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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________

FORM 10-K

(Mark One)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2023

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For transition period from               to

Commission File Number   001-38847 

______________________________

SILK ROAD MEDICAL, INC.

(Exact name of registrant as specified in its charter)

______________________________

Delaware

20-8777622

State or other jurisdiction of
incorporation or organization

(I.R.S. Employer
Identification No.)

1213 Innsbruck Dr. Sunnyvale, CA 94089

(Address of registrant’s principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (408) 720-9002 

______________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.001 par value

SILK

Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes      No  

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes      No  

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes   No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) Exchange Act.  

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No

The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $1.2 billion as of June 30, 2023 based on the closing sale price of the registrant’s common stock on the Nasdaq Global Select Market on such date. Solely for purposes of this disclosure, shares of common stock held by executive officers and directors of the registrant as of such date have been excluded in that such persons may be deemed affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

As of February 23, 2024, the number of outstanding shares of the registrant's common stock, par value $0.001 per share, was 39,174,619.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive proxy statement for our 2024 Annual Meeting of Stockholders, or the 2024 Proxy Statement, are incorporated by reference into Part III of this report where indicated. The 2024 Proxy Statement will be filed with the U.S. Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates.


TABLE OF CONTENTS

Page

Part I

Item 1.

Business

3

Item 1A.

Risk Factors

30

Item 1B.

Unresolved Staff Comments

75

Item 1C.

Cybersecurity

75

Item 2.

Properties

77

Item 3.

Legal Proceedings

77

Item 4.

Mine Safety Disclosures

77

Part II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

77

Item 6.

[Reserved]

79

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

80

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

88

Item 8.

Financial Statements and Supplementary Data

90

Item 9.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

116

Item 9A.

Controls and Procedures

116

Item 9B.

Other Information

117

Item 9C.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

117

Part III

Item 10.

Directors, Executive Officers and Corporate Governance

118

Item 11.

Executive Compensation

118

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

118

Item 13.

Certain Relationships and Related Transactions, and Director Independence

118

Item 14.

Principal Accountant Fees and Services

118

Part IV

Item 15.

Exhibits and Financial Statement Schedules

119

Item 16.

Form 10-K Summary

122

Signatures

123

 

As used in this report, references to “Silk Road Medical,” the “Company,” “we,” “our” or “us,” unless the context otherwise requires, refer to Silk Road Medical, Inc.

“Silk Road Medical,” the “Silk Road Medical” logo, “TCAR,” “ENROUTE,” the “ENROUTE” logo, “ENHANCE,” “Enflate” and our other registered or common law trade names, trademarks or service marks appearing in this Annual Report on Form 10-K are our property. Trade names, trademarks and service marks of other companies appearing in this Annual Report on Form 10-K are the property of their respective owners. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, these other companies unless otherwise stated. Solely for convenience, the trademarks and tradenames referred to in this Annual Report on Form 10-K appear without the ® and ™ symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights, or the right of the applicable licensor to these trademarks and tradenames.


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements concerning our business, operations and financial performance and condition, as well as our plans, objectives and expectations for our business, operations, prospects, and financial performance and condition. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements within the meaning of the federal securities laws and are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “potential,” “positioned,” “seek,” “should,” “target,” “will,” “would” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology, or the use of future dates.

These forward-looking statements include, but are not limited to, statements about the following subjects:

our goal to establish transcarotid artery revascularization, or TCAR, as the standard of care for the treatment of carotid artery disease;

our 2024 strategic priorities to grow, strengthen and diversify our business;

our plans to conduct further clinical trials and anticipated enrollment, clinical sites, completion, results and timing thereof;

our plans and expected timeline related to our products, including timing of commercial launch, or developing new products, to address additional indications or to obtain regulatory approvals or clearances or otherwise;

the expected use of our products by physicians, including market awareness, acceptance and adoption of our products, and anticipated increased utilization of our products and market penetration;

our expectations regarding the number of procedures that will be performed with our products, the number of physicians we expect to train, and the number of our sales territories;

our ability to obtain, maintain and expand regulatory approvals and clearances for our current products and any new products we create;

the expected growth of our business and our organization;

our expectations regarding government and third-party payer coverage and reimbursement and the anticipated effect of such decisions;

our ability to manage our recent Chief Executive Officer transition and retain and recruit key personnel, including the continued expansion of our sales and marketing infrastructure, and the anticipated timing and effect of such actions;

our ability to obtain an adequate supply of materials, components and finished goods for our products from our third-party suppliers, most of whom are single-source suppliers;

our ability to manufacture sufficient quantities of our products with sufficient quality and the sufficiency of our current manufacturing capabilities;

our ability to obtain and maintain intellectual property protection for our products and our business;

our ability to expand our business into new geographic markets and the anticipated timing thereof, including in Japan and China;

our compliance with extensive Nasdaq and U.S Securities and Exchange Commission, or SEC, requirements and government laws, rules and regulations both in the United States and internationally;

our expectations regarding operating trends, future financial performance and expense management and our estimates of our future expenses, ongoing losses, future revenue, including per procedure revenue and the effect thereon of new products, gross margins, operating leverage, capital requirements and our need for, or ability to obtain, additional financing;

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our ability to identify and develop new and planned products and/or acquire new products;

our experience with inflationary and price pressures and increased labor costs and labor and staffing shortages;

developments and projections relating to our market opportunity and penetration, competitors or our industry; and

our intended use of net proceeds from our public offerings.

We believe that it is important to communicate our future expectations to our investors. However, there may be events in the future that we are not able to accurately predict or control and that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. These forward-looking statements are based on management’s current expectations, estimates, forecasts and projections about our business and the industry in which we operate and management’s beliefs and assumptions and are not guarantees of future performance or development and involve known and unknown risks, uncertainties and other factors that are in some cases beyond our control. As a result, any or all of our forward-looking statements in this Annual Report on Form 10-K may turn out to be inaccurate. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under “Risk Factors” and elsewhere in this Annual Report on Form 10-K.

These forward-looking statements speak only as of the date of this Annual Report on Form 10-K. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Annual Report on Form 10-K to conform these statements to actual results or to changes in our expectations. You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur.

You should read this Annual Report on Form 10-K and the documents that we reference in this Annual Report on Form 10-K and have filed with the SEC as exhibits to this Annual Report on Form 10-K with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect.

 


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PART I

Item 1. Business

Overview

We are a medical device company focused on reducing the risk of stroke and its devastating impact. We believe a key to stroke prevention is minimally-invasive and technologically advanced intervention to safely and effectively treat carotid artery disease, one of the leading causes of stroke. Our business is focused on a relatively new approach for the treatment of carotid artery disease called transcarotid artery revascularization, or TCAR, which we seek to establish as the standard of care.

TCAR relies on two novel concepts - minimally-invasive direct carotid access in the neck and high-rate blood flow reversal during the procedure to protect the brain - and combines novel endovascular techniques with fundamental surgical principles. TCAR using our portfolio of products has been clinically demonstrated to reduce the upfront morbidity and mortality risks commonly associated with carotid endarterectomy while maintaining a reduction in long-term stroke risk. We have obtained U.S. Food and Drug Administration, or FDA, approvals, secured specific Medicare reimbursement coverage, and commercialize products engineered and indicated specifically for transcarotid use, in patients who require carotid revascularization and who meet certain treatment criteria. In the second quarter of 2022, we announced FDA label and Medicare coverage expansions for the use of TCAR in standard surgical risk patients in the TCAR Surveillance Project, or TSP. Effective October 11, 2023, the U.S. Centers for Medicare and Medicaid Services, or CMS, published the final decision memo for National Coverage Determination, or NCD, 20.7 expanding coverage for CAS, including TCAR, under indication B4 for both high risk and standard surgical risk patients. TCAR remains covered within the TSP as well as outside of the TSP under the revised NCD 20.7. As of December 31, 2023, more than 85,000 TCAR procedures have been performed globally, including more than 25,000 in the United States during 2023.

Carotid artery disease is the progressive buildup of plaque causing narrowing of the arteries in the front of the neck, which supply blood flow to the brain. Plaque can embolize, or break away from the arterial wall, and travel toward the brain and interrupt critical blood supply, leading to an ischemic stroke. Carotid artery disease is one of the leading causes of stroke, and stroke is one of the most catastrophic, debilitating, and costly conditions worldwide. We believe the best way to mitigate the mortality, morbidity and cost burden of stroke is to prevent strokes in the first place. Clinical evidence has demonstrated that with proper diagnosis and treatment, stroke due to carotid artery disease is mostly preventable. We believe there were approximately 4.4 million people with carotid artery disease in the United States in 2022, with an estimated 440,000 diagnoses in 2022, and existing treatment options have substantial safety and effectiveness limitations.

The main goal of treating carotid artery disease is to prevent a future stroke. Unfortunately, one of the main complications of existing treatments for carotid artery disease is causing a stroke, along with other procedure-related adverse events. When intervention beyond medical management is warranted, the current standard of care for reduction in stroke risk is an invasive carotid revascularization procedure called carotid endarterectomy, or CEA. To perform a CEA, a physician makes a large incision in the neck, cuts the carotid artery open, and then removes the plaque from inside the vessel. CEA was first performed in 1953, and while generally effective at reducing stroke risk in the long term, large randomized clinical trials have demonstrated that CEA is associated with a significant risk of adverse events, including cranial nerve injury, heart attack, wound complications, and, in some cases, even stroke and death. These risks are elevated in certain patient populations.

To address the invasiveness of CEA, transfemoral carotid artery stenting, or CAS, was developed in the 1990s. The CAS procedure uses minimally-invasive catheters traveling from a puncture site in the groin to place a stent in the carotid artery in the neck to restrain the plaque and prevent embolization that could cause a stroke. While both CEA and CAS have been clinically demonstrated to reduce long-term stroke risk, randomized clinical trials and other studies have shown that CAS, relative to CEA, often results in an almost two-fold increase in stroke within 30 days following treatment, which we believe is due to inadequate protection of the brain. Accordingly, to date, CEA has remained the standard of care. Therefore, we believe reducing the rate of morbidity and mortality of CEA is an unmet clinical need that continues to persist.

TCAR is a minimally-invasive procedure intended to address the morbidity of CEA and the 30-day stroke risk of CAS while maintaining a reduction in long-term stroke risk beyond the first 30 days. TCAR starts with a small incision in the neck slightly above the collarbone, otherwise known as transcarotid access, through which our ENROUTE® Transcarotid Stent System, or ENROUTE stent, is placed during a period of temporary high-rate blood flow reversal that is enabled by our ENROUTE® Transcarotid Neuroprotection System, or ENROUTE NPS. Blood flow reversal directs embolic debris that could cause a stroke away from the brain, while the stent braces the plaque and prevents embolization to afford a

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reduction in long-term stoke risk. We believe that by meeting the standard of brain protection and reduction in 30-day and long-term stroke risk afforded by CEA, while providing benefits commensurate with an endovascular, minimally-invasive approach, TCAR could become the preferred alternative for carotid revascularization. Additionally, we believe that as our technology becomes more widely adopted, TCAR may become a compelling alternative for patients who are treated with medical management alone each year.

Based on the estimated 440,000 new carotid artery disease diagnoses that occurred in the United States in 2022, we believe a total annual U.S. market opportunity of approximately $3.1 billion exists for our portfolio of TCAR products. We estimate that there were approximately 172,000 carotid revascularization procedures performed in 2022, which we estimate to represent a market conversion opportunity of approximately $1.2 billion. More than 25,000 TCAR procedures were performed in 2023 in the United States using our products, representing approximately 5.7% of annual diagnoses of carotid artery disease.

The safety, effectiveness and clinical advantages of TCAR have been demonstrated in multiple clinical trials, post-market studies and registries that have been published in over 300 TCAR publications to date, representing outcomes in tens of thousands of patients. The results of our U.S. pivotal trial, ROADSTER, reflect the lowest reported 30-day stroke rate for any prospective, multicenter clinical trial of carotid stenting of which we are aware. Our ROADSTER 2 post-approval study was completed in 2019 and showed a 30-day stroke rate of 0.6% in the primary analysis population. Additionally, data on real-world outcomes of TCAR relative to CEA and CAS have continued to accrue through the ongoing TCAR Surveillance Project, which is an ongoing open-ended registry sponsored by the Society for Vascular Surgery through the Vascular Quality Initiative, or VQI. In a VQI study published in the Journal of the American Medical Association in December 2019, a propensity matched analysis of 3,286 high surgical risk patients in each cohort showed in-hospital stroke or death was significantly lower for TCAR at 1.6% versus 3.1% for CAS, p < 0.001. The statistically significant difference favoring TCAR persisted through 30 days and 1 year. In a VQI study published in the Annals of Surgery in September 2020, a propensity matched analysis of 6,384 high surgical risk patients in each cohort demonstrated significant reduction in the risk of in-hospital myocardial infarction and cranial nerve injury after TCAR compared to CEA (0.5% vs. 0.9%, p = 0.005; 0.4% vs. 2.7%, p < 0.001, respectively), with no differences in the rates of in-hospital stroke/death (1.6% TCAR and 1.6% CEA). In a more recent analysis of both high risk and standard risk surgical risk patients, a 2022 VQI study by Zhang GQ, et al published in the Journal of Vascular Surgery, compared outcomes (composite of stroke, death and myocardial infarction) using a multivariate logistic regression analysis analyzing TCAR procedures using the predicate device, TF-CAS using distal filters and CEA procedures from 2015-2020. Within the high risk patient cohort of 10,903 TCAR vs. 7,967 CEA vs. 9,896 TF-CAS procedures, TCAR demonstrated significantly lower odds of 30-day stroke, death and stroke/death and myocardial infarction for TCAR compared to both CEA and TF-CAS. Within the standard risk cohort of 4,694 TCAR vs. 33,720 CEA vs. 7,351 TF-CAS procedures, TCAR and CEA showed equivalent odds of 30-day stroke, death, and stroke/death, whereas TFCAS was associated with significantly higher risk for these endpoints. In 2023, an analysis of the National Inpatient Sample database, which is the largest all-payor inpatient database for ~35 million hospitalizations nationwide, was published by Ramsay IA, et al in the journal Operative Neurosurgery and demonstrated the risk of stroke with TCAR was significantly lower compared to CEA.

TCAR is reimbursed based on established Current Procedural Technology, or CPT, codes and International Classification of Diseases, or ICD-10, codes related to carotid artery disease and carotid artery stenting. Our ENROUTE NPS is currently the only FDA-cleared transcarotid neuroprotection device. CMS is the primary payer for carotid revascularization procedures as carotid artery disease is most often a disease of the elderly, and we estimate Medicare covers approximately 75% of patients treated.

We began commercializing our products in the United States in late 2015. Our revenue increased to $177.1 million for the year ended December 31, 2023 compared to $138.6 million for the year ended December 31, 2022, representing growth of 28%. Our net losses were $55.7 million and $55.0 million for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023 and 2022, our accumulated deficit was $399.5 million and $343.7 million, respectively.

Our Product Portfolio

TCAR is enabled by our proprietary portfolio of TCAR products designed to provide direct access to the carotid artery, effective reduction in stroke risk throughout the procedure, and long-term restraint of carotid plaque. In addition to enabling the safety and effectiveness of TCAR, our proprietary products are specifically designed to enable a short learning curve, consistent ease of use and physician comfort. Our products are also currently the only devices cleared and approved by the FDA specifically for transcarotid use.

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Our current product portfolio consists of the following five single-use components:

ENROUTE Transcarotid Neuroprotection System

Picture 1

Used to directly access the common carotid artery and establish temporary blood flow reversal

Embolic debris is captured and filtered, returning filtered blood to the femoral vein

Allows for flow modulation enabling lesion imaging and patient tolerability

Only FDA-cleared transcarotid neuroprotection system

ENROUTE Transcarotid Stent System

Picture 2

Cylindrical and tapered configurations with optimized cell design and auto-conforming technology

Designed for transcarotid access, improving the accuracy and ergonomics of the TCAR procedure

Only FDA-approved transcarotid stent system optimized for the TCAR procedure

ENHANCE Transcarotid Peripheral Access Kit

Image 1027

Used to gain initial access to the common carotid artery

Only access kit specifically designed for use in the common carotid artery

ENROUTE 0.014” Guidewire

Picture 3

Designed for precise and atraumatic vessel navigation and target lesion crossing for delivery of interventional devices

Short working length and proprietary tip designed for the TCAR procedure

ENROUTE Enflate Transcarotid RX Balloon

Dilation Catheter

Picture 7

Only transcarotid rapid exchange balloon on the market and only specialty balloon designed for the TCAR procedure

Short working length for transcarotid access and sizes optimized for use with the ENROUTE stent system

Highly visible radiopaque markers for accurate positioning

In the second quarter of 2023, we received 510(K) clearance for our next generation neuroprotection system, or ENROUTE NPS PLUS, which is designed to support additional ease-of-use and further minimize the risk for complications. We are planning for the upcoming launch of our ENROUTE NPS PLUS in the first half of 2024. We also received PMA approval for tapered configurations of our ENROUTE stent in the second quarter of 2023, which will provide greater choice for physicians to address the diversity of patient specific anatomy. We initiated a limited market release in the first quarter of 2024 with a full market release planned in the first half of 2024.

Clinical Data

The safety, effectiveness and clinical advantages of TCAR have been demonstrated in multiple clinical trials, post-market studies and registries that have been published in over 300 TCAR publications to date. Our first-in-human trial, the PROOF Study, was initiated as a feasibility study to assess the safety and performance of the ENROUTE NPS and later was expanded to support CE marking of the ENROUTE NPS. Data from the PROOF Study were also used to support FDA approval of the investigational device exemption, or IDE, for the ROADSTER Study. Data from the pivotal cohort of the ROADSTER Study supported FDA 510(k) clearance of the ENROUTE NPS, and a subset of the data supported pre-market, or PMA, approval of the ENROUTE stent. We have completed a post-market approval study, ROADSTER 2, which was designed to evaluate the outcomes in TCAR procedures using the ENROUTE stent used in conjunction with the ENROUTE NPS in broader, “realworld” use among 692 patients that were enrolled. In May 2022, FDA granted approval for an expanded label indication of the ENROUTE stent allowing for treatment of patients at standard surgical risk, in addition to patients at high surgical risk. This approval was obtained by submitting a retrospective matched analysis of 5,066 standard risk TCAR patients with 15,198 CEA patients in a 1:3 ratio from VQI’s TCAR Surveillance Project and CEA registries, both sponsored by the Society for Vascular Surgery. Data on TCAR outcomes also continues to accrue through TSP, an ongoing realworld, open-ended registry. The VQI stated that > 60,000 TCAR procedures have been submitted to the registry as of December 31, 2023.

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Summary of Key Clinical Trials

Clinical Trials

PROOF

ROADSTER

ROADSTER 2

ROADSTER 3

TCAR Surveillance Project

Study Type

First in Human

U.S. Pivotal IDE Study

U.S. Post-Approval Study

U.S. Post-Approval Study

Real world observation

CE Marking

DW-MRI Sub-Study

Patients

75 pivotal

67 Lead-in

692

Up to 400

Open Ended

56 DW-MRI Sub-Study

141 Pivotal

with a minimum of 315 per protocol patients

78 Continued

Access

52 Stent Sub-

Study

Profile

High Surgical Risk
and Standard Surgical Risk

High Surgical Risk

High Surgical Risk

Standard Surgical Risk

High Surgical Risk and Standard Surgical Risk

Status

Complete

Complete

Complete

Enrolling

Ongoing - > 60,000 TCAR cases as of December 31, 2023, per VQI

Carotid Stent Systems Used

CE Marked Carotid Stents, including the Cordis Precise Stent

FDA Approved Carotid Stents, including the Cordis Precise Stent

ENROUTE Transcarotid Stent System

ENROUTE Transcarotid Stent System

ENROUTE Transcarotid Stent System

Summary of TCAR Clinical Trial Outcomes

PROOF

Pooled ROADSTER

ROADSTER 2

Intention to Treat Population

Intention to Treat Population

Per-protocol

Intention to Treat Population

Per-protocol

Stroke at 30 days

All stroke

1.3 

%

1.4 

%

0.5 

%

1.9 

%

0.6 

%

All stroke and death

1.3 

%

2.3 

%

1.5 

%

2.3 

%

0.8 

%

Other adverse events at 30 days

Myocardial infarction

0.0 

%

1.4 

%

1.0 

%

0.9 

%

0.9 

%

Cranial nerve injury*

2.7 

%

0.5 

%

NR

1.40

%

NR

(Acute)

Cranial nerve injury

2.7 

%

0.0 

%

NR

0.9

%**

NR

(persisting at 6 months)

Procedural information

Mean procedure time (mins)

NR

73.2 

NR

74.8 

74.6

Mean length of stay (days)

NR

1.7 

NR

NR

1.6

*Only tabulated for Intention to Treat Population.

**Evaluated at 90 days.

PROOF First-in-human Clinical Trial

Our first-in-human trial, the PROOF Study, was a single-arm trial conducted at one trial site in Europe from 2009 to 2012. The PROOF Study was initiated as a feasibility study to assess the safety and performance of the ENROUTE NPS in a limited number of patients, initially enrolling 10 patients. The PROOF Study was later expanded to 75 patients to collect the clinical data necessary to support the original CE marking of the ENROUTE NPS. The results from the PROOF

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Study demonstrated TCAR was technically feasible and resulted in a minor stroke incidence of 1.3% within 30 days (zero major strokes), which was significantly lower than that reported for CAS in prior clinical trials. A sub-study of 56 patients who underwent pre- and post-procedure diffusion-weighted magnetic resonance image scanning, or DW-MRI, demonstrated only 18% of the sub-study population presented with ipsilateral new white lesions. This was comparable to CEA results in prior clinical trials and significantly less than that reported in prior CAS trials. Data from the PROOF Study were also used to support FDA approval of the IDE for the ROADSTER Study.

Pivotal ROADSTER Clinical Trial

Our pivotal trial, the ROADSTER Study, was a single-arm trial conducted at 17 sites across the United States and one site in Europe from 2012 to 2014. The design of the ROADSTER Study, which was used to support FDA 510(k) clearance of the ENROUTE NPS, was largely based upon predicate embolic prevention studies and followed the relevant FDA guidance published in 2008. In the pivotal phase, the ROADSTER study enrolled 141 patients that were classified as being at high surgical risk. The primary endpoint of the ROADSTER Study was a hierarchical composite of stroke, death or myocardial infarction within 30 days.

Among the intention-to-treat, study population, which included patients treated despite major protocol deviations, the primary endpoint event rate at 30 days was 3.5%, comprised of two strokes, two deaths, and one myocardial infarction. Of note, in the per protocol analysis, which included only patients who met all study eligibility criteria, the primary endpoint event rate was 2.9%, comprised of one stroke, two deaths, and one myocardial infarction. The data from the intention-to-treat analysis supported FDA 510(k) clearance of the ENROUTE NPS.

A continued access phase of the ROADSTER Study was conducted during the time that the 510(k) premarket notification for the ENROUTE NPS was under review by FDA. This phase enrolled an additional 78 patients with the same primary and secondary endpoints and similar results as the pivotal phase of the ROADSTER Study. The ENROUTE NPS was 510(k) cleared by the FDA in February 2015.

Following a pre-submission interaction with the FDA, the FDA permitted data from a sub-analysis of 52 patients in the ROADSTER Study who were treated with the Cordis Precise Pro RX Carotid Stent System to be used, in conjunction with existing data from Cordis on CAS clinical trials performed with the Cordis Precise Pro RX Stent System, or Precise stent, to support our pre-market approval application for the ENROUTE stent. The ENROUTE stent system and the Precise stent system share the same design for the stent implant itself, and differ only in the design of the delivery system. Based on this data, the pre-market approval application for the ENROUTE stent was approved in May 2015.

We also initiated a separate sub-study of patients treated on a PP basis in the ROADSTER pivotal and continued access cohorts to assess the longer-term rate of ipsilateral stroke beyond 30 days. This sub-analysis, which consisted of 164 patients including 112 from the pivotal phase and 52 from the continued access phase, provided insight into the ability of TCAR to limit stroke incidence in longer-term follow-up. At one-year follow-up, the ipsilateral stroke rate was 0.6% beyond 30 days.

ROADSTER 2 U.S. Post-Market Approval Study

The ROADSTER 2 Post-Market Approval Study was a condition of PMA approval for the ENROUTE stent. The study evaluated the outcomes in TCAR using the ENROUTE stent in conjunction with the ENROUTE NPS in broader, “real world” use. Similar to the sub-analysis from the ROADSTER Study that led to PMA approval of the ENROUTE stent, the primary endpoint, was the rate of procedural success at 30 days in high surgical risk patients with a three-year minimum life expectancy in the PP study population.

The ROADSTER 2 study enrolled 692 patients at 42 sites, of which 632 patients were included in the PP analysis. Among the operating physicians in the study, 62% of the participating patients were treated by physicians who did not participate in the pivotal ROADSTER Study. Enrollment commenced in 2015 and was completed, along with the final 30-day follow-up assessments in 2019.

The primary endpoint of ROADSTER 2 was successfully met with a procedural success rate of 97.9%, which compared favorably to the rate of procedural success (98.1%) in the ROADSTER Sub-Study population. Data from a

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subset of ROADSTER 2 subjects (n=155) were analyzed to assess the incidence of ipsilateral stroke from day 31 through day 365 post-procedure. The ipsilateral stroke rate at one-year follow-up was 0% beyond 30 days.

The Society for Vascular Surgery’s TCAR Surveillance Project

The TCAR Surveillance Project was implemented in September 2016 as an initiative of the Society for Vascular Surgery Patient Safety Organization. The TCAR Surveillance Project is an ongoing, open-ended registry that was designed to monitor the safety and effectiveness of transcarotid stents placed directly into the internal carotid artery while reversing blood flow. It is intended to compare TCAR with CEA in centers that participate in the Society for Vascular Surgery VQI. The TCAR Surveillance Project was reviewed by the FDA and deemed to be a scientifically valid extension study of TCAR, thereby allowing CMS to provide coverage within the parameters of the existing National Coverage Determination (NCD 20.7). The Society for Vascular Surgery VQI is designed to improve the quality, safety, effectiveness and cost of vascular health care by collecting and exchanging information, and is available to all providers of vascular health care and their respective institutions participating in the registry. Because data from transfemoral CAS and CEA procedures are also collected in their respective registries within the Society for Vascular Surgery VQI, comparisons of TCAR to transfemoral CAS or CEA can also be made.

Eligible patients must meet the inclusion criteria specified for the TCAR Surveillance Project. This means patients must have had their TCAR procedure performed using any FDA-cleared transcarotid proximal embolic protection device utilizing flow reversal, such as our ENROUTE NPS, and any FDA-approved transcarotid stent, such as our ENROUTE stent. To date, the ENROUTE NPS is the only such device cleared and approved by the FDA. Additionally, patients had to be at high surgical risk. Following FDA’s approval expanding the indication for the ENROUTE stent to standard surgical risk patients, CMS announced expanded coverage for standard risk patients entered in TSP in June 2022. As a result, TCAR procedures performed for either high surgical risk or standard surgical risk patients who are entered into TSP are eligible for reimbursement by Medicare if the patients meet the additional requirements set forth above.

The Society for Vascular Surgery VQI has reported that 778 centers have contributed more than 60,000 TCAR procedures to the CAS VQI registry as of December 31, 2023. Over time, it is expected that physicians and academic researchers will continue to query the database and produce publications in peer review journals, and present data at medical conferences, regarding the safety and effectiveness of TCAR in real world use.

In October 2023, CMS revised the NCD to cover carotid artery stenting, including TCAR, in both high and standard surgical risk patients, following a request to re-open the NCD from a group of physicians labeled the Multispecialty Carotid Alliance, or MSCA, in June 2022. In their review and as suggested by the MSCA, CMS considered evidence published from the ACT I, CREST (long-term results), SPACE-2, and ACST-2 randomized controlled trials of CAS versus CEA, amongst other datasets. In addition, CMS reviewed multiple publications supporting TCAR including the ROADSTER and ROADSTER 2 studies, and large real-world evidence, or RWE, published datasets from the TCAR Surveillance Project within the VQI, including propensity-matched comparisons to each of CEA and CAS. Under the recent NCD, TCAR remains covered within the TSP while expanding TCAR coverage outside of the TSP, which opens up the potential for some new opportunities in hospitals that previously chose not to participate in the TSP. The revised coverage determination stipulates that such procedures must include documented shared decision-making with the patient prior to treatment, independent neurological assessments, imaging requirements and the maintenance of facility and physician standards. While these requirements are new for carotid artery stenting, they do not apply to procedures done under the auspices of the TSP.

TCAR Surveillance Project: TCAR vs. CAS

In a study published in the Journal of the American Medical Association in December 2019, TCAR was compared to CAS in a propensity score matched analysis with 3,286 pairs. TCAR was associated with a lower risk of in-hospital stroke or death (1.6% vs 3.1%; P < .001), stroke (1.3% vs 2.4%; P = .001), and death (0.4% vs 1.0%; P = .008). As expected with two minimally invasive procedures, there was no statistically significant difference in the risk of perioperative MI between the two cohorts (0.2% for TCAR vs. 0.3% for TFCAS; P = .47). At 1 year using Kaplan-Meier life-table estimation, TCAR was associated with a lower risk of ipsilateral stroke or death (5.1% vs 9.6%; hazard ratio, 0.52 [95%CI, 0.41 to 0.66]; P < .001). TFCAS was associated with more radiation (median fluoroscopy time, 5 minutes [interquartile range {IQR}, 3 to 7] vs 16 minutes [IQR, 11 to 23]; P < .001) and more contrast usage (median contrast used, 30 mL [IQR, 20 to 45] vs 80 mL [IQR, 55 to 122]; P < .001).

TCAR Surveillance Project: TCAR vs. CEA

In a study published in the Annals of Surgery in September 2020, TCAR was compared to CEA in propensity score matched high surgical risk patients who underwent TCAR or CEA for carotid artery stenosis (2016-2019). Propensity

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scores were calculated based on baseline clinical variables and used to match patients in the two treatment groups (n=6,384 each). The primary endpoint was the combined outcome of perioperative stroke and/or death. No significant differences were observed between TCAR and CEA in terms of in-hospital stroke/death [TCAR,1.6% vs. CEA,1.6%, P=.945], stroke [1.4% vs. 1.4%, P=.881], or death [0.4% vs. 0.3%, P=.662]. Compared to CEA, TCAR was associated with lower rates of in-hospital myocardial infarction [0.5% vs. 0.9%, P=.005], cranial nerve injury [0.4% vs. 2.7%, P<.001], and post-procedural hypertension [13% vs.18.8%, P<.001]. They were also less likely to stay in the hospital for more than one day [26.4% vs. 30.1%, P<.001]. No significant interaction was observed between procedure and symptomatic status in predicting postoperative outcomes. At one year, the incidence of ipsilateral stroke or death was similar between the two groups [HR (95%CI): 1.09 (0.87-1.36), P=.44]. This propensity-score matched analysis demonstrated significant reduction in the risk of postoperative myocardial infarction and cranial nerve injury after TCAR compared to CEA, with no differences in the rates of stroke/death. In a more recent analysis of both high risk and standard surgical risk patients, a 2022 VQI study by Zhang GQ, et al published in the Journal of Vascular Surgery, compared outcomes (composite of stroke, death and myocardial infarction) using a multivariate logistic regression analysis analyzing TCAR procedures using the predicate device, TF-CAS using distal filters and CEA procedures from 2015-2020. Within the high risk patient cohort of 10,903 TCAR vs. 7,967 CEA vs. 9,896 TF-CAS procedures, TCAR demonstrated significantly lower odds of 30-day stroke, death and stroke/death and myocardial infarction for TCAR compared to both CEA and TF-CAS. Within the standard risk cohort of 4,694 TCAR vs. 33,720 CEA vs. 7,351 TF-CAS procedures, TCAR and CEA showed equivalent odds of 30-day stroke, death, and stroke/death, whereas TFCAS was associated with significantly higher risk for these endpoints. In 2023, an analysis of the National Inpatient Sample database, which is the largest all-payor inpatient database for ~35 million hospitalizations nationwide, was published by Ramsay IA, et al in the journal Operative Neurosurgery and queried data from 2015-2019, demonstrating the risk of stroke with TCAR was significantly lower compared to CEA with multivariate analysis (OR 0.47 (95% CI, 0.25-0.87), P = .017) and after propensity-matched analysis (OR 0.50 (95% CI, 0.25-0.97), P = .042).

TCAR Surveillance Project: Learning Curve

In a study published in the Journal of the American College of Surgeons in January 2020, Kashyap, et al, examined the learning curve of TCAR performed by surgeons participating in the TCAR Surveillance Project. The authors reviewed 3,456 TCAR procedures performed by 417 unique practitioners at 178 centers. Patients were grouped into four levels based upon the physicians’ experience with TCAR at the time of procedure: novice (1-5 cases), intermediate (6-20 cases), advanced (20-30 cases) and expert (>30 cases). Of the patients analyzed, 41% of patients were treated by novice physicians, 40% of patients were treated by intermediate physicians, 9% of patients were treated by advanced physicians and 10% of patients were treated by expert physicians. There was no significant difference in the baseline characteristics by surgeon case experience with three exceptions; expert physicians were more likely to treat patients with moderate or severe congestive heart failure, novice and intermediate physicians were more likely to treat patients with prior CEA or CAS, and advanced and expert physicians were more likely to treat patients with CMS medical high-risk criteria. There was a statistically significant reduction in operative time (novice 81.7 mins, expert 59.6 mins; p<.001) and flow reversal time (novice 12.2 mins, expert 9.7 mins; p<.001) over the four levels. There was a decrease in fluoroscopy time and contrast usage up to the advanced level. Bleeding complications were significantly less frequent in the advanced and expert groups of physicians. There was no difference in the incidence of cranial nerve injury across the groups of physicians. Expert physicians were more likely to use local anesthesia compared to the other three categories of physicians. There was no difference in the technical failure rate across the four categories of physicians. The rate of composite stroke, stroke alone and death did not differ between the categories. The authors noted that TCAR novices can achieve the same clinical outcomes as expert practitioners, while in comparison, CAS requires more than 50 cases to achieve proficiency.

Ongoing TCAR Studies

ROADSTER 3 U.S. Post-Market Approval Study

In May 2022, we announced FDA approval of a label expansion for the ENROUTE stent for use in standard surgical risk patients. In June 2022, we announced that CMS, through collaboration with the Society for Vascular Surgery’s Patient Safety Organization and their VQI has expanded coverage for TCAR to include standard surgical risk patients within the VQI’s TCAR Surveillance Project. As a condition of FDA approval for such label expansion, we are conducting a prospective, multi-center, single-arm post-approval study, ROADSTER 3, to evaluate on-label usage of the ENROUTE stent and the ENROUTE NPS for the treatment of patients at standard risk for adverse events from carotid endarterectomy who require carotid revascularization and who are eligible for treatment with these devices. The targeted enrollment in ROADSTER 3 is at least 315 patients treated per protocol at up to 60 U.S. sites. The primary endpoint is a hierarchical composite of major adverse events defined as any death, stroke or myocardial infarction within 30 days of the index procedure, plus ipsilateral stroke within 31 days to 365 days of the TCAR procedure.

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Our Commercial Strategy

We believe vascular surgeons represent the specialty most frequently responsible for managing the care of and receiving referrals for patients with carotid artery disease and are skilled in endovascular procedures. Our sales, marketing, professional education and medical affairs efforts are focused on driving adoption and supporting their practice development by offering them an innovative, safe, effective and minimally-invasive alternative for treating carotid artery disease.

We market and sell our products in the United States through a direct sales organization consisting of sales management, sales representatives, known as area managers, and clinical support specialists, known as therapy development specialists. The area managers are typically complemented by one therapy development specialist in each territory. Our sales professionals have substantial experience launching and establishing new disruptive therapies and converting open surgical procedures to minimally-invasive alternatives. We primarily market our products directly to vascular surgeons, their staffs, operating room managers and hospital administrators. We also market to other specialists with experience in CEA and/or CAS with the appropriate skill set for TCAR, including neurosurgeons, cardiothoracic surgeons and non-surgical interventionalists in radiology, neuroradiology and cardiology.

Our area managers are responsible for developing territory business plans, targeting and opening new accounts, promoting the benefits of TCAR and our products, and driving adoption and penetration of TCAR. Together with the therapy development specialist, they also support the training and proper use of our TCAR portfolio of products and provide clinically consultative support for patient selection, pre-procedure planning, procedure support, and post-procedure care. As we continue to grow the size of our U.S. sales organization, with a focus on increasing adoption of TCAR by existing customers and expanding our current customer base, we expect to focus on adding a strategic mix of area managers and therapy development specialists.

Our highly specialized area managers and therapy development specialists, along with other key employees, receive in-depth training and develop a thorough understanding of carotid artery disease, patient selection, imaging interpretation, procedure planning, reimbursement and regulatory policies to meaningfully support our customers and maintain compliance. Our extensive training and continuous education program consists of foundational training, procedure observation, and sales skills development. Our personnel are selected based on their focus on patient outcomes and delivering a positive customer experience in addition to their technical and clinical aptitude.

Additionally, we support our sales organization with marketing and market and practice development initiatives. We plan to continue to expand and enhance our marketing and analytics capabilities to support our growing commercial organization and customer base.

While we do not currently sell our products in markets outside the United States, we are pursuing regulatory clearances in Japan and China. In Japan, we received Shonin approval for the ENROUTE NPS and the ENROUTE stent in the fourth quarter of 2022. During the fourth quarter of 2023, we entered into an exclusive distribution agreement for our products in Japan and we submitted our updated reimbursement application during the first quarter of 2024. In addition, in the first quarter of 2023, we received approval from China’s National Medical Products Administration, or NMPA, for our ENROUTE NPS. In the first quarter of 2024, we received NMPA approval for our ENROUTE stent, and we also entered into an exclusive distribution agreement for our products in China. In both geographies, we are conducting regulatory activities to support future clearance of our next-generation ENROUTE NPS PLUS that was cleared in the U.S. in the second quarter of 2023. Our next steps include assessing the reimbursement process and our pathway and timeline to launch.

Professional Education

We are focused on developing strong relationships with our customers and devote significant resources to training and educating physicians in the use of TCAR and our associated products. Our Office of Medical Affairs leads our physician education and training programs in addition to disseminating the scientific information and clinical data supporting TCAR. The Office of Medical Affairs also leads compliance activities.

Our practice is to require physicians to complete a training program before performing TCAR, which is also a regulatory requirement derived from the PMA approval of the ENROUTE stent. To facilitate training, we have developed a robust training course including clinical and procedural details as well as hands-on workshops designed to provide the highest potential for successful outcomes. We conduct physician training courses in large group, in-person formats as well as virtual and small groups. We also provide training through physician proctors on an as needed basis. As of December 31, 2023, we have trained and certified over 2,800 physicians in the United States.

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We offer a series of training programs for fellows and our objective is to support them in being certified to perform TCAR upon graduation from their fellowship. TCAR is now offered in most of the teaching institutions where fellows train in the United States. TCAR is also now included as part of the examination required for board certification in vascular surgery.

Coverage and Reimbursement

CMS covers carotid artery angioplasty and stenting, including TCAR, under NCD 20.7. Since September 2016, TCAR was primarily covered under NCD 20.7 indication B3, as an FDA-approved post-approval study sponsored by the Society for Vascular Surgery’s VQI TCAR Surveillance Project. For providers participating in the VQI TSP, NCD 20.7 covers patients at high surgical risk for CEA who are either symptomatic with 50% stenosis or asymptomatic with 80% stenosis, and effective May 31, 2022, CMS expanded coverage in the VQI TSP to include the standard surgical risk population. For providers not participating in the VQI TSP, TCAR was previously only covered under NCD 20.7 indication B4 for patients at high risk for CEA and who had symptomatic carotid artery stenosis >70%.

Following a request to re-open the NCD from a group of physicians labeled the MSCA in June 2022, and effective October 11, 2023, CMS published the final decision memo for NCD 20.7 expanding coverage for CAS, including TCAR, under indication B4 for both high risk and standard surgical risk patients. TCAR continues to be covered under NCD 20.7 for percutaneous transluminal angioplasty, or PTA, according to these indications:

B3 – Concurrent with Carotid Stent Placement in FDA-Approved Post-Approval Studies (e.g., VQI TSP)

B4 – Concurrent with Carotid Stent Placement

Indications

B3. VQI TSP*

(no change)

B4. Carotid Stent Placement

(Updated 10/11/2023)

B4. Carotid Stent Placement (Original thru 10/10/2023)

Clinical Criteria

Surgical Risk Factor

Standard Risk & High Risk

High Risk

Symptom Status & Degree of Stenosis

Symptomatic & ≥50% stenosis

Asymptomatic & ≥70% stenosis

Symptomatic & ≥70% stenosis

Additional Criteria

Facility Requirements

Facility standards and approval

Facility and physician standards for carotid stent program

CMS facility approval and certification

Registry or Data Collection

Registry participation (VQI-TSP)

Not required for coverage

Data collection

Neurological Assessments

Not specified

Pre & post-op neurological assessments by a neurologist or NIHSS certified HCP

Not specified

Imaging Guidelines

Not specified

Duplex US and CTA/MRA or

Duplex US and DSA when non-invasive imaging is inconclusive or CTA/MRA are contraindicated

Not specified

Shared Decision Making

Not specified

Shared decision-making with patients about CEA, CAS (including TCAR), and OMT before treatment

Not specified

*Medicare coverage for VQI TSP is based on the study protocol (clinicaltrials.gov (NCT02850588)).

Under the revised NCD 20.7, placement of an FDA-approved carotid stent with an FDA-approved or cleared embolic protection device in patients with symptomatic carotid artery stenosis ≥50% and in patients with asymptomatic carotid artery stenosis ≥70% are covered under the following conditions:

(1)Neurological assessment must be performed by a neurologist or NIH stroke scale (NIHSS) certified health professional before and after CAS.

(2)First-line evaluation of carotid artery stenosis must use duplex ultrasound.

(3)Computed-tomography angiography (CTA) or magnetic resonance angiography (MRA), if not contraindicated, must be used to confirm degree of stenosis, and provide information about the aortic arch, and extra and intra-cranial circulation.

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(4)Intra-arterial digital subtraction (catheter) angiography may be used only when there is significant discrepancy between non-invasive imaging results or contraindicated for CTA or MRA.

Prior to furnishing CAS, the practitioner must engage in a shared decision-making interaction with the beneficiary, which must include:

(1)Discussion of all treatment options for carotid stenosis, including CEA, CAS (which includes TCAR), and optimal medical therapy (OMT).

(2)Explanation of risks and benefits for each option specific to the beneficiary’s clinical condition.

(3)Integration of clinical guidelines (e.g., patient co-morbidities and concomitant treatments).

(4)Discussion and incorporation of beneficiary’s personal preferences and priorities in choosing a treatment plan.

Facilities must establish and maintain institutional and physician standards to support a dedicated carotid stent program. However, CMS facility approval or certification is not required. The Medicare Administrative Contractors will have discretion to make carotid artery stenting coverage determinations not addressed in NCD 20.7. As a result of the expansion of coverage in NCD 20.7 and CMS’s stated goals for broader patient access, we believe there could be rising interest and awareness in minimally invasive carotid stenting procedures including TCAR.

TCAR, like CAS, is only reimbursed by Medicare as an inpatient procedure and therefore reimbursed to hospitals under the Medicare Severity Diagnosis Related Group, or MS-DRG, system.

There are three key aspects of reimbursement in the United States: coding, coverage and payment.

Coding refers to distinct numeric and alphanumeric billing codes that are used by healthcare providers to report the provision of medical procedures and the use of supplies for specific patients to payers. CPT codes are published by the American Medical Association and are used to report medical services and procedures performed by or under the direction of physicians. Medicare pays physicians for services based on submission of a claim using one or more specific CPT codes. Physician payment for procedures may vary according to site of service. Hospitals are reimbursed for inpatient procedures based on Medicare Severity Diagnosis Related Group, or MS-DRG classifications derived from ICD-10-CM diagnosis and ICD-10-PCS codes that describe the patient’s diagnoses and procedure(s) performed during the hospital stay. MS-DRGs closely calibrate payment for groups of services based on the severity of a patient’s illness. One single MS-DRG payment is intended to cover all hospital costs associated with treating an individual during his or her hospital stay, except for physician charges associated with performing medical procedures, which are reimbursed through CPT codes and payments.

Payment refers to the amount paid to providers for specific procedures and supplies. Payment is generally determined by the specific CPT and billing code. In addition, there may be separate numeric codes, under which the billing code is classified, to establish a payment amount.

Coverage refers to decisions made by individual payers as to whether or not to pay for a specific procedure and related supplies and if so, under what conditions, including specific diagnoses and clinical indications.

Coding for Physicians

In 2014, the Society for Vascular Surgery helped to guide an editorial change by the American Medical Association to CPT 37215 to be inclusive of TCAR. The Category I CPT code for TCAR, effective January 1, 2015, is CPT 37215: Transcatheter placement of intravascular stent(s), cervical carotid artery, open or percutaneous, including angioplasty, when performed, and radiological supervision and interpretation; with distal embolic protection. Published CMS guidance confirms that reverse flow embolic protection systems, such as our ENROUTE NPS, qualify as distal embolic protection under this code. This code has a 90-day global period. Coverage and payment for CPT code 37215 is only available from CMS in the inpatient setting, subject to the terms of the National Coverage Determination Manual Section 20.7, and facilities must establish and maintain institutional and physician standards to support a dedicated carotid stent program. Hospitals participating in the VQI are considered to meet CMS’s minimum facility standards.

Coding for Hospitals

There are a number of appropriate ICD-10-CM diagnosis codes that describe occlusions and stenosis of carotid arteries for asymptomatic patients as well as cerebral infarction due to embolus and thrombus of carotid arteries for

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symptomatic patients, which establish medical necessity. As of October 1, 2020, the proper ICD-10-PCS procedure codes for TCAR includes a code for carotid stenting [e.g. 037(H/J/K/L)3(D/E/F/G)Z] and a code for extracorporeal reverse flow neuroprotection [e.g. X2(H/J) 336]. Based on the ICD 10 diagnosis and procedure codes, TCAR inpatient admissions are assigned to MS-DRG 034 when the patient presents with major complications or co-morbidities, or MCC, 035 when the patient presents with a complication or co-morbidity, or CC, or 036 for patients without complications or co-morbidities.

Payment for Physicians

The 2024 national average physician professional fee payment for CPT code 37215 is approximately $951. We believe physicians feel this level of payment represents a reasonable amount for TCAR. CEA procedures are reimbursed under CPT code 35301, for which the 2024 national average physician professional fee payment is $1,084.

Payment for Hospitals

The Medicare national unadjusted 2024 hospital inpatient payment amounts for MS-DRGs 034, 035 and 036 are $27,316, $16,100 and $12,660, respectively. Based on prior procedure volumes assigned to MS-DRGs, we estimate that the weighted average payment amount across MS-DRGs 034, 035 and 036 is $15,785 in 2024. These MS DRG payments are intended to cover all hospital costs associated with treating an individual during his or her hospital stay, except for physician charges associated with performing medical procedures. We believe that facilities feel this level of payment represents a reasonable amount for the treatment of patients with TCAR. CEA procedures are reimbursed under MS-DRGs 037, 038 and 039. The national unadjusted 2024 payment amounts for MS-DRGs 037, 038 and 039 to be $23,635, $11,202 and $7,989, respectively. Based on prior procedure volumes, we estimate that the weighted average payment amount across these three Extracranial Procedure MS-DRGs to be $10,726. The base payment amounts for MS-DRGs may vary greatly by individual acute-care hospital for several reasons including but not limited to geographic, teaching status, case-mix index, and use of electronic health record systems.

Research, Development and Clinical Programs

Our research and development activities encompass basic research, clinical research and product development. Our engineering team has mechanical engineering, project management, materials science, and prototyping expertise. In addition, our clinical research organization has trial design, project management, data management and other clinical study operational expertise.

Our research and development efforts are currently focused on improving and expanding our portfolio of TCAR products and their labeled indications for use to further improve and simplify the treatment experience for a broad base of patients and physicians. We have worked together with vascular surgeons and other physicians to develop our products. The objective of our research and development program is to leverage our engineering capabilities, clinical and regulatory organizations, and unique insights into treatment of carotid artery disease to continue to lead the TCAR category.

Our clinical research activities are currently focused on our recently closed feasibility study in acute ischemic stroke, NITE-1, as well as completing enrollment in ROADSTER 3, our post-approval study for TCAR in standard surgical risk patients. NITE-1 results, as of the date of an abstract submission to the International Stroke Conference, were included in a poster presentation in early February 2024. Final results will be submitted in a manuscript later this year.

We also have a broad intellectual property platform addressing the transcarotid approach and, in the future, we intend to leverage our expertise to develop new products targeting market opportunities and disease states that could benefit from the physiologic and engineering advantages made possible by our transcarotid approach, including in the heart, aortic arch and brain.

For the fiscal years ended December 31, 2023, 2022 and 2021, our research, development and clinical expenses were $41.3 million, $36.4 million and $27.1 million, respectively.

Seasonality

Our revenue has fluctuated and we expect to continue to fluctuate from quarter-to-quarter due to a variety of factors, including seasonality and number of selling days. With respect to seasonality, our first quarter revenue may be harmed by adverse weather and the resetting of annual patient healthcare insurance plan deductibles, both of which may cause patients to delay elective procedures. Holiday and summer vacations by healthcare providers and/or patients may adversely affect procedure volumes that in turn affect hospital ordering patterns. In addition, we have also experienced moderate procedure volumes during major medical conferences when significant portions of our customer base are attending the conferences.

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Competition

TCAR is a relatively new procedure category and as such the basis of competition for our products is with respect to alternative carotid revascularization procedures. We are positioning TCAR as an alternative to the existing procedures CEA and CAS, and therefore compete primarily with manufacturers of medical devices used in those procedures.

The major manufacturers of products, such as patches and shunts, used in connection with CEA include LeMaitre Vascular, Inc., Getinge AB, Baxter International Inc., Terumo Medical Corporation, W. L. Gore & Associates, Inc. and Edwards Lifesciences Corporation. Many of these companies are large public companies or divisions of publicly-traded companies and have several competitive advantages, including established relationships with vascular surgeons who commonly perform the CEA procedure, significantly greater name recognition and significantly greater sales and marketing resources.

Companies with actively marketed FDA-approved stents and embolic protection devices for use with CAS procedures or which could potentially be used in TCAR include Abbott Laboratories, Medtronic plc, Boston Scientific Corporation, and Cordis Corporation. Other companies have approved devices not currently marketed in the U.S., including W. L. Gore & Associates, Inc., Terumo Medical Corporation, Contego Medical Inc. and InspireMD, Inc. Additionally, some companies have stents and other products in ongoing IDE or planned IDE trials in the U.S., including Terumo Medical Corporation, Contego Medical Inc. and InspireMD, Inc. Preliminary results from Contego Medical Inc.’s PERFORMANCE II and InspireMD, Inc.’s C-Guardians studies were presented at the Vascular InterVentional Advances, or VIVA, conference in November 2023. Contego Medical Inc. and InspireMD, Inc. have also announced plans to develop products for TCAR. Many of these companies have several competitive advantages including the following: more established sales and marketing programs and networks, larger portfolio of products, longer operating histories, established relationships with healthcare professionals and greater name recognition.

Some competitors market other endovascular products that can be used in CAS and TCAR, such as peripheral access kits, guidewires, stents, balloons and sheaths. Such companies include but are not limited to Abbott Laboratories, Boston Scientific Corporation, Cordis Corporation, Medtronic plc and Cook Medical Inc.

In addition to competing for market share for TCAR, we also compete against these companies for personnel, including qualified personnel that are necessary to grow our business.

We believe the principal competitive factors in our market include the following:

Patient outcomes and adverse event rates;

Patient experience;

Acceptance by treating physicians and referral sources;

Physician learning curve;

Ease-of-use and reliability;

Patient recovery time and level of discomfort;

Economic benefits and cost savings;

Price;

Availability and amount of reimbursement; and

Strength of clinical evidence.

We also compete against manufacturers of medications used for medical management of carotid artery disease, including aspirin and statins. Many such companies are large public companies or divisions of publicly-traded companies and have several competitive advantages including the following: established treatment patterns where drugs are generally first-line therapy and invasive procedures or surgery are considered later; established relationships with general practitioners who commonly prescribe such medications; significantly greater name recognition; and significantly greater sales and marketing resources.

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Intellectual Property

We actively seek to protect the intellectual property and proprietary technology that we believe is important to our business, which includes seeking and maintaining patents covering our technology and products, proprietary processes and any other inventions that are commercially or strategically important to the development of our business. We also rely upon trademarks to build and maintain the integrity of our brand, and we seek to protect the confidentiality of trade secrets that may be important to the development of our business.

To protect our proprietary rights, we rely on a combination of trademark, copyright, patent, trade secret and other intellectual property laws, employment, confidentiality and invention assignment agreements, and protective contractual provisions with our employees, contractors, consultants, suppliers, partners and other third parties.

As of December 31, 2023, we owned 179 patents globally, of which 78 were issued U.S. patents and 101 were patents outside of the United States. Our patents expire between November 2024 and July 2039. Our material patents, their jurisdiction, expiration date and the product to which they relate, are listed in the table below:

Jurisdiction

Patent No.

Expiration Date

Related Product

US

8,002,728

12/2/2025

Transcarotid Neuroprotection System

US

8,343,089

6/22/2025

Transcarotid Neuroprotection System

Transcarotid Stent System

US

8,157,760

9/3/2030

Transcarotid Neuroprotection System

US

8,784,355

8/7/2029

Transcarotid Neuroprotection System

US

8,740,834

3/6/2029

Transcarotid Neuroprotection System

US

9,011,364

4/10/2031

Transcarotid Neuroprotection System

US

9,833,555

10/26/2029

Transcarotid Neuroprotection System

US

10,238,853

5/16/2039

Transcarotid Neuroprotection System

Europe

2,173,425

7/18/2028

Transcarotid Neuroprotection System

France

2,173,425

7/18/2028

Transcarotid Neuroprotection System

Germany

2,173,425

7/18/2028

Transcarotid Neuroprotection System

Italy

2,173,425

7/18/2028

Transcarotid Neuroprotection System

Great Britain

2,173,425

7/18/2028

Transcarotid Neuroprotection System

Japan

5,290,290

7/18/2028

Transcarotid Neuroprotection System

Japan

5,693,661

7/18/2028

Transcarotid Neuroprotection System

As of December 31, 2023, we had 96 pending patent applications globally, including 41 in the United States and 55 outside the United States.

As of December 31, 2023, we had trademark registrations for “Silk Road Medical,” the “Silk Road Medical” logo, “TCAR,” “Enroute” and the “Enroute” logo and “Enhance” in the United States, and various other countries. Including these trademark registrations, our trademark portfolio contained 101 trademark registrations/applications.

We also seek to maintain certain intellectual property and proprietary know-how as trade secrets, and generally require our partners to execute non-disclosure agreements prior to any substantive discussions or disclosures of our technology or business plans. Our trade secrets include proprietary account analytics, user training methods, and operational processes. For more information, please see “Risk Factors—Risks Related to Intellectual Property.”

Manufacturing and Supply

We currently manufacture the ENROUTE NPS and ENROUTE NPS PLUS, or our ENROUTE NPS products, at our facilities in Sunnyvale, California and Plymouth, Minnesota. These facilities provide an aggregate of approximately 35,000 square feet of space for our production and distribution operations, including manufacturing, quality control and storage. We believe our combined facilities will be sufficient to meet our manufacturing needs for at least the next five years.

Our manufacturing and distribution operations are subject to regulatory requirements of the FDA’s Quality System Regulation, or QSR, for medical devices sold in the United States, set forth in 21 CFR part 820. Our quality system is also certified as demonstrating compliance to ISO 13485:2016. In July 2022, we voluntarily requested the cancellation of our CE Mark certifications for business reasons but will continue to work with our Registrar to maintain ISO 13485:2016 certifications of our quality system for both our Sunnyvale and Plymouth facilities. We may seek new CE Mark certifications in the future. We are also subject to applicable local regulations relating to the environment, waste management and health and safety matters, including measures relating to the release, use, storage, treatment,

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transportation, discharge, disposal, sale, labeling, collection, recycling, treatment and remediation of hazardous substances.

The FDA monitors compliance with the QSR through periodic inspections of our facilities. Our suppliers’ facilities are also subject to FDA regulations, including the QSR, and unannounced inspections by the FDA and other similar regulatory authorities. Our Registrar for ISO 13485:2016, British Standards Institute, or BSI, monitors compliance to the standard’s requirements through annually scheduled audits of our manufacturing facilities.

We have been an FDA registered medical device establishment and California licensed medical device manufacturer since 2011. We completed the initial FDA registration of our Plymouth, Minnesota facility in May 2022.

The FDA has conducted a total of five establishment inspections of our manufacturing facility in Sunnyvale, California. The most recent inspection in 2023 concluded with no actions indicated. The FDA conducted an initial facility inspection in our Plymouth, Minnesota location in January 2024 and a one-observation Form 483 Notice of Observation was issued pertaining to a singular piece of production equipment in relation to calibration and preventive maintenance. In response, we initiated a Corrective and Preventive Action, or CAPA, to address the 483. We believe that we are in compliance, in all material respects, with all applicable FDA requirements, including the QSR.

Since obtaining ISO 13485 certification in 2011 for the Sunnyvale facility, BSI has conducted scheduled surveillance audits annually, recertification audits every third year, and periodic audits since the initial certification period. The most recent recertification audit for Sunnyvale was conducted in September 2023 and no major non-conformities were identified. The initial ISO 13485:2016 certification of the Plymouth facility was completed in November 2023, with no major non-conformities identified. We are no longer subject to unannounced audits since our CE Mark certifications have been canceled. We believe that we are in compliance, in all material respects, with all ISO 13485 requirements.

Manufacturing of the materials and components of the ENROUTE NPS products are provided by approved suppliers, some of which are single-source suppliers of key components, sub-assemblies and materials. We purchase finished transcarotid access kits, guidewires, balloons and stents through contract manufacturers. Cordis is our contract manufacturer and currently the sole source supplier for the ENROUTE stent. We typically maintain several months’ worth of ENROUTE stents in inventory, and we estimate that it would take up to two years or more to qualify a second source supplier for our ENROUTE stent. The suppliers for our ENROUTE NPS products and our other product lines are evaluated, qualified and approved through a stringent supplier management program, which includes various evaluations, assessments, qualifications, validations, testing and inspection to ensure the supplier can meet acceptable quality requirements. We ensure a strict change control policy with our key suppliers to ensure that no component or process changes are made without our prior approval.

Order quantities and lead times for components purchased from suppliers are based on our forecasts derived from historical demand and anticipated future demand. Lead times for components may vary depending on the size of the order, time required to fabricate and test the components, specific supplier requirements and current market demand for the components, sub-assemblies and materials. We typically stock several months of supply for components and raw materials to mitigate any supply delays or disruptions. Considering ongoing global supply chain constraints, we are working with all our suppliers on additional orders and forecasting to mitigate any potential supply issues. We perform assembly, testing, inspection and final product release activities for the ENROUTE NPS. Finished ENROUTE NPS devices are ethylene oxide sterilized at a qualified supplier.

Cordis License Agreement

In December 2010, we entered into a license agreement with Cordis, which agreement was amended in May 2023 (as amended, the Cordis License Agreement). Pursuant to the Cordis License Agreement, Cordis granted us a worldwide, non-exclusive, perpetual, royalty-bearing license to certain of its intellectual property related to the PRECISE carotid stent, or the Licensed IP, for transcervical treatment of carotid artery disease with an intravascular stent for certain applications for accessing blood vessels through the neck and cervical area. Cordis may not license the Licensed IP in our licensed field of use to any other third party during the term of the Cordis License Agreement.

The Cordis License Agreement requires us to work exclusively with either Cordis or Confluent Medical Technologies, Inc. (f/k/a Nitinol Devices and Components, Inc.), or Confluent, for the development, manufacture and supply of the licensed products. If either Cordis or Confluent cannot continue to manufacture or supply the licensed products, we can seek a third-party manufacturer with the prior written consent of Cordis.

We have the right to assign or transfer the Cordis License Agreement to an entity that succeeds all or substantially all of our equity or assets. The Cordis License Agreement may be terminated by either party in the event of uncured material

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breach by the other party that remains uncured for 60 days (or 30 days for payment related breaches), or bankruptcy of the other party.

Cordis Supply Agreement

In October 2011, we entered into a supply agreement with Cordis and have since entered into several amendments, most recently in May 2023 (as amended, the Cordis Supply Agreement). Pursuant to the Cordis Supply Agreement, Cordis has assisted in the development of a transcarotid stent delivery system according to our specifications with a PRECISE carotid stent implant, or ENROUTE stent and has supplied the ENROUTE stent through preclinical and clinical trials. Cordis has agreed to supply the ENROUTE stent for our commercial sale through February 19, 2029 and has agreed to engage in good faith negotiations to extend its supply commitment beyond that date. Cordis has the exclusive right to manufacture and supply the current generation of the ENROUTE stent during the term of the Cordis Supply Agreement. If Cordis is not able to supply the ENROUTE stent, upon our election, Cordis shall permit Confluent or a third-party manufacturer to provide supply of the ENROUTE stent, provided that Cordis retains the right to manufacture and supply the ENROUTE stent to us to the extent it is able to do so. The Cordis Supply Agreement requires a specified minimum volume purchase commitment from us from July 2023 through February 2029 based on the actual units purchased during the prior year period from July 1 through June 30, with the unit purchase price dependent upon annual volume during the same prior year period.

The Cordis Supply Agreement will continue in full force and effect until the earlier to occur of (i) termination of the Cordis License Agreement; (ii) our election if and when Cordis approves another manufacturer; (iii) mutual written termination; or (iv) termination pursuant to the terms therein. The Cordis Supply Agreement may be terminated by either party in the event of uncured material breach by the other party that remains uncured for 30 days, or bankruptcy of the other party.

Government Regulation

United States Food & Drug Administration

Our products and operations are subject to extensive and ongoing regulation by the FDA under the Federal Food, Drug, and Cosmetic Act, or FDCA, and its implementing regulations, as well as other federal and state regulatory bodies in the United States. The laws and regulations govern, among other things, product design and development, pre-clinical and clinical testing, manufacturing, packaging, labeling, storage, record keeping and reporting, clearance or approval, marketing, distribution, promotion, import and export, and post-marketing surveillance.

Unless an exemption applies, each new or significantly modified medical device we seek to commercially distribute in the United States will require either a premarket notification to the FDA requesting permission for commercial distribution under Section 510(k) of the Federal Food, Drug and Cosmetic Act, or FDCA, also referred to as a 510(k) clearance, or approval from the FDA of a PMA application. In some cases, where no predicate device exists, Class II devices may come to market through the de novo authorization process. The 510(k) clearance, de novo authorization, and PMA processes can be resource intensive, expensive, and lengthy, and require payment of significant user fees, unless an exemption is available.

Device Classification

Under the FDCA, medical devices are classified into one of three classes-Class I, Class II or Class III-depending on the degree of risk associated with each medical device and the extent of control needed to provide reasonable assurances with respect to safety and effectiveness.

Class I includes devices with the lowest risk to the patient and are those for which safety and effectiveness can be reasonably assured by adherence to a set of FDA regulations, referred to as the General Controls for Medical Devices, which require compliance with the applicable portions of the QSR, facility registration and product listing, reporting of adverse events and malfunctions, and appropriate, truthful and non-misleading labeling and promotional materials. Some Class I devices, also called Class I reserved devices, also require premarket clearance by the FDA through the 510(k) premarket notification process described below. Most Class I products are exempt from the premarket notification requirements.

Class II devices are those that are subject to the General Controls, and special controls as deemed necessary by the FDA to ensure the safety and effectiveness of the device. These special controls can include performance standards, patient registries, FDA guidance documents and post-market surveillance. Most Class II devices are subject to premarket

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review and clearance by the FDA. Premarket review and clearance by the FDA for Class II devices is accomplished through the 510(k) premarket notification process.

Class III devices include devices deemed by the FDA to pose the greatest risk such as life-supporting or life-sustaining devices, or implantable devices, in addition to those deemed novel and not substantially equivalent following the 510(k) process. The safety and effectiveness of Class III devices cannot be reasonably assured solely by the General Controls and Special Controls described above. Therefore, these devices are subject to the PMA application process, which is generally more costly and time consuming than the 510(k) process. Through the PMA application process, the applicant must submit data and information demonstrating reasonable assurance of the safety and effectiveness of the device for its intended use to the FDA’s satisfaction. Accordingly, a PMA application typically includes, but is not limited to, extensive technical information regarding device design and development, pre-clinical and clinical trial data, manufacturing information, labeling and financial disclosure information for the clinical investigators in device studies. The PMA application must provide valid scientific evidence that demonstrates to the FDA’s satisfaction a reasonable assurance of the safety and effectiveness of the device for its intended use.

If a new medical device does not qualify for the 510(k) premarket notification process because no predicate device to which it is substantially equivalent can be identified, the device is automatically classified into Class III. The Food and Drug Administration Modernization Act of 1997 established a new route to market for low to moderate risk medical devices that are automatically placed into Class III due to the absence of a predicate device, called the “Request for Evaluation of Automatic Class III Designation,” or the de novo classification process. This process allows a manufacturer whose novel device is automatically classified into Class III to request down-classification of its medical device into Class I or Class II on the basis that the device presents low or moderate risk, rather than requiring the submission and approval of a PMA. If the manufacturer seeks reclassification into Class II, the manufacturer must include a draft proposal for special controls that are necessary to provide a reasonable assurance of the safety and effectiveness of the medical device. The FDA may reject the reclassification petition if it identifies a legally marketed predicate device that would be appropriate for a 510(k) or determines that the device is not low to moderate risk and requires PMA or that general controls would be inadequate to control the risks and special controls cannot be developed.

The Investigational Device Process

In the United States, absent certain limited exceptions, human clinical trials intended to support medical device clearance or approval require an IDE application. Some types of studies deemed to present “non-significant risk” are deemed to have an approved IDE once certain requirements are addressed and Institutional Review Board. or IRB, approval is obtained. If the device presents a “significant risk” to human health, as defined by the FDA, the sponsor must submit an IDE application to the FDA and obtain IDE approval prior to commencing the human clinical trials. The IDE application must be supported by appropriate data, such as animal and laboratory testing results, showing that it is safe to test the device in humans and that the testing protocol is scientifically sound. The IDE application must be approved in advance by the FDA for a specified number of subjects. Generally, clinical trials for a significant risk device may begin once the IDE application is approved by the FDA and the study protocol and informed consent are approved by appropriate IRBs at the clinical trial sites. There can be no assurance that submission of an IDE will result in the ability to commence clinical trials, and although the FDA’s approval of an IDE allows clinical testing to go forward for a specified number of subjects, it does not bind the FDA to accept the results of the trial as sufficient to prove the product’s safety and effectiveness, even if the trial meets its intended success criteria.

All clinical trials must be conducted in accordance with the FDA’s IDE regulations that govern investigational device labeling, prohibit promotion and specify an array of recordkeeping, reporting and monitoring responsibilities of study sponsors and study investigators. Clinical trials must further comply with the FDA’s good clinical practice regulations for institutional review board approval and for informed consent and other human subject protections. Required records and reports are subject to inspection by the FDA. The results of clinical testing may be unfavorable, or, even if the intended safety and effectiveness success criteria are achieved, may not be considered sufficient for the FDA to grant marketing approval or clearance of a product.

The 510(k) Clearance Process

Under the 510(k) process, the manufacturer must submit to the FDA a premarket notification, demonstrating that the device is “substantially equivalent,” as defined in the statute, to a legally marketed predicate device.

A predicate device is a legally marketed device that is not subject to premarket approval, i.e., a device that was legally marketed prior to May 28, 1976 (pre-amendments device) and for which a PMA is not required, a device that has been reclassified from Class III to Class II or I, or a device that was previously found substantially equivalent through the 510(k) process. To be “substantially equivalent,” the proposed device must have the same intended use as the predicate device,

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and either have the same technological characteristics as the predicate device or have different technological characteristics and not raise different questions of safety or effectiveness than the predicate device. Clinical data is sometimes required to support substantial equivalence.

After a 510(k) premarket notification is submitted, the FDA determines whether to accept it for substantive review. If it lacks necessary information for substantive review, the FDA will refuse to accept the 510(k) notification. If it is accepted for filing, the FDA begins a substantive review. The Medical Device User Fee Amendments sets a performance goal of 90 days for FDA review of a 510(k) submission, but the review time can be delayed if FDA raises questions or requests additional information during the review process. As a practical matter, clearance often takes longer, and clearance is never assured. Although many 510(k) premarket notifications are cleared without clinical data, the FDA may require further information, including clinical data, to make a determination regarding substantial equivalence, which may significantly prolong the review process. If the FDA agrees that the device is substantially equivalent, it will grant clearance to commercially market the device.

If the FDA determines that the device is not “substantially equivalent” to a predicate device, or if the device is automatically classified into Class III, the device sponsor must then fulfill the much more rigorous premarketing requirements of the PMA approval process, or seek reclassification of the device through the de novo process. A manufacturer can also submit a petition for direct de novo review if the manufacturer is unable to identify an appropriate predicate device and the new device or new use of the device presents a moderate or low risk.

After 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, could require a PMA application or de novo classification. The FDA requires each manufacturer to determine whether the proposed change requires submission of a 510(k) or a PMA in the first instance, but the FDA can review any such decision and disagree with a manufacturer’s determination. Many minor modifications are accomplished by a letter-to-file in which the manufacture documents the change in an internal letter-to-file. The letter-to-file is in lieu of submitting a new 510(k) to obtain clearance for such change. The FDA can always review these letters to file in an inspection. If the FDA disagrees with a manufacturer’s determination regarding whether a new premarket submission is required for the modification of an existing device, the FDA can require the manufacturer to cease marketing and/or recall the modified device until 510(k) clearance or approval of a PMA application is obtained.

More recently, in September 2019, the FDA finalized guidance describing an optional “safety and performance based” premarket review pathway for manufacturers of “certain, well-understood device types” to demonstrate substantial equivalence under the 510(k) clearance pathway by showing that such device meets objective safety and performance criteria established by the FDA, thereby obviating the need for manufacturers to compare the safety and performance of their medical devices to specific predicate devices in the clearance process. The FDA intends to develop and maintain a list of device types appropriate for the “safety and performance based” pathway and will continue to develop product-specific guidance documents that identify the performance criteria for each such device type, as well as the testing methods recommended in the guidance documents, where feasible.

The De Novo Process

Medical devices that the FDA has not previously classified as Class I, II or III are automatically classified into Class III regardless of the level of risk they pose. The Food and Drug Administration Modernization Act of 1997 established a new route to market for low to moderate risk medical devices that are automatically placed into Class III due to the absence of a predicate device, called the “Request for Evaluation of Automatic Class III Designation,” or the de novo classification procedure.

This procedure allows a manufacturer whose novel device is automatically classified into Class III to request down-classification of its medical device into Class I or Class II on the basis that the device presents low or moderate risk, rather than requiring the submission and approval of a PMA application. Prior to the enactment of the Food and Drug Administration Safety and Innovation Act of 2012, or FDASIA, a medical device could only be eligible for de novo classification if the manufacturer first submitted a 510(k) premarket notification and received a determination from the FDA that the device was not substantially equivalent. FDASIA streamlined the de novo classification pathway by permitting manufacturers to request de novo classification directly without first submitting a 510(k) premarket notification to the FDA and receiving a not substantially equivalent determination. De novo classification requests are also subject to the payment of user fees. Under FDASIA, the FDA is required to make a decision within 120 days following receipt of the de novo request, but the process may take significantly longer.

If the manufacturer seeks reclassification into Class II, the manufacturer must include a draft proposal for special controls that are necessary to provide a reasonable assurance of the safety and effectiveness of the medical device. If the

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FDA grants the de novo request, the device may be legally marketed in the United States. However, the FDA may reject the request if it identifies a legally marketed predicate device that would be appropriate for a 510(k) notification or determines that the device is not low to moderate risk or that general controls would be inadequate to control the risks and/or special controls cannot be developed.

Once a device receives a de novo classification as a Class II device, any modification that could significantly affect its safety or efficacy, or that would constitute a major change or modification in its intended use, will require a new 510(k) clearance or, depending on the modification, another de novo request or even PMA approval.

The PMA Approval Process

Following receipt of a PMA application, the FDA conducts an administrative review to determine whether the application is sufficiently complete to permit a substantive review. If it is not, the agency will refuse to file the PMA. If it is, the FDA will accept the application for filing and begin the review. The FDA, by statute and by regulation, has 180 days to review a filed PMA application, although the review of an application more often occurs over a significantly longer period of time. During this review period, the FDA may request additional information or clarification of information already provided, and the FDA may issue a major deficiency letter to the applicant, requesting the applicant’s response to deficiencies communicated by the FDA. The FDA considers a PMA or PMA supplement to have been voluntarily withdrawn if an applicant fails to respond to an FDA request for information (e.g., major deficiency letter) within a total of 360 days. Before approving or denying a PMA, an FDA advisory committee may review the PMA at a public meeting and provide the FDA with the committee’s recommendation on whether the FDA should approve the submission, approve it with specific conditions, or not approve it. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.

Prior to approval of a PMA, the FDA may conduct inspections of the clinical trial data and clinical trial sites, as well as inspections of the manufacturing facility and processes. Overall, the FDA review of a PMA application generally takes between one and three years, but may take significantly longer. The FDA can delay, limit or deny approval of a PMA application for many reasons, including:

The device may not be shown safe or effective to the FDA’s satisfaction;

The data from pre-clinical studies and/or clinical trials may be found unreliable or insufficient to support approval;

The manufacturing process or facilities may not meet applicable requirements; and

Changes in FDA approval policies or adoption of new regulations may require additional data.

If the FDA evaluation of a PMA is favorable, the FDA will issue either an approval letter, or an approvable letter, the latter of which usually contains a number of conditions that must be met in order to secure final approval of the PMA. When and if those conditions have been fulfilled to the satisfaction of the FDA, the agency will issue a PMA approval letter authorizing commercial marketing of the device, subject to the conditions of approval and the limitations established in the approval letter. If the FDA’s evaluation of a PMA application or manufacturing facilities is not favorable, the FDA will deny approval of the PMA or issue a not approvable letter. The FDA also may determine that additional tests or clinical trials are necessary, in which case the PMA approval may be delayed for several months or years while the trials are conducted and data is submitted in an amendment to the PMA, or the PMA is withdrawn and resubmitted when the data is available. The PMA process can be expensive, uncertain and lengthy and a number of devices for which the FDA approval has been sought by other companies have never been approved by the FDA for marketing.

New PMA applications or PMA supplements are required for modification to the manufacturing process, equipment or facility, quality control procedures, sterilization, packaging, expiration date, labeling, device specifications, ingredients, materials or design of a device that has been approved through the PMA process. PMA supplements often require submission of the same type of information as an initial PMA application, except that the supplement is limited to information needed to support any changes from the device covered by the approved PMA application and may or may not require as extensive technical or clinical data or the convening of an advisory panel, depending on the nature of the proposed change.

In approving a PMA application, as a condition of approval, the FDA may also require some form of post-approval study or post-market surveillance, whereby the applicant conducts a follow-up study or follows certain patient groups for a number of years and makes periodic reports to the FDA on the clinical status of those patients when necessary to protect the public health or to provide additional or longer term safety and effectiveness data for the device. The FDA may also require post-market surveillance for certain devices cleared under a 510(k) notification, such as implants or life-supporting

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or life-sustaining devices used outside a device user facility. The FDA may also approve a PMA application with other post-approval conditions intended to ensure the safety and effectiveness of the device, such as, among other things, restrictions on labeling, promotion, sale, distribution and use.

Japan Pharmaceuticals and Medical Devices Agency

Japan maintains a regulatory framework, similar to that described for the United States, under its Pharmaceutical and Medical Device Act, or PMD Act. The PMD Act covers regulations on pharmaceuticals, medical devices, and cosmetics and is governed by the Ministry of Health, Labor, and Welfare, or MHLW, which has the authority to (1) issue marketing licenses, (2) issue Marketing Authorization Holder licenses, and (3) issue Foreign Manufacturer Registration, or FMR, licenses, among its other responsibilities in policies and administrative measures. Within the MHLW, the Pharmaceuticals and Medical Devices Agency, or PMDA, performs the technical management and review of medical devices including, but not limited to, (1) review, examination, analysis, and approval recommendations, (2) Quality Management Systems, Good Laboratory Practice, and Good Clinical Practice inspections, and (3) collection and analysis of Post Market Surveillance data.

Our portfolio in Japan is subject to the PMD Act regulatory framework. Like the FDCA regulatory framework, medical devices must be classified into one of four classes - Class I, Class II, Class III, or Class IV - depending on the degree of risk associated with each medical device and the extent of control needed to provide reasonable assurances with respect to safety and effectiveness. Our devices are classified as Class IV, Specially Controlled Medical Devices, with a regulatory pathway that requires MHLW approval (Shonin pathway).

Pursuant to the Shonin regulatory pathway, the PMDA may conduct audits to verify compliance with Good Clinical Practice, Documentation Reliability, and Quality Management System standards and/or regulations, in addition to inspections of the manufacturing facility and processes. Often, in the case of novel device approvals, the PMDA may require some form of post-approval study or post-market surveillance, whereby the applicant conducts a follow-up study or follows certain patient groups for a number of years and makes periodic reports to the PMDA on the clinical status of those patients when necessary to protect the public health or to provide additional or longer term safety and effectiveness data for the device.

There are several additional pre-requisites that are required of medical device manufacturers to obtain approval for market authorization in Japan. These include the appointment of a Marketing Authorization Holder in Japan and the acquisition of an FMR. Only a Marketing Authorization Holder, or MAH, a Japanese domestic medical device manufacturer, or a Designated Marketing Authorization Holder, or DMAH, a designee by an overseas medical device manufacturer, may import and sell medical products to the Japanese market. Additional duties of the MAH/DMAH include, but may not be limited to, the following:

Facilitating PMDA product registration, managing product license modifications, and maintaining product approvals;

Managing product quality and safety to ensure that manufacturing sites comply with Japan’s Quality Management System requirements;

Managing product storage in the Japanese market;

Administering product release to distributors in the Japanese market; and

Managing post-market surveillance in the Japanese market.

If the PMDA evaluation of a Shonin application is favorable, MHLW may then issue the applicant a license for the product. This product license does not have an expiration date, however, the FMR and QMS conformity certificate expires every five years and requires renewal to keep the product in compliance on the Japanese market.

China National Medical Products Administration

China maintains a regulatory framework for medical devices directed by State Decree No. 739, “The Regulations on the Supervision and Administration of Medical Devices”. State Decree No. 739 outlines regulations on the following elements, (1) General Provisions, (2) Medical Device Product Registration and Filing, (3) Medical Device Production, (4) Operation and Use of Medical Devices, (5) Handling of Adverse Events and Recall of Medical Devices, (6) Supervision and Inspection, and (7) Legal Liability. The Chinese NMPA is charged with the administration of these regulations and coordinates its supervision with other governmental bodies, (i.e., Center for Medical Device Evaluation, Center for Medical

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Device Standardization), to ensure that devices registered, imported/exported, manufactured, sold, or used in the Chinese market are safe and effective.

Our portfolio in China is subject to the State Decree No. 739 framework. Manufacturers of medical devices must classify those devices into one of three categories - Class I, Class II, or Class III - depending on the degree of risk associated with each medical device and the extent of control needed to provide reasonable assurances with respect to safety and effectiveness. Our devices are classified as Class III, a higher-risk device category requiring special measures to be strictly controlled and managed to ensure safety and effectiveness and which are subject to product registration.

Pursuant to the regulatory framework in China, manufacturers must demonstrate the following in order to successfully gain approval for a medical device:

Appoint a Legal Agent in China;

Obtain foreign market approval, (typically either FDA clearance/approval or EU certificate);

Obtain certification of a Quality Management System (typically ISO 13485 certification);

Prepare Chinese specific Product Technical Requirements (PTR); and

Perform successful Type Testing of the product per established PTR.

The legal agent in China is a domestic representative (or service) who acts as an interface with the Chinese regulatory bodies in both pre-market and post-market phases of any medical device distributed in China. Often, a distributor serves as both the domestic distributor and the legal agent if that distributor has the appropriate Chinese licensing to do so. Additional duties of the legal agent include, but may not be limited to, the following:

Performs product registration/filing for overseas manufacturers;

Performs domestic post market surveillance duties, (e.g., Adverse Event reporting, recall coordination, customer compliant collection, etc.);

Assists NMPA with inspection and quality evaluation of overseas manufacturers; and

Manages and monitors medical device importation, sales, and distribution in China.

If the NMPA evaluation of the medical device filing is favorable, the applicant is issued a license for the product. This product license has a five (5) year expiration period and must be renewed prior to license expiry for the product to continue to be imported, sold, or distributed in China.

Pervasive and Continuing Regulation

After a device is placed on the market, numerous regulatory requirements continue to apply. These include:

The FDA, NMPA, and PMDA QSR, which require manufacturers, including their suppliers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the manufacturing process;

Labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or off-label uses;

Medical device reporting, or MDR, regulations, which require that manufacturers report to the FDA, NMPA, and/or PMDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction were to recur;

Medical device recalls, which require that manufacturers report to the FDA, NMPA, and PMDA any recall of a medical device, provided the recall was initiated to either reduce a risk to health posed by the device, or to remedy a violation of the FDCA, State Decree No. 47, or PMD Act caused by the device that may present a risk to health; and

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Post-market surveillance regulations, which apply when necessary to protect the public health or to provide additional safety and effectiveness data for the device.

We have registered with the FDA as a medical device manufacturer and a specification developer and have obtained a manufacturing license from the California Department of Public Health, or CDPH. The FDA and CDPH have broad post-market and regulatory enforcement powers. We are subject to unannounced inspections by the FDA and the Food and Drug Branch of CDPH to determine our compliance with the QSR and other regulations, and these inspections may include the manufacturing facilities of our suppliers. Additionally, our Registrar, BSI, regularly inspects our manufacturing, design and operational facilities to ensure ongoing ISO 13485 compliance. Further, in February 2024, the FDA issued a final rule replacing the QSR with the Quality Management System Regulation, or QMSR, which incorporates by reference the quality management system requirements of ISO 13485:2016. The FDA has stated that the standards contained in ISO 13485:216 are substantially similar to those set forth in the existing QSR. This final rule does not go into effect until February 2026.

We maintain a Foreign Manufacturer Registration with Japan’s MHLW which requires assessment of the quality system by PMDA on an ongoing basis. We also maintain a DMAH in the Japanese market that has been appropriately recognized by MHLW, which oversees quality management and operations in the Japanese market for our products licensed in Japan. Similarly, we maintain a legal agent in the Chinese market that has been appropriately recognized by NMPA, which oversees quality management and operations in the Chinese market for our products licensed in China.

Failure to comply with applicable regulatory requirements can result in enforcement action by the FDA, NMPA, or PMDA, which may include any of the following sanctions:

Warning letters, fines, injunctions, consent decrees and civil penalties;

Repair, replacement, refunds, recall or seizure of our products;

Operating restrictions, partial suspension or total shutdown of production;

Refusing our requests for submissions, including 510(k) clearance or premarket approval of new products, new intended uses or modifications to existing products, or license modifications;

Withdrawing 510(k) clearance or premarket approvals that have already been granted; and

Criminal prosecution.

Compliance

Our compliance organization is designed to support our growing organization through an effective Corporate Compliance Program based on our legal and regulatory environment. Our compliance and ethics programs support our key business objectives, identify legal and ethical behavior boundaries through our code of conduct, and establish a system to inform leadership. Primary responsibilities of our compliance organization are as follows:

Healthcare compliance program development and implementation;

Existing program evaluation through risk assessment and internal audits;

Compliance issue investigation and remediation;

Corporate compliance training and education; and

HIPAA privacy training.

Health Insurance Portability and Accountability Act

The Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, established federal protection for the privacy and security of health information. Under HIPAA, the Department of Health and Human Services, or HHS, has issued regulations to protect the privacy and security of protected health information used or disclosed by “Covered Entities,” including healthcare providers and their Business Associates. HIPAA also regulates standardization of data content, codes and formats used in healthcare transactions and standardization of identifiers for health plans and providers. The privacy

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regulations protect medical records and other protected health information by limiting their use and release, giving patients the right to access their medical records and limiting most disclosures of health information to the minimum amount necessary to accomplish an intended purpose. The HIPAA security standards require the adoption of administrative, physical, and technical safeguards and the adoption of written security policies and procedures. HIPAA requires Covered Entities to execute Business Associate Agreements with their Business Associates and subcontractors, who provide services to Covered Entities and who need access to protected health information. In addition, companies that would not otherwise be subject to HIPAA may become contractually obligated to follow HIPAA requirements through agreements with Covered Entities and Business Associates, and some of our customers may require us to agree to these provisions.

In addition, HIPAA and other federal privacy regulations, such as Section 5 of the Federal Trade Commission Act, there are a number of state laws regarding the privacy and security of health information and personal data that apply to us. The compliance requirements of these laws, including additional breach reporting requirements, and the penalties for violation vary widely, and new privacy and security laws in this area are evolving. Requirements of these laws and penalties for violations vary widely.

If we or our operations are found to be in violation of HIPAA, HITECH, or their implementing regulations, we may be subject to penalties, including civil and criminal penalties, fines, and exclusion from participation in federal or state healthcare programs, and the curtailment or restructuring of our operations. HITECH increased the civil and criminal penalties that may be imposed against Covered Entities, their Business Associates and possibly other persons, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorney’s fees and costs associated with pursuing federal civil actions.

U.S. Federal, State and Foreign Fraud and Abuse Laws

The federal and state governments have enacted, and actively enforce, a number of laws to address fraud and abuse in federal healthcare programs. Our business is subject to compliance with these laws.

Anti-Kickback Statutes

The federal Anti-Kickback Statute prohibits persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual, or the furnishing or arranging for a good or service, for which payment may be made under a federal healthcare program, such as Medicare or Medicaid. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation.

The definition of “remuneration” has been broadly interpreted to include anything of value, including, for example, gifts, certain discounts, the furnishing of free supplies, equipment or services, credit arrangements, payment of cash and waivers of payments. Several courts have interpreted the statute’s intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal healthcare covered businesses, the statute has been violated. Violations of the federal Anti-Kickback Statute may result in civil monetary penalties per violation, plus up to three times the remuneration involved. Civil penalties for such conduct can further be assessed under the federal False Claims Act. Violations can also result in criminal penalties, including criminal fines and imprisonment. Similarly, violations can result in exclusion from participation in government healthcare programs, including Medicare and Medicaid. In addition, some kickback allegations have been claimed to violate the Federal False Claims Act.

The Office of Inspector General, or OIG, of the HHS has issued a series of regulations known as “safe harbors.” These safe harbors set forth provisions that, if all their applicable requirements are met, will assure healthcare providers and other parties that they will not be prosecuted under the Anti-Kickback Statute. The failure of a transaction or arrangement to fit precisely within one or more safe harbors does not necessarily mean that it is per se illegal or that prosecution will be pursued. However, conduct and business arrangements that do not fully satisfy an applicable safe harbor may result in increased scrutiny by government enforcement authorities such as OIG.

Many states have adopted laws similar to the Anti-Kickback Statute. Some of these state prohibitions apply to referral of recipients for healthcare products or services reimbursed by any source, not only government healthcare programs, and may apply to payments made directly by the patient.

Government officials have focused their enforcement efforts on the marketing of healthcare services and products, among other activities, and recently have brought cases against companies, and certain individual sales, marketing and executive personnel, for allegedly offering unlawful inducements to potential or existing customers in an attempt to procure their business.

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Federal False Claims Act

The federal False Claims Act, or FCA, 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 healthcare program. The qui tam provisions of the FCA allow a private individual to bring actions on behalf of the federal government alleging that the defendant has violated the FCA and to share in any monetary recovery. In addition, various states have enacted false claims laws analogous to the FCA, and many of these state laws apply where a claim is submitted to any third-party payer and not only a federal healthcare program.

When an entity is determined to have violated the FCA, it may be required to pay up to three times the actual damages sustained by the government, plus civil fines and penalties for each false claim, subject to adjustment for inflation. As part of any settlement, the government may require the entity to enter into a corporate integrity agreement, which imposes certain compliance, certification and reporting obligations. There are many potential bases for liability under the FCA. Liability arises, primarily, when an entity knowingly submits, or causes another to submit, a false claim for reimbursement to the federal government. The federal government has used the FCA to assert liability on the basis of kickbacks, or in instances in which manufacturers have provided billing or coding advice to providers that the government considered to be inaccurate. In these cases, the manufacturer faces liability for “causing” a false claim. In addition, the federal government has prosecuted companies under the FCA in connection with off-label promotion of products. Our activities relating to the reporting of discount and rebate information and other information affecting federal, state and third-party reimbursement of our products and the sale and marketing of our products may be subject to scrutiny under these laws.

Civil Monetary Penalties

The Civil Monetary Penalty Act of 1981 imposes penalties against any person or entity that, among other things, is determined to have presented or caused to be presented a claim to a federal healthcare program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent, or offering or transferring remuneration to a federal healthcare beneficiary that a person knows or should know is likely to influence the beneficiary’s decision to order or receive items or services reimbursable by the government from a particular provider or supplier.

Open Payments

The Physician Payments Sunshine Act, known as “Open Payments” and enacted as part of the Affordable Care Act, requires applicable manufacturers of covered drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to annually report to CMS information regarding certain payments and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain non-physician healthcare professionals (such as physician assistants and nurse practitioners, among others), and teaching hospitals, as well as information regarding ownership and investment interests held by physicians and their immediate family members. Failure to submit required information on time may result in civil monetary penalties with additional amounts for knowingly failing to submit payment information. We are subject to Open Payments and the information we disclose may lead to greater scrutiny, which may result in modifications to established practices and additional costs. Additionally, similar reporting requirements have also been enacted on the state level domestically, and an increasing number of countries worldwide either have adopted or are considering similar laws requiring transparency of interactions with healthcare professionals.

Foreign Corrupt Practices Act

The Foreign Corrupt Practices Act, or FCPA, prohibits any U.S. individual or business from paying, offering, or authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the United States to comply with accounting provisions requiring us to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, if any, and to devise and maintain an adequate system of internal accounting controls for international operations.

International Laws

Outside of the United States, we are subject to medical device laws and other applicable laws in countries where we operate or commercialize our medical devices. In addition to medical device laws, various countries have adopted anti-

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bribery laws providing for severe consequences in the form of criminal penalties and significant fines for individuals or companies committing a bribery offense. Violations of these anti-bribery laws, or allegations of such violations, could have a negative impact on our business, results of operations and reputation.

For instance, in the United Kingdom, under the U.K. Bribery Act 2010, a bribery occurs when a person offers, gives or promises to give a financial or other advantage to induce or reward another individual to improperly perform certain functions or activities, including any function of a public nature. Bribery of foreign public officials also falls within the scope of the U.K. Bribery Act 2010. An individual found in violation of the U.K. Bribery Act 2010, faces imprisonment of up to ten years. In addition, the individual can be subject to an unlimited fine, as can commercial organizations for failure to prevent bribery.

There are also international privacy laws that impose restrictions on the access, use, and disclosure of health information. All of these laws may impact our business. Our failure to comply with these privacy laws or significant changes in the laws restricting our ability to obtain required patient information could significantly impact our business and our future business plans.

U.S. Centers for Medicare and Medicaid Services

Medicare is a federal program administered by the U.S. Centers for Medicare and Medicaid Services through fiscal intermediaries and carriers. Available to individuals age 65 or over, and certain other individuals, the Medicare program provides, among other things, healthcare benefits that cover, within prescribed limits, the major costs of most medically necessary care for such individuals, subject to certain deductibles and copayments.

CMS has established guidelines for the coverage and reimbursement of certain products and procedures by Medicare. In general, in order to be reimbursed by Medicare, a healthcare procedure furnished to a Medicare beneficiary must be reasonable and necessary for the diagnosis or treatment of an illness or injury, or to improve the functioning of a malformed body part. The methodology for determining coverage status and the amount of Medicare reimbursement varies based upon, among other factors, the setting in which a Medicare beneficiary received healthcare products and services. Any changes in federal legislation, regulations and policy affecting CMS coverage and reimbursement relative to the procedure using our products could have a material effect on our performance.

CMS also administers the Medicaid program, a cooperative federal/state program that provides medical assistance benefits to qualifying low income and medically needy persons. State participation in Medicaid is optional, and each state is given discretion in developing and administering its own Medicaid program, subject to certain federal requirements pertaining to payment levels, eligibility criteria and minimum categories of services. The coverage, method and level of reimbursement vary from state to state and is subject to each state’s budget restraints. Changes to the availability of coverage, method or level of reimbursement for TCAR may affect future revenue negatively if reimbursement amounts are decreased or discontinued.

All CMS programs are subject to statutory and regulatory changes, retroactive and prospective rate adjustments, administrative rulings, interpretations of policy, intermediary determinations, and government funding restrictions, all of which may materially increase or decrease the rate of program payments to healthcare facilities and other healthcare providers, including those paid for TCAR.

United States Health Reform

Changes in healthcare policy could increase our costs and subject us to additional regulatory requirements that may interrupt commercialization of our current and future solutions. Changes in healthcare policy could increase our costs, decrease our revenue and impact sales of and reimbursement for our current and future products. The ACA substantially changes the way healthcare is financed by both governmental and private insurers, and significantly impacts our industry. The United States and some foreign jurisdictions are considering or have enacted a number of legislative and regulatory proposals to change the healthcare system in ways that could affect our ability to sell our products profitably. Among policy makers and payers in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality or expanding access. Current and future legislative proposals to further reform healthcare or reduce healthcare costs may limit coverage of or lower reimbursement for the procedures associated with the use of our products. The cost containment measures that payers and providers are instituting and the effect of any healthcare reform initiative implemented in the future could impact our revenue from the sale of our products.

The implementation of the Affordable Care Act in the United States, for example, has changed healthcare financing and delivery by both governmental and private insurers substantially, and affected medical device manufacturers

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significantly. The Affordable Care Act also provided incentives to programs that increase the federal government’s comparative effectiveness research, and implemented payment system reforms including a national pilot program on payment bundling to encourage hospitals, physicians and other providers to improve the coordination, quality and efficiency of certain healthcare services through bundled payment models.

Additionally, the Affordable Care Act has expanded eligibility criteria for Medicaid programs and created a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research. We do not yet know the full impact that the Affordable Care Act will have on our business. There have been judicial and Congressional challenges to certain aspects of the Affordable Care Act, and we expect additional challenges and amendments in the future. It is unclear how efforts to repeal and replace the ACA will impact the healthcare industry or our business operations.

In addition, other legislative changes have been proposed and adopted since the Affordable Care Act was enacted. For example, the Budget Control Act of 2011, among other things, included reductions to CMS payments to providers of 2% per fiscal year, which went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2032, unless Congress takes additional action. Additionally, the American Taxpayer Relief Act of 2012, among other things, reduced CMS payments to several providers, including hospitals, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

We believe that there will continue to be proposals by legislators at both the federal and state levels, regulators and third-party payers to reduce costs while expanding individual healthcare benefits. Certain of these changes could impose additional limitations on the rates we will be able to charge for our current and future products or the amounts of reimbursement available for our current and future products from governmental agencies or third-party payers. Current and future healthcare reform legislation and policies could have a material adverse effect on our business and financial condition.

Human Capital

Our mission is to help deliver brighter patient outcomes - one procedure at a time. We recognize that our employees are key to our ability to achieve this mission and believe our employees have been and will continue to be a primary reason for our growth and success.

Recognizing the importance of our human capital, our board of directors, through the compensation committee, retains direct oversight of our human capital and oversees and reviews our culture, policies, and strategies related to human capital management, including with respect to diversity and inclusion initiatives, pay equity, talent, recruitment and development, performance management and employee engagement.

We are a certified Great Place to Work,® which certification is the only recognition based entirely on what employees report about their workplace experience. 97% of our employees say Silk Road Medical is a great place to work, compared to 57% of employees at a typical U.S.-based company, according to a Great Place To Work® 2023 Global Employee Engagement Study. We take pride in our company culture to ensure a sense of support and family among our employees.

Our Cartwheel Culture: Building and Supporting Human Capital

We understand the commitment our employees make to our company, and we take our commitment to them very seriously. Consistent with this commitment, we strive to create a work environment in which everyone is empowered to develop, to contribute, and to thrive. We strongly believe our corporate culture is the operating system that powers the company. We talk about it, obsess over it, and have even given it a name – Cartwheel Culture.

Our Cartwheel Culture is uniquely ours, and it’s one we love and nurture every day. Our Cartwheel Culture provides a shared set of beliefs that drives everyday behaviors. These include:

Courage: We think big. We act boldly. We take on new challenges. We challenge ourselves and our colleagues to try new things that are difficult. We take smart risks. We explore new ideas and do things differently.

Focus on Core Strength: We unleash our strengths and shore up weaknesses in our company, in every department and in each member of our company.

Flexibility: We view opportunities and challenges from all angles…even upside down. We explore all possibilities and are both willing and able to respond to changing circumstances and expectations. We make it a priority to listen and understand other people’s ideas and viewpoints.

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Lend a Hand: We actively support each other to achieve our common goal. Teamwork Matters.

Persistence: We believe that innovation comes from persistence and learning from our mistakes. We are persistent in the pursuit of our goals and believe that it’s better to try and sometimes fail than to sit tight and fail for sure. We learn from the mistakes we make and move forward.

Code of Business Conduct and Business Ethics

All employees are expected to conduct business with the highest standards of business ethics. Each employee receives and agrees to follow our Code of Business Conduct and Ethics. Our Code of Business Conduct and Ethics does more than just codify rules of conduct - it is the very foundation by which we conduct business every day. The Code of Business Conduct and Ethics, which also applies to our board members, describes how we put our values into practice, and it explains our commitments, our expectations and provides guidance for our employees and all others who work on our behalf. Our employees receive annual training on our Code of Business Conduct and Ethics. We have an open access policy, signifying that employees are encouraged to discuss any related concerns with management or report concerns anonymously through an Integrity Helpline.

Number of Employees, Tenure and Turnover

Our workforce consists of a highly-skilled, diverse, and engaged team dedicated to the company’s mission and goals. As of December 31, 2023, we had 474 active employees, all located within the United States, of whom 264 employees were engaged in sales, general and administrative activities, 95 were engaged in research and development activities, and 115 were engaged in manufacturing operations. During 2023, the number of employees increased by 60, or nearly 15%. None of our employees are represented by a labor union, and we have never experienced any employment-related work stoppages. We consider our relationship with our employees to be good.

As of December 31, 2023, 28% of our employees had been with Silk Road Medical for more than four years. While fluctuations may occur within our workforce from time to time, we track and attempt to manage our attrition rates and also analyze employee departure data so that we can continually improve upon our employee experience. During 2023, our employee turnover rate related to voluntary terminations was approximately 8%, which was 3% lower than the prior year.

Commitment to Diversity, Equity, and Inclusion

We strive to create an inclusive work environment that represents the diversity in the communities where we live and work, and we are proud of the diversity throughout our entire organization. In late 2022, we formed a Diversity, Equity, and Inclusion (DEI) Council with the mission of fostering an environment that is inclusive and welcoming to all. The Council started work with a climate assessment survey and baseline training to bring awareness, engage employees on the topic of inclusion, and create a common language. The Council’s work expanded in 2023 with a focus on employee education, cultural awareness, and DEI awareness in our HR and marketing programs.

As of December 31, 2023, women made up approximately 46% of our workforce, including 38% of our senior level leaders and 48% of our total corporate leaders. People of color made up approximately 44% of our workforce, including 21% of our senior level leaders and 27% of our total corporate leaders.

Our workforce spans approximately four generations. Baby Boomers make up about 10% of our workforce, GenX makes up about 46% of our workforce, Millennials make up about 38% of our workforce, and GenZ makes up about 6% of our workforce.

We believe that it is important to have a balanced and diverse board of directors and are committed to building and maintaining director diversity with members who bring a range of expertise, perspectives, experiences, and personal characteristics pertaining to age, race, gender, and ethnicity. As of December 31, 2023, our board of directors, which consisted of eight members, included two female directors and two directors who self-identify as an underrepresented minority.

In addition, we actively recruit candidates from a variety of backgrounds and work to ensure a fair interview and selection process. We are also active in building a diverse pipeline of candidates through our Summer @ the Road internship program. We have partnered with organizations such as East Side Prep in East Palo Alto, California, and diversity groups at several universities from which we recruit students. In 2023, we had 13 interns with 77% being people of color and 67% of engineering interns being women. Five interns accepted full-time jobs starting in 2024.

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Commitment to Creating a Safe, Healthy, and Secure Work Environment

We are committed to providing a safe, healthy and secure work environment for all employees and visitors. Safety is extremely important to the company. We have developed and implemented several health and safety programs throughout our facilities with employees’ safety in mind. These programs include an Injury and Illness Prevention/AWAIR Program, an Emergency Action Plan, an Ergonomic Program, an Exposure Control Plan, a Hazard Communication Program, a Hazardous Waste Management Program, and other specialized safety programs. We support these programs and allot time for safety training. In addition, any employee working in a hospital operating room is required to wear a dosimetry badge that monitors occupational radiation exposure to ensure compliance with annual limits. Our Employee Safety Committee reviews performance monthly to discuss trends and risks, as well as opportunities for improvement. We have in place an Employee Emergency Response Team comprised of volunteers trained in First Aid, CPR, AED operation and site-specific emergency procedures. We are proud of our safety record. During 2023, our total recordable injury rate was 1.1, which is below the average for the medical device manufacturing industry. The total recordable injury rate is a standard metric comparing recordable injury rate per 100 employees.

Commitment to Competitive and Fair Compensation

We place a focus on attracting and retaining talented and experienced individuals to manage and support our operations and believe that employees should be compensated fairly for their contributions to the company. To ensure we pay our employees competitively, annual benchmarking is completed on all positions throughout the company and we use external benchmarking surveys to guide our assessment of compensation competitiveness. Our compensation program consists of three primary components: base salary, annual bonus targets (non-sales), commission plans (sales), and equity. We also offer all eligible employees the option to participate in our Employee Stock Purchase Plan or ESPP. Participants in the ESPP may purchase our common stock at a 15% discount to market price. We believe our ESPP plan, along with our new hire equity grants and refresh equity grants, helps to build an ownership mindset amongst our participating employees.

Commitment to the Health and Wellbeing of our Employees

One of our top priorities is to maintain the health and well-being of our employees and their families. We offer a comprehensive health and wellness program with a variety of options for eligible employees. Health benefits include three medical plans, dental, and vision insurance. The company covers 90% of health care premiums on behalf of our employees. Financial wellness benefits include life and disability insurance, flexible spending accounts, a health savings account with generous employer funding, a 401(k)-retirement savings program with a company match, paid time off for employees in non-exempt positions, flexible time away for employees in exempt positions, and 160 hours of child bonding pay. Additional wellness discounts and perks are offered through our health carriers. Well-being offerings include an employee assistance program, a fitness benefit of $50 a month to be used toward the fitness method of choice, a company wellness app with fitness challenges and monetary incentives, and flexible work arrangements for positions that can be performed remotely from one of our primary work locations.

Commitment to Learning and Development; Succession Planning

We believe that the professional development of our employees is a critical element to the success of our company. We have invested in a robust learning and development program that provides employees at all levels of the company opportunities to build and grow their skills in their current roles and prepare them for future roles in the company.

We have an extensive training and development program in place for our salesforce that includes a robust clinical training continuum for our therapy development specialists, area managers, and area directors. Upon hire, these employees attend a training program that includes intensive clinical/practical application training the observation of live TCAR cases, followed by intermediate training with advanced clinical education. Employees in these roles also attend regular continuing education courses