Item
1. Business.
Overview
We
are a medical device company focusing on the development and commercialization of our proprietary MicroNet™ stent platform technology
for the treatment of complex vascular and coronary disease. A stent is an expandable “scaffold-like” device, usually constructed
of a metallic material, that is inserted into an artery to expand the inside passage and improve blood flow. MicroNet, a micron mesh
sleeve, is wrapped over a stent to provide embolic protection in stenting procedures.
Our
CGuard™ carotid embolic prevention system (“CGuard EPS”) combines MicroNet and a self-expandable nitinol stent in a
single device for use in carotid artery applications. Our CGuard EPS received CE mark approval in the European Union in March 2013 and
was fully launched in Europe in September 2015. Subsequently, we launched CGuard EPS in Russia and certain countries in Latin America
and Asia, including India. In September 2020, we launched CGuard EPS in Brazil after receiving regulatory approval in July 2020 and as
discussed below, on February 3, 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.
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 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.
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. The first patients, who were under the care of principal investigator, Chris Metzger, M.D., system chair of clinical research at
Ballard Health System in Eastern Tennessee, were successfully implanted with the CGuard EPS stent device. These are the first of 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 enrollment phase.
Additionally,
we intend to continue to invest in current and future potential product and manufacturing enhancements for CGuard EPS that are expected
to reduce cost of goods and/or provide the best-in-class performing delivery system. In furtherance of our strategy that focuses on establishing
CGuard EPS as a viable alternative to vascular surgery, we are exploring adding new delivery systems and accessory solutions for procedural
protection to our portfolio.
We
consider the 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 $666 million in 2022 (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). According to this same report,
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 $5 billion.
Our
MGuard™ Prime™ embolic protection system (“MGuard Prime EPS”) is marketed for use in patients with acute coronary
syndromes, notably acute myocardial infarction (heart attack) and saphenous vein graft coronary interventions, or bypass surgery. MGuard
Prime EPS combines MicroNet with a bare-metal cobalt-chromium based stent. MGuard Prime EPS received CE mark approval in the European
Union in October 2010 for improving luminal diameter and providing embolic protection. Over the past years there has been a shift in
industry preferences away from bare-metal stents, such as MGuard Prime EPS in ST-Elevation Myocardial Infarction (“STEMI”)
patients. As a result of declining sales of the MGuard Prime EPS, which we believe this is largely driven by the predominant industry
preferences favoring drug-eluting, or drug-coated, stents, we intend to phase out future sales of our MGuard Prime EPS in 2022.
We
also intend to develop a pipeline of other products and indications by leveraging our MicroNet technology to improve peripheral procedures
such as the treatment of the superficial femoral artery disease and vascular disease below the knee as well as neurovascular procedures,
such as the treatment of acute stroke.
Presently,
none of our products may be sold or marketed in the United States, but we do derive revenues from the use of our products in the currently
ongoing trials.
We
were organized in the State of Delaware on February 29, 2008.
Recent
Developments
Public
Offerings
On
February 8, 2021, we closed an underwritten public offering of 1,935,484 units, with each such unit being comprised of one share of our
common stock, par value $0.0001 per share, and one Series G Warrant to purchase one-half of one share of common stock (the “February
2021 Offering”). The offering price to the public was $9.30 per unit. The Series G Warrants were immediately exercisable at a price
of $10.23 per share, subject to adjustment in certain circumstances, and expire five years from the date of issuance. We also granted
the underwriter of the offering an option to purchase an additional 290,322 shares of common stock and Series G Warrants to purchase
145,161 shares of common stock, which the underwriter exercised in full. In connection with the offering we granted to the underwriter
a compensation warrant to purchase up to 111,290 shares of common stock with an exercise price of $10.23 per share and which are exercisable
for five years from February 3, 2021. Our net proceeds from the offering, after giving effect to the exercise of the underwriter’s
over-allotment option, were approximately $18.9 million, after deducting underwriting discounts and commissions and payment of other
expenses associated with the offering, but excluding the proceeds, if any, from the exercise of Series G Warrants sold in the offering.
Distribution
and Purchase Agreement with Chinese Partners
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 eight-year
exclusive distribution right to sell our products in China with the term of the agreement continuing on a year-to-year basis unless terminated.
Under the Distribution Agreement, the China-based partners will be subject to minimum purchase obligations. The Distribution Agreement
may be terminated for cause upon failure to meet minimum purchase obligations, failure to obtain regulatory approvals or for other material
breaches.
In
addition, and on the same day, we entered into an investment transaction with QIDI, which included (i) an SPA, pursuant to which QIDI
agreed to invest $900,000 in exchange for shares of our common stock at a purchase price of $10.062 per share, and (ii) an IRA, whereby
QIDI was provided certain customary registration rights, including a commitment by us to file a registration statement with the SEC on
Form S-1 or Form S-3 and have such registration statement become effective not later than 150 days following the closing of the transactions
under the SPA.
The
transactions closed on February 5, 2021.
2021
Equity Incentive Plan
On
September 30, 2021, at our 2021 annual meeting of stockholders, our stockholders approved our 2021
Equity Incentive Plan.
ATM
Offering
On
July 28, 2020, we entered into a Sales Agreement with Alliance Global Partners (“A.G.P.”) pursuant to which we may offer
and sell, from time to time, at our option, through or to A.G.P., up to an aggregate of approximately $9,300,000 of shares of common
stock (the “ATM Facility”). Any shares to be offered and sold under the Sales Agreement will be issued and sold pursuant
to the Company’s Registration Statement on Form S-3 (File No. 333-223130), filed with the SEC on February 21, 2018 and the prospectus
supplement thereto filed with the SEC on July 28, 2020, by methods deemed to be an “at the market offering” as defined in
Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended, or if specified by us, by any other method permitted by law.
On January 11, 2021, we increased the aggregate amount of our shares of common stock that may be sold under the Sales Agreement from
$9,300,000 to $10,382,954, and, as a result, utilized and sold the maximum amount allowable under the ATM Facility, which resulted in
an aggregate amount of $10,381,958.
Reverse
Stock Split
On
April 14, 2021, our stockholders approved a reverse stock split of our common stock, following which, and on the same date, our board
of directors approved a ratio of 1-for-15 for the reverse stock split, or the Reverse Stock Split. On April 14, 2021, the Delaware Secretary
of State approved our Certificate of Amendment to our Amended and Restated Certificate of Incorporation, which set an effective date
of April 26, 2021, for the Reverse Stock Split. The post-Reverse Stock Split CUSIP number for our common stock is 45779A 846.
On
the April 26, 2021, the total number of shares of our common stock held by each stockholder was converted automatically into the number
of whole shares of common stock equal to (i) the number of issued and outstanding shares of common stock held by such stockholder immediately
prior to the Reverse Stock Split, divided by (ii) 15.
No
fractional shares were issued in connection with the Reverse Stock Split, and no cash or other consideration was be paid. Instead, we
issued one whole share of the post-Reverse Stock Split common stock to any shareholder who otherwise would have received a fractional
share as a result of the Reverse Stock Split.
Appointment
of Kathryn Arnold to our Board of Directors
On
May 10, 2021, the board of directors appointed Ms. Kathryn Arnold as a Class III member of the Board, effective as of that date, with
a term expiring at the Company’s 2023 annual meeting of stockholders. In connection with her appointment, on May 10, 2021, Ms.
Arnold was granted (a) options to purchase 3,512 shares of Common Stock (the “Options”), and (b) 10,536 shares of restricted
stock (the “Restricted Stock”, together with the Options the “Arnold Grant”). The Options have an exercise price
equal to the closing fair market value of the Common Stock on the date of grant, subject to the terms and conditions of the Company’s
2013 Long-Term Incentive Plan (the “Plan”). The Options and the Restricted Stock will vest and become exercisable in three
equal annual installments beginning on the one-year anniversary of the date of the Arnold Grant, provided that in the event that Ms.
Arnold is either (i) not reelected as a director at the Company’s 2023 annual meeting of stockholders, or (ii) not nominated for
reelection as a director at the Company’s 2023 annual meeting of stockholders, any unvested Options or Restricted Stock will vest
in full and become exercisable on the date of the decision not to reelect or nominate her (as applicable). The Options have a term of
10 years from the date of grant.
Nasdaq
Listing
On
May 10, 2021, we announced that our shares that previously traded on the NYSE American were approved for listing on the Nasdaq Capital
Market (“Nasdaq”) and such shares began trading on Nasdaq on May 21, 2021 under the symbol, “NSPR.” On May 27,
2021, we announced that our warrants that previously traded on the NYSE American were approved for listing on Nasdaq, and such warrants
began trading on June 8, 2021. On July 7, 2021, our Series A warrants that previously traded under symbol “NSPRW” expired.
National
Commission for the Evaluation of Medical Devices and Health Technologies
On
October 13, 2021, we announced that our CGuard EPS stent system received a positive opinion from the National Commission for the Evaluation
of Medical Devices and Health Technologies (CNEDIMTS) of the French National Authority for Health (HAS) regarding reimbursement in France,
and the CGuard EPS was being added to the list of reimbursed medical products (LPPR) effective October 25, 2021. This was the final step
to full commercial launch of CGuard EPS following CNEDIMTS’ positive opinion for reimbursement received by the Company on May 11,
2021 for the treatment of symptomatic and non-symptomatic lesions when surgery is not indicated.
COVID-19
Developments
The
COVID-19 global pandemic has led governments and authorities around the globe to take various precautionary measures in order to limit
the spread of COVID-19, including government-imposed quarantines, lockdowns, and other public health safety measures. 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 have shifted
resources to patients affected by COVID-19. To the best of our knowledge, there are European countries in which we operate reinstated
non-emergency procedures. However, new COVID-19 variants, and potentially increasing infection rates make the current COVID-related environment
highly volatile and uncertain and we anticipate that the continuation of the pandemic and related restrictions and safety measures will
likely result in continued fluctuations in sales of our products, potentially enrollments in our studies as well as potential disruptions
to our supply chain for the upcoming periods.
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
2021, 2.8 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 380,000 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 two 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 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.
Peripheral
Peripheral
vascular diseases (“PVD”) are caused by the formation of atherosclerotic plaques in arteries, which carry blood to organs,
limbs and head. It is also known as peripheral artery occlusive disease or peripheral artery disease. It comprises diseases pertaining
to both peripheral veins and peripheral arteries, affecting the peripheral and cardiac circulation in the body. PVD includes diseases
outside of the heart and brain, but most times refers to the leg and foot.
Peripheral
stents are more often used in combination with balloon angioplasty to open the veins, so that blood can flow through the blocked veins
in the body.
The
growing prevalence of PVD is expected to cause increased demand for treatment options. PVD is age related and its prevalence increases
markedly with advancing age. In addition, PVD is more prevalent in lower and medium income countries than in higher income countries
(https://www.thelancet.com/journals/langlo/article/PIIS2214-109X(19)30255-4)
Our
Products
Below
is a summary of our current products and products under development, and their intended applications.
MicroNet
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.
CGuard
– Carotid 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™ carotid embolic prevention system (“CGuard EPS”) combines MicroNet and a self-expandable nitinol stent in a
single device for use in carotid artery applications. Our CGuard EPS received CE mark approval in the European Union in March 2013 and
was fully launched in Europe in September 2015. Subsequently, we launched CGuard EPS in Russia and certain countries in Latin America
and Asia, including India. In September 2020, we launched CGuard EPS in Brazil after receiving regulatory approval in July 2020 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.
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.
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. The first patients, who were under the care of principal investigator, Chris Metzger, M.D., system chair of clinical research at
Ballard Health System in Eastern Tennessee, were successfully implanted with the CGuard EPS stent device. These are the first of 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 enrollment phase. Additionally, we
intend to continue to invest in current and future potential product and manufacturing enhancements for CGuard EPS that are expected
to reduce cost of goods and/or provide the best-in-class performing delivery system. In furtherance of our strategy that focuses on establishing
CGuard EPS as a viable alternative to vascular surgery, we are exploring adding new delivery systems and accessory solutions for procedural
protection to our portfolio.
MGuard
Products– Coronary Applications
Bare-Metal
Stent MGuard Product. Our MGuard Prime EPS coronary product is comprised of MicroNet wrapped around a cobalt-chromium based
bare-metal stent. In comparison to a conventional bare-metal stent, we believe our MGuard Prime EPS coronary product with MicroNet mesh
provides protection from dangerous embolic showers in patients experiencing ST-segment elevation myocardial infarction, the most severe
form of a heart attack, referred to as STEMI. Standard stents were not engineered for heart attack patients. Rather, they were designed
for treating stable angina patients whose occlusion is different from that of an occlusion in a heart attack patient. In acute heart
attack patients, the plaque or thrombus is unstable and often breaks up as the stent is implanted causing downstream blockages in a significant
portion of heart attack patients. Our MGuard Prime EPS is integrated with a precisely engineered micro net mesh that is designed to prevent
the unstable arterial plaque and thrombus that caused the heart attack blockage from breaking off. Over the past years there has been
a shift in industry preferences away from bare-metal stents, such as MGuard Prime EPS in ST-Elevation Myocardial Infarction STEMI patients.
As a result of declining sales of the MGuard Prime EPS, which we believe this is largely driven by the predominant industry preferences
favoring drug-eluting, or drug-coated, stents, we intend to phase out future sales of our MGuard Prime EPS in 2022.
PVGuard
— Peripheral Vascular Applications
We
intend to develop our MicroNet mesh sleeve and a self-expandable stent for use in peripheral vascular applications, to which we refer
to as PVGuard. PVDs are usually characterized by the accumulation of plaque in arteries in the legs. This accumulation can lead to the
need for amputation or even death, when untreated. PVD is treated either by trying to clear the artery of the blockage, or by implanting
a stent in the affected area to push the blockage out of the way of normal blood flow.
As
in carotid procedures, peripheral procedures are characterized by the necessity of controlling embolic showers both during and post-procedure.
Controlling embolic showers is so important in these indications that physicians often use fully covered stents, at the risk of blocking
branching vessels, to ensure that emboli do not fall into the bloodstream and move to the brain. We believe that our MicroNet design
will provide substantial advantages over existing therapies in treating peripheral artery stenosis.
However,
as we plan to focus our resources on the further expansion of our sales and marketing activities for CGuard EPS and potential product
enhancements and manufacturing enhancements for CGuard EPS expected to reduce cost of goods and/or provide the best-in-class performing
delivery system and its submission for CE mark approval, we do not intend to pursue the development of PVGuard in the near future.
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.
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:
|
● |
The
CARENET trial demonstrated safety of the CGuard EPS stent, with a 30 day MACCE rate of 0%. |
|
|
|
|
● |
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. |
|
|
|
|
● |
Twelve
month data showed no stroke or stroke-related deaths, and no cardiac adverse events. |
|
|
|
|
● |
CGuard
EPS offers enhanced benefits for patients undergoing CAS with unprecedented safety. |
Physician-Sponsored
Clinical Trials for CGuard—PARADIGM-101 Study
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.
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; |
|
|
|
|
● |
Angiographic
diameter stenosis or vessel narrowing was reduced from 83±9% to only 6.7±5% (p<0.001); |
|
|
|
|
● |
Periprocedural
death/major stroke/ myocardial infarction (“MI”) rates were 0%; |
|
|
|
|
● |
One
event was adjudicated by the Clinical Events Committee as a minor stroke (0.9%), with no change in NIH Stroke Scale or modified Ranking
scale; |
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.
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; |
|
|
|
|
● |
No
peri- or post-procedural complications; |
|
|
|
|
● |
No
deaths, major adverse events, minor or major strokes, or new neurologic symptoms during the six months following the procedure; |
|
|
|
|
● |
Modified
Rankin Scale improved for the symptomatic patients from 1.56 prior to the procedure to 0 afterwards; |
|
|
|
|
● |
All
vessels treated with CGuard EPS remained patent (open) at six months; and |
|
|
|
|
● |
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.
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; |
|
|
|
|
● |
No
MI, major stroke or death at 30 days; |
|
|
|
|
● |
There
were two transient ischemic attacks and five periprocedural minor strokes, including one thrombosis solved by surgery. |
|
|
|
|
● |
Total
elimination of post-procedural neurologic complications by 30 days; |
|
|
|
|
● |
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%). |
|
|
|
|
● |
At
12 months, there were no new major neurological adverse events, thrombosis or external carotid occlusion recorded; |
|
|
|
|
● |
One
myocardial infarction occurred at 12 months. |
Peri-procedural
brain lesions prevention in CAS (3PCAS): Randomized trial comparing CGuard stent vs. WallStent™ Study
3PCAS
study was an independent investigator-led single center randomized clinical trial, comparing CGuard EPS vs. WallStent™, intended
to evaluate the incidence of peri-procedural diffusion-weighted-magnetic-resonance-imaging (DW-MRI) new brain lesions after carotid artery
stenting. Sixty-one consecutive patients referred for carotid revascularization (between January 2015 and October 2016) were eligible
for the study. The results of the 3PCAS study was published in the International Journal of Cardiology in September 2018. The discussion
distinguished between peri-procedural (from procedure to 48h -72h) and post-procedural periods (72h to 30 days) where the CGuard EPS
demonstrated a reduction in the post-procedural embolic effect during the carotid plaque healing period. In contrast, there was no difference
between the two stent groups during the peri-procedural stage because of, according to the published article, the presence of bilateral/contralateral
lesions (lesions resulting from the contralateral artery from the non-treated carotid) which suggest that the peri-procedural neurological
damage may have originated from extra-carotid sources (outside of the artery which was treated and outside the stent itself).
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. |
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
“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 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.
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, myocardia infarctions or deaths in the CGuard arm and three events the Acculink™ arm (two
strokes and one myocardial infarction). |
Completed
Clinical Trials for MGuard Bare-Metal Coronary Products
We
have completed eight clinical trials with respect to our first generation stainless steel-based MGuard coronary device and our cobalt-chromium
based MGuard Prime EPS stent. Our first generation MGuard stent combining the MicroNet with a stainless steel stent received CE mark
approval for the treatment of coronary artery disease in the European Union in October 2007. We subsequently replaced the stainless steel
stent with a more advanced cobalt-chromium based stent for MGuard Prime EPS.
The
First in Men (FIM) study conducted in Germany from the fourth quarter of 2006 through the second quarter of 2008 focused on patients
with occlusion in their stent graft. This group is considered to be in “high risk” for complications during and shortly after
the procedure due to the substantial risk of occurrence of a thromboembolic event. The study demonstrated MGuard’s safety in this
high risk group. This study was followed by the GUARD study in Brazil in 2007 with a similar patient population which reinforced the
safety profile of MGuard in patients prone to procedural complications. The MAGICAL study was a pilot study in STEMI patients conducted
in Poland from 2008 through 2012 which demonstrated safety, measured by MACE rates at 30 days following the procedure, as well as efficacy
results, measured by the ability of MGuard to reestablish blood flow into the infarcted area of the muscle. Furthermore, we conducted
three registries (iMOS, IMR and iMOS Prime) that confirmed the feasibility of MGuard and MGuard Prime EPS for the treatment of STEMI
patients and the safety of MGuard and MGuard Prime EPS in the STEMI patient group. Safety was repeatedly demonstrated in these trials
and registries by the low mortality rate in the first month after the procedure.
In
the second calendar quarter of 2011, we began the MGuard for Acute ST Elevation Reperfusion Trial (which we refer to as our “MASTER
I trial”), a prospective, randomized study, which demonstrated that among patients with acute STEMI undergoing emergency PCI, patients
treated with MGuard had superior rates of epicardial coronary flow (blood flow within the vessels that run along the outer surface of
the heart) and complete ST-segment resolution, or restoration of blood flow to the heart muscle after a heart attack, compared to those
treated with commercially-approved bare metal or drug-eluting stents. The results of this trial are summarized in greater detail below.
Finally,
the MASTER II trial, which we initially initiated as part of our efforts to seek approval of our MGuard Prime EPS by the FDA, was discontinued
at our election in its current form in light of market conditions moving toward the use of drug-eluting stents over bare-metal stents.
Analysis of the patients already enrolled in the MASTER II trial prior to its suspension, however, reconfirmed the MASTER I safety results
due to a continued low mortality rate.
MASTER
I Trial
In
the second calendar quarter of 2011, we began the MASTER I trial, a prospective, randomized study in Europe, South America and Israel
to compare the MGuard with commercially-approved bare metal and drug-eluting stents in achieving superior myocardial reperfusion (the
restoration of blood flow) in primary angioplasty for the treatment of acute STEMI, the most severe form of heart attack. The MASTER
I trial enrolled 433 subjects, 50% of whom were treated with MGuard and 50% of whom were treated with a commercially-approved bare metal
or drug-eluting stents. The detailed acute and 30 days results from the trial were presented at the TCT conference on October 24, 2012
and published (Prospective, Randomized, Multicenter Evaluation of a Polyethylene Terephthalate Micronet Mesh–Covered Stent (MGuard)
in ST-Segment Elevation Myocardial Infarction, Stone et. al, JACC, 60; 2012). The results were as follows:
|
● |
The
primary endpoint of post-procedure complete ST-segment resolution (restoration of blood flow to the heart muscle after a heart attack)
was statistically significantly improved in patients randomized to the MGuard compared to patients receiving a commercially-approved
bare metal or drug-eluting stent (57.8% vs. 44.7%). |
|
|
|
|
● |
Patients
receiving MGuard exhibited superior rates of thrombolysis in myocardial infarction (TIMI) 3 flow, which evidences normal coronary
blood flow that fills the distal coronary bed completely, as compared to patients receiving a commercially-approved bare metal or
drug-eluting stent (91.7% vs. 82.9%), with comparable rates of myocardial blush grade 2 or 3 (83.9% vs. 84.7%) and corrected TIMI
frame count (cTFC) (17.0 vs. 18.1 |
|
|
|
|
● |
Angiographic
success rates (attainment of <50% final residual stenosis of the target lesion and final TIMI 3 flow) were higher in the MGuard
group compared to commercially-approved bare metal or drug-eluting stents (91.7% vs 82.4%). |
|
|
|
|
● |
Mortality
(0% vs. 1.9%) and major adverse cardiac events (1.8% vs. 2.3%) at 30 days post procedure were not statistically significantly different
between patients randomized to MGuard as opposed to patients randomized to commercially-approved bare metal or drug-eluting stents.
All other major adverse cardiac event components, as well as stent thrombosis, were comparable between the MGuard and commercially-approved
bare metal or drug-eluting stents. |
The
six month results from the MASTER I trial were presented at the 2013 EuroPCR Meeting, the official annual meeting of the European Association
for Percutaneous Cardiovascular Interventions, on May 23, 2013 in Paris, France. The results were as follows:
|
● |
Mortality
(0.5% vs. 2.8%) and major adverse cardiac events (5.2% vs. 3.4%) at 6 months post procedure were not statistically significantly
different between patients randomized to the MGuard as compared to patients randomized to commercially-approved bare metal or drug-eluting
stents. All other major adverse cardiac event components, as well as stent thrombosis, were comparable between patients treated with
MGuard and those treated with commercially-approved bare metal or drug-eluting stents. |
The
twelve month results from the MASTER I trial were presented at the TCT conference on October 29, 2013 and published (Mesh-Covered Embolic
Protection Stent Implantation in ST-Segment–Elevation Myocardial Infarction Final 1-Year Clinical and Angiographic Results From
the MGUARD for Acute ST Elevation Reperfusion Trial, Dudek et. al, Coronary Interventions, 2014). The results were as follows:
|
● |
Mortality
(1.0% vs. 3.3%) and major adverse cardiac events (9.1% vs. 3.3%) at 12 months post procedure were not statistically significantly
different between patients randomized to the MGuard as opposed to those randomized to commercially-approved bare metal or drug-eluting
stents. All other major adverse cardiac events, as well as stent thrombosis, were comparable between the MGuard and commercially-approved
bare metal or drug-eluting stents. |
In
summary, the MASTER I trial demonstrated that among patients with acute STEMI undergoing emergency PCI patients treated with MGuard had
superior rates of epicardial coronary flow (blood flow within the vessels that run along the outer surface of the heart) and complete
ST-segment resolution compared to those treated with commercially-approved bare metal or drug-eluting stents. In addition, patients treated
with MGuard showed a slightly lower mortality rate and a slightly higher major adverse cardiac event rate as compared to patients treated
with commercially-approved bare metal or drug-eluting stents six and twelve months post procedure.
A
detailed table with the results from the MASTER I trial is set forth below. The “p-Value” refers to the probability of obtaining
a given test result. Any p value less than 0.05 is considered statistically significant.
| |
MGuard | | |
Bare
Metal Stents/Drug Eluting
Stents | | |
p-Value | |
Number
of Patients | |
| 217 | | |
| 216 | | |
| — | |
TIMI 0-1 | |
| 1.8 | | |
| 5.6 | | |
| 0.01 | |
TIMI 3 | |
| 91.7 | | |
| 82.9 | | |
| 0.006 | |
Myocardial
blush grade 0-1 | |
| 16.1 | | |
| 14.8 | | |
| 0.71 | |
Myocardial
blush grade 3 | |
| 74.2 | | |
| 72.1 | | |
| 0.62 | |
ST
segment resolution >70 | |
| 57.8 | | |
| 44.7 | | |
| 0.008 | |
30
day major adverse cardiac event | |
| 1.8 | | |
| 2.3 | | |
| 0.75 | |
6
month major adverse cardiac event | |
| 5.2 | | |
| 3.4 | | |
| 0.34 | |
12
month major adverse cardiac event | |
| 9.1 | | |
| 3.3 | | |
| 0.02 | |
Future
Clinical Trials for CGuard EPS and MGuard Prime EPS
Post-marketing
clinical trials (outside the United States) could be conducted to further evaluate the safety and efficacy of CGuard EPS in specific
indications. These trials would be designed to facilitate market acceptance and expand the use of the product. We expect to be able to
rely upon CE mark approval of the product and other supporting clinical data to obtain local approvals.
We
do not anticipate conducting additional post-marketing clinical trials for our bare-metal MGuard coronary products.
Growth
Strategy
Our
primary business objective is to utilize our proprietary MicroNet technology and products to become the industry standard for treatment
of stroke, complex vascular and coronary 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 adjuctive
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. |
|
|
● |
Portfolio
expansion and pipeline development We will continue to invest in advancing our portfolio with new delivery system alternatives
to facilitate the use of CGuard by all physicians. Our delivery systems will enable all endovascular access points including accessory
devices for Arterial Venous (AV) shunting. |
|
|
● |
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. 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. |
● |
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
The
carotid stent markets in the United States and Europe are dominated by Abbott Laboratories, Boston Scientific Corporation, Covidien Ltd.
(currently part of Medtronic, Inc.), and Cordis Corporation (currently part of Cardinal Health, Inc.). Gore Medical and Terumo Medical
Corporation produce a polytetrafluoroethylene mesh-covered stent and a double layer metal stent, respectively. All of these larger companies
have substantially 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 and relationships
with our target customers, as well as worldwide distribution methods that are more effective than ours. However, we believe that the
European market is somewhat fragmented, and, in our opinion, smaller competitors may be able to gain market share with greater flexibility.
Neurovascular
Leading
industry players in the global neurovascular devices market include Medtronic, Stryker, Terumo and Johnson & Johnson. Acquisitions
and mergers are increasingly used as a strategy for product portfolio expansion and to grow footprint. (Global Market Insights, Inc.
- Devices Market Share 2018-2024 Industry Size Report. https://www.gminsights.com/industry-analysis/neurovascular-devices-market)
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.
As
a result of declining sales of the MGuard Prime EPS, which we believe is largely driven by the predominant industry preferences favoring
drug-eluting stents rather than bare metal stents such as MGuard Prime EPS in STEMI patients, we intend to phase out future sales of
our MGuard Prime EPS in 2022.
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 products and MGuard coronary products 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 53 issued patents, including 16 patents issued in the U.S., and 17 pending patent applications, 7 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 | |
| |
|
Visualization
of blood flow in a venous/arterial shunting system | |
US
(Provisional) | |
| |
|
Device
for shunting blood between the arterial and venous systems of a patient | |
US
(provisional) | |
| |
|
Removing
air from fluid in vascular and/or arterial delivery lines or blood circuits | |
US
(provisional)
| |
| |
|
| |
| |
| |
|
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 2/1/2014 3/29/2017 11/27/2018
10/28/2019 |
Optimized
Stent Jacket | |
EPO
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
(validated in 9 countries: BE, CH, DE, FR, UK, IT, IE, LX, NL) | |
12/11/2018 12/9/2015
1/2/2013 5/30/2018 10/01/2020 9/15/2015 12/27/2016 10/10/2017 9/11/2018 9/10/2019 9/10/2019 10/11/2017 |
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 4/22/2015
10/27/2015 2/13/2019 3/1/2017 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
EP IN CN JP | |
| |
|
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® (US, European Union, and UK) |
|
● |
NGuard®
(US, European Union) |
|
● |
PVGuard®
(US, European Union, and UK) |
|
● |
Micronet®
(US) |
|
● |
(MNP
Micronet Protection logo) (European Union and UK) |
|
● |
Carenet®)European
Union and UK) |
|
● |
SmartFit™
(US), UK |
|
● |
SmartFit
Logo (EP, UK, US); CN & JP in preparation |
|
● |
CGuard
Prime (EP, UK, US) |
|
● |
SwitchGuard
(EP, UK) |
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 the Medical Device Directive 93/42/EEC (“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 the products we currently distribute into the European Union display 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 European Medical Devices Regulation, or MDR (MDR 2017/745, Council Directive 93/42/EEC). The MDR
will apply after a transitional period of three years ending on May 26, 2021, which is expected to change several aspects of the existing
regulatory framework in Europe. Manufacturers have 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. After May 26, 2021, medical devices can still be placed on the market
under the provision of the MDD until May 26, 2024; provided the CE Mark was issued prior to this date and the manufacturer continues
to comply with this directive. By May 26, 2024, all medical devices entering the EU will need to have a CE Mark under the MDR, even if
they have been on the market previously under the MDD. In our case, CGuard and MGuard Prime can continue to be marketed under the MDD
until November 12, 2022. Specifically, the EU MDR will require changes in the clinical evidence required for medical devices, post-market
clinical follow-up evidence, annual reporting of safety information for Class III products, Unique Device Identification (“UDI”)
for all products, submission of core data elements to a European UDI database prior to placement of a device on the market, and multiple
other labeling changes. Approvals for certain of our currently-marketed products could be curtailed or withdrawn as a result of the implementation
and recertification process of the EU MDR and acquiring approvals for new products could be more challenging, time consuming and costly.
As
noted below, we have or had regulatory approval and made sales of CGuard EPS, MGuard Prime EPS or both products either through distributors
pursuant to distribution agreements or directly, in the following countries: Argentina, Australia, Austria, Belarus, Belgium, Brazil,
Bulgaria, Chile, Colombia, Croatia, Cyprus, Czech Republic, Denmark, Ecuador, Estonia, Finland, France, Germany, Hong Kong, Hungary,
India Ireland, Israel, Italy, Latvia, Lithuania, Luxembourg, Malaysia, Malta, Mexico, Netherlands, New Zealand, Norway, Peru, Poland,
Portugal, Romania, Russia, Saudi Arabia, Serbia, Slovakia, Slovenia, South Africa, Spain, Sweden, Switzerland, Turkey, Vietnam, Taiwan
and the United Kingdom. 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 above-listed countries that are not members of the European Union 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.
In
October 2007, our first generation MGuard stent combining the MicroNet with a stainless-steel stent received CE mark approval for the
treatment of coronary artery disease in the European Union. We subsequently replaced the first generation MGuard product with MGuard
Prime EPS, which uses a more advanced cobalt-chromium based stent. Our MGuard Prime EPS received CE mark approval in the European Union
in October 2010 and marketing approval in those countries listed in the table below.
The
CGuard EPS received CE mark approval in the European Union on March 14, 2013 and marketing approval in the countries listed in the table
below. We are currently seeking marketing approval for CGuard EPS in, South Korea.
Please
refer to the table below setting forth the approvals and sales made for CGuard EPS and the MGuard Prime 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 | |
Y | |
| Y | |
Austria | |
Y | |
| Y | |
Belarus | |
Y | |
| Y | |
Belgium | |
Y | |
| Y | |
Brazil | |
Y | |
| Y | |
Bulgaria | |
Y | |
| Y | |
Chile | |
Y | |
| Y | |
Colombia | |
Y | |
| Y | |
Croatia | |
Y | |
| N | |
Cyprus | |
Y | |
| Y | |
Czech
Republic | |
Y | |
| Y | |
Denmark | |
Y | |
| Y | |
Dominican
Republic | |
Y | |
| Y | |
Ecuador | |
Y | |
| Y | |
Estonia | |
Y | |
| Y | |
Finland | |
Y | |
| Y | |
France | |
Y | |
| Y | |
Germany | |
Y | |
| Y | |
Greece | |
Y | |
| Y | |
Netherlands | |
Y | |
| Y | |
Hong
Kong | |
Y | |
| Y | |
Hungary | |
Y | |
| Y | |
Iceland | |
Y | |
| N | |
India | |
Y | |
| Y | |
Ireland | |
Y | |
| Y | |
Israel | |
Y | |
| Y | |
Italy | |
Y | |
| Y | |
Kazakhstan | |
N | |
| Y | (1) |
Latvia | |
Y | |
| Y | |
Lithuania | |
Y | |
| Y | |
Liechtenstein | |
Y | |
| N | |
Luxembourg | |
Y | |
| N | |
Malaysia | |
N | |
| N | |
Malta | |
Y | |
| N | |
Mexico | |
Y | |
| Y | |
Montenegro | |
Y | |
| N | |
New
Zealand | |
Y | |
| N | |
Norway | |
Y | |
| N | |
Peru | |
Y | |
| Y | |
Poland | |
Y | |
| Y | |
Portugal | |
Y | |
| Y | |
Romania | |
Y | |
| Y | |
Russia | |
Y | |
| Y | |
Saudi
Arabia | |
N | |
| N | |
Serbia | |
Y | |
| Y | |
Slovakia | |
Y | |
| Y | |
Slovenia | |
Y | |
| Y | |
South
Africa | |
Y | |
| Y | |
Spain | |
Y | |
| Y | |
Sweden | |
Y | |
| Y | |
Switzerland | |
Y | |
| Y | |
Turkey | |
Y | |
| Y | |
Taiwan | |
Y | |
| N | |
Venezuela | |
N | |
| N | |
Vietnam | |
Y | |
| Y | |
Ukraine | |
Y | |
| Y | |
United
Kingdom | |
Y | |
| Y | |
United
States | |
N | |
| Y | (2) |
(1)
|
Refers
to temporary approval to import limited amount of units (400) to Kazakhstan. |
(2)
|
Refers to units used in our ongoing FDA trial.
|
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 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 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 FDA guidelines that do not
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 began shipping our MGuard product to customers in Europe in January 2008 and CGuard product to customers
in Europe in 2014 and have since expanded our global distribution network to Southeast Asia, India, Latin America and Israel. 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 recently 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.
Natec
Medical Ltd. supplies us with catheters that help create the base for our CGuard EPS stents. Our agreement with Natec Medical Ltd., as
amended, may be terminated by us upon eight months’ notice. On August 1, 2017, we amended the agreement with Natec Medical Ltd.,
so that we are responsible for purchasing and handling inventory of CGuard EPS delivery system, and Natec Medical Ltd.is responsible
for the manufacturing process.
Natec
Medical Ltd. supplies us with catheters that help create the base for our MGuard Prime EPS. Our agreement with Natec Medical Ltd., which
may be terminated by either party upon six months’ notice, calls for non-binding minimum orders.
The
cobalt-chromium stent for our MGuard Prime EPS was designed by Svelte Medical Systems Inc. We have an agreement with Svelte Medical Systems
Inc., as amended, that grants us a non-exclusive, worldwide license for production and use of the MGuard Prime cobalt-chromium stent
for the life of the stent’s patent, subject to the earlier termination of the agreement upon the bankruptcy of either party or
the uncured default by either party under any material provision of the agreement. Our royalty payments to Svelte Medical Systems Inc.
are determined by the sales volume of MGuard Prime EPS. Currently, the royalty rate is 2.9% of all net sales.
We
manufacture our CGuard EPS and MGuard Prime EPS at our own facility. The bare-metal cobalt-chromium stents for our MGuard Prime EPS and
the self-expanding bare-metal stents for our CGuard EPS are being manufactured and supplied by MeKo Laserstrahl-Materialbearbeitung.
Our agreement with MeKo Laserstrahl-Materialbearbeitung for the production of electro polished L605 bare-metal stents for MGuard Prime
EPS and CGuard EPS is priced on a per-stent basis, subject to the quantity of stents ordered. The complete assembly process for MGuard
Prime EPS and CGuard EPS, 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 MGuard Prime EPS and CGuard EPS 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.
Each
MGuard stent is manufactured from two main components, the stent and the mesh polymer. The stent is made out of cobalt chromium. This
material is readily available, and we acquire it in the open market. The mesh is made from polyethylene terephthalate (polyester). This
material is readily available in the market as well, because it is used for many medical applications.
A
CGuard EPS 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. This material is readily
available in the market as well, because it is used for many medical applications. In the event that our supplier can no longer supply
this material in fiber form, we would need to qualify another supplier, which could take several months. 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 several months. 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:
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the
COVID-19 pandemic has caused interruptions or delays of our business plan and may have a significant adverse effect on our business; |
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we
have a history of net losses and may experience future losses; |
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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; |
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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; |
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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; |
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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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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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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; |
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though
necessary to pursue FDA premarket approval, pre-clinical and clinical trials are inherently lengthy and expensive and subject to
any number of regulatory and/or clinical difficulties that can cause further delays, additional costs, and/or rejection by the FDA,
and any such delay, added cost, or failure in connection with any future clinical trials could prevent us from commercializing our
products, including MicroNet products in the United States, which would materially and adversely affect our results of operations
and the value of our business; |
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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; |
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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; |
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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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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; |
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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; |
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offers
or availability for sale of a substantial number of shares of our common stock may cause the price of our publicly traded securities
to decline; |
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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; |
Risks
Related to Our Business
The
COVID-19 pandemic has caused interruptions or delays of our business plan and may have a significant adverse effect on our business.
We
have been impacted by the COVID-19 pandemic, and we cannot predict the future impacts the COVID-19 pandemic, including the emergence
of new strains such as the Omicron or Delta variant, may have on its business, results of operations and financial condition. The COVID-19
global pandemic has led governments and authorities around the globe to take various precautionary measures in order to limit the spread
of COVID-19, including government-imposed quarantines, lockdowns, and other public health safety measures. 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 have shifted resources to
patients affected by COVID-19. To the best of our knowledge, some European countries in which we operate reinstated non-emergency procedures.
In particular, in November 2021, the Government of Israel announced that non-Israeli residents or citizens, except for non-nationals
whose lives are based in Israel, are not allowed to enter Israel, New COVID-19 variants, and potentially increasing infection rates make
the current COVID-related environment highly volatile and uncertain, and we anticipate that the continuation of the pandemic and related
restrictions and safety measures will likely result in continued fluctuations in sales of our products, enrollments in our studies as
well as potential disruptions to our supply chain, for the upcoming periods.
During
this uncertain time, we are committed to the health and safety of our employees. In response to the COVID-19 pandemic, we follow government
regulations which may include at certain periods having employees work from home, while implementing additional safety measures for employees
continuing critical on-site work.
Governmental
mandates related to COVID-19 or other infectious diseases may impact, our personnel and personnel at third-party manufacturing facilities
in Israel and other countries, and the availability or cost of materials, which would disrupt our supply chain and/or reduce our margins.
Although the manufacturing of our products in Israel has not been materially impacted by COVID-19 as of February 2022, we cannot guarantee
that we will continue to manufacture at full capacity in the event that pandemic persists, and further restrictions are imposed.
Finally,
we anticipate that the COVID-19 pandemic may impact clinical and regulatory matters. COVID-19 is delaying enrollment in clinical trials
across the medical device industry and may affect any new trials we decide to pursue. COVID-19 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.
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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 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 coronavirus. The actions to contain COVID-19 or treat its impact,
the efficacy and scale of the various vaccines currently deployed across the world, among others. Moreover, COVID-19 has had indeterminable
adverse effects on general commercial activity and the world economy, and our business and results of operations could be adversely affected
to the extent that COVID-19 or any other epidemic continues to harm the global economy generally.
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.
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 $14.9 million for the fiscal year ended December
31, 2021, and had a net loss of approximately $10.5 million during the fiscal year ended December 31, 2020. As of December 31, 2021,
we had an accumulated deficit of $183 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.
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.
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, Medtronic, Inc., and Cardinal Health, Gore Medical 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. 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. For CGuard EPS and MGuard Prime
EPS, we depend on MeKo Laserstrahl-Materialbearbeitung for the laser cutting of the stent, Natec Medical Ltd. for the supply of catheters,
and Biogeneral Inc. for the fiber. We may have difficulty obtaining similar components from other suppliers that are acceptable to the
FDA or foreign regulatory authorities if it becomes necessary.
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.
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 our Products, Clinical Trials and Regulatory Matters
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.
Clinical
trials necessary to support a pre-market approval application to the FDA for our products, including CGuard EPS stent will be expensive
and will 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.
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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.
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 experiences 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
expect to derive our revenue from sales of our CGuard EPS stent product and other products we may develop, such as CGuard EPS with enhancements.
If we fail to generate revenue from these sources, our results of operations and the value of our business would be materially and adversely
affected.
We
expect our revenue to be generated from sales of our CGuard EPS stent products and other products we may develop. Future sales of CGuard
EPS will be subject to the receipt of regulatory approvals and commercial and market uncertainties that may be outside our control. In
addition, there may be insufficient demand for other products we are seeking to develop, such as CGuard EPS with enhancements. If we
fail to generate expected revenues from these products, our results of operations and the value of our business and securities would
be materially and adversely affected.
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 and MGuard Prime EPS products 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 or MGuard Prime 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 or MGuard Prime 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.
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 either CGuard EPS or MGuard Prime 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.
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 recent IDE approval for CGuard™ Carotid Stent System, CARENET-III, we must apply for and obtain IRB approval of
the proposed CGuard EPS clinical study 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 CGuard EPS trial. If we obtain IDE approval, IRB approval, and meet all of the other applicable
requirements that must be met before beginning clinical trials in the United States, we will, then, be able to lawfully initiate the
clinical investigation of the safety and effectiveness of CGuard EPS in the United States.
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 CGuard EPS or any new devices 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.
Though
necessary to pursue FDA’s premarket approval, pre-clinical and clinical trials are inherently lengthy and expensive and subject
to any number of regulatory and/or clinical difficulties that can cause further delays, additional costs, and/or rejection by the FDA,
and any such delay, added cost, or failure in connection with any future clinical trials could prevent us from commercializing our MicroNet
products in the United States, which would materially and adversely affect our results of operations and the value of our business.
As
part of the regulatory process, we must conduct clinical trials for each product candidate to demonstrate safety and efficacy to the
satisfaction of the regulatory authorities, including, if we seek in the future to sell our products in the United States, the FDA. Clinical
trials are subject to rigorous regulatory requirements and are expensive and time-consuming to design and implement. They 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. In some trials, a greater number of patients and a longer follow-up
period may be required. 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 existing products and those 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. In addition, market demand may change for products being tested due to the length of time
needed to complete requisite clinical trials.
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.
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 claims 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 are not yet fully implemented
and for which it is unclear what the full impact will be from the legislation.
The
legislation 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, as well as efforts
by the Trump Administration 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 is
expected to rule in that case in early 2021. Assuming entire Affordable Care Act is not ruled to be unconstitutional, the 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 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 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 the Affordable Care Act. 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 a new Medical Device Regulation (EU) 2017/745 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. As a result, the
new legislation can prevent or delay the CE marking and certifications of our products under development or impact our ability to modify
our currently CE marked products on a timely basis. 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.
General
Risk Factors
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 Ordinary Shares.
We
face risks associated with litigation and claims.
We
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, the COVID-19 pandemic has significantly affected most of the world, including each of our primary markets, resulting in, among
other things, government-imposed quarantines and other public health safety measures. At this point, the extent to which the coronavirus
may impact our business cannot be estimated; however, procedures with CGuard EPS, which are generally scheduled or non-emergency procedures,
have seen extended postponements since the onset of COVID-19 as hospitals shift resources to patients affected by the coronavirus, and
it is highly plausible that this trend will continue. We anticipate that the COVID-19 pandemic may impact clinical and regulatory matters.
COVID-19 is delaying enrollment in clinical trials across the medical device industry and may affect any new trials we decide to pursue.
COVID-19 may cause disruptions that could have a material adverse impact on our FDA clinical trial plans and timelines. The extent to
which COVID-19 impacts 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 coronavirus, the actions to contain COVID-19 or treat its impact, the
efficacy and scale of the various vaccines currently deployed across the world, among others. Moreover, COVID-19 has had indeterminable
adverse effects on general commercial activity and the world economy, and our business and results of operations could be adversely affected
to the extent that COVID-19 or any other epidemic continues to harm the global economy generally.
International
sales and operations are subject to a variety of risks, including:
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longer
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logistical
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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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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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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
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the
risk of third party disputes over ownership of intellectual property and infringement of third party intellectual property by our
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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 stakeholders’ 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 stakeholders 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, or fail to meet evolving investor, industry or stakeholder expectations and concerns
regarding ESG issues, investors may reconsider their capital investment in our Company, and customers and consumers may choose to stop
purchasing our products, which could have a material adverse effect on our reputation, business or financial condition.
Risks
Related to the Geopolitical and Military Tensions Between Russia and Ukraine in Europe
We
derived approximately 8.2% of total sales in Russia in 2021. The escalation of geopolitical instability in Russia and Ukraine as well
as currency fluctuations in the Russian Ruble could negatively impact our operations, sales, and future growth prospects in that region.
As a result of the crisis in Ukraine both the United States and the EU have implemented sanctions against certain Russian individuals
and entities. Our global operations expose us to risks that could adversely affect our business, financial condition, results of operations,
cash flows or the market price of our securities, including the potential for increased tensions between the United States and Russia
resulting from the current situation involving Russia and Ukraine, tariffs, economic sanctions and import-export restrictions imposed
by either nation, and retaliatory actions by the other nation, as well as the potential negative impact on our business and sales in
Russia. Current geopolitical instability in Russia and Ukraine and related sanctions by the U.S. government against certain companies
and individuals may hinder our ability to conduct business with potential or existing customers and vendors in these countries. The U.S.
government has imposed sanctions through several executive orders restricting U.S. companies from conducting business with specified
Russian and Ukrainian individuals and companies. While we believe that the executive orders currently do not preclude us from conducting
business with our current customers or vendors in Russia, the sanctions imposed by the U.S. government may be expanded in the future
to restrict us from engaging with them. If we are unable to conduct business with new or existing customers or vendors or pursue business
opportunities in Russia or Ukraine, our business, including revenue, profitability and cash flows, and operations could be adversely
affected. We cannot provide assurance that current sanctions or potential future changes in sanctions will not have a material impact
on our operations in Russia and the Ukraine or on our financial results.
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.
In
addition, many of our officers or key employees may be called to active and reserve mandatory service duty at any time under emergency
circumstances for extended periods of time. See “— Our operations could be disrupted as a result of the obligation of certain
of our personnel residing in Israel to perform military service.”
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 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.
The
market prices of our common stock and our Series B Warrants (which is intended to expire on March 14, 2022) 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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additions
or departures of key personnel; |
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our
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
developments; |
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economic,
political and other external factors; and |
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period-to-period
fluctuations in our financial results. |
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 and our publicly traded warrants.
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.