, are vulnerable to damage from computer viruses, malware, ransomware, cyber fraud,
natural disasters, terrorism, war, telecommunication and electrical failures, cyber-attacks or cyber-intrusions over the Internet, attachments
to emails, persons inside our organization, or persons with access to systems inside our organization. The risk of a security breach
or disruption, particularly through cyber-attacks or cyber intrusion, including by computer hackers, foreign governments, and cyber terrorists,
has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased.
Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, encrypted, lost
or stolen. Any such access, inappropriate disclosure of confidential or proprietary information or other loss of information, including
our data being breached at third-party providers, could result in legal claims or proceedings, liability or financial loss under laws
that protect the privacy of personal information, disruption of our operations or our product development programs and damage to our
reputation, which could adversely affect our business. For example, the loss of clinical trial data from completed or ongoing or planned
clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce
the data.
The
loss of key members of our senior management team or our inability to attract and retain highly skilled scientists and laboratory and
field personnel could adversely affect our business.
We
depend on the skills, experience and performance of our senior management and research personnel. The efforts of each of these persons
will be critical to us as we continue to further develop our products, increase sales and broaden our product offerings. If we were to
lose one or more of these key employees, we may experience difficulties in competing effectively, developing our technologies and implementing
our business strategies. Our research and development programs and commercial laboratory operations depend on our ability to attract
and retain highly skilled scientists and technicians. We may not be able to attract or retain qualified scientists and technicians in
the future due to the intense competition for qualified personnel among life science businesses. There can be no assurance that we will
be able to attract and retain necessary personnel on acceptable terms given the intense competition among medical device, biotechnology,
pharmaceutical and healthcare companies, universities and non-profit research institutions for experienced management, scientists, researchers,
sales and marketing and manufacturing personnel. If we are unable to attract, retain and motivate our key personnel to accomplish our
business objectives, we may experience constraints that will adversely affect our ability to support our operations, and our results
of operations may be materially and adversely affected.
We
are an international business, and we are exposed to various global and local risks that could have a material adverse effect on our
financial condition and results of operations.
We
operate globally and develop and market products in multiple countries. Consequently, we face complex legal and regulatory requirements
in multiple jurisdictions, which may expose us to certain financial and other risks. In addition, we are subject to global events beyond
our control, including war, public health crises, such as pandemics and epidemics, trade disputes and other international events. Any
of these changes could have a material adverse effect on our reputation, business, financial condition or results of operations.
For
example, in the past we have been impacted by the COVID-19 pandemic which has caused interruptions or delays of our business plan. In
particular, we experienced a significant COVID-19 related impact on our financial condition and results of operations, primarily during
the year ended December 31, 2020, which we primarily attribute to the postponement of CGuard EPS procedures (non-emergency procedures),
as hospitals shifted resources to patients affected by COVID-19. If there is a renewed outbreak of COVID-19 it may result in restrictions
and safety measures that could cause fluctuations in sales of our products, ability to manufacture, as well as potential disruptions
to our supply chain.
International
sales and operations are subject to a variety of risks, including:
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foreign
currency exchange rate fluctuations; |
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greater
difficulty in staffing and managing foreign operations; |
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greater
risk of uncollectible accounts; |
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longer
collection cycles; |
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logistical
and communications challenges; |
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potential
adverse changes in laws and regulatory practices, including export license requirements, trade barriers, tariffs and tax laws; |
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changes
in labor conditions; |
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burdens
and costs of compliance with a variety of foreign laws; |
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political
and economic instability; |
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the
escalation of hostilities in Israel, which could impair our ability to manufacture our products; |
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increases
in duties and taxation; |
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foreign
tax laws and potential increased costs associated with overlapping tax structures; |
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greater
difficulty in protecting intellectual property; |
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the
risk of third party disputes over ownership of intellectual property and infringement of third party intellectual property by our
products; and |
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general
economic and political conditions in these foreign markets. |
International
markets are also affected by economic pressure to contain reimbursement levels and healthcare costs. Profitability from international
operations may be limited by risks and uncertainties related to regional economic conditions, regulatory and reimbursement approvals,
competing products, infrastructure development, intellectual property rights protection and our ability to implement our overall business
strategy. We expect these risks will increase as we pursue our strategy to expand operations into new geographic markets. We may not
succeed in developing and implementing effective policies and strategies in each location where we conduct business. Any failure to do
so may harm our business, results of operations and financial condition.
Environmental,
social and corporate governance (ESG) issues, including those related to climate change and sustainability, may have an adverse effect
on our business, financial condition and results of operations and damage our reputation.
There
is an increasing focus from certain investors, customers, consumers, employees and other stakeholders concerning ESG matters. Additionally,
public interest and legislative pressure related to public companies’ ESG practices continue to grow. If our ESG practices fail
to meet regulatory requirements or investor, customer, consumer, employee or other shareholders’ evolving expectations and standards
for responsible corporate citizenship in areas including environmental stewardship, support for local communities, Board of Director
and employee diversity, human capital management, employee health and safety practices, product quality, supply chain management, corporate
governance and transparency, our reputation, brand and employee retention may be negatively impacted, and our customers and suppliers
may be unwilling to continue to do business with us.
Customers,
consumers, investors and other shareholders are increasingly focusing on environmental issues, including climate change, energy and water
use, plastic waste and other sustainability concerns. Concern over climate change may result in new or increased legal and regulatory
requirements to reduce or mitigate impacts to the environment. Changing customer and consumer preferences or increased regulatory requirements
may result in increased demands or requirements regarding plastics and packaging materials, including single-use and non-recyclable plastic
products and packaging, other components of our products and their environmental impact on sustainability, or increased customer and
consumer concerns or perceptions (whether accurate or inaccurate) regarding the effects of substances present in certain of our products.
Complying with these demands or requirements could cause us to incur additional manufacturing, operating or product development costs.
If
we do not adapt to or comply with new regulations, including the SEC’s published proposed rules that would require companies to
provide significantly expanded climate-related disclosures in their periodic reporting, which may require us to incur significant additional
costs to comply and impose increased oversight obligations on our management and board of directors, or fail to meet evolving investor,
industry or stakeholder expectations and concerns regarding ESG issues, investors may reconsider their capital investment in our Company,
we may become subject to penalties, and customers and consumers may choose to stop purchasing our products, if approved for commercialization,
which could have a material adverse effect on our reputation, business or financial condition.
Our
business, operating results and growth rates may be adversely affected by current or future unfavorable economic and market conditions
and adverse developments with respect to financial institutions and associated liquidity risk.
Our
business depends on the economic health of the global economies. If the conditions in the global economies remain uncertain or continue
to be volatile, or if they deteriorate, including as a result of the impact of military conflict, such as the war between Russia and
Ukraine, terrorism or other geopolitical events, our business, operating results and financial condition may be materially adversely
affected. Economic weakness, inflation and increases in interest rates, limited availability of credit, liquidity shortages and constrained
capital spending have at times in the past resulted, and may in the future result, in challenging and delayed sales cycles, slower adoption
of new technologies and increased price competition, and could negatively affect our ability to forecast future periods, which could
result in an inability to satisfy demand for our products and a loss of market share.
In
addition, increases in inflation raise our costs for commodities, labor, materials and services and other costs required to grow and
operate our business, and failure to secure these on reasonable terms may adversely impact our financial condition. Additionally, increases
in inflation, along with the uncertainties surrounding COVID-19, geopolitical developments and global supply chain disruptions, have
caused, and may in the future cause, global economic uncertainty and uncertainty about the interest rate environment, which may make
it more difficult, costly or dilutive for us to secure additional financing. A failure to adequately respond to these risks could have
a material adverse impact on our financial condition, results of operations or cash flows.
More
recently, the closures of SVB and Signature Bank and their placement into receivership with the FDIC created bank-specific and broader
financial institution liquidity risk and concerns. Although the Department of the Treasury, the Federal Reserve and the FDIC jointly
released a statement that depositors at SVB and Signature Bank would have access to their funds, even those in excess of the standard
FDIC insurance limits, under a systemic risk exception, future adverse developments with respect to specific financial institutions or
the broader financial services industry may lead to market-wide liquidity shortages, impair the ability of companies to access near-term
working capital needs, and create additional market and economic uncertainty. There can be no assurance that future credit and financial
market instability and a deterioration in confidence in economic conditions will not occur. Our general business strategy may be adversely
affected by any such economic downturn, liquidity shortages, volatile business environment or continued unpredictable and unstable market
conditions. If the current equity and credit markets deteriorate, or if adverse developments are experienced by financial institutions,
it may cause short-term liquidity risk and also make any necessary debt or equity financing more difficult, more costly, more onerous
with respect to financial and operating covenants and more dilutive. Failure to secure any necessary financing in a timely manner and
on favorable terms could have a material adverse effect on our growth strategy, financial performance and stock price and could require
us to alter our operating plans. In addition, there is a risk that one or more of our service providers, financial institutions, manufacturers,
suppliers and other partners may be adversely affected by the foregoing risks, which could directly affect our ability to attain our
operating goals on schedule and on budget.
We
are subject to financial reporting and other requirements that place significant demands on our resources.
We
are subject to reporting and other obligations under the Securities Exchange Act of 1934, as amended, including the requirements of Section
404 of the Sarbanes-Oxley Act of 2002. Section 404 requires us to conduct an annual management assessment of the effectiveness of our
internal controls over financial reporting. These reporting and other obligations place significant demands on our management, administrative,
operational, internal audit and accounting resources. Any failure to maintain effective internal controls could have a material adverse
effect on our business, operating results and stock price. Moreover, effective internal control is necessary for us to provide reliable
financial reports and prevent fraud. If we cannot provide reliable financial reports or prevent fraud, we may not be able to manage our
business as effectively as we would if an effective control environment existed, and our business and reputation with investors may be
harmed.
There
are inherent limitations in all control systems, and misstatements due to error or fraud may occur and not be detected.
The
ongoing internal control provisions of Section 404 of the Sarbanes-Oxley Act of 2002 require us to identify material weaknesses in internal
control over financial reporting, which is a process to provide reasonable assurance regarding the reliability of financial reporting
for external purposes in accordance with accounting principles generally accepted in the United States. Our management, including our
chief executive officer and chief financial officer, does not expect that our internal controls and disclosure controls will prevent
all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance
that the objectives of the control system are met. In addition, the design of a control system must reflect the fact that there are resource
constraints, and the benefit of controls must be relative to their costs. Because of the inherent limitations in all control systems,
no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, in our company have
been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can
occur because of simple errors or mistakes. Further, controls can be circumvented by individual acts of some persons, by collusion of
two or more persons, or by management override of the controls. The design of any system of controls is also based in part upon certain
assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated
goals under all potential future conditions. Over time, a control may be inadequate because of changes in conditions, such as growth
of the company or increased transaction volume, or the degree of compliance with the policies or procedures may deteriorate. Because
of inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
In
addition, discovery and disclosure of a material weakness, by definition, could have a material adverse impact on our financial statements.
Such an occurrence could discourage certain customers or suppliers from doing business with us and adversely affect how our stock trades.
This could in turn negatively affect our ability to access equity markets for capital.
Risks
Related to Operating in Israel
We
anticipate being subject to fluctuations in currency exchange rates because we expect a substantial portion of our revenues will be generated
in Euros and U.S. dollars, while a significant portion of our expenses will be incurred in New Israeli Shekels.
We
expect a substantial portion of our revenues will be generated in U.S. dollars and Euros, while a significant portion of our expenses,
principally salaries and related personnel expenses, is paid in New Israeli Shekels, or NIS. As a result, we are exposed to the risk
that the rate of inflation in Israel will exceed the rate of devaluation of the NIS in relation to the Euro or the U.S. dollar, or that
the timing of this devaluation will lag behind inflation in Israel. Because inflation has the effect of increasing the dollar and Euro
costs of our operations, it would therefore have an adverse effect on our dollar-measured results of operations. The value of the NIS,
against the Euro, the U.S. dollar, and other currencies may fluctuate and is affected by, among other things, changes in Israel’s
political and economic conditions. Any significant revaluation of the NIS may materially and adversely affect our cash flows, revenues
and financial condition. Fluctuations in the NIS exchange rate, or even the appearance of instability in such exchange rate, could adversely
affect our ability to operate our business.
If
there are significant shifts in the political, economic and military conditions in Israel and its neighbors, it could have a material
adverse effect on our business relationships and profitability.
Our
executive office, sole manufacturing facility and certain of our key personnel are located in Israel. Our business is directly affected
by the political, economic and military conditions in Israel and its neighbors. Since the establishment of the State of Israel in 1948,
a number of armed conflicts have occurred between Israel and its Arab neighbors.
During
June 2021, July and August 2014 and November 2012, Israel was engaged in an armed conflict with Hamas, a militia group and political
party which controls the Gaza Strip, and during the summer of 2006, Israel was engaged in an armed conflict with Hezbollah, a Lebanese
Islamist Shiite militia group and political party. These conflicts involved missile strikes against civilian targets in various parts
of Israel, including areas in which our employees and some of our consultants are located, and negatively affected business conditions
in Israel. We cannot predict if or when armed conflict will take place and the duration of each conflict.
Our
commercial insurance does not cover losses that may occur as a result of events associated with war and terrorism. Although the Israeli
government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot
assure you that this government coverage will be maintained or that it will sufficiently cover our potential damages. Any losses or damages
incurred by us could have a material adverse effect on our business. Any armed conflicts or political instability in the region would
likely negatively affect business conditions and could harm our results of operations.
The
continued political instability and hostilities between Israel and its neighbors and any future armed conflict, terrorist activity or
political instability in the region could adversely affect our operations in Israel and adversely affect the market price of our shares
of common stock. In addition, several organizations and countries may restrict doing business with Israel and Israeli companies have
been and are today subjected to economic boycotts. The interruption or curtailment of trade between Israel and its present trading partners
could adversely affect our business, financial condition and results of operations.
Israel’s
most recent general elections were held on April 9, 2019, September 17, 2019, March 2, 2020, March 23, 2021 and November 1, 2022. In
addition, proposed judicial reform has sparked widespread protests across Israel. Uncertainty surrounding future elections and the outcome
of the judicial reform in Israel may continue and the political situation in Israel may further deteriorate. Actual or perceived political
instability in Israel or any negative changes in the political environment, may individually or in the aggregate adversely affect the
Israeli economy and, in turn, our business, financial condition, results of operations and growth prospects.
Our
operations could be disrupted as a result of the obligation of certain of our personnel residing in Israel to perform military service.
Many
of our officers and employees reside in Israel and may be required to perform annual military reserve duty. Currently, all male adult
citizens and permanent residents of Israel under the age of 40 (or older, depending on their position with the Israeli Defense Forces
reserves), unless exempt, are obligated to perform military reserve duty annually and are subject to being called to active duty at any
time under emergency circumstances. Our operations could be disrupted by the absence for a significant period of one or more of our key
officers and employees due to military service. Any such disruption could have a material adverse effect on our business, results of
operations and financial condition.
We
may not be able to enforce covenants not-to-compete under current Israeli law.
We
have non-competition agreements with most of our employees, many of which are governed by Israeli law. These agreements generally prohibit
our employees from competing with us or working for our competitors for a specified period following termination of their employment.
However, Israeli courts are reluctant to enforce non-compete undertakings of former employees and tend, if at all, to enforce those provisions
for relatively brief periods of time in restricted geographical areas and only when the employee has unique value specific to that employer’s
business and not just regarding the professional development of the employee. Any such inability to enforce non-compete covenants may
cause us to lose any competitive advantage resulting from advantages provided to us by such confidential information.
We
may become subject to claims for remuneration or royalties for assigned service invention rights by our employees, which could result
in litigation and adversely affect our business.
A
significant portion of our intellectual property has been developed by our Israeli employees in the course of their employment for us.
Under the Israeli Patent Law, 5727-1967 (the “Israeli Patent Law”), inventions conceived by an employee during the term and
as part of the scope of his or her employment with a company are regarded as “service inventions,” which belong to the employer,
absent a specific agreement between the employee and employer giving the employee service invention rights. The Israeli Patent Law also
provides that if there is no such agreement between an employer and an employee, the Israeli Compensation and Royalties Committee (the
“C&R Committee”), a body constituted under the Israeli Patent Law, shall determine whether the employee is entitled to
remuneration for his inventions. The C&R Committee (decisions of which have been upheld by the Israeli Supreme Court) has held that
employees may be entitled to remuneration for their service inventions despite having specifically waived any such rights. We generally
enter into intellectual property assignment agreements with our employees pursuant to which such employees assign to us all rights to
any inventions created in the scope of their employment or engagement with us. Although our employees have agreed to assign to us service
invention rights and have specifically waived their right to receive any special remuneration for such assignment beyond their regular
salary and benefits, we may face claims demanding remuneration in consideration for assigned inventions. As a consequence of such claims,
we could be required to pay additional remuneration or royalties to our current or former employees, or be forced to litigate such claims,
which could negatively affect our business.
It
may be difficult for investors in the United States to enforce any judgments obtained against us or some of our directors or officers.
The
majority of our assets other than cash are located outside the U.S. In addition, certain of our officers are nationals and/or residents
of countries other than the U.S., and all or a substantial portion of such persons’ assets are located outside the U.S. As a result,
it may be difficult for investors to enforce within the United States any judgments obtained against us or any of our non-U.S. officers,
including judgments predicated upon the civil liability provisions of the securities laws of the U.S. or any state thereof. Additionally,
it may be difficult to assert U.S. securities law claims in actions originally instituted outside of the U.S. Israeli courts may refuse
to hear a U.S. securities law claim because Israeli courts may not be the most appropriate forums in which to bring such a claim. Even
if an Israeli court agrees to hear a claim, it may determine that the Israeli law, and not U.S. law, is applicable to the claim. Further,
if U.S. law is found to be applicable, certain content of applicable U.S. law must be proved as a fact, which can be a time-consuming
and costly process, and certain matters of procedure would still be governed by the Israeli law. Consequently, you may be effectively
prevented from pursuing remedies under U.S. federal and state securities laws against us or any of our non-U.S. directors or officers.
The
tax benefits that are currently available to us under Israeli law require us to satisfy specified conditions. If we fail to satisfy these
conditions, we may be required to pay increased taxes and would likely be denied these benefits in the future.
InspireMD
Ltd. has been granted a “Beneficiary Enterprise” status by the Investment Center in the Israeli Ministry of Industry Trade
and Labor, and we are therefore eligible for tax benefits under the Israeli Law for the Encouragement of Capital Investments, 1959. The
main benefit is a two-year exemption from corporate tax, commencing when we begin to generate net income derived from the beneficiary
activities in facilities located in Israel, and a reduced corporate tax rate for an additional five to eight years, depending on the
level of foreign investment in each year. In addition, under the January 1, 2011 amendment to the Israeli Law for the Encouragement of
Capital Investments, 1959, a uniform corporate tax rate of 16% applies to all qualifying income of “Preferred Enterprise,”
which we may be able to apply as an alternative tax benefit.
The
tax benefits available to a Beneficiary Enterprise or a Preferred Enterprise are dependent upon the fulfillment of conditions stipulated
under the Israeli Law for the Encouragement of Capital Investments, 1959 and its regulations, as amended, which include, among other
things, maintaining our manufacturing facilities in Israel. If we fail to comply with these conditions, in whole or in part, the tax
benefits could be cancelled and we could be required to refund any tax benefits that we received in the past. If we are no longer eligible
for these tax benefits, our Israeli taxable income would be subject to regular Israeli corporate tax rates. The standard corporate tax
rate for Israeli companies in 2019 and thereafter is 23% of taxable income. The termination or reduction of these tax benefits would
increase our tax liability, which would reduce our profits.
In
addition to losing eligibility for tax benefits currently available to us under Israeli law, if we do not maintain our manufacturing
facilities in Israel, we will not be able to realize certain tax credits and deferred tax assets, if any, including any net operating
losses to offset against future profits.
The
tax benefits available to Beneficiary Enterprises may be reduced or eliminated in the future. This would likely increase our tax liability.
The
Israeli government may reduce or eliminate in the future tax benefits available to Beneficiary Enterprises and Preferred Enterprises.
Our Beneficiary Enterprise status and the resulting tax benefits may not continue in the future at their current levels or at any level.
The tax benefit period is twelve years from the year of election, which means that after a year of election, the two-year exemption and
eight years of reduced tax rate can only be used within the next twelve years. The Company elected the year 2007, as a year of election
and 2011 as an additional year of election. The 2011 amendment regarding Preferred Enterprise may not be applicable to us or may not
fully compensate us for the change. The termination or reduction of these tax benefits would likely increase our tax liability. The amount,
if any, by which our tax liability would increase will depend upon the rate of any tax increase, the amount of any tax benefit reduction,
and the amount of any taxable income that we may earn in the future.
Risks
Related to Our Common Stock, Preferred Stock and Warrants
The
market prices of our common stock are subject to fluctuation and have been and may continue to be volatile, which could result in substantial
losses for investors.
The
market prices of our common stock have been and are likely to continue to be highly volatile and could fluctuate widely in response to
various factors, many of which are beyond our control, including the following:
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technological
innovations or new products and services by us or our competitors; |
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or departures of key personnel; |
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ability to execute our business plan; |
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operating
results that fall below expectations; |
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loss
of any strategic relationship; |
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industry
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In
addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the
operating performance of particular companies. These market fluctuations may also significantly affect the market prices of our common
stock.
Our
common stock could be delisted from the Nasdaq Capital Market if we fail to meet the Nasdaq Capital Market’s stockholders’
equity continued listing standards. Our ability to publicly or privately sell equity securities and the liquidity of our common stock
could be adversely affected if we are delisted from the Nasdaq Capital Market.
Our
common stock is listed on the Nasdaq Capital Market, and we are therefore subject to its continued listing requirements, including requirements
with respect to the market value of publicly-held shares, market value of listed shares, minimum bid price per share, and minimum stockholders’
equity, among others, and requirements relating to board and committee independence. If we fail to satisfy one or more of the requirements,
we may be delisted from the Nasdaq Capital Market.
Delisting
from the Nasdaq Capital Market may adversely affect our ability to raise additional financing through the public or private sale of equity
securities, may significantly affect the ability of investors to trade our securities and may negatively affect the value and liquidity
of our common stock. Delisting also could have other negative results, including the potential loss of employee confidence, the loss
of institutional investors or interest in business development opportunities.
Delaware
law and our corporate charter and bylaws contain anti-takeover provisions that could delay or discourage takeover attempts that stockholders
may consider favorable.
Our
board of directors is authorized to issue shares of preferred stock in one or more series and to fix the voting powers, preferences and
other rights and limitations of the preferred stock. Accordingly, we may issue shares of preferred stock with a preference over our common
stock with respect to dividends or distributions on liquidation or dissolution, or that may otherwise adversely affect the voting or
other rights of the holders of common stock. Issuances of preferred stock, depending upon the rights, preferences and designations of
the preferred stock, may have the effect of delaying, deterring or preventing a change of control, even if that change of control might
benefit our stockholders. In addition, we are subject to Section 203 of the Delaware General Corporation Law. Section 203 generally prohibits
a public Delaware corporation from engaging in a “business combination” with an “interested stockholder” for
a period of three years after the date of the transaction in which the person became an interested stockholder, unless (i) prior to the
date of the transaction, the board of directors of the corporation approved either the business combination or the transaction which
resulted in the stockholder becoming an interested stockholder; (ii) the interested stockholder owned at least 85% of the voting stock
of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding
(a) shares owned by persons who are directors and also officers and (b) shares owned by employee stock plans in which employee participants
do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) on or subsequent to the date of the transaction, the business combination is approved by the board and authorized at an annual
or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66, 2/3%, of the outstanding voting
stock which is not owned by the interested stockholder.
Section
203 could delay or prohibit mergers or other takeover or change in control attempts with respect to us and, accordingly, may discourage
attempts to acquire us even though such a transaction may offer our stockholders the opportunity to sell their stock at a price above
the prevailing market price.
We
have a staggered board of directors, which could impede an attempt to acquire us or remove our management.
Our
board of directors is divided into three classes, each of which serves for a staggered term of three years. This division of our board
of directors could have the effect of impeding an attempt to take over our company or change or remove management, since only one class
will be elected annually. Thus, only approximately one-third of the existing board of directors could be replaced at any election of
directors.
As
a former shell company, resales of shares of our restricted common stock in reliance on Rule 144 of the Securities Act are subject to
the requirements of Rule 144(i).
We
previously were a “shell company” and, as such, sales of our securities pursuant to Rule 144 under the Securities Act of
1933, as amended, cannot be made unless, among other things, at the time of a proposed sale, we are subject to the reporting requirements
of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, and have filed all reports and other materials required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 as amended, as applicable, during the preceding 12 months, other
than Form 8-K reports. Because, as a former shell company, the reporting requirements of Rule 144(i) will apply regardless of holding
period, restrictive legends on certificates for shares of our common stock cannot be removed except in connection with an actual sale
that is subject to an effective registration statement under, or an applicable exemption from the registration requirements of, the Securities
Act of 1933, as amended. Because our unregistered securities cannot be sold pursuant to Rule 144 unless we continue to meet such requirements,
any unregistered securities we issue will have limited liquidity unless we continue to comply with such requirements.
If
securities and/or industry analysts fail to continue publishing research about our business, if they change their recommendations adversely
or if our results of operations do not meet their expectations, our stock price and trading volume could decline.
The
trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about
us or our business. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could
lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. In addition, it is
likely that in some future period our operating results will be below the expectations of securities analysts or investors. If one or
more of the analysts who cover us downgrade our stock, or if our results of operations do not meet their expectations, our stock price
could decline.
Aspects
of the tax treatment of the securities may be uncertain.
The
tax treatment of our preferred stock and our warrants is uncertain and may vary depending upon whether you are an individual or a legal
entity and whether or not you are domiciled in the United States. In the event you are a non-U.S. investor, you should consult your tax
advisors as to the consequences, under the tax laws of the country where you are resident for tax purposes, of acquiring, holding and
disposing of our preferred stock and our warrants.