Table of third-parties without informing us. It is our policy to require all employees to document potential inventions and other intellectual property in laboratory notebooks and to disclose inventions to patent counsel.Contents

We also seek to preserve the integrity and confidentiality of our data and trade secrets by taking commercially reasonable efforts to maintain the physical security of our premises and physical and electronic security of our information technology systems.

While we have confidence in these individuals, organizations and systems, our security measures may be breached, or may otherwise prove inadequate to protect the integrity and confidentiality of our data and trade secrets. Further, our agreements may be breached (or not obtained in the first place) and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independently discovered by competitors. To the extent that our consultants, contractors or collaborators use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.

In addition to patents, trademarks, and trade secrets, we also rely on assignment and license agreements, pursuant to which we may license rights under patents held by third parties, and non-disclosure agreements, to protect our proprietary intellectual property.

We obtain assignments or licenses of varying durations for certain of our products from third parties. We typically acquire rights under such assignments or licenses in exchange for lump-sum payments or arrangements under which we pay a percentage of sales to the licensor. However, while ~~assignments or licenses to us generally~~such rights are irrevocable, no assurance can be given that these arrangements will continue to be made available to us on financial terms that are acceptable to us, or at all. The terms of our license ~~and assignment~~ agreements vary in length from a specified number of years to the life of product patents or the economic life of the product. These agreements generally provide for royalty payments and termination rights in the event of a material breach.

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We will continue to seek patent, trademark, and copyright protection as we deem advisable to protect the markets for our products and to support our research and development efforts.

Manufacturing and supply

~~Our HA viscosupplementation therapies~~We largely manufacture and ~~certain of~~assemble our ~~surgical~~medical device products are manufactured exclusively by single-source third-party manufacturers, pursuant to multi-year supply agreements. We work closely with each of our manufacturing partners and provide them with a forecast, which enables them to better capacity plan and sequence their production efficiently.

For Durolane, we are subject to minimum order volumes for each order and purchase amounts are also based in part on forecasts. For GELSYN-3, we will be subject to certain annual minimum purchase requirements and purchase amounts based on rolling forecasts. For SUPARTZ FX, we are subject to certain annual minimum purchase requirements based on a percentage of our SUPARTZ FX annual forecast.

For Durolane, in December 2016, we entered into an amended and restated supply agreement, or the Q-Med Supply Agreement, with Q-Med AB, or Q-Med. Under the Q-Med Supply Agreement, Q-Med supplies Durolane products exclusively to us for sale in the United States for use in the in the prevention or treatment of pain due to OA on a purchase order basis, based on the amounts of Durolane we require as set forth in rolling forecasts and we are subject to certain semi-annual minimum purchase requirements based on a percentage of our Durolane forecast.

~~We assemble, inspect, test and package our Exogen system~~ at our ~~facility~~production facilities located in Cordova, Tennessee with components supplied by third-party suppliers. Our Exogen system includes a transducer which is a key component that is supplied by a single-source supplier. We perform inspections of these components before use in our manufacturing operations.TN, Farmingdale, NY, Valencia, CA and Hod Hasharon, Israel. We believe our manufacturing operations are in compliance with regulations mandated by the FDA. We are an FDA-registered medical device manufacturer. Our manufacturing facilities and processes are subject to periodic inspections and audits by various federal, state and foreign regulatory agencies. Our products include components manufactured by other companies in the United States and elsewhere.

~~MTF will~~Some of our products and product components are manufactured exclusively ~~manufacture~~by single-source third-party manufacturers, pursuant to multi-year supply agreements that may include minimum order volumes. We work closely with each of our manufacturing partners and ~~supply MOTYS under current Good Tissue Practices (cGTPs)~~provide them with a forecast, which enables them to ~~us to allow~~better capacity plan and sequence their production efficiently.

We may encounter difficulty in obtaining materials, supplies and components adequate for our limited commercialization that began in the fourth quarter of 2020 under the tissue regulations while we pursue a BLA for the product. MTF is responsible for obtaining and storing all materials, including all tissue materials, required for the manufacture, testing, handling, packaging, labeling, release and delivery of the product to us.

anticipated short-term needs. We intend to maintain sufficient supplies of the products and components from these single-source suppliers in the event that one or more of these suppliers were to encounter certain interruptions in ~~supply.~~supply of products including L360 and H200 both of which are manufactured in Israel.

Government regulation

~~Government regulation of medical devices~~

Our ~~medical devices~~products and operations are subject to extensive regulation by ~~numerous government agencies, including~~ the FDA and ~~comparable foreign agencies. The FDA~~other federal and ~~other U.S. and foreign governmental agencies regulate, among other things, with respect to medical devices:~~

•~~design, development and manufacturing;~~

•~~testing, labeling, content and language of instructions for use and storage;~~

•~~clinical trials;~~

•~~product safety;~~

•~~marketing, sales and distribution;~~

•~~premarket clearance and approval;~~

•~~record keeping procedures;~~

•~~advertising and promotion;~~

•~~recalls and field safety corrective actions;~~

•~~postmarket surveillance, including reporting of deaths or serious injuries and malfunctions that, if they were to recur, could lead to death or serious injury;~~

•~~postmarket approval studies; and~~

•~~product import and export.~~

The regulations to which we are subject are complex and have tended to become more stringent over time. Regulatory changes could result in restrictions on our ability to carry on or expand our operations, higher than anticipated costs or lower than anticipated sales.

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~~FDA premarket clearance and approval requirements~~

~~Each medical device we seek to commercially distribute~~state authorities in the United States, ~~must first receive~~as well as comparable authorities in foreign jurisdictions. In the United States, our products and product candidates are regulated as either medical devices under the Federal Food, Drug, and Cosmetic Act (“FDCA”), and its implementing regulations, or as drugs or biological products under the FDCA and the Public Health Service Act (“PHSA”), and their implementing regulations, each as amended and enforced by the FDA. The FDA regulates the development, design, non-clinical and clinical research, manufacturing, safety, efficacy, labeling, packaging, storage, installation, servicing, recordkeeping, premarket clearance or approval, adverse event reporting, advertising, promotion, marketing and distribution, and import and export of medical devices and biological products to ensure that such products distributed domestically are safe and effective for their intended uses and otherwise meet the applicable requirements of the FDCA and PHSA.

U.S. Regulation of Medical Devices

In the United States, the majority of our products are regulated as medical devices by the FDA. Unless an exemption applies, each medical device commercially distributed in the United States requires either FDA clearance of a 510(k) ~~clearance~~premarket notification, or approval of a PMA ~~application from~~application. Under the ~~FDA, unless specifically exempt. The FDA classifies all~~FDCA, medical devices are classified into one of three ~~classes. Devices deemed to pose lower risk are categorized as either~~ classes—Class I, Class II or Class ~~II. Class II devices require~~III—depending on the degree of risk associated with each medical device and the extent of manufacturer and regulatory control needed to ~~submit to the FDA a 510(k) pre-market notification requesting clearance of the device for commercial distribution in the United States. Class I devices are exempted from this requirement.~~ensure its safety and effectiveness. Devices deemed by the FDA to pose the greatest ~~risk,~~risks, such as life sustaining, ~~life-supporting, selected~~life supporting or some implantable devices, or devices ~~deemed~~that have a new intended use, or use advanced technology that is not substantially equivalent to that of a ~~previously 510(k) cleared~~legally marketed device, are ~~categorized~~typically placed into Class III.

While most Class I devices are exempt from the 510(k) premarket notification requirement, manufacturers of most Class II devices are required to submit to the FDA a premarket notification under Section 510(k) of the FDCA requesting permission to commercially distribute the device. The FDA’s permission to commercially distribute a device subject to a 510(k) premarket notification is generally known as 510(k) clearance. Class III ~~generally requiring submission and~~devices require approval of a ~~PMA.~~premarket approval application, or PMA, evidencing safety and effectiveness of the device.

~~510(k) clearance process~~

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To obtain 510(k) clearance, wea manufacturer must submit a premarket notification demonstrating to the ~~FDA demonstrating~~FDA’s satisfaction that the proposed device is “substantially equivalent” to ~~be substantially equivalent to a~~another legally marketed device that itself does not require PMA approval (a predicate ~~device.~~device). A predicate device is a ~~previously cleared 510(k)~~legally marketed device that is not subject to premarket approval, i.e., a device that was ~~in commercial distribution before~~legally marketed prior to May 28, 1976 (pre-amendment device) and for which ~~the FDA has~~a PMA is not ~~yet called for the submission of PMA applications, or is~~required, a device that has been reclassified from Class III to ~~either~~ Class II or I.I, or a device that was found substantially equivalent through the 510(k) process. The ~~standard review~~FDA’s 510(k) clearance process ~~for 510(k)s is between 30 days~~usually takes from three to 3twelve months, ~~dependent upon the type of 510(k) filing submitted. Although many 510(k) premarket notifications are cleared without clinical data, in some cases, the~~but often takes longer. The FDA may require ~~clinical data to support substantial equivalence. In reviewing a premarket notification, the FDA may request~~ additional information, including clinical data, to make a determination regarding substantial equivalence. In addition, the FDA collects user fees for certain medical device submissions and annual fees for medical device establishments.

If the FDA agrees that the device is substantially equivalent to a lawfully marketed predicate device, it will grant 510(k) clearance to authorize the device for commercialization. If the FDA determines that the device is “not substantially equivalent,” the device is automatically designated as a Class III device. In such cases, the device sponsor must then fulfill more rigorous PMA requirements, or can request a risk-based classification determination for the device in accordance with the de novo classification process, which ~~may significantly prolong the review process~~is a route to market for novel medical devices that are low to moderate risk and ~~clearance is never assured.~~are not substantially equivalent to a predicate device.

After a device receives 510(k) clearance, any ~~subsequent~~ modification ~~of the device~~ that could significantly affect its safety or effectiveness, or that would constitute a major change or modification in its intended use, ~~requires~~will require a new 510(k) clearance or, ~~could require~~depending on the modification, PMA approval or de novo classification. The FDA requires each manufacturer to determine whether the proposed change requires submission ~~and approval~~ of a 510(k), de novo classification request or a PMA ~~application~~ in ~~cases where new indications are sought for which there is no predicate. Non-significant changes are handled via internal documentation by~~ the ~~Company. Each manufacturer must judge~~first instance, but the ~~significance of modifications based on algorithms within~~ FDA ~~510(k) guidance documents. FDA may~~can review any such decision and ~~may~~ disagree with a manufacturer’s determination. If the FDA disagrees with a manufacturer’s determination not to seek a new 510(k) or other form of marketing authorization for the modification to the 510(k)-cleared product, the FDA ~~may~~can require the manufacturer to cease marketing and/or request the recall of the modified device until 510(k) clearance or PMA approval is ~~obtained. We have modified aspects~~obtained or a de novo classification is granted.

The PMA process is more demanding than the 510(k) premarket notification process. In a PMA, the manufacturer must demonstrate that the device is safe and effective, and the PMA must be supported by extensive data, including data from preclinical studies and human clinical trials. All clinical investigations of ~~some~~devices to determine safety and effectiveness must be conducted in accordance with the FDA’s investigational device exemption (“IDE”) regulations which govern investigational device labeling, prohibit promotion of ~~our devices since receiving initial regulatory clearance. We concluded~~the investigational device, and specify an array of recordkeeping, reporting and monitoring responsibilities of study sponsors and study investigators. If the device presents a “significant risk” to human health, as defined by the FDA, the FDA requires the device sponsor to submit an IDE application to the FDA, which must become effective prior to commencing human clinical trials. A significant risk device is one that ~~some of those modifications did not significantly affect~~presents a potential for serious risk to the health, safety or ~~efficacy~~welfare of a patient and either is implanted, used in supporting or sustaining human life, substantially important in diagnosing, curing, mitigating or treating disease or otherwise preventing impairment of human health, or otherwise presents a potential for serious risk to a subject. In addition, the study must be approved by, and conducted under the oversight of, an Institutional Review Board (“IRB”), for each clinical site. The IRB is responsible for the initial and continuing review of the IDE, and may impose additional requirements for the conduct of the study. If the device presents a non-significant risk to the patient, a sponsor may begin the clinical trial after obtaining approval for the trial by one or more IRBs without separate approval from the FDA, but must still follow abbreviated IDE requirements, such as monitoring the investigation, ensuring that the investigators obtain informed consent, and labeling and record-keeping requirements.

In addition to clinical and preclinical data, the PMA must contain a full description of the device and ~~therefore, that new 510(k) clearances were not required. We have also obtained new 510(k) clearances from~~its components, a full description of the methods, facilities, and controls used for manufacturing, and proposed labeling. Following receipt of a PMA, the FDA ~~for other modifications~~determines whether the application is sufficiently complete to our devices. In the future, we may make additional modifications to our products after they have received FDA clearance or approval and in appropriate circumstances, determine that new clearance or approval is unnecessary. However,permit a substantive review. If the FDA ~~may disagree with our determination and if~~accepts the ~~FDA requires us~~application for review, it has 180 days under the FDCA to ~~seek 510(k) clearance or submit new~~complete its review of a PMA, applications for any modifications to a previously cleared product, we may be required to cease marketing or recall the modified device until we obtain the required clearance or approval. Under these circumstances, we may also be subject to significant regulatory fines or other penalties.

~~We have obtained 510(k) premarket clearance from the FDA for Signafuse Bioactive Bone Graft Putty, Interface Bioactive Bone Graft, Osteomatrix +, and Signafuse Mineralized Collagen Scaffold.~~

~~Premarket approval process~~

~~A PMA application must be submitted if the medical device is~~although in Class III (although the FDA has the discretion to continue to allow certain pre-amendment Class III devices to use the 510(k) process) or cannot be cleared through the 510(k) process. A PMA application must be supported by, among other things, extensive technical, preclinical, clinical trials, manufacturing and labeling data to demonstrate topractice, the FDA’s ~~satisfaction the safety~~review often takes significantly longer, and ~~effectiveness of the device.~~

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After a PMA application is submitted and filed, the FDA begins an in-depth review of the submitted information. The standard review of such application is six months. During this review period, the FDA may request additional information or clarification of information already provided. This can ~~extend the overall review process and typically PMAs~~ take ~~between one~~up to ~~three years in total for approval. Also during the review period, an~~several years. An advisory panel of experts from outside the FDA ~~will usually~~may be convened ~~for a new type of device~~ to review and evaluate the application and provide recommendations to the FDA as to the approvability of the device. The FDA may or may not accept the panel’s recommendation. In addition, the FDA will generally conduct a pre-approval inspection of the ~~manufacturing facility~~applicant or its third-party manufacturers’ or suppliers’ facilities to ensure compliance with ~~Quality System Regulation (QSR), which impose elaborate design development, testing, control, documentation~~the QSR.

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The FDA will approve the new device for commercial distribution if it determines that the data and ~~other quality assurance procedures~~information in the ~~design~~PMA constitute valid scientific evidence and ~~manufacturing process.~~that there is reasonable assurance that the device is safe and effective for its intended use(s). The FDA may approve a PMA ~~application~~ with post-approval conditions intended to ensure the safety and effectiveness of the device, including, among other things, restrictions on labeling, promotion, sale and distribution, and collection of long-term follow-up data from patients in the clinical study that supported ~~approval.~~PMA approval or requirements to conduct additional clinical studies post-approval. The FDA may condition PMA approval on some form of post-market surveillance when deemed necessary to protect the public health or to provide additional safety and efficacy data for the device in a larger population or for a longer period of use. In such cases, the manufacturer might be required to follow certain patient groups for a number of years and to make periodic reports to the FDA on the clinical status of those patients. Failure to comply with the conditions of approval can result in ~~materially~~material adverse enforcement action, including ~~the loss or~~ withdrawal of the approval. ~~PMA supplements are required for significant modifications~~Certain changes to an approved device, such as changes in manufacturing facilities, methods, or quality control procedures, or changes in the ~~manufacturing process, labeling~~design performance specifications, which affect the safety or effectiveness of the ~~product and design~~device, require submission of a device that is approved through the PMA process. PMA supplements requires submission of information needed to support any changes from the device covered by the original PMA and typically do not require clinical data or the convening of an advisory panel. Non-significant changes must be reported to the FDA through an annual report filing with the FDA. In review of this Annual Report, FDA may disagree with a manufacturer’s determination of the level of significance of the change. If the FDA disagrees with a manufacturer’s determination, the FDA may require the manufacturer to cease marketing and/or recall the modified device until PMA supplement, ~~approval is obtained.~~

~~Durolane, GELSYN-3, SUPARTZ FX and our Exogen bone healing system have each been approved through the PMA process.~~

~~Clinical trials~~

~~A clinical trial is typically required to support~~or in some cases a PMA and is sometimes required for a 510(k) premarket notification. In the United States, authorization to conduct a clinical trial generally requires submission of an application for an IDE to the FDA. 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 investigational protocol is scientifically sound. The IDE application must be approved in advance by the FDA for a specified number of patients, unless the product is deemed a non-significant risk device and eligible for abbreviated IDE requirements. Clinical trials for a significant risk device may begin once the IDE application is approved by the FDA as well as the appropriate institutional review boards (IRBs), at the clinical trial sites and the informed consent of the patients participating in the clinical trial is obtained. After a trial begins, the FDA may place it on hold or terminate it if, among other reasons, it concludes that the clinical subjects are exposed to an unacceptable health risk. Any trials we conduct must be conducted in accordance with FDA regulations as well as other federal regulations and state laws concerning human subject protection and privacy. Moreover, the results of a clinical trial may not be sufficient to obtain clearance or approval of the product.

~~Pervasive and continuing FDA regulation~~new PMA.

After a ~~medical~~ device is ~~placed on the market,~~cleared or approved or otherwise authorized for marketing, numerous ~~FDA~~pervasive regulatory requirements continue to apply unless explicitly exempt. These include:

•establishment registration and device listing with the FDA;

•QSR requirements, which require manufacturers, including ~~but not limited to the following:~~

•~~QSRs, which requires~~third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the design and manufacturing process;

•~~Establishment Registration, which requires establishments involved in the production~~labeling and ~~distribution of medical devices, intended for commercial distribution in the United States, to register with the FDA;~~

•~~Medical Device Listing, which requires manufacturers to list the devices they have in commercial distribution with the FDA;~~

•~~Labeling~~marketing regulations, which ~~prohibit “misbranded” devices from entering the market, as well as~~require that promotion is truthful, not misleading, fairly balanced and provide adequate directions for use and that all claims are substantiated, and also prohibit the promotion of products for unapproved or ~~off-label~~“off-label” uses and impose other restrictions on labeling; FDA guidance on off-label dissemination of information and responding to unsolicited requests for information;

•~~Postmarket surveillance, including Medical Device Reporting (MDR) requirements~~clearance or approval of product modifications to 510(k)-cleared devices that could significantly affect safety or effectiveness or that would constitute a major change in intended use of one of our cleared devices;

•medical device reporting regulations, which ~~requires manufacturers to~~require that a manufacturer report to the FDA if ~~their~~a device it markets may have caused or contributed to a death or serious injury, or has malfunctioned inand the device or a ~~way~~similar device that it markets would be likely to cause or contribute to a death or serious injury, if itthe malfunction were to recur;

•correction, removal and

•~~Corrections and Removal Reporting~~ recall reporting regulations, which require that manufacturers report to the FDA field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the ~~United States Federal Food, Drug, and Cosmetic Act (FDCA)~~FDCA that may present a risk to ~~health.~~health;

~~Table o~~f ~~contents~~•complying with requirements governing Unique Device Identifiers on devices and also requiring the submission of certain information about each device to the FDA’s Global Unique Device Identification Database;

•the FDA’s recall authority, whereby the agency can order device manufacturers to recall from the market a product that is in violation of governing laws and regulations; and

~~The FDA enforces these requirements by inspection~~•post-market surveillance activities and ~~market surveillance. Failure to comply with applicable regulatory requirements may result in enforcement action by~~regulations, which apply when the FDA ~~which may include one~~deems them necessary to protect the public health or ~~more of~~to provide additional safety and effectiveness data for the ~~following sanctions:~~device.

•~~untitled letters or warning letters;~~HCT/Ps

•~~fines, injunctions and civil penalties;~~

•~~mandatory recall or seizure~~Certain of our ~~products;~~

•~~administrative detention or banning of our products;~~

•~~operating restrictions, partial suspension or total shutdown of production;~~

•~~refusing our request for 510(k) clearances or PMA approvals for new product versions;~~

•~~revocation of 510(k) clearances or PMA approvals previously granted; and~~

•~~criminal prosecution and penalties.~~

~~U.S. regulation of HCT/Ps~~

~~Our~~ products ~~including OsteoAMP and PureBone,~~ are regulated as HCT/P, which is an acronym for human ~~cells, tissues~~cell, tissue, and cellular and tissue-based ~~products, or HCT/Ps.~~products. Section 361 of the PHSA authorizes the FDA to issue regulations to prevent the introduction, transmission or spread of communicable disease. HCT/Ps regulated as “Section 361” HCT/Ps are subject to requirements relating to registering facilities and listing products with the FDA, screening and testing for tissue donor eligibility, ~~cGTP,~~current Good Tissue Practices (“cGTPs”) when processing, storing, labeling and distributing HCT/Ps, including required labeling information, stringent record keeping and adverse event reporting, among other applicable requirements and laws. Specifically, cGTPs are requirements that govern the methods used in, and the facilities and controls used for, the manufacture of HCT/Ps in a way that prevents the introduction, transmission, or spread of communicable diseases. Section 361 HCT/Ps do not require 510(k) clearance, PMA approval, BLAs, or other premarket authorization from the FDA before marketing. However, to be regulated as a Section 361 HCT/P, the product must, among other things, be “minimally manipulated,” which for structural tissue products means that the manufacturing processes do not alter the original relevant characteristics of the tissue relating to the tissue’s utility for reconstruction, repair, or replacement and which for cells or nonstructural tissue products, means that the manufacturing processes do not alter the relevant biological characteristics of cells or tissues. A Section 361 HCT/P must also be intended for “homologous use,” which refers to use in the repair, reconstruction, replacement, or supplementation of a recipient’s cells or tissues with an HCT/P that performs the same basic function or functions in the recipient as in the donor.

We believe our OsteoAMP product is properly regulated as a Section 361 HCT/P and therefore have not sought or obtained 510(k) clearance, PMA approval, or licensure through a BLA. However, the FDA’s Center for Devices and Radiological Health (CDRH) issued us a letter in March 2016 in which it asserted that OsteoAMP meets the definition of a medical device and requested that we provide CDRH with information in support of our position that OsteoAMP does not require 510(k) clearance or PMA approval. We provided CDRH with the requested information in support of this position in May 2016 and we have received no further inquiries to date. We believe that CDRH’s assertion is unfounded and inconsistent with a 2011 letter from the FDA concluding that OsteoAMP meets the criteria for regulation solely as a Section 361 HCT/P. However, if the FDA were to disagree and if we are otherwise unsuccessful in asserting our position, the FDA may then require that we obtain 510(k) clearance or PMA approval and that we cease marketing OsteoAMP and/or recall OsteoAMP unless and until we receive clearance or approval. We estimate that if we were to cease marketing OsteoAmp and/or recall OsteoAmp that our net sales would decrease, which would adversely affect our results of operations. See ~~Part I, Item 1A. Risk Factors—Risks related to government regulation—Our HCT/P products are subject to extensive government regulation and our failure to comply with these requirements could cause our business to suffer.~~

HCT/Ps that do not meet the criteria of Section 361 are regulated under Section 351 of the PHSA. Unlike Section 361 HCT/Ps, HCT/Ps regulated as ~~“351”~~“Section 351” HCT/Ps are subject to premarket review and/or approval by the FDA, as required.

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In November 2017, the FDA released a guidance document entitled “Regulatory Considerations for Human Cells, Tissues, and Cellular and Tissue—Based Products: Minimal Manipulation and Homologous Use—Guidance for Industry and Food and Drug Administration Staff.” The guidance outlined the FDA’s position that all lyophilized amniotic products are more than minimally manipulated and would therefore require a BLA to be lawfully marketed in the United States. The guidance also indicated that the FDA would exercise enforcement discretion, using a risk-based approach, with respect to the ~~IND~~Investigational New Drug ("IND") application and pre-market approval requirements for certain HCT/Ps that had been marketed without marketing authorization, including, among others, lyophilized amniotic products, for a period of 36 months from the issuance date of the guidance to allow manufacturers to pursue ~~its IND application.~~INDs and/or seek marketing authorizations. Under this approach, the FDA indicated that high-risk products and uses could be subject to immediate enforcement action. In July 2020, the FDA extended its period of enforcement discretion to May 31, 2021.

~~Failure~~ The FDA resumed enforcement of IND and premarket approval requirements with respect to ~~comply with statutory and regulatory requirements subjects a manufacturer to possible legal or regulatory action, including the seizure or recall~~these products as of ~~products, injunctions, consent decrees placing significant restrictions on or suspending manufacturing operations and civil and criminal penalties.~~

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June 1, 2021.

U.S. ~~regulation~~Regulation of ~~drugs~~Drugs and ~~biologics~~biological products

~~We expect that MOTYS will be regulated by~~In the United States, the FDA ~~as a biological product, or biologic,~~regulates drugs under the FDCA and ~~we plan to submit a BLA to the FDA to allow for the marketing of MOTYS following the expiration of the FDA’s enforcement discretion period for certain HCT/Ps. Biologics are regulated~~its implementing regulations, and biologics under ~~both~~ the FDCA and the PHSA and ~~other federal, state, local and foreign statutes and~~their implementing regulations. We, along with third-party contractors, will be required to navigate the various preclinical, clinical and commercial approval requirements of the governing regulatory agencies of the countries in which we wish to conduct studies or seek approval or licensure of our product candidates.

The process required by the FDA before ~~product candidates~~a drug or biologic may be marketed in the United States generally involves the following:

•completion of ~~extensive~~ preclinical laboratory tests and animal studies performed in accordance with ~~applicable regulations, including~~ the FDA’s Good Laboratory Practice ~~(GLP), regulations;~~requirements;

•submission to the FDA of an IND, which must become effective before clinical trials may begin;

•approval by an ~~independent institutional review board, or~~ IRB or ethics committee at each clinical site before the trial is commenced;

•performance of adequate and well-controlled human clinical trials to establish the safety, ~~and effectiveness of the proposed drug candidate and the safety,~~efficacy, purity and potency of the proposed ~~biologic~~ product candidate for its intended purpose;

•preparation of and submission to the FDA of ana BLA for biologics or New Drug Application (NDA) ~~or BLA~~for small molecule drugs after completion of all pivotal clinical trials;

•satisfactory completion of an FDA Advisory Committee review, if applicable;

•a determination by the FDA within 60 days of its receipt of a ~~NDA~~BLA or ~~BLA~~NDA to file the application for review;

•satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which the proposed product is produced to assess compliance with ~~cGMP requirements,~~cGMPs and to assure that the facilities, methods and controls are adequate to preserve the biological product’s continued safety, purity and ~~effectiveness,~~potency, and of selected clinical investigation sites to assess compliance with ~~GCPs;~~Good Clinical Practices (“GCPs”); and

•FDA review and approval of athe BLA or NDA ~~or BLA~~ to permit commercial marketing of the product for particular indications for use in the United States.

~~Preclinical and Clinical Development~~

Prior to beginning clinical trials of a new drug or biologic product in the ~~first clinical trial with a product candidate, we must submit~~United States, an IND must be submitted to the FDA. An IND is a request for authorization from the FDA to administer an investigational new drug product to humans. ~~The central focus of an IND submission is on the general investigational plan and the protocol or protocols clinical trials. The IND also includes results of animal and~~ ~~in vitro~~ studies assessing the toxicology, pharmacokinetics, pharmacology and pharmacodynamic characteristics of the product, chemistry, manufacturing and controls (CMC), information, and any available human data or literature to support the use of the investigational product. An IND must become effective before human clinical trials may begin. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day period, raises safety concerns or questions about the proposed clinical trial. In such a case, the IND may be placed on clinical hold and the IND sponsor and the FDA must resolve any outstanding concerns or questions before the clinical trial can begin. Submission of an IND therefore may or may not result in FDA authorization to begin a clinical trial.

Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators in accordance with good clinical practices (GCPs), which include the requirement that all research subjects provide their informed consent for their participation in any clinical study. Clinical trials are conducted under protocols detailing, among other things, the objectives of the study, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. A separate submission to the existing IND must be made for each successive clinical trial conducted during product development and for any subsequent protocol amendments. Furthermore, an independent IRB for each site proposing to conduct the clinical trial must review and approve the plan for any clinical trial and its informed consent form before the clinical trial begins at that site, and must monitor the study until completed. Regulatory authorities, the IRB or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects are being exposed to an unacceptable health risk or that the trial is unlikely to meet its stated objectives. Some studies also include oversight by an independent group of qualified experts organized by the clinical study sponsor, known as a data safety monitoring board, which provides authorization for whether or not a study may move forward at designated check points based on access to certain data from the study and may halt the clinical trial if it determines that there is an unacceptable safety risk for subjects or other grounds, such as no demonstration of efficacy. There are also requirements governing the reporting of ongoing preclinical studies and clinical trials and clinical study results to public registries.

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~~For purposes of regulatory approval, human clinical trials are typically conducted in three sequential phases that may overlap or be combined:~~

•~~Phase 1~~. The investigational product is initially introduced into patients with the target disease or condition. These studies are designed to test the safety, dosage tolerance, absorption, metabolism and distribution of the investigational product in humans, the side effects associated with increasing doses, and, if possible, to gain early evidence on effectiveness.

•~~Phase 2~~. The investigational product is administered to a limited patient population to evaluate the preliminary efficacy, optimal dosages and dosing schedule and to identify possible adverse side effects and safety risks.

•~~Phase 3~~. The investigational product is administered to an expanded patient population to further evaluate dosage, to provide statistically significant evidence of clinical efficacy and to further test for safety, generally at multiple geographically dispersed clinical trial sites. These clinical trials are intended to establish the overall risk/benefit ratio of the investigational product and to provide an adequate basis for product approval.

In some cases, the FDA may require, or companies may voluntarily pursue, additional clinical trials after a product is approved to gain more information about the product. These so-called Phase 4 studies may be made a condition to approval of the NDA or BLA. Concurrent with clinical trials, companies may complete additional animal studies and develop additional information about the biological characteristics of the product candidate, and must finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, must develop methods for testing the identity, strength, quality and purity of the final product, or for biologics, the safety, purity and potency. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.

During all phases of clinical development, regulatory agencies require extensive monitoring and auditing of all clinical activities, clinical data, and clinical study investigators. The FDA or the sponsor or its data safety monitoring board may suspend a clinical study at any time on various grounds, including a finding that the research participant or participants are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical study at its institution if the clinical study is not being conducted in accordance with the IRB’s requirements or if the product candidate has been associated with unexpected serious harm to patients. There are also requirements governing the reporting of ongoing clinical trials and completed clinical trial results to public registries. Sponsors of clinical trials of FDA-regulated products may be required to register and disclose certain clinical trial information, which is publicly available at www.clinicaltrials.gov.

~~NDA or BLA Submission and Review~~

Assuming successful completion of all required testing in accordance with all applicable regulatory requirements, the results of product development, nonclinical studies and clinical trials are submitted to the FDA as part of aan NDA or BLA requesting approval to market the product for one or more indications. The ~~NDA~~BLA or ~~BLA~~NDA must include all relevant data available from ~~pertinent~~ preclinical ~~studies~~ and clinical ~~trials,~~studies, including negative or ambiguous results as well as positive findings, together with detailed information relating to the product’s ~~CMCs~~chemistry, manufacturing, controls, and proposed labeling, among other things. The submission of a ~~NDA~~BLA or ~~BLA~~NDA requires payment of a substantial application user fee to the FDA, unless a waiver or exemption applies. The FDA has 60 days from the applicant’s submission of a NDA or BLA to either issue a refusal to file letter or accept the NDA or BLA for filing, indicating that it is sufficiently complete to permit substantive review.

Once a NDA or BLA has been accepted for filing, the FDA’s goal is to review standard applications within ten months after it accepts the application for filing, or, if the application qualifies for priority review, six months after the FDA accepts the application for filing. In both standard and priority reviews, the review process is often significantly extended by FDA requests for additional information or clarification. The FDA reviews a NDA or BLA to determine, among other things, whether a product is safe and effective, or safe, pure, and potent, for its intended use, and whether the facility in which it is manufactured, processed, packed or held meets standards designed to assure and preserve the product’s identity, safety, strength, quality, potency and purity. The FDA may convene an advisory committee to provide clinical insight on application review questions. Before approving a NDA or BLA, the FDA will typically inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. Additionally, before approving a NDA or BLA, the FDA will typically inspect one or more clinical sites to assure compliance with GCPs. If the FDA determines that the application, manufacturing process or manufacturing facilities are not acceptable, it will outline the deficiencies in the submission and often will request additional testing or information. Notwithstanding the submission of any requested additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.

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After the FDA evaluates a ~~NDA~~BLA or ~~BLA~~NDA and conducts inspections of manufacturing facilities where the investigational product and/or its drug substance will be ~~manufactured,~~produced and of select clinical trial sites, the FDA may issue an approval letter or a Complete Response ~~letter.~~Letter (“CRL”). An approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications. A ~~Complete Response letter~~CRL will describe all of the deficiencies that the FDA has identified in the ~~NDA~~BLA or ~~BLA,~~NDA, except that where the FDA determines that the data supporting the application are inadequate to support approval, the FDA may issue the ~~Complete Response letter~~CRL without first conducting required inspections, testing submitted product lots, and/or reviewing proposed labeling. In issuing the ~~Complete Response letter,~~CRL, the FDA may recommend actions that the applicant might take to place the ~~NDA~~BLA or ~~BLA~~NDA in condition for approval, including requests for additional information or ~~clarification, including the potential requirement for additional clinical studies.~~clarification. The FDA may delay or refuse approval of a BLA or NDA if applicable regulatory criteria are not satisfied, require additional testing or information and/or require post-marketing testing and surveillance to monitor safety or efficacy of a product.

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If regulatory approval of a product for human therapeutic or prophylactic use is granted, such approval will be granted for particular indications and may ~~entail~~include limitations on the indicated uses for which such product may be marketed. For example, the FDA may approve the NDA or BLA with a Risk Evaluation and Mitigation Strategy, or REMS, to ensure the benefits of the product outweigh its risks. A REMS is a safety strategy to manage a known or potential serious risk associated with a product and to enable patients to have continued access to such medicines by managing their safe use, and could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. The FDA also may condition approval on, among other things, changes to proposed labeling or the development of adequate controls and specifications. Once approved, the FDA may withdraw the product approval if compliance with pre- and post-marketing requirements is not maintained or if problems occur after the product reaches the marketplace. The FDA may require one or more ~~Phase 4~~ post-market studies ~~and~~or post-market surveillance to further assess and monitor the product’s safety and effectiveness after commercialization, and may limit further marketing of the product based on the results of these post-marketing studies.

~~Post-Approval Requirements~~

Any ~~products~~drugs or biologics manufactured or distributed ~~by us~~ pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to record-keeping, reporting of adverse experiences, periodic reporting, product sampling and distribution, and advertising and promotion of the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims, are subject to prior FDA review and approval. There also are continuing, ~~user fee requirements, under which the FDA assesses an~~ annual program ~~fee~~fees for ~~each product identified in an approved NDA or BLA. Manufacturers~~any marketed products. Biologic and drug manufacturers and their subcontractors are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with ~~cGMPs,~~cGMP, which impose certain procedural and documentation requirements upon us and our third-party manufacturers. Changes to the manufacturing process are strictly regulated, and, depending on the significance of the change, may require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from ~~cGMPs~~cGMP and impose reporting requirements upon us and any third-party manufacturers that we may decide to use. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain compliance with ~~cGMPs~~cGMP and other aspects of regulatory compliance.

Post-market Enforcement

The FDA may withdraw ~~approval~~marketing authorizations for drugs, biologics (including Section 361 HCT/Ps) and/or medical devices if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety ~~information;~~information, imposition of post-market studies or clinical studies to assess new safety ~~risks;~~risks, or imposition of distribution restrictions or other ~~restrictions under a Risk Evaluation and Mitigation Strategy (REMS) program.~~restrictions. Other potential consequences include, among other things:

•~~restrictions on the marketing or manufacturing of a product,~~ complete withdrawal of the product from the market, or product ~~recalls;~~

•recalls, fines, warning orletters, untitled letters, orclinical holds on ~~post-approval~~ clinical ~~studies;~~

•studies, refusal of the FDA to approve pending applications or supplements to approved applications, ~~or suspension or revocation of existing~~ product ~~approvals;~~

•~~product seizure~~seizures or detention, or refusal ~~of the FDA~~ to permit the import or export of ~~products;~~

•products, consent decrees, corporate integrity agreements, debarment or exclusion from federal healthcare ~~programs;~~

•~~mandated modification of promotional materials and labeling and~~programs, the issuance of corrective ~~information;~~

•~~the issuance of safety alerts, Dear Healthcare Provider letters, press releases and other communications containing warnings or other safety~~ information, ~~about the product; or~~

•injunctions, or the imposition of civil or criminal penalties.

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~~The~~In addition, the FDA closely regulates the marketing, labeling, advertising and promotion of drugs, biologics (including Section 361 HCT/Ps) and ~~biologics.~~medical devices. A company can make only those claims relating to safety and efficacy, purity and potency that are cleared or approved by the FDA and in accordance with the provisions of the ~~approved~~authorized label. ~~However, companies may share truthful and not misleading information that is otherwise consistent with a product’s FDA approved labeling.~~ The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses. Failure to comply with these requirements can result in, among other things, adverse publicity, warning letters, corrective advertising and potential civil and criminal penalties. Physicians may prescribe legally available products for uses that are not described in the product’s labeling and that differ from those tested by us and approved by the FDA, but physicians may not submit claims for reimbursement that are false or fraudulent. Such off-label uses are common across medical specialties. Physicians may believe that such off-label uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of physicians in their choice of treatments. The FDA does, however, restrict manufacturer’s communications on the subject of off-label use of their products.

International regulation of medical devices

Sales of medical devices outside the United States are subject to foreign government regulations, which vary substantially from country to country. In order to market our products in other countries, we must obtain regulatory approvals or certifications and comply with extensive safety and quality regulations in other countries. The time required to obtain approval or certification by a foreign country may be longer or shorter than that required for FDA approval and the requirements may differ significantly.

EU regulation of medical devices

The EUEuropean Union (“EU”) has adopted ~~legislation,~~specific directives and regulations regulating the design, manufacture, clinical investigation, conformity assessment, labeling and adverse event reporting for medical devices.

Until May 25, 2021, medical devices were regulated by Council Directive 93/42/EEC (the “EU Medical Devices Directive”), which has been repealed and replaced by Regulation (EU) No 2017/745 (the “EU Medical Devices Regulation”). The majority of our current certificates have been granted under the EU Medical Devices Directive described below. However, as of May 26, 2021, some of the EU Medical Devices Regulation requirements apply in place of the ~~form~~corresponding requirements of ~~directives~~the EU Medical Devices Directive with regard to ~~be implemented in each Member State, concerning the regulation~~registration of economic operators and of devices, post-market surveillance and vigilance requirements. Pursuing marketing of medical devices within the EU. The directives include, among others, the Medical Device Directive (Council Directive 93/42/EEC) that establishes certain requirements, such as the essential requirements, with which medical devices must comply before they can be commercialized in the ~~European Economic Area (EEA) (which is comprised~~EU will notably require that all of our devices not currently certified under the ~~Member States of~~new requirements set forth in the EU ~~plus Norway, Liechtenstein and Iceland).~~ Medical Devices Regulation receive such certification when the current certificates expire.

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Medical Devices Directive

Under the EU Medical ~~Device~~Devices Directive, all medical devices ~~are classified into four Classes,~~placed on the market in the EU must meet the relevant essential requirements in Annex I ~~IIa, IIb~~to the EU Medical Devices Directive, including the requirement that a medical device must be designed and ~~III, with Class I being~~manufactured in such a way that it will not compromise the ~~lowest risk~~clinical condition or safety of patients, or the safety and ~~Class III being~~health of users and others. In addition, the ~~highest risk. Under~~device must achieve the ~~Medical Device Directive, a competent authority is nominated~~performance intended by the ~~government~~manufacturer and be designed, manufactured, and packaged in a suitable manner. The European Commission has adopted various standards applicable to medical devices. These include standards governing common requirements, such as sterilization and safety of ~~each Member State~~medical electrical equipment and product standards for certain types of medical devices. There are also harmonized standards relating to ~~monitor~~design and ~~ensure~~manufacture. While not mandatory, compliance with these standards is viewed as the easiest way to satisfy the essential requirements as a practical matter as it creates a rebuttable presumption that the device satisfies that essential requirement.

To demonstrate compliance with the ~~Directive. To demonstrate compliance of their~~essential requirements in Annex I to the EU Medical Devices Directive, medical ~~devices with the essential requirements,~~device manufacturers must undergo a conformity assessment ~~evaluation,~~procedure, which varies according to the type of medical device and its (risk) classification. Generally, demonstration of conformity of medical devices and their manufacturers with the essential requirements must be based, among other things, on the evaluation of clinical data supporting the safety and performance of the products during normal conditions of use. Specifically, a manufacturer must demonstrate that the device achieves its intended performance during normal conditions of use, that the known and foreseeable risks, and any adverse events, are minimized and acceptable when weighed against the benefits of its intended performance, and that any claims made about the performance and safety of the device are supported by suitable evidence. Except for ~~certain types of low risk~~low-risk medical devices (Class I non-sterile, non-measuring devices), where the manufacturer can ~~issue an EC Declaration of Conformity based on a self-assessment of~~self-declare the conformity of its products with the essential requirements ~~of the Medical Devices Directive,~~(except for any parts which relate to sterility or metrology), a conformity assessment ~~evaluation~~procedure requires the intervention of ~~an organization accredited~~a notified body. Notified bodies are independent organizations designated by ~~a Member State~~EU member states to assess the conformity of devices before being placed on the ~~EEA to conduct conformity assessments, a so-called Notified Body. The Notified Body~~market. A notified body would typically audit and examine a product’s technical dossiers and the manufacturers’ quality system (the notified body must presume that quality systems which implement the relevant harmonized standards – which is ISO 13485:2016 for Medical Devices Quality Management Systems – conform to these requirements). If satisfied that the ~~manufacture, design and final inspection~~relevant product conforms to the relevant essential requirements, the notified body issues a certificate of conformity, which the manufacturer uses as a basis for its own declaration of conformity. The manufacturer may then apply the CE mark to the device, which allows the device to be placed on the market throughout the EU.

Throughout the term of the ~~medical devices, along with conducting a technical review~~certificate of ~~data supporting~~conformity, the ~~device’s safety and efficacy, before issuing a certification demonstrating~~manufacturer will be subject to periodic surveillance audits to verify continued compliance with the ~~essential~~applicable requirements. ~~Both the quality system and the product are reviewed and certified. The Company is subject to annual surveillance audits~~In particular, there will be a new audit by the ~~Notified Body and must undergo re-certification every 5 years. During these audits, (minor or major) non-conformities~~notified body before it will renew the relevant certificate(s).

Medical Device Regulation

The regulatory landscape related to the essential requirement may be issued to the Company. The Company could potentially lose marketing authorization if these non-conformities are not remediated with the Notified Body. Significant modifications to the quality system or product changes for Class IIImedical devices must be submitted to the Notified Body for review prior to implementation. Non-significant changes are subject to review during the annual surveillance audits. Medical devices that comply with the essential requirements are entitled to bear the CE mark. Medical devices properly bearing the CE mark may be commercially distributed throughout the EEA. We have received CE certification from the British Standards Institute, a United Kingdom Notified Body, for conformity within the EU ~~Medical Device Directive allowing us~~continues to place the CE mark on Durolane (Class III) and our Exogen bone healing system (Class IIa). Additional PMAs in individual EEA countries are sometimes required prior to marketing of a product. Failure to maintain the CE mark would preclude us from selling our products in the EEA, as could failure to comply with the specific requirements of the Member States.

evolve. On April 5, 2017, the ~~European Parliament passed the~~EU Medical Devices Regulation ~~which repeals~~was adopted with the aim of ensuring better protection of public health and ~~replaces the~~patient safety. The EU Medical Devices Directive. Unlike directives, which must be implemented into the national laws of the EEA Member States, the regulations would be directly applicable without the need for adoption of EEA Member State laws implementing them in all EEA Member States and are intended to eliminate current differences in the regulation of medical devices among EEA Member States. The Medical Devices Regulation ~~among other things, is intended to establish~~establishes a uniform, transparent, predictable and sustainable regulatory framework across the ~~EEA~~EU for medical ~~devices and~~ ~~in vitro~~ ~~diagnostic~~ devices and ensure a high level of safety and health while supporting innovation.

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~~The~~ Unlike the EU Medical Devices Directive, the EU Medical Devices Regulation ~~was meant~~is directly applicable in EU member states without the need for member states to ~~become applicable three years after publication (in May 2020). However, on April 23, 2020, to take~~implement into national law. This aims at increasing harmonization across the pressure off EEA national authorities, notified bodies, manufacturers and other actors so they can focus fully on urgent priorities related to the COVID-19 pandemic, the European Council and Parliament adopted Regulation 2020/561, postponing the date of application of theEU.

The EU Medical Devices Regulation ~~by one year (to~~became effective on May ~~2021). Once applicable, the~~26, 2021. The new ~~regulations will~~Regulation among other things:

•~~strengthen~~strengthens the rules on placing devices on the market (e.g., reclassification of certain devices and ~~reinforce~~wider scope than the EU Medical Devices Directive) and reinforces surveillance once they are available;

•~~establish~~establishes explicit provisions on manufacturers’ responsibilities for the follow-up onof the quality, performance and safety of devices placed on the market;

•~~improve~~establishes explicit provisions on importers’ and distributors’ obligations and responsibilities;

•imposes an obligation to identify a responsible person who is ultimately responsible for all aspects of compliance with the requirements of the new regulation;

•improves the traceability of medical devices throughout the supply chain to the end-user or patient through the introduction of a unique identification ~~number;~~number, to increase the ability of manufacturers and regulatory authorities to trace specific devices through the supply chain and to facilitate the prompt and efficient recall of medical devices that have been found to present a safety risk;

•~~set~~sets up a central database (Eudamed) to provide patients, healthcare professionals and the public with comprehensive information on products available in the EU; and

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•~~strengthen~~strengthens rules for the assessment of certain high-risk devices, such as implants, which may have to undergo ~~an additional check~~a clinical evaluation consultation procedure by experts before they are placed on the market.

Devices lawfully placed on the market pursuant to the EU Medical Devices Directive prior to May 26, 2021 may generally continue to be made available on the market or put into service until their EU Medical Devices Directive certificate expires, provided that the requirements of the transitional provisions are fulfilled. In particular, the certificate in question must still be valid. However, even in this case, manufacturers must comply with a number of new or reinforced requirements set forth in the EU Medical Devices Regulation, in particular the obligations described below.

Regulation (EU) 2023/607 of the European Parliament and of the Council of 15 March 2023 amending Regulations (EU) 2017/745 and (EU) 2017/746 as regards the transitional provisions for certain medical devices and in vitro diagnostic medical devices. The Regulation introduces a staggered extension of the transition period provided for in Regulation (EU) 2017/745 on medical devices (MDR), subject to certain conditions. The transition period of medical devices to MDR has been extended until December 31, 2027 or December 31, 2028 depending on the classification of the medical device. The transition provisions covers products with CE certificates issued under the Medical Devices Directive (MDD) set to expire before the date of application. The amended Article 120(2), the extension of validity for these devices will, however, apply only if one of the following conditions is met:

(i)The manufacturer has signed a written agreement with a Notified Body for the conformity assessment of the device in question at the moment of expiry,

(ii)a national competent authority has granted a derogation from the applicable conformity assessment procedure in accordance with Article 59 of the MDR; or

(iii)a national competent authority has required the manufacturer to carry out the conformity assessment procedure within a specific time period in accordance with Article 97 of the MDR.

The EU Medical Devices Regulation requires that before placing a device, other than a custom-made device, on the market, manufacturers (as well as other economic operators such as authorized representatives and importers) must register by submitting identification information to the electronic system (“Eudamed”), unless they have already registered. The information to be submitted by manufacturers (and authorized representatives) also includes the name, address and contact details of the person or persons responsible for regulatory compliance. The new EU Medical Devices Regulation also requires that before placing a device, other than a custom-made device, on the market, manufacturers must assign a unique identifier to the device and provide it along with other core data to the unique device identifier (“UDI”) database. These new ~~rules~~requirements aim at ensuring better identification and ~~procedures may result~~traceability of the devices. Each device – and as applicable, each package – will have a UDI composed of two parts: a device identifier (“UDI-DI”) specific to a device, and a production identifier (“UDI-PI”) to identify the unit producing the device. Manufacturers are also notably responsible for entering the necessary data on Eudamed, which includes the UDI database, and for keeping it up to date. The obligations for registration in ~~increased regulatory oversight~~Eudamed will become applicable at a later date (as Eudamed is not yet fully functional). Until Eudamed is fully functional, the corresponding provisions of ~~our~~the EU Medical Devices Directive continue to apply for the purpose of meeting the obligations laid down in the provisions regarding exchange of information, including, and in particular, information regarding registration of devices and economic operators.

All manufacturers placing medical devices into the market in the EU must comply with the EU medical device vigilance system. Under this ~~may, in turn, increase~~system, serious incidents and Field Safety Corrective Actions (“FSCAs”) must be reported to the ~~costs, time and requirements~~relevant authorities of the EU member states. Manufacturers are required to take FSCAs defined as any corrective action for technical or medical reasons to prevent or reduce a risk of a serious incident associated with the use of a medical device that ~~we need to meet in order to maintain or place such devices~~is made available on the ~~EEA~~ market. An FSCA may include the recall, modification, exchange, destruction or retrofitting of the device.

~~Further, the~~The advertising and promotion of ~~our products in the EEA~~medical devices is subject to ~~the laws of individual EEA Member States implementing~~some general principles set forth in EU legislation. According to the EU Medical Devices ~~Directive,~~Regulation, only devices that are CE marked may be marketed and advertised in the EU in accordance with their intended purpose. Directive 2006/114/EC concerning misleading and comparative advertising and Directive 2005/29/EC on unfair commercial practices, ~~as well as other EEA Member State~~while not specific to the advertising of medical devices, also apply to the advertising thereof and contain general rules, for example, requiring that advertisements are evidenced, balanced and not misleading. Specific requirements are defined at a national level. EU member states’ laws ~~governing~~related to the advertising and promotion of medical ~~devices. These laws~~devices, which vary between jurisdictions, may limit or restrict the advertising and promotion of ~~our~~ products to the general public and may impose limitations on ~~our~~ promotional activities with healthcare professionals.

~~Other countries’~~

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Many EU member states have adopted specific anti-gift statutes that further limit commercial practices for medical devices, in particular vis-à-vis healthcare professionals and organizations. Additionally, there has been a recent trend of increased regulation of payments and transfers of value provided to healthcare professionals or entities and many EU member states have adopted national “Sunshine Acts” which impose reporting and transparency requirements (often on an annual basis), similar to the requirements in the United States, on medical ~~devices~~device manufacturers. Certain countries also mandate implementation of commercial compliance programs.

The aforementioned EU rules are generally applicable in the European Economic Area (“EEA”) which consists of the 27 EU member states plus Norway, Liechtenstein and Iceland. Legislation has been approved to extend the transition dates for the EU MDR to 2027/2028. Despite the extension, the notified bodies that are responsible for implementing the EU MDR guidelines must still adopt these changes into their current framework of procedures, which could take additional time.

Other countries

Many other countries have specific requirements for classification, registration and post marketing surveillance that are independent of the countries already listed. We obtain what we believe are the appropriate clearances for ~~Durolane and~~ our ~~Exogen bone healing system~~products and conduct our business in accordance with the applicable laws of each country. This landscape is constantly changing, and we could be found in violation if we interpret the laws incorrectly or fail to keep pace with changes. In the event of either of these occurrences, we could be instructed to recall products, cease distribution and/or be subject to civil or criminal penalties.

Anti-kickback ~~false claims~~Statute, False Claims Act and other healthcare laws

~~In addition to FDA restrictions on the marketing of pharmaceutical, biological and medical device products, we~~We are ~~also~~ subject to a number of U.S. laws regulating healthcare ~~regulation~~fraud, waste, and ~~enforcement by~~abuse (“FWA”) including without limitation the federal ~~government~~Anti-Kickback Statute and the ~~states~~federal Physician Self-Referral Law (known as the Stark Law), the Civil False Claims Act, the civil prohibition on beneficiary inducements, and ~~foreign governments~~the Health Insurance Portability and ~~authorities in the locations in which we conduct our business.~~Accountability Act of 1996 (“HIPAA”), as well as numerous state laws regulating healthcare and insurance. These ~~other agencies include,~~laws are enforced by, without limitation, CMS, other divisions of the U.S. Department of Health and Human Services ~~(HHS)~~(“HHS”), including without limitation the HHS Office of Inspector General (“OIG”), the U.S. Department of Justice and individual U.S. Attorney offices within the Department of Justice, as well as state and local governments. ~~Such agencies enforce a variety of laws which include, without limitation, state and federal anti-kickback, fraud and abuse, false claims, data privacy and security and physician payment transparency~~Among other things, these laws, and ~~regulations.~~

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~~The federal Anti-Kickback Statute prohibits, among other things, any person~~others aimed at curbing FWA, generally: (1) prohibit the provision of anything of value in exchange for the referral of patients or entity from knowingly and willfully offering, paying, soliciting or receiving any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, to induce or in return for ~~purchasing, leasing, ordering or arranging for or recommending~~ the purchase, ~~lease~~order, or ~~order~~recommendation of any ~~good, facility,~~ item or service ~~reimbursable, in whole or in part,~~reimbursed by ~~Medicare, Medicaid or other~~a federal healthcare ~~programs. The term “remuneration” has been broadly interpreted~~program, (including Medicare and Medicaid); (2) require that claims for payment submitted to include anything of value, including cash, improper discounts and free or reduced price items and services. Among other things, the Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical, biotechnology and medical device manufacturers on the one hand and prescribers, purchasers and formulary managers on the other. Although there are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution, the exceptions and safe harbors are drawn narrowly. Practices that involve remuneration that may be alleged to be intended to induce prescribing, purchases or recommendations may be subject to scrutiny if they do not meet the requirements of a statutory or regulatory exception or safe harbor. Failure to meet all of the requirements of a particular applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all of its facts and circumstances. 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 business,~~programs be truthful; and (3) require the ~~Anti-Kickback Statute has been violated. In addition, a person or entity does not need to have actual knowledge~~maintenance of the statute or specific intent to violate it in order to have committed a violation. Violations are subject to civil monetary penalties up to $100,000 for each violation, plus up to three times the remuneration involved,certain government licenses and may result in criminal fines of up to $100,000 and imprisonment of up to ten years, or exclusion from Medicare, Medicaid or other governmental programs. Further, a claim including items or services resulting from a violation of the federal Anti-Kickback Statute also constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act.permits.

Federal law also includes a provision commonly known as the “Stark Law,” which prohibits a physician from referring Medicare or Medicaid patients to an entity providing “designated health services,” which includes durable medical equipment, if the physician or immediate family member of the physician, has an ownership or investment interest or compensation arrangement with such entity that does not comply with the requirements of a Stark exception. Violation of the Stark Law could result in denial of payment, disgorgement of reimbursements received under a non-compliant arrangement, civil penalties, and exclusion from Medicare, Medicaid or other governmental programs.

The federal false claims and civil monetary penalties laws, including the civil False Claims Act, prohibit, among other things, any person or entity from knowingly presenting, or causing to be presented, a false or fraudulent claim for payment to or approval by the federal government or knowingly making, using or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government. A claim includes “any request or demand” for money or property presented to the U.S. government. Actions under the False Claims Act may be brought by the Attorney General or as a qui tam action by a private individual in the name of the U.S. government. Violations of the False Claims Act can result in very significant monetary penalties and treble damages. The federal government is using the False Claims Act and the accompanying threat of significant liability, in its investigation and prosecution of pharmaceutical, biotechnology and medical device companies throughout the country. Manufacturers can be held liable under these laws if they are deemed to “cause” the submission of false or fraudulent claims by for example, in connection with the promotion of products for unapproved or off-label uses and other sales and marketing practices. The government has obtained multi-million and multi-billion dollar settlements under the False Claims Act in addition to individual criminal convictions under applicable criminal statutes. When an entity is determined to have violated the federal civil False Claims Act, the government may impose civil fines and penalties ranging from $11,181 to $22,363 for each false claim, plus treble damages, and exclude the entity from participation in Medicare, Medicaid and other federal healthcare programs. In addition, companies found liable under the False Claims Act have been forced to implement extensive corrective action plans, and have often become subject to consent decrees or corporate integrity agreements, severely restricting the manner in which they conduct their business and imposing ongoing reporting and disclosure obligations.

The federal civil monetary penalties statute 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 health 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. Given the significant size of actual and potential settlements, it is expected that governmental authorities will continue to devote substantial resources to investigating healthcare providers’ and manufacturers’ compliance with applicable fraud and abuse laws. For drugs that are covered under Medicare Part B, the manufacturer must report average sales price (ASP), to CMS on a quarterly basis. Failure to report this information in a timely and accurate manner can lead to substantial civil and criminal penalties and to liability under the False Claims Act.

In July of 2018 we became aware of allegations that certain of our sales personnel may have been completing Section B of the Certificate for Medical Necessity form (CMN) required in connection with Medicare claims for the Exogen system, which, under federal law, must be completed by the physician and/or physician staff.

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Together with our outside counsel, we initiated an investigation into these allegations, and we determined that the CMN forms for a portion of Medicare claims for the Exogen system were in fact improperly completed by our sales representatives, some of which also failed to meet CMS coverage requirements. As a result of our findings we made a self-disclosure on November 30, 2018 to the Office of Inspector General of the HHS (OIG), under the Provider Self-Disclosure Protocol. Our self-disclosure disclosed the extent of our findings relative to the inappropriate completion of CMN forms by our sales personnel and offered to make repayment for such claims which failed to meet CMS coverage requirements and which we submitted to the Medicare program between October 1, 2012 and September 30, 2018, the statutory period applicable to such conduct. The total value of impacted claims was $30.1 million in the aggregate.

In October 2019, our outside counsel received a letter from the Office of the United States Attorney in the Middle District of North Carolina (USAO) stating that the USAO would be working with the OIG to resolve our self-disclosure. After settlement discussions with the USAO and OIG, on January 25, 2021 we reached an agreement in principle with the USAO and the OIG with respect to the submission of Medicare claims that did not meet CMS coverage requirements and for which our sales representatives completed Section B of the CMN forms. On February 22, 2021, we finalized all terms related to the settlement and entered into a formal settlement agreement with the USAO and OIG consistent with our previous agreement in principle and which included releases from associated False Claims Act liability and further Civil Monetary Penalties that are customary in self-disclosures of this type. Under the agreement, we resolved the potential liability related to our self-disclosure for $3.6 million, of which $2.4 million had already been paid through our 2019 return of overpayments described previously, leaving a net payment to be made of $1.2 million. We made payment of the $1.2 million net settlement amount due under the agreement on February 23, 2021. The settlement amount noted above was recorded in the consolidated financial statements for the year ended December 31, 2020.

In 2019, separate from the self-disclosure described above, as a result of our internal auditing of Exogen Medicare claims, we made repayments to our Medicare Administrative Contractors (MACs) for overpayments identified during such auditing totaling $7.5 million for the period October 1, 2012 through December 31, 2018. This amount reflected certain Medicare claims for Exogen for which we lacked adequate documentation of medical necessity consistent with Medicare coverage requirements. Similarly, in July of 2020, we made repayments to the MACs of $1.5 million after completing our internal auditing of Exogen Medicare claims for the period beginning January 1, 2019 through December 31, 2019. We maintain a reserve for reimbursement claims related to our Exogen system that may have been processed for payment without adequate medical records support. Our reserve is estimated using an extrapolation of an error rate from a statistical sample, which represents our best estimate as of the date of the financial statements, but because of the uncertainty inherent in such estimates, the ultimate repayment amounts may be materially different.

~~See~~ ~~Part I, Item 1A. Risk Factors~~—Risks related to government regulation—We may be subject to enforcement action if we engage in improper claims submission practices and resulting audits or denials of our claims by government agencies could reduce our net sales or profits.

The federal Health Insurance Portability and Accountability Act of 1996, as amended by Health Information Technology for Economic and Clinical Health Act (HITECH), and the regulations that implement both laws, collectively known as HIPAA, created additional federal criminal statutes that prohibit, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payers, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of these statutes or specific intent to violate them in order to have committed a violation.

~~Also, many~~Many states have similar ~~fraud and abuse~~FWA statutes or regulations that may be broader in scope and may apply regardless of payer, in addition to items and services reimbursed under Medicaid and other state programs.

The federal Anti-Kickback Statute (“AKS”) prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration, directly or indirectly, in cash or kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under federal and state healthcare programs such as Medicare and Medicaid. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. Several courts have interpreted the AKS’s intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal healthcare covered business, the AKS has been violated. The AKS includes statutory exceptions and regulatory safe harbors that protect certain arrangements that would otherwise be prohibited by the statute. Failure to meet the requirements of an applicable AKS exception or safe harbor, however, does not render an arrangement illegal. Rather, the government must evaluate such arrangements on a case-by-case basis, taking into account all facts and circumstances, including the parties’ intent and the arrangement’s potential for abuse, and may be subject to greater scrutiny by enforcement agencies. Criminal penalties and administrative sanctions for violating the AKS include civil penalties of up to $120,816 per violation plus three times the amount of the improper remuneration, criminal penalties up to $100,000 per violation, prison terms, and exclusion from participation in the Federal health care programs. Under the Civil Monetary Penalties statute, physicians who pay or accept kickbacks also face penalties of up to $50,000 per kickback plus three times the amount of the prohibited remuneration.

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The Stark Law prohibits a physician who has a financial relationship, or who has an immediate family member who has a financial relationship, with entities providing designated health services (“DHS”) from referring Medicare and Medicaid patients to such entities for the furnishing of DHS, unless an exception applies. The Stark Law also prohibits the entity from billing for any such prohibited referral. Unlike the AKS, the Stark Law is a strict liability statute, meaning that the law has been violated if the financial arrangement does not meet an applicable exception regardless of any intent by the parties to induce or reward referrals or the reasons for the financial relationship and the referral. If the Stark Law applies and the elements of an applicable exception have not been met, then the government is prohibited from making payment for such services and any amount paid pursuant to a non-compliant financial relationship must be reimbursed to the government. In addition to reimbursing the government any associated overpayment, violations of the Stark Law can lead to: (1) civil penalties of nearly $29,000 per claim (in 2023, adjusted annually for inflation); (2) three times the amount of damages suffered by the government; and (3) potential exclusion from participation in federal healthcare programs.

The Federal False Claims Act (“FCA”) prohibits a person ~~who offers~~from knowingly presenting, or ~~transfers~~caused to be presented, a false or fraudulent request for payment from the federal government, or from making a false statement or using a false record to have a claim approved. A claim includes “any request or demand” for money or property presented to the United States government. Moreover, the government may assert that a claim including items and services resulting from a violation of the AKS or the Stark Law constitutes a false or fraudulent claim for purposes of the civil False Claims Act. In addition, knowingly concealing or decreasing an obligation to pay the government (or reimburse, in the case of an overpayment) can create liability under the reverse false claims provision of the statute. Overpayments must be repaid to the government within 60 days of the time the provider or supplier determines (or reasonably should have determined through the exercise of reasonable diligence) that it received an overpayment. Penalties for a violation of the FCA include fines for each false claim, plus up to three times the amount of damages caused by each false claim. Private individuals, known as qui tam relators, also have the ability to bring actions under these false claims laws in the name of the government alleging false and fraudulent claims presented to or paid by the government (or other violations of the statutes). Such realtors, often current or former employees or competitors, share in any amounts paid to the government in fines or settlement.

Further, the Civil Monetary Penalties Statute authorizes the imposition of civil monetary penalties, assessments and exclusion against an individual or entity based on a variety of prohibited conduct, including, but not limited to offering remuneration to a ~~Medicare or Medicaid~~federal healthcare program beneficiary ~~any remuneration, including waivers of co-payments and deductible amounts (or any part thereof),~~ that the ~~person~~individual or entity knows or should know is likely to influence the ~~beneficiary’s selection of~~beneficiary to order or receive healthcare items or services from a particular provider ~~practitioner or supplier of Medicare or Medicaid payable items or services may be liable for civil monetary penalties of up to $20,866 for each wrongful act.~~(also known as “beneficiary inducements”). Moreover, in certain cases, providers who routinely waive co-payments and deductibles for Medicare and Medicaid beneficiaries can also be held liable under the ~~Anti-Kickback Statute~~AKS and civil ~~False Claims Act, which can impose additional penalties associated with the wrongful act.~~FCA. One of the statutory exceptions to the beneficiary inducements prohibition is non-routine, unadvertised waivers of co-payments or deductible amounts based on individualized determinations of financial need or exhaustion of reasonable collection efforts. The OIG emphasizes, however, that this exception should only be used occasionally to address special financial needs of a particular patient. Although this prohibition applies only to federal healthcare program beneficiaries, the routine waivers of co-payments and deductibles offered to patients covered by commercial payers may implicate applicable state laws related to, among other things, unlawful schemes to defraud, excessive fees for services, tortious interference with patient contracts and statutory or common law fraud. To the extent our patient assistance programs are found to be inconsistent with applicable laws, we may be required to restructure or discontinue such programs, or be subject to other significant penalties.

~~Additionally, there has been a recent trend of increased~~The Health Insurance Portability and Accountability Act (“HIPAA”) also established federal and state regulation of payments made to physicians and certain other healthcare providers. The Patient Protection and Affordable Care Act, as amended by the Health Care and Education and Reconciliation Act, or collectively, the Affordable Care Act, imposed,criminal statutes that prohibit, among other things, ~~new annual reporting requirements through~~knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payers, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the ~~Physician Payments Sunshine Act~~delivery of or payment for ~~covered manufacturers for certain payments~~healthcare benefits, items or services. Similar to the AKS, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.

Many states in which we operate have also adopted similar fraud and ~~“transfers~~abuse laws to those described above. The scope of ~~value” provided~~these laws and the interpretations of them vary from state to ~~physicians~~state and ~~teaching hospitals,~~are enforced by state courts and ~~beginning in 2022, physician assistants, nurse practitioners~~regulatory authorities, each with broad discretion. Some state fraud and abuse laws apply to items or services reimbursed by any payer, including patients, employers and commercial insurers, not just those reimbursed by a federally or state funded healthcare program.

Violation of any of these laws or any other practitioners, as well as ownership and investment interests held by such providers and their immediate family members. Failure to submit timely, accurately and completely the required information for all payments, transfers of value and ownership or investment interestsgovernmental regulations that apply may result in civil monetary penalties of up to an aggregate of $176,495 per year and up to an aggregate of $1.177 million per year for “knowing failures.” Covered manufacturers must submit reports by the 90th day of each calendar year. In addition, certain states require implementation of compliance programs and compliance with the industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, impose restrictions on marketing practices, make periodic public disclosures on sales, marketing, pricing, clinical trials and other activities and/or require tracking and reporting of gifts, compensation and other remuneration or items of value provided to physicians and other healthcare professionals and entities.

These laws impact the kinds of financial arrangements we may have with hospitals, physicians or other potential purchasers of our products. They particularly impact how we structure our sales offerings, including discount practices, customer support, education and training programs, physician consulting, research grants and other arrangements. If our operations are found to be in violation of any of the health regulatory laws described above or any other laws or regulations that apply to us, we may be subject tosignificant penalties, including, without limitation, ~~potentially significant~~administrative civil and criminal ~~civil and/or administrative~~ penalties, damages, disgorgement, fines, ~~disgorgement,~~additional reporting requirements and compliance oversight obligations, in the event that a corporate integrity agreement or other agreement is required to resolve allegations of noncompliance with these laws, the curtailment or restructuring of operations, exclusion from participation in government healthcare programs ~~imprisonment, contractual damages, reputational harm, administrative burdens, diminished profits and future earnings and the curtailment~~ and/or ~~restructuring~~individual imprisonment.

Table of ~~our operations.~~Contents

As a result of our sale or distribution of products in a foreign country, we may be subject to similar foreign laws and regulations, which may include, for instance, applicable post marketing requirements, including safety surveillance, anti-fraud and abuse laws and implementation of corporate compliance programs and reporting of payments or other transfers of value to healthcare professionals.

We also participate in state government-managed Medicaid programs as well as certain other qualifying federal and state government programs where discounts and mandatory rebates are provided to participating state and local government entities. In connection with several of these government programs, we are required to report prices to various government agencies. Pricing calculations vary among programs. The calculations are complex and are often subject to interpretation by the reporting entities, government agencies and the courts. Our methodologies for calculating these prices could be challenged under false claims laws or other laws. We could make a mistake in calculating reported prices and required discounts, which could result in retroactive liability to government agencies. Government agencies may also make changes in program interpretations, requirements or conditions of participation, some of which may have implications for amounts previously estimated or paid. If we make these mistakes or if governmental agencies make these changes, we could face, in addition to prosecution under federal and state false claims laws, substantial liability and civil monetary penalties, exclusionBy way of our products from reimbursement under government programs, criminal fines or imprisonment, or prosecutors may impose a Corporate Integrity Agreement, Deferred Prosecution Agreement, or similar arrangement.

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~~The~~example, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 ~~(MMA)~~(“MMA”), requires that manufacturers report data to CMS on pricing of covered drugs reimbursed under Medicare Part B. These are generally drugs and biologicals, such as injectable products, that are administered “incident to” a physician service and in general are not self-administered. Effective January 1, 2005, ASP became the basis for reimbursement to physicians and suppliers for drugs and biologicals covered under Medicare Part B, replacing the average wholesale price ~~(AWP)~~(“AWP”), provided and published by pricing services. In general, we must comply with all reporting requirements for any drug that is separately reimbursable under Medicare. ~~The~~Our SUPARTZ FX, ~~product is~~Gelsyn-3 and Durolane products are reimbursed under Medicare Part B and, as a result, we provide ASP data on this product to CMS on a quarterly basis.

Foreign Corrupt Practices Act

We are subject to the Foreign Corrupt Practices Act of 1977, as amended (“FCPA”). The FCPA prohibits U.S. companies and their representatives from processing, offering, or making payments of money or anything of value to foreign officials with the intent to obtain or retain business or seek a business advantage. In certain countries, the health care professionals we or our distributors regularly interact with may meet the definition of a foreign government official for the purposes of the FCPA. Our international activities create the risk of unauthorized payments or offers of payments by our employees, consultants and agents, including distributors, even though they may not always be subject to our control. Our existing safeguards may prove to be less than effective, and our employees, consultants, and agents may engage in conduct for which we might be held responsible. The FCPA also requires us to maintain accurate books and records and have a system of internal controls sufficient to, among other things, provide reasonable assurances that transactions are executed and assets are accessed and accounted for in accordance with management’s authorization. A determination that our operations or activities are not, or were not, in compliance with U.S. or foreign laws or regulations could result in the imposition of substantial fines, interruptions of business, loss of suppliers, vendor or other third-party relationships, termination of necessary licenses or permits, and legal or equitable sanctions. Other internal or governmental investigations or legal or regulatory proceedings, including lawsuits brought by private litigants, may also follow as a consequence. We are also subject to the UK and Brazilian equivalents, the UK Bribery Act and the Brazil Clean Company Act.

ISO Standards

We also operate and maintain a Quality Management System that is designed to comply with the requirements of International Standards ISO 13485: 2016 Medical Devices – Quality Management Systems. This system encompasses the principles of enhancing customer satisfaction through the effective application of processes for control, monitoring, and continual improvement, which is designed to ensure that we consistently meet or exceed customer expectations and applicable statutory/regulatory requirements.

Privacy and data protection laws ~~in the United States~~

HIPAA and its implementing regulations, contain substantial restrictions and requirements with respect to the use and disclosure of certain protected health information (PHI)). These restrictions and requirementsWe are ~~set forth in the HIPAA Privacy, Security and Breach Notification Rules.~~

In some of our operations, such those involving the acceptance of payments, we are a “covered entity” under HIPAA and therefore required to comply with the Privacy, Security and Breach Notification Rules and is subject to ~~significant civil~~a number of federal, state and ~~criminal penalties for failure to do so. We also provide services to customers~~foreign laws and regulations that ~~are covered entities themselves~~govern the collection, use, disclosure, and ~~we are required to provide satisfactory written assurances to these customers through written “business associate” agreements that we will provide our services in accordance with HIPAA.~~

~~The Final Rule published by HHS Office for Civil Rights (OCR) in January 2013~~protection of health-related and ~~effective March 23, 2013, modified the HIPAA Privacy, Security, Breach Notification and Enforcement Rules,~~other personal information, including ~~revisions/additions made by the HITECH Act. The rule expanded the~~health information privacy and security ~~requirements for business associates~~laws, data breach notification laws, and consumer protection laws and regulations (e.g., Section 5 of the Federal Trade Commission Act). For example, HIPAA imposes obligations on “covered entities,” including certain healthcare providers, such as us, health plans, and healthcare clearinghouses, and their respective “business associates” that create, receive, maintain or transmit ~~PHI~~individually identifiable health information for or on behalf of a covered ~~entities, increased penalties for noncompliance~~entity, as well as their covered subcontractors with respect to safeguarding the privacy, security and ~~strengthened requirements for reporting~~transmission of ~~breaches~~individually identifiable health information. Entities that are found to be in violation of HIPAA, which may occur in connection with, among other things, a breach of unsecured ~~PHI, among other changes. The rule also made business associates and their subcontractors directly liable for civil monetary penalties for impermissible uses and disclosures of PHI.~~

~~If we were to be found to have breached our obligations under HIPAA, we could~~protected health information (“PHI”), a complaint about privacy practices, or an audit by HHS, may be subject to ~~enforcement actions by the OCR~~significant civil, criminal, and ~~state health regulators~~administrative fines, penalties, and ~~lawsuits, including class~~damages and/or additional reporting and oversight obligations if required to enter into a resolution agreement and corrective action ~~law suits, by private plaintiffs.~~ plan with HHS to settle allegations of HIPAA non-compliance.

In addition, ~~OCR performs compliance audits in order to proactively enforce~~certain state and foreign laws, including without limitation the ~~HIPAA~~California Consumer Privacy Act (“CCPA”), the California Privacy Rights Act (“CPRA”), General Data Protection Regulation (“GDPR”) and the United Kingdom General Data Protection Regulation (“UK GDPR”), govern the privacy and security standards. OCR has become an increasingly active regulator and has signaled its intention to continue this trend. OCR has the discretion to impose penalties without being required to attempt to resolve violations through informal means; further OCR may require companies to enter into resolution agreements and corrective action plansof personal information, including health-related information in certain circumstances, some of which impose ongoing compliance requirements. OCR enforcement activity can result in financial liability and reputational harm, and responses to such enforcement activity can consume significant internal resources. In addition to enforcement by OCR, state attorneys general are authorized to bring civil actions under either HIPAA or relevant state laws seeking either injunctions or damages in response to violations that threaten the privacy of state residents. Although we have implemented and maintained policies, processes and a compliance program infrastructure to assist us in complying with these laws and regulations and our contractual obligations, we cannot provide assurance regarding how these laws and regulations will be interpreted, enforced or applied to our operations.

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~~In addition to HIPAA, we must adhere to state patient confidentiality laws that are not pre-empted by HIPAA, including those that~~ are more stringent than HIPAA ~~requirements. Numerous~~and many of which differ from each other ~~state, federal~~in significant ways and ~~foreign laws, including consumer protection laws and regulations, govern~~may not have the ~~collection, dissemination, use, access~~same effect, thus complicating compliance efforts.

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Failure to confidentiality and security of patient health information. In addition, Congress and some states are considering new laws and regulations that further protect the privacy and security of medical records or medical information. With the recent increase in publicity regarding data breaches resulting in improper dissemination of consumer information, all states have passed laws regulating the actions that a business must take if it experiences a data breach, such as prompt disclosure to affected customers. Generally,comply with these laws, are limited to electronic data and make some exemptions for smaller breaches. Congress has also been considering similar federal legislation relating to data breaches. The Federal Trade Commission (FTC) and states’ Attorneys General have also brought enforcement actions and prosecuted some data breach cases as unfair and/or deceptive acts or practices under the FTC Act. In addition to data breach notification laws, some states have enacted statutes and rules requiring businesses to reasonably protect certain types of personal information they hold or to otherwise comply with certain specified data security requirements for personal information. For example, the California Consumer Privacy Act (CCPA) took effect on January 1, 2020. The CCPA establishes a new privacy framework for covered businesses and provides new and enhanced data privacy rights to California residents, such as affording consumers the right to access and delete their information and to opt out of certain sharing and sales of personal information. The CCPA imposes severe statutory damages as well as a private right of action for certain data breaches thatwhere applicable, can result in the ~~loss~~imposition of personal information. This private right of action is expected to increase the likelihood of, and risks associated with, data breach litigation. It remains unclear how various provisions of the CCPA will be interpreted and enforced. The CCPA contains an exemption for medical information governed by the California Confidentiality of Medical Information Act (CMIA) and for PHI collected by a covered entity significant civil and/or business associate governed by the privacy, security and breach notification rules established pursuant to HIPAA and HITECH, but the precise application and scope of this exemption is not yet clear, and the law may still apply to certain aspects of our business. Additionally, a new privacy law, the California Privacy Rights Act (CPRA), was approved by California voters in the November 3, 2020 election. The CPRA generally takes effect on January 1, 2023 and significantly modifies the CCPA, including by expanding consumers’ rights with respect to certain personal information, restricting use of sensitive personal information, which includes health information, and creating a new state agency to oversee implementation and enforcement efforts, potentially resulting in further uncertainty and requiring us to incur additional costs and expenses in an effort to comply. The CCPA and CPRA may lead other states to pass comparable legislation, with potentially greatercriminal penalties and ~~more rigorous compliance requirements relevant to our business,~~private litigation. Privacy and ~~that may not include exemptions for businesses subject to HIPAA. The effects of the CCPA,~~security laws, regulations, and other ~~similar state~~obligations are constantly evolving, may conflict with each other to complicate compliance efforts, and can result in investigations, proceedings, or federal laws, are potentially significant and may require us to modify our data processing practices and policies and to incur substantial costs and potential liability in an effort to comply with such legislation. As with HIPAA, any laws regulating the collection, dissemination, use, access to, confidentiality and security of personal information may apply directly to our business or indirectly by contract when we provide services to other companies. We intend to continue to comprehensively protect all consumer data and to comply with all applicable laws regarding the protection of this data.

~~Privacy and data protection laws in Europe~~

We are subject to European laws relating to our and our suppliers’, partners’ and subcontractors’ collection, control, processing and other use of personal data, such as data relating to an identifiable living individual, whetheractions that individual can be identified directly or indirectly. We and our suppliers, partners and subcontractors process personal data including in relation to our employees, employees of customers, trial patients, health care professions and employees of suppliers including health and medical information. The data privacy regime in the EU includes the General Data Protection Regulation (GDPR), the E-Privacy Directive (2002/58/EC) and national laws implementing or supplementing each of them.

The GDPR requires that personal data is only collected for specified, explicit and legal purposes as set out in the GDPR or local laws and the data may then only be processed in a manner consistent with those purposes. The personal data collected and processed must be adequate, relevant and not excessive in relation to the purposes for which it is collected and processed, it must be held securely, not transferred outside of the EEA unless certain steps are taken to ensure an adequate level of protection and must not be retained for longer than necessary for the purposes for which it was collected. In addition, the GDPR requires companies processing personal data to take certain organizational steps to ensure that they have adequate records, policies, security, training and governance frameworks in place to ensure the protection of data subject rights, including as required to respond to complaints and requests from data subjects. In addition, to the extent a company processes, controls or otherwise uses ‘special category’ personal data (including patients’ health or medical information, genetic information and biometric information), more stringent rules apply, further limiting the circumstances and the manner in which a company is legally permitted to process that data. Finally, GDPR provides a broad right for EU Member States to create supplemental national laws. Such laws and they are increasingly adopting different approaches to the role of the parties in clinical trials. Such laws, for example may relate to the processing of health, genetic and biometric data, which could further limit our ability to use and share such data or could cause our costs to increase and harm our business and financial condition.

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From January 1, 2021, we are also subject to the GDPR and also the UK GDPR, which, together with the amended UK Data Protection Act 2018, retains the GDPR in UK national law. The UK GDPR mirrors the fines under the GDPR, e.g. fines up to the greater of €20 million (£17.9 million) or 4% of global turnover. The relationship between the United Kingdom and the European Union in relation to certain aspects of data protection law remains unclear, and it is unclear how UK data protection laws and regulations will develop in the medium to longer term, and how data transfers to and from the United Kingdom will be regulated in the long term. Currently there is a four to six-month grace period agreed in the EU and UK Trade and Cooperation Agreement, ending 30 June 2021 at the latest, whilst the parties discuss an adequacy decision. However, it is not clear whether (and when) an adequacy decision may be granted by the European Commission enabling data transfers from EU member states to the United Kingdom long term without additional measures. These changes will lead to ~~additional costs~~significant civil and/or criminal penalties and ~~increase our overall risk exposure.~~

In addition, the United Kingdom’s withdrawal from the European Union means that the United Kingdom will become a “third country” for the purposes of data transfers from the European Union to the United Kingdom following the expiration of the four to six-month personal data transfer grace period (from January 1, 2021) set out in the EU and UK Trade and Cooperation Agreement, unless a relevant adequacy decision is adopted in favor of the United Kingdom (which would allow data transfers without additional measures). These changes may require us to find alternative solutions for the compliant transfer of personal data into the United Kingdom.

~~We are also subject to evolving European laws~~restrictions on data export and electronic marketing. The rules on data export will apply when we transfer personal data to group companies or third parties outside of the EEA. For example, in 2015, the Court of Justice of the European Union (CJEU) ruled that the U.S.-EU Safe Harbor framework, one compliance method by which companies could transfer personal data regarding citizens of the EU to the United States, was invalid and could no longer be relied upon. European and U.S. negotiators agreed in February 2016 to a new framework, the EU-US Privacy Shield framework, which replaced the Safe Harbor framework, however, on July 16, 2020 the CJEU also invalidated the Privacy Shield framework as a method to transfer personal data from the EEA to US. While the CJEU upheld the adequacy of the standard contractual clauses (a standard form of contract approved by the European Commission as an adequate personal data transfer mechanism, and potential alternative to the Privacy Shield), it made clear that reliance on them alone may not necessarily be sufficient in all circumstances; this has created uncertainty. These changes will require us to review and amend the legal mechanisms by which we make and/ or receive personal data transfers to/ in the U.S. As supervisory authorities issue further guidance on personal data export mechanisms, including circumstances where the standard contractual clauses cannot be used, and/or start taking enforcement action, we could suffer additional costs, complaints and/or regulatory investigations or fines, and/or if we are otherwise unable to transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we provide our services, the geographical location or segregation of our relevant systems and operations, and could adversely affect our financial results.

We are also subject to evolving EU and UK privacy laws on cookies and e-marketing. In the European Union and the United Kingdom, regulators are increasingly focusing on compliance with requirements in the online behavioral advertising ecosystem, and current national laws that implement the ePrivacy Directive are highly likely to be replaced by an EU regulation known as the ePrivacy Regulation which will significantly increase fines for non-compliance. In the European Union and the United Kingdom, informed consent is required for the placement of a cookie or similar technologies on a user’s device and for direct electronic marketing. The GDPR also imposes conditions on obtaining valid consent, such as a prohibition on pre-checked consents and a requirement to ensure separate consents are sought for each type of cookie or similar technology. While the text of the ePrivacy Regulation is still under development, a recent European court decision and regulators’ recent guidance are driving increased attention to cookies and tracking technologies. If regulators start to enforce the strict approach in recent guidance, this could lead to substantial costs, require significant systems changes, limit the effectiveness of our marketing activities, divert the attention of our technology personnel, adversely affect our margins, increase costs and subject us to additional liabilities.

We are subject to the supervision of local data protection authorities in those jurisdictions where we are established or collecting data from EU residents. We depend on a number of third parties in relation to our provision of our services, a number of which process personal data on our behalf. With each such provider we enter into contractual arrangements to ensure that they only process personal data according to our instructions, and that they have sufficient technical and organizational security measures in place. Where we transfer personal data outside the EEA, we do so in compliance with the relevant data export requirements. As previously described, following the CJEU’s decision to invalidate Privacy Shield, we are now required to review and amend the legal mechanisms by which we make and/or receive personal data transfers to/in the U.S. As supervisory authorities issue further guidance on personal data export mechanisms, including circumstances where the standard contractual clauses cannot be used, and/or start taking enforcement action, we could suffer additional costs, complaints and/or regulatory investigations or fines, and/or if we are otherwise unable to transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we provide our services, the geographical location or segregation of our relevant systems and operations, and could adversely affect our financial results.

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We take our data protection obligations seriously, as any improper, unlawful or accidental disclosure, loss, alteration or access to, personal data, particularly sensitive personal data, such as special category, could adversely affect our business and/or our reputation.

We may find it necessary or desirable to join self-regulatory bodies or other privacy-related organizations, particularly relating to biopharmacy and/or scientific research that require compliance with certain rules pertaining to privacy and data security.

There are costs and administrative burdens associated with compliance with GDPR and the resultant changes in the EU and EEA Member States’ national laws and the introduction of the e-Privacy Regulation once it takes effect. Any failure or perceived failure to comply with global privacy laws carries with it the risk of significant penalties and sanctions. These laws or new interpretations, enactments or supplementary forms of these laws, could create liability for us, could impose additional operational requirements on our business, and could affect the manner in which we use and transmit patient information and could increase our cost of doing business. Claims of violations of privacy rights or contractual breaches, even if we are not found liable, could be expensive and time-consuming to defend and could result in adverse publicity that could harm our business.processing.

Coverage and reimbursement

~~Significant uncertainty exists~~Our products may be reimbursed by third-party payors, such as government programs, including Medicare and Medicaid, or private insurance plans and healthcare networks. As a result, demand for our products is and will continue to be dependent in part on the coverage and reimbursement ~~status~~policies of ~~any pharmaceutical, biological or medical device product. In~~these payors. The manner in which reimbursement is sought and obtained varies based upon the ~~United States and markets in other countries, patients who are prescribed treatments or undergo procedures for their conditions~~type of payor involved and the ~~providers performing~~setting in which the ~~services generally rely on third-party payers to reimburse all or part of the associated healthcare costs. Patients are unlikely to use our products unless coverage~~product is ~~provided~~furnished and reimbursement is adequate to cover a significant portion of the cost of our products or related procedures. Sales of any products will therefore depend, in part, on the availability of coverage and adequate reimbursementutilized. Reimbursement from ~~third-party payers. Third-party payers include government authorities, managed care organizations, private health insurers~~Medicare, Medicaid and other ~~organizations.~~

~~The process for determining whether a~~ third-party payer will provide coverage for a product typically is separate from the process for setting the price of such product or for establishing the reimbursement rate that the payer will pay for the product once coverage is approved. Third-party payerspayors may ~~limit coverage~~be subject to specific products on an approved list, also known as a formulary, which might not include all of the FDA-approved products for a particular indication, or place products at certain formulary levels that result in lower reimbursement levels and higher cost-sharing obligation imposed on patients. A decision by a third-party payer not to cover any of our products or product candidates could reduce physician utilization of such products and adversely affect our business, results of operations and financial condition. Moreover, a third-party payer’s decision to provide coverage for a product does not imply that an adequate reimbursement rate will be approved. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development. Additionally, coverage and reimbursement for products can differ significantly from payer to payer. One third-party payer’s decision to cover a particular medical product or service does not ensure that other payers will also provide coverage for the medical product or service, or will provide coverage at an adequate reimbursement rate. As a result, the coverage determination process will often require us to provide scientific and clinical support for the use of our products to each payer separately and can be a time-consuming process.

Third-party payers are increasingly challenging the price and examining the medical necessity and cost-effectiveness of medical products and services, in addition to their safety and efficacy. Third-party payers may not consider our products to be medically necessary or cost-effective for certain indications or for all uses, andperiodic adjustments as a result of legislative, regulatory and policy changes, as well as budgetary pressures. Possible reductions in, or eliminations of, coverage or reimbursement by third-party payors, or denial of, or provision of uneconomical reimbursement for new products may ~~not provide coverage for~~affect our customers’ revenue and ability to purchase our products. In order to obtain and maintain coverage and reimbursement for our products and product candidates, we may need to conduct expensive clinical trials in order to demonstrate the medical necessity and cost-effectiveness of such products, in addition to the costs required to obtain regulatory approvals. If third-party payers do not consider a product to be cost-effective compared to other available therapies, they may not cover the product as a benefit under their plans or, if they do, the level of payment may not be sufficient to allow a company to sell our products at a profit. Any changes in ~~coverage and reimbursement that further restrict coverage of~~the healthcare regulatory, payment or enforcement landscape relative to our ~~products or lower reimbursement for procedures using our devices could materially~~customers’ healthcare services have the potential to significantly affect our ~~business. See~~ ~~Part I, Item 1A. Risk Factors—Risks related~~operations and revenue. The Medicare program is expected to ~~our business—If we~~continue to implement a new payment mechanism for certain durable medical equipment, prosthetics, orthotics, and supplies (“DMEPOS”) items via the implementation of its competitive bidding program. Bone growth therapy devices are unable to achieve and maintain adequate levels of coverage and/or reimbursement for our products, the procedures using our products, or any future products we may seek to commercialize, the commercial success of these products may be severely hindered.currently exempt from this competitive bidding process.

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Outside of the United States, the pricing of medical devices and prescription pharmaceuticals is subject to governmental control in many countries. ~~For example, in the EU, pricing and reimbursement schemes vary widely from country to country.~~ Some countries provide that products may be marketed only after a reimbursement price has been agreed. Some countries may require the completion of additional studies that compare the cost-effectiveness of a particular therapy to currently available therapies or so called health technology assessments, in order to obtain reimbursement or pricing approval. Other countries may allow companies to fix their own prices for products, but monitor and control prescription volumes and issue guidance to physicians to limit prescriptions. ~~Efforts to control prices and utilization of medical devices and pharmaceutical products could continue as countries attempt to manage healthcare expenditures, especially~~

Consolidated Appropriations Act

In July 2022, in light of the severe fiscal and debt crises experienced by many countries in the EU. There can be no assurance that any country that has price controls or reimbursement limitations for medical devices or pharmaceutical products will allow favorable reimbursement and pricing arrangements for any of our products, if approved in those countries. See ~~Part 1A. Risk Factors~~—Risks related to our business—Governments outside the United States may not provide coverage or reimbursement of our products, which may adversely affect our business, results of operations and financial condition.

~~Exogen reimbursement and order fulfillment~~

Our Exogen system is classified as durable medical equipment, meaning the product is used by the patient in the home and that the patient and/or insurance company, rather than the physician, is billed for the product. We bill third-party payers, such as private insurance or Medicare, on behalf of our patients and bill the patient for their co-payment obligations and deductibles. An internal team and external consultants assist with billing and processing orders for our Exogen system and has been trained in verifying case-by-case benefits, obtaining prior authorization and billing and collecting payments from payers. We also have a separate dedicated team of employees that provides customer support services for our Exogen system.

We have strong and established payer relationships, including the largest private payers in the United States. Based on our estimates, we are contracted as a provider with payers covering over 200 million lives. These contracts allow patients to access our Exogen system at a competitive rate and copay comparable to other suppliers and easing our administrative burden in processing at both authorization and when billing. Our Exogen system is reimbursed under Healthcare Common Procedure Coding System (HCPCS) code E0760.

~~Healthcare reform~~

~~Current and future legislative proposals to further reform healthcare or reduce healthcare costs may limit coverage for the procedures associated~~connection with the ~~use of our products, or result in lower reimbursement~~Consolidated Appropriations Act, 2021 (“CAA”), the Centers for ~~those procedures. The cost containment measures that payers~~Medicare and ~~providers are instituting and~~Medicaid Services (“CMS”) began utilizing new pricing information the effect of any healthcare reform initiative implemented in the future could significantly reduce our revenues from the sale of our products. By way of example, the Affordable Care Act substantially changed healthcare financing and delivery by both governmental and private insurers and significantly impacted the pharmaceutical and medical device industries. The Affordable Care Act imposed, among other things, a new federal excise tax on the sale of certain medical devices, provided incentivesCompany reported 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. Since its enactment, there have been judicial and Congressional challenges to certain aspects of the Affordable Care Act, including the permanent repeal of the federal excise tax on the sale of certain medical devices effective January 1, 2020. We expect there will be additional challenges and amendmentsit pursuant to the ~~Affordable Care Act in~~newly adopted reporting obligations to adjust the ~~future.~~

In addition, other legislative changes have been proposed and adopted in the United States since the Affordable Care Act was enacted. On August 2, 2011, the Budget Control Act of 2011 was signed into law, which, among other things, included reductions to Medicare ~~payments to providers of 2% per fiscal year, which went into effect on April 1, 2013. Subsequent legislative amendments related to the COVID-19 pandemic suspended this Medicare sequestration~~ payment reduction from May 1, 2020 through March 31, 2021, but extended sequestration through 2030. On January 2, 2013, the American Taxpayer Relief Act of 2012, was signed into law, which, among other things, further reduced Medicare payments to several types of providers, including hospitals.

~~Moreover, payment methodologies may be subject to changes due~~ to healthcare ~~legislation~~providers using our Durolane and regulatory initiatives. For example, CMS may develop new payment and delivery models, such as bundled payment models. In addition, recently there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several U.S. Congressional inquiries and proposed and enacted federal legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare and review the relationship between pricing and manufacturer patient programs.

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Individual states in the United States have also increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures and, in some cases, designed to encourage importation from other countries and bulk purchasing. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs.

In the EU, similar political, economic and regulatory developments have occurred or are being contemplated. In addition to continuing pressure on prices and cost containment measures, legislative developments at the EU or Member State level may result in significant additional requirements or obstacles that may increase operating costs. The delivery of healthcare in the EU, including the establishment and operation of health services and the pricing and reimbursement of medicines, is almost exclusively a matter for national, rather than EU, law and policy. National governments and health service providers have different priorities and approaches to the delivery of health care and the pricing and reimbursement of products in that context. In general, however, the healthcare budgetary constraints in most EU Member States have resulted in restrictions on the pricing and reimbursement of medicines by relevant health service providers.

We expect that additional foreign, state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our products or additional pricing pressure.Gelsyn-3 products.

Employee and Human Capital Resources

As of December 31, ~~2020,~~2023, we had approximately ~~700~~970 employees, none of whom were covered by collective bargaining agreements. Most of these employees are located in the United States with approximately 90120 located outside the United States. We believe that our relations with our employees are generally good.

We value our employees and regularly benchmark total rewards we provide, such as short and long term compensation, 401(k) contributions, health, welfare and quality of life benefits, paid time off and personal leave, against our industry peers to ensure we remain competitive and attractive to potential new hires. We seek to create a workplace environment that fosters personal and business successes by offering training and development programs, which further assist our current employees in meeting and exceeding our established standards of ~~performance.~~ performance, and a leadership development program specially designed to help our new leaders be successful in their expanded roles.

Additionally, ~~through~~to build on our culture of treating all individuals fairly and respectfully, we have established a Diversity, Equity and Inclusion ~~Counsel,~~(“DE&I”) Council and formed several Employee Resource Groups (“ERGs”). The DE&I Council and ERGs are voluntary, employee-led groups of employees who come together in their workplace based on shared characteristics or life experiences. The stated mission of the DE&I Council is to foster a culture and identity that drives diversity, equity and inclusion as we engage and develop current employees and recruit future talent, all working together to build a transformative work environment. Our ERGs are generally intended to provide support, enhance career development, and contribute to personal development in the work environment. The goals of these and other similar initiatives is to encourage broad and diverse viewpoints to achieve the best outcomes for the patients, healthcare providers, and employees we serve.

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Our Organizational Structure

Bioventus Inc. is a Delaware corporation formed on December 22, 2015 and functions as a holding company with no direct operations and our ~~employees work directly~~principal asset is the equity interest in BV LLC. We are headquartered in Durham, North Carolina. On February 16, 2021, we closed an initial public offering (“IPO”). Our IPO was conducted through what is commonly referred to as an umbrella partnership C corporation (“UP-C”) structure. In connection with the IPO and the UP-C structure, we completed a series of organizational transactions including, without limitation, the following:

•the limited liability company agreement of BV LLC was amended and restated (“Bioventus LLC Agreement”) to, among other things, (i) provide for a new single class of common membership interests in BV LLC (“LLC Interests”), (ii) exchange all of the then existing membership interests of the holders of BV LLC membership interests (“Original LLC Owners”) for LLC Interests and (iii) appoint Bioventus Inc. as the sole managing member of BV LLC; and

•the acquisition, by merger, of certain members of BV LLC (“Former LLC Owners”), for which we issued shares of Class A common stock as merger consideration (“Merger”).

•We amended and restated its certificate of incorporation to authorize Class A common stock, Class B common stock and undesignated preferred stock. Class B common stock has voting rights but no economic rights.

We have a majority economic interest, the sole voting interest in, and control the management of, BV LLC. As a result, we will consolidate the financial results of BV LLC and reports a non-controlling interest representing the LLC Interests held by Smith & Nephew, Inc. (“Continuing LLC Owner”). Refer to Part II, Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 8. Stockholders’ equity of this Annual Report for additional information about the organizational transactions completed as part of the IPO.

Information about our Executive Officers

The following table sets forth information concerning our executive ~~management team~~officers as of March 1, 2024:

Name

Age

Position(s)

Robert E. Claypoole

President and Chief Executive Officer

Mark L. Singleton

Senior Vice President and Chief Financial Officer

Anthony D’Adamio

Senior Vice President and General Counsel

Katrina Church

Senior Vice President and Chief Compliance Officer

Robert Claypoole joined Bioventus in January 2024 from Mölnlycke Health Care (“Mölnlycke”), a world-leading medical products and solutions company, where he served as Executive Vice President of Wound Care since July 2021. In this role, Mr. Claypoole had full responsibility for a $1.2 billion business. Before that, Mr. Claypoole served in several leadership positions with Mölnlycke from March 2017 to ~~address any internal concerns~~July 2021, including Executive Vice President and ~~continuously improve~~President, US for Mölnlycke and as an Officer of Mölnlycke Health Care US, LLC and Mölnlycke Manufacturing US, LLC. Prior to joining Mölnlycke in 2017, Mr. Claypoole served in various leadership roles at Medtronic Ltd. (now Medtronic plc (NYSE: MDT)), a global healthcare technology company, and Covidien, before it was acquired by Medtronic. Mr. Claypoole was Global Vice President & General Manager, Obesity & Metabolic Health (April 2016 to March 2017) and Global Vice President & General Manager of the ~~ways~~Soft Tissue Repair & Hemostats business (December 2012 to April 2016). Before that, he was the Vice President, Executive Operations after serving as Vice President, Global Marketing while located in ~~which we~~Trevoux, France. Prior to his time in France, Mr. Claypoole was the Vice President, US Marketing for the company’s Endomechanical & Intelligent Device business. Before joining Covidien in 2007, Mr. Claypoole held various marketing roles with increasing responsibility at Johnson & Johnson’s Vision Care division. Mr. Claypoole previously served on the board of directors of ZetrOz Inc. (January 2014 to January 2016) and the Association of periOperative Registered Nurses (December 2017 to December 2020). Mr. Claypoole received his Bachelor of Arts and his Masters of Business Administration from Cornell University. The Company’s Board of Directors (the “Board”) believes that Mr. Claypoole is well-qualified to serve on the Board considering the breadth of his experience across multiple global medical device markets and his extensive expertise in accelerating innovation, driving operational excellence, enhancing go-to-market strategies, and driving commercial execution and organizational effectiveness.

Mark Singleton has served as our ~~employees~~Senior Vice President and ~~customers.~~Chief Financial Officer since March 2022. Mr. Singleton previously served as Vice President of Finance, Americas Strategic Business Units at Teleflex Inc. (“Teleflex”), a provider of specialty medical devices, from February 2021 to March 2022 and prior to that, served as Teleflex’s Vice President of Finance, Vascular Strategic Business Unit from 2014 to 2020. Prior to Teleflex, Mr. Singleton held multiple leadership roles at Lenovo Group Limited, a multinational technology company, including as Executive Director, Think Business Group Chief Financial Officer (2013-2014), Executive Director, Western Europe Chief Financial Officer (2011-2012), Executive Director, North America Chief Financial Officer (2007-2011) and Director, U.S. Finance Manager (2005-2007). Mr. Singleton received his Bachelor of Science from Purdue University and his Master of Business Administration from Duke University, Fuqua School of Business.

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Anthony D’Adamio has served as our Senior Vice President and General Counsel since August 2017. Previously, Mr. D’Adamio was General Counsel and Secretary at Siemens Healthcare (now known as Siemens Healthineers AG) from January 2010 to August 2017 and served as Deputy General Counsel and Secretary of Siemens Healthcare Diagnostics from January 2007 to January 2010. Prior to that, Mr. D’Adamio was Senior Counsel within the Diagnostics Division of Bayer Healthcare LLC (now known as Siemens Healthineers Diagnostics) from January 2001 to December 2006. Mr. D’Adamio began his legal career at the law firm of Bond, Schoeneck & King before taking corporate legal positions with companies within the health insurance, pharmaceutical and biotechnology industries, including Group Health Incorporated, Quest Diagnostics and Covance Inc. Mr. D’Adamio holds a Juris Doctor from Howard University School of Law and a Bachelor of Arts from the State University of New York at Binghamton.

Katrina Church has served as our Chief Compliance Officer since August 2020. Prior to joining us, Ms. Church served in corporate counsel and compliance roles within the Merz Group of companies, most recently as Global Compliance Officer for Merz Pharma GmbH & Co KGaA, a privately-held pharmaceutical company, from March 2015 to August 2020. From June 1998 to December 2008, Ms. Church was Executive Vice President and General Counsel of Connetics Corporation, a specialty pharmaceutical company that was acquired by Stiefel Laboratories, Inc. in 2008. Ms. Church began her career as an attorney at Hopkins & Carley, a San Jose-based law firm. In 2020, Ms. Church was nominated for several industry awards for compliance training and received the 2020 Women in Compliance Award for “Most Impactful Compliance Training Programme of the Year” and the Brandon Hall 2020 Gold Medal for Excellence in Training. Ms. Church holds a Juris Doctor from New York University School of Law and a Bachelor of Arts in Comparative Literature from Duke University.

Available Information

Our filings with the Securities and Exchange Commission (“SEC”), including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements for stockholder meetings, any registration statements, and amendments to those reports, are available free of charge on our website ~~is located at www.bioventus.com.~~as soon as reasonably practicable after they are filed with, or furnished to, the SEC. Information on our website or connected to our website is not incorporated by ~~references~~reference into this Annual Report. Our website is located at www.bioventus.com. Our SEC filings are also available on the SEC website at www.sec.gov.

Item 1A.Risk Factors.

Described below are certain risks that we believe apply to our business and the industry in which we operate. You should carefully consider each of the following risk factors in conjunction with other information provided in this Annual Report on Form 10-K ~~(Annual Report)~~(“Annual Report”) and in our other public disclosures. The risks described below highlight potential events, trends or other circumstances that could adversely affect our business, financial condition, results of operations, cash flows, liquidity or access to sources of financing, and consequently, the market value of our Class A common stock. These risks could cause our future results to differ materially from historical results and from guidance we may provide regarding our expectations of future financial performance. The risks described below are those that we have identified as material and is not an exhaustive list of all the risks we face. There may be others that we have not identified or that we have deemed to be immaterial. All forward-looking statements made by us or on our behalf are qualified by the risks described below.

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Risks related to our ~~business~~financial position

~~Our business may~~If we are unable to meet our current operating projections or secure other sources of liquidity, substantial doubt about our ability to continue ~~to experience adverse impacts~~ as a ~~result~~going concern may arise, which may negatively affect the market value of our Class A common stock.

The consolidated financial statements included elsewhere in this Annual Report have been prepared under the going concern basis of accounting, which presumes that the Company’s liquidation is not imminent. Based on our current operating plans and potential market and economic conditions, the Company believes it should be able to meet its obligations as they become due within the next twelve months from the date of issuance of the ~~COVID-19 pandemic.~~

~~In 2020, the COVID-19 pandemic spread around the world and~~consolidated financial statements included elsewhere in this Annual Report, as evaluated under generally accepted accounting principles in the ~~U.S.~~United States.

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While we were in compliance as of December 31, 2023 with the financial covenants as stated within the Credit and ~~more recently, new variants~~Guaranty Agreement dated as of December 6, 2019 (the “2019 Credit Agreement,” and, as amended by that certain Amendment No. 1 to Credit and Guaranty Agreement, dated as of August 29, 2021, by the Second Amendment to Credit and Guaranty Agreement, dated as of October 29, 2021, by the Third Amendment to Credit and Guaranty Agreement, dated as of July 11, 2022, by the Fourth Amendment to Credit and Guaranty Agreement, dated as of March 31, 2023 and by the Fifth Amendment, the “Amended 2019 Credit Agreement”), on January 18, 2024, the Company entered into Amendment No. 5 to the 2019 Credit Agreement (the “Fifth Amendment”) as part of its efforts to further improve its financial condition. The Fifth Amendment modified the financial covenant requirements contained in the 2019 Credit Agreement to provide additional financial covenant relief and included modifications to the Company’s leverage maintenance covenant and interest coverage ratio to provide financial and operational flexibility relative to its operating plan.

However, the Company has based the above assessment on assumptions of revenues, cash flows and operating costs that may prove to be wrong. In such event, the Company may need to seek further modifications to certain of the ~~virus have emerged, some~~covenants in the Amended 2019 Credit Agreement to avoid an event of ~~which have shown~~default or seek waivers of any potential noncompliance. Moreover, the Company has historically relied on its ability to ~~be more contagious. The COVID-19 pandemic has had widespread, rapidly evolving~~fund its operations primarily through cash flows from operations, as well as public and unpredictable impacts on global society, economies, financial markets and business practices. Federal and state governments have implemented measures in an effort to minimize the spread of the virus and ongoing effects of the pandemic, including social distancing, travel restrictions, border closures, limitations on public gatherings, mandatory closure or reduced capacity of business, work from home, supply chain logistical changes and other measures, which have caused global business disruptions and significant volatility in U.S. and internationalprivate debt and equity ~~markets.~~ financings, but there can be no assurances that such financing or funding will continue to be available to the Company on satisfactory terms, or at all. In addition, we cannot guarantee that financing will be available in sufficient amounts or on terms acceptable to us, if at all. Moreover, the terms of any financing may adversely affect the holdings or the rights of our stockholders and the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our shares to decline. The sale of additional equity or convertible securities would dilute all of our stockholders. The incurrence of indebtedness would result in increased fixed payment obligations and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. The inability to secure alternative financing on acceptable terms or to obtain any additional required modifications to the Amended 2019 Credit Agreement in the event that we fail to meet our operating projections may raise substantial doubt about our ability to continue as a going concern and adversely affect our business and financial condition.

Our Amended 2019 Credit Agreement contains financial and operating restrictions that may limit our access to credit. If we fail to comply with its financial or other covenants, we may be required to repay the indebtedness, which may harm our liquidity.

We are subject to certain covenants under the Amended 2019 Credit Agreement, including, but not limited to:

•a minimum interest coverage ratio and a maximum debt leverage ratio requirement as defined in the Amended 2019 Credit Agreement;

•a minimum Liquidity (as defined in the Amended 2019 Credit Agreement) of not less than $10.0 million as of the end of each calendar month through October 29, 2025;

•restrictions on the declaration or payment of certain distributions on or in respect of our equity interests;

•restrictions on acquisitions, investments and certain other payments;

•limitations on the incurrence of new indebtedness;

•limitations on the incurrence of new liens on property or assets;

•limitations on transfers, sales and other dispositions;

•limitations on entering into transactions with affiliates; and

•limitations on making any material change in any of our business objectives that could reasonably be expected to have a material adverse effect on the repayment of our Amended 2019 Credit Agreement.

In the absence of a waiver from our lenders, any failure by us to comply with these covenants in the future might result in the declaration of an event of default, which could adversely affect our business, results of operations and financial ~~condition~~position.

In addition, our indebtedness could have ~~been, and may continue~~significant consequences on our financial position, including:

•requiring a substantial portion of our cash flows to be ~~materially impacted due~~dedicated to debt service payments instead of funding growth, working capital, capital expenditures, investments or other cash requirements;

•reducing our flexibility to adjust to changing business conditions or obtain additional financing;

•exposing us to the ~~decrease in patient visits~~risk of increased interest rates as certain of our borrowings, including borrowings under our term loan, are at variable rates, making it more difficult for us to make payments on our indebtedness;

•restricting us from making strategic acquisitions or causing us to make non-strategic divestitures; and ~~elective procedures~~

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•limiting our ability to obtain additional financing for working capital, capital expenditures, debt service requirements and any future temporary cessations of elective procedures and could be further impacted by delays in payments from customers, supply chain interruptions, extended “shelter-in-place” orders or advisories, facility closuresgeneral corporate or other reasons related to the pandemic. Furthermore, the long-term impact of COVID-19 on our business will depend on many factors, including, but not limited to, the duration and severity of the pandemic, new and ongoing measures taken in response to the pandemic, the availability and effectiveness of vaccines to combat COVID-19, the impact on economic activity from the pandemic and actions taken in response and the resulting impact it has on our partners, patients and communities in which we operate, all of which continue to be uncertain. For example, there has been a decrease in patient visits to hospitals due to risk and fear of exposure to COVID-19, as well as decreases in, or temporary moratoriums on, elective procedures, which may be re-imposed in the future. In addition to lower sales, we have experienced decreased costs as a result of the pandemic including declines in travel and lower compensation related expenses. We have also implemented other various cost reduction initiatives and measures to safeguard liquidity, refer to purposes.

See Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Indebtedness for further ~~details~~discussion concerning our indebtedness.

Failure to establish and maintain effective financial controls could cause us to have material weaknesses and financial misstatements due to error, which could adversely affect our business and stock price.

We are required to comply with the SEC’s rules implementing Sections 302, 404 and 906 of the Sarbanes-Oxley Act of 2002, which require management to certify financial and other information in our quarterly and annual reports, provide quarterly and annual management reports on the ~~impact~~effectiveness of ~~COVID-19~~disclosure controls and procedures, and provide annual management reports on the effectiveness of internal controls over financial reporting. Though we are required to disclose changes made in our internal controls and procedures on a quarterly basis and assess internal controls over financial reporting on an annual basis, our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404 until we are no longer an emerging growth company pursuant to the provisions of the JOBS Act. At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our controls are documented, designed or operating.

We have undertaken various actions to comply with the requirements of being a public company. However, we cannot assure you that the measures we have taken to date, and actions we may take in the future, will be sufficient to prevent or avoid financial misstatements due to error or material weaknesses. If we identify any material weaknesses in the future that we cannot fully remediate, the accuracy and timing of our financial reporting may be adversely affected. Testing and maintaining financial controls can also divert our management’s attention from other matters that are important to the operation of our business. Ineffective disclosure controls and procedures or internal control over financial reporting could cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the trading price of our Class A common stock.

Additionally, when evaluating our financial controls, we may identify material weaknesses in our internal controls that we may not be able to remediate in time to meet the applicable deadline imposed upon us for compliance with the requirements of Section 404. If we identify any material weaknesses in our internal controls over financial reporting or are unable to comply with the requirements of Section 404 in a timely manner, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal controls over financial reporting once we are no longer an emerging growth company, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our Class A common stock could be adversely affected, and we could become subject to investigations by the stock exchange on which our securities are listed, the SEC or other regulatory authorities, which could require additional financial and management resources.

We maintain our cash at financial institutions, often in balances that exceed federally insured limits.

We maintain the majority of our cash and cash equivalents in accounts at banking institutions in the United States that we believe are of high quality. Cash held in these accounts often exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limits. If such banking institutions were to fail, we could lose all or a portion of amounts held in excess of such insurance limitations. The FDIC took control of two such banking institutions, Silicon Valley Bank (“SVB”) on March 10, 2023 and Signature Bank (“Signature Bank”) on March 12, 2023. While we did have an account at SVB, we were able to recover all of our deposits when the FDIC stepped in and allowed us to transfer funds held at SVB to another bank without incurring any losses. In the event of failure of any of the financial institutions where we maintain our cash and cash equivalents, there can be no assurance that we would be able to access uninsured funds in a timely manner or at all. Any inability to access or delay in accessing these funds could adversely affect our business and financial position.

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We might require additional capital to fund our financial and operating obligations and support business growth.

If our expected cash from operations together with available borrowings under our Amended 2019 Credit Agreement are not sufficient to fund our current financial and operating obligations, we might require additional capital. In addition, we intend to continue to make investments to support our business growth and might require additional funds to respond to business challenges or opportunities, including the need to further develop our current products and any new products, enhance our operating infrastructure, and acquire complementary businesses. Accordingly, we might need to engage in equity or additional debt financings to secure additional funds. If we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. Any additional debt financing secured by us could involve restrictive covenants relating to our capital-raising activities and other financial and operational matters, which might make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. In addition, we might not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly limited.

Risks related to our business

We are currently subject to securities class action litigation and derivative shareholder lawsuits and may be subject to similar or other litigation in the future, which will require significant management time and attention, result in significant legal expenses and may result in unfavorable outcomes, which may have a material adverse effect on our ~~business.~~business, operating results and financial condition, and negatively affect the price of our common stock.

ToWe are, and may in the ~~extent~~future become, subject to various legal proceedings and claims that arise in or outside the ~~COVID-19 disruptions continue~~ordinary course of business. For example, on January 12, 2023, the Company and certain of its current and former directors and officers were named as defendants in a putative class action lawsuit filed in the Middle District of North Carolina, Ciarciello v. Bioventus, Inc., No. 1:23– CV – 00032-CCE-JEP (M.D.N.C. 2023). The complaint asserts violations of Sections 10(b) and 20(a) of the Exchange Act and of Sections 11 and 15 of the Securities Act and generally alleges that the Company failed to disclose certain information regarding rebate practices, its business and financial prospects, and the sufficiency of internal controls regarding financial reporting. The complaint seeks damages in an unspecified amount. On April 12, 2023, the Court appointed Wayne County Employees’ Retirement System as lead plaintiff. The plaintiff’s amended consolidated complaint was filed with the Court on June 12, 2023. On July 17, 2023, the defendants filed a motion to dismiss the complaint raising a number of legal and factual deficiencies with the amended consolidated complaint. In response to the defendants’ motion to dismiss, the lead plaintiff filed a second amended complaint on July 31, 2023. The defendants moved to dismiss the second amended complaint on August 21, 2023, which the Court granted in part and denied in part on November 6, 2023. The Court dismissed the plaintiff’s Securities Act claims, but allowed the plaintiff’s Exchange Act claims to proceed into discovery.

On October 4, 2023, certain of the Company’s current and former directors and officers were also named as defendants in a derivative shareholder lawsuit (in which the Company is a nominal defendant) filed in the United States District Court for the District of Delaware, Grogan, on behalf of Bioventus Inc., v. Reali, et.al., No. 1:23-CV-01099-RGA (D. Del. 2023). The complaint asserts violations of Section 14(a) of the Exchange Act, breaches of fiduciary duties and related state law claims, and a claim for contribution, and generally alleges the same purported misconduct as alleged in the Ciarciello case. On January 12, 2024, the Court agreed to stay the case pending resolution of the Ciarciello case.

On February 9, 2024, another plaintiff filed a derivative shareholder lawsuit against certain of the Company’s current and former directors and officers (in which the Company is a nominal defendant) filed in the United States District Court for the District of Delaware, Sanderson, on behalf of Bioventus Inc., v. Reali, et.al., No. 1:24-cv-00180-RGA (D. Del. 2024). Like the Grogan case, this case asserts violations of Section 10(b) of the Exchange Act, breaches of fiduciary duties and related state law claims, and a claim for contribution, and generally alleges the same purported misconduct as alleged in the Ciarciello case. The parties are in discussions to consolidate the two derivative matters and stay them on terms similar to those entered in the Grogan case.

The Company believes the claims alleged in each of the above matters lack merit and intends to defend itself vigorously. However, the outcome of these matters is not presently determinable, and any loss is neither probable nor reasonably estimable. The results of such lawsuits and any future legal proceedings cannot be predicted with certainty. Also, our assets may be insufficient to cover any claimed amounts that exceed our insurance coverage, and we may have to pay damage awards or otherwise may enter into settlement arrangements in connection with such claims. Any such payments or settlement arrangements in current or future litigation could have a material adverse effect on our business, operating results or financial condition. Even if the plaintiffs’ claims are not successful, current or future litigation could result in substantial costs and significantly and adversely impact our reputation and divert management’s attention and resources, which could have a material adverse effect on our business, operating results ~~of operations~~ and financial condition, ~~it may also have~~and negatively affect the ~~effect of heightening many of the other risks described in~~ ~~Part I, Item 1A. Risk Factors~~, including risks relating to our ability to successfully commercialize new developed or acquired products or therapies, consolidation in the healthcare industry, disruptions in the supply or manufacturingprice of our ~~products or their components, intensified pricing pressure as a result~~common stock. In addition, such lawsuits may make it more difficult to finance our operations.

Table of ~~changes in the purchasing behavior of hospitals and maintenance of our numerous contractual relationships.~~Contents

We are highly dependent on a limited number of products.

Our ~~OA joint pain treatment and joint preservation~~HA products accounted for ~~53%~~43%, ~~54%~~42% and ~~49%~~51% of our total revenue for the years ended December 31, ~~2020, 2019~~2023, 2022 and ~~2018,~~2021, respectively. We expect that sales of such products will continue to account for a substantial portion of our revenue, and therefore, our ability to execute our growth strategy and maintain profitability will depend upon the continued demand for these products. ~~In addition, our supply and distribution agreements for Durolane, GELSYN-3 and SUPARTZ FX are subject to renewal and their terms end in December 2115, February 2026 and December 2028, respectively.~~ If the supply and distribution agreements for any of our HA ~~viscosupplementation therapies~~products were terminated, our revenue would be impaired. If our ~~OA joint pain treatment and joint preservation~~HA products fail to maintain their market acceptance for any reason, our business, results of operations and financial condition may be adversely affected.

Our long-term growth depends on our ability to develop, acquire and commercialize new products, line extensions or expanded indications.

Our industry is highly competitive and subject to rapid change and technological advancements. Therefore, it is important to our business that we continue to introduce new products and/or enhance our existing product offerings through line extensions or expanded indications. Developing, acquiring and commercializing products is expensive, time-consuming and could divert management’s attention away from our existing business. Even if we are successful in developing additional products, the success of any new product offering or enhancements to existing products will depend on several factors, including our ability to:

•properly identify and anticipate the needs of healthcare professionals and patients;

•develop and introduce new products, line extensions and expanded indications in a timely manner;

•distinguish our products from those of our competitors;

•avoid infringing upon the intellectual property rights of ~~third-parties~~third parties and maintain necessary intellectual property licenses from ~~third-parties;~~third parties;

•demonstrate, if required, the safety and efficacy of new products with data from preclinical studies and clinical trials;

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•obtain clearance, approval, or ~~approval,~~certification, if required, from the FDA and other regulatory agencies or notified bodies, for such new products, line extensions and expanded indications, and maintain full compliance with FDA and other regulatory requirements applicable to new devices or products or modifications of existing devices or products;

•provide adequate training to potential users of our products;

•market acceptance of our newly developed or acquired products or therapies;

•receive adequate coverage and reimbursement for our products; and

•maintain an effective and dedicated sales and marketing team.

If we are unsuccessful in developing, acquiring and commercializing new products or enhancing our existing product offerings through line extensions and expanded indications, our ~~ability to increase our net sales~~long-term growth may be ~~impaired.~~negatively affected.

Additionally, our research and development efforts may require a substantial investment of time and resources before we are adequately able to determine the commercial viability of a new product, technology, material or other innovation. Such efforts may not result in the development of a viable product. In addition, even if we are able to successfully develop new active healing products, line extensions and expanded indications, these products may not produce sales in excess of the costs of development and they may be rendered obsolete by changing customer preferences or the introduction by our competitors of products embodying new technologies or features.

~~We may be unable to successfully commercialize newly developed or acquired products or therapies in the United States.~~

The commercial success of newly acquired or developed products, such as MOTYS, in the United States will depend upon the awareness and acceptance of such products among the medical community, including physicians and patients. Market acceptance will depend on a number of factors, including, among others:

•~~the perceived advantages and disadvantages of such products over existing therapies and other competitive treatments;~~

•~~availability of alternative treatments;~~

•~~inability to secure and maintain adequate coverage, including obtaining a unique reimbursement code;~~

•~~the extent to which physicians prescribe the Company’s products;~~

•~~the willingness of the target patient population to try new therapies;~~

•~~the strength of marketing and distribution support of the Company’s new products and competitive products;~~

•~~publicity concerning the Company’s new products, our existing products or competing products and treatments;~~

•~~pricing and cost effectiveness of such new therapies;~~

•~~the effectiveness of our sales and marketing strategies; and~~

•~~the willingness of patients to pay out-of-pocket in the absence of third-party reimbursement.~~

Our efforts to educate the medical community about the benefits of newly acquired or developed products may require significant resources and we may never be successful. If such newly acquired or developed products do not achieve an adequate level of acceptance by patients and physicians in the United States, our business, results of operations and financial condition may be adversely affected.

Demand for our existing ~~portfolio of~~ products and any new products, line extensions or expanded indications depends on the continued and future acceptance of our products by physicians, patients, third-party payers and others in the medical community.

We cannot be certain that our existing ~~portfolio of~~ products and any new products, line extensions or expanded indications that we develop will achieve or maintain market acceptance. ~~With respect to our OA joint pain treatment and joint preservation products, third-party~~Third-party payers may be reluctant to continue to cover our ~~HA viscosupplementation therapies~~products at their current prices. Further, new injectable therapies or oral medications may become available that help manage OA ~~joint~~ pain in a more convenient and/or cost effective manner than our HA viscosupplementation therapies. With respect to our ~~BGS products,~~Surgical Solutions, new allograft, DBMs, synthetics, growth factors, or other enhancements to our existing implants may never achieve broad market acceptance, which can be affected by a lack of clinical acceptance of ~~BGSs~~Surgical Solutions products and technologies, introduction of competitive treatment options which render ~~BGSs~~Surgical Solutions products and technologies too expensive or obsolete and difficulty training surgeons in the use of ~~BGSs~~Surgical Solutions products and technologies. Media reports or other negative publicity concerning both methods of tissue recovery from donors and actual or potential disease transmission from donated tissue may limit widespread acceptance by the medical community of our allografts, growth factor and DBMs, whether directed at these products generally or our products specifically. Unfavorable reports of improper or illegal tissue recovery practices by any participant in the industry, both in the United States and internationally, as well as incidents of improperly processed tissue leading to transmission of disease, may broadly affect the rate of future tissue donation and market acceptance of allograft based technologies by the medical community.

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In addition, we believe that even if the medical community generally accepts our existing portfolio of products and any new products, line extensions or expanded indications, acceptance and recommendations by influential members of the medical community will be important to their broad commercial success. If the medical community does not broadly accept our products, we may not remain competitive in the market, which could adversely affect our business, results of operations and financial condition.

~~Our commercial success depends on our ability to differentiate the HA viscosupplementation therapies that we own or distribute from alternative therapies for the treatment of OA.~~

Our ability to achieve commercial success will, at least in part, depend on our ability to differentiate the HA viscosupplementation therapies that we own or distribute in such a way that physicians and patients will select them. The HA viscosupplementation therapies that we own or distribute could face competition from steroid injections, other HA viscosupplementation therapies, combination HA viscosupplementation/steroid therapies and alternate therapies for the treatment of OA, including those currently in development.

We expect that the HA viscosupplementation therapies that we own or distribute will continue to be used primarily after oral analgesics and steroid injections no longer provide adequate pain relief. In addition, the five and three injection HA viscosupplementation therapies that we distribute face competition from single injection therapies. We expect the three injection market to decline by a projected 3.1% CAGR and the five injection market to decline by a projected 13.6% CAGR from 2019 to 2024. Due to the convenience associated with the single injection treatments, it is expected that these products will continue to capture increasing market share of the HA viscosupplementation therapies market, which may adversely affect our business, results of operations and financial condition to the extent physicians and patients do not select Durolane, our single injection HA viscosupplementation therapy. There are also a number of combination HA viscosupplementation/steroid therapies currently in development. The American Association of Orthopedic Surgeons (AAOS), since the release of their May 2013 clinical practice guidelines, does not recommend the use of HA for patients with symptomatic knee OA. The evidence for the AAOS recommendation is based on two or more high quality studies with consistent findings for recommending for or against the intervention. The AAOS recommendation states that practitioners should follow a strong recommendation, such as this one, unless a clear and compelling rationale for an alternative approach is present. In May 2018, the Journal of the AAOS ranked the nonsteroidal anti-inflammatory drug naproxen the most effective in individual knee OA treatment for improving both pain and function. To the extent that any additional therapies receive approval or alternative therapies receive positive support from the AAOS or other physician associations, they could reduce the market share represented by HA viscosupplementation therapies for OA treatment and adversely affect our commercial success.

If we are unable to differentiate the HA viscosupplementation therapies we own or distribute from other therapies, physicians and patients may not be willing to use them or be willing to switch from existing therapies with which they are familiar. Once physicians incorporate a particular treatment into their practice, they may not alter their practice absent compelling clinical evidence of safety and/or effectiveness and/or significant pricing reimbursement advantages.

The proposed down-classification of non-invasive bone growth stimulators, including ~~our~~ Exogen, ~~system,~~ by the FDA could increase future competition for bone growth stimulators and otherwise adversely affect ~~the Company’s~~our sales of Exogen.

~~On August 17,~~In 2020, the FDA published a Federal Register notice announcing its proposal to reclassify non-invasive bone growth stimulators, such as Exogen, from Class III medical devices to Class II with special controls. Class III devices are subject to the most stringent regulatory pathway for approval for medical devices requiring, among other things, rigorous clinical studies and pre-approval manufacturing review. Class II devices may be cleared for marketing by the FDA under the 510(k) pathway if they are determined to be substantially equivalent to a legally marketed predicate device. The 510(k) clearance process does not always require clinical testing, and is generally less onerous than the premarket approval process applicable to Class III devices. ~~On September 8-9,~~Also in 2020, the Orthopaedic and Rehabilitation Devices Panel of the FDA Medical Devices Advisory Committee met and ~~discussed FDA’s proposal. The Panel, whose authority is non-binding but nonetheless considered by FDA,~~ ultimately voted in favor of the FDA’s proposal to down-classify non-invasive bone growth stimulators.

~~The FDA has proposed that any final order would become effective 30 days after publication.~~ While the FDA has not yet finalized its proposal to down-classify non-invasive bone growth stimulators, should such down-classification occur now or in the future, we may face additional competition from new market entrants who would be able to pursue marketing authorization through the 510(k) clearance pathway instead of the more onerous and burdensome PMA approval process. Class II devices that qualify as durable medical equipment under the Medicare program may also be eligible for inclusion in Medicare’s competitive bidding program ~~for~~for durable medical equipment, ~~prosthetics, orthotics~~prosthetic and ~~supplies.~~orthotic supplies (“DEMPOS”). As a result of down-classification, Exogen could face additional competition or we could receive lower reimbursement amounts, ~~for Exogen,~~ all of which could adversely affect our business, results of operations and financial condition.

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If we are unable to achieve and maintain adequate levels of coverage and/or reimbursement for our products, the procedures using our products, or any future products we may seek to commercialize, the commercial success of these products may be severely hindered.

Our products are purchased by healthcare providers and customers who typically bill third-party payers ~~such as government programs, including Medicare and Medicaid,~~ or private insurance plans and healthcare networks, to cover all or a portion of the costs and fees associated with our products. ~~Patients may also be billed for deductibles or co-payments in accordance with third-party payer policies.~~ These third-party payers and insurers may deny reimbursement if they determine that a device or product provided to a patient or used in a procedure does not meet applicable payment criteria or if the policyholder’s healthcare insurance benefits are limited.

As required by law, the CMS, which administers the Medicare program, has continued efforts to implement a competitive bidding program for selected durable medical equipment, prosthetic and orthotic supplies items paid for by the Medicare program. In this program, Medicare rates are based on bid amounts for certain products in designated geographic areas, rather than the Medicare fee schedule amount. Bone growth stimulation products like our Exogen system are currently exempt from this competitive bidding process, but may be eligible for inclusion if the FDA’s proposed down-classification order becomes effective. We cannot predict which products from any of our businesses may ultimately be affected or whether or when the competitive bidding process may be extended to our businesses.

~~Limits~~ Further, limits put on reimbursement by third-party payers, whether foreign or domestic, governmental or commercial, could make it more difficult to buy our products and substantially reduce, or possibly eliminate, patient access to our products. The healthcare industry in the United States has experienced a trend toward cost containment as government and private insurers seek to control rising healthcare costs by imposing lower payment rates and negotiating reduced contract rates with providers and suppliers.

~~There is no uniform policy of~~Private payers may adopt coverage decisions and ~~reimbursement~~payment amounts determined by the Centers for ~~our products or procedures using our products among third-party payers~~Medicare and Medicaid Services (“CMS”), the federal agency that administers the Medicare program in the United States, ~~and~~as guidelines in setting their coverage and reimbursement ~~for our products~~policies. In addition, CMS periodically reviews medical study literature to determine how the literature addresses certain procedures and procedures using our products can differ significantly from payer to payer. Further, these payers regularly review new and existing technologies for possible coverage and can, without notice, deny or reverse coverage for new or existing products and treatments. Third-party payers may not consider our products to be medically necessary or cost-effective for certain indications or off-label uses or for all uses, and as a result, may not provide coverage for the products. For example, Blue Cross Blue Shield Association’s Evidence Street platform issued a report in April 2018 questioning the efficacy of our Exogen system, which resulted in several non-coverage policies being issued by member organizations. Additionally, to the extent that third party payers decide that they are no longer willing to provide reimbursement for physician prescribed off-label uses of Exogen, sales may be negatively impacted. See ~~Part I, Item 1A. Risk Factors—~~Risks related to government regulation—We may be subject to enforcement action if we engage in improper marketing or promotion of our products, and the misuse or off-label use of our products may harm our imagetherapies in the marketplace, result in injuries that lead to product liability suits or result in costly investigations, fines or sanctions by regulatory bodies if we are deemed to have engaged in the promotion of these uses, any of which could be costly to our business.

~~We may also be required to conduct expensive clinical studies to justify~~Medicare population. For some governmental programs, such as Medicaid, coverage and reimbursement ~~and/or the level of reimbursement relative~~differs from state to state. Medicaid payments to physicians, facilities and other ~~therapies. In addition, should governmental authorities continue to enact legislation or adopt regulations that affect third-party coverage and reimbursement, access to our products and coverage~~providers are often lower than payments by private or public insurers may be reduced. If third-party payers or insurers that currently cover or reimburse our products or the procedures in which they are used limit their coverage or reimbursement in the future, or if other third-party payers ~~or insurers issue similar policies, this could impact our ability to sell~~and some state Medicaid programs may not pay an adequate amount for the procedures performed with our products, ~~force us to lower the price we charge for our products, and adversely affect our business, results of operations and financial condition.~~

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~~Our ability to market and sell our products could be harmed by future actions by~~if any payment is made at all. If CMS, other government agencies or private payers lower their reimbursement rates or establish additional limitations on coverage of our products, or if any of the proposed drug pricing executive orders or legislative reforms are enacted, the commercial success of our products may be adversely affected.

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Further, legislative or other regulatory reforms that have been adopted or may be adopted in the future may result in additional reductions in Medicare and other healthcare funding, more rigorous coverage criteria, new payment methodologies or other downward pressure on the pricing or reimbursement we or our customers receive for our products. For example, the Consolidated Appropriations Act, 2021 (“CAA”) was signed into law on December 27, 2020, and pursuant to ~~diminish payments~~implementing regulations promulgated by CMS, expanded price reporting obligations for manufacturers of certain products reimbursed under Medicare Part B beginning January 1, 2022, including all of our HA viscosupplements. In July 2022, CMS began utilizing the new pricing information we reported to it pursuant to these newly adopted reporting obligations to adjust the Medicare payment to healthcare providers using our Durolane and ~~suppliers. For example,~~Gelsyn-3 products. As a result, the rates currently available for those products have been reduced from those previously available and will be subject to future reporting and adjustment, which may affect the demand for those products or our ability to sell them profitably. We cannot predict the extent to which this law, or other reimbursement reform proposals or other healthcare cost containment measures that might be enacted in the future, may impact the demand or commercial success of our HA viscosupplements and other products we sell or plan to commercialize in the future.

In addition, due to the manner in which rebates are calculated and paid under certain of our contracts with private payers, changes in the ASP for our HA viscosupplements may result in larger than expected rebates payments for the sale of these products. In addition, we are dependent on these payers to provide timely and accurate invoices for the rebates that we are obligated to pay under these contractual relationships. If the information is not received timely or is inaccurate, we may not be able to correctly forecast the amounts due under those agreements, which may adversely affect our operating results and financial condition.

CMS, ~~in its ongoing implementation of~~which administers the Medicare program, has continued efforts to implement a competitive bidding program for selected DEMPOS items paid for by the Medicare program. In this program, Medicare rates are based on bid amounts for certain products in designated geographic areas, rather than the Medicare fee schedule amount. Bone growth stimulation products like Exogen are currently exempt from this competitive bidding process, but may be eligible for inclusion if the FDA’s proposed down-classification order becomes effective. We cannot predict which products from any of our businesses may ultimately be affected or whether or when the competitive bidding process may be extended to our businesses.

CMS periodically reviews medical study literature to determine how the literature addresses certain procedures and therapies in the Medicare population. The impact that these assessments could have on Medicare or third-party payer coverage determinations for our products is currently unknown, but we cannot provide assurances that the resulting actions will not restrict Medicare or other insurance coverage for our products. In addition, there can be no assurance that we or our distributors will not experience significant coverage or reimbursement impediments in the future related to these or other programs and policies of CMS. Specifically, drug pricing reform legislation and executive orders, which could negatively affect the reimbursement rates paid for our HA viscosupplements, have been issued by the White House and proposed and enacted by Congress. For example, the Consolidated Appropriations Act, 2021(CAA), was signed into law on December 27, 2020, and will expand price reporting obligations for manufacturers of certain products reimbursed under Medicare Part B beginning, January 1, 2022. CMS could utilize the new pricing information to adjust Medicare payment for these products, which may include HA viscosupplements. We cannot predict how this law will be implemented by CMS, or the extent to which this law, or other proposals that may be enacted in the future, may impact the Medicare payment available for our HA viscosupplements.

Private payers may adopt coverage decisions and payment amounts determined by CMS as guidelines in setting their coverage and reimbursement policies. In addition, for some governmental programs, such as Medicaid, coverage and reimbursement differs from state to state. Medicaid payments to physicians, facilities and other providers are often lower than payments by other third-party payers and some state Medicaid programs may not pay an adequate amount for the procedures performed with our products, if any payment is made at all. If CMS, other government agencies or private payers lower their reimbursement rates, or if any of the proposed drug pricing executive orders or legislative reforms are enacted, the commercial success of our products may be adversely affected.

Our business may be adversely affected if consolidation in the healthcare industry leads to demand for price concessions or if a ~~GPO,~~Group Purchasing Organization (“GPO”), third-party payers or other similar entities exclude us from being a supplier.

Healthcare costs have risen significantly over the past decade, which has resulted in or led to numerous cost reform initiatives by legislators, regulators and third-party payers. Cost reform has triggered a consolidation trend in the healthcare industry to aggregate purchasing power, which may increase requests for pricing concessions or risk vendor exclusion. For example, non-clinical staff at hospitals are increasingly involved in the evaluation of products and product purchasing decisions. In order for us to sell our products, we must convince such staff as well as physicians and hospitals that our products are attractive alternatives to competing products for use in surgical procedures. Additionally, GPOs, ~~independent~~integrated delivery networks (“IDNs”) and large single accounts may continue to use their market power to consolidate purchasing decisions for physicians. Third-party payers may also continue to use their market power to reduce the reimbursement for our products by increasing the rebates we are required to pay them when our products are covered, which may negatively impact our results. We expect that market demand, government regulation, third-party coverage and reimbursement policies and societal pressures will continue to change the healthcare industry worldwide, resulting in further business consolidations and alliances among our customers, which may exert further downward pressure on the prices of our products.

~~If we choose to acquire or invest in new businesses, products or technologies, we~~

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We may be unable to complete ~~these~~proposed acquisitions or to successfully integrate ~~them~~proposed or recent acquisitions in a cost-effective and non-disruptive manner.

Our success depends on our ability to enhance and broaden our product offerings in response to changing customer demands, competitive pressures and advances in technologies. We continue to search for viable acquisition candidates or strategic alliances that would expand our market sector and/or global presence, as well as additional products appropriate for current distribution channels. Accordingly, we have previously and may in the future pursue the acquisition of, or joint ventures relating to, new businesses, products or technologies instead of developing them internally. ~~For example, we entered into an Option~~Our future success will depend, in part, upon our ability to manage the expanded business following these acquisitions, including challenges related to the management and ~~Equity PurchaseAgreement~~monitoring of new operations and associated increased costs and complexity associated with ~~CartiHeal providing for, among other things, an exclusive option to acquire~~ the company under certain terms and conditions as described above. See “Business—Development and Clinical Pipeline—Treatment of Cartilage for Osteochondral defects—CartiHeal (developer of Agili-C) investment and option and equity purchase agreement.” We are also exploring a possible acquisition of a medical device company, referred to herein as the Target. We were recently notified that a minority shareholder of the Target has filed a complaint with the Court of Chancery of the State of Delaware contesting the Potential Transaction, as well as related motions to expedite proceedingsMisonix, Bioness, and issue a temporary restraining order. We understand that the Target intends to defend the action vigorously, but there can be no assurance that this action will not impact the timing, terms or likelihood of closing of the Potential Transaction.other potential acquisitions. Other risks involving potential future and completed acquisitions and strategic investments include:

•risks associated with conducting due diligence;

•problems integrating the purchased technologies, products or business operations;

•inability to achieve the anticipated synergies and overpaying for acquisitions or unanticipated costs associated with acquisitions;

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•invalid net sales assumptions for potential acquisitions;

•issues maintaining uniform standards, procedures, controls and policies;

•diversion of management’s attention from our core business;

•adverse effects on existing business relationships with suppliers, distributors and customers;

•risks associated with entering new markets in which we have limited or no experience;

•potential loss of key employees of acquired businesses; and

•increased legal, accounting and compliance costs.

We compete with other companies for these opportunities, and we may be unable to consummate such acquisitions or joint ventures on commercially reasonable terms, or at all. In addition, acquired businesses may have ongoing or potential liabilities, legal claims (including tort and/or personal injury claims) or adverse operating issues that we fail to discover through due diligence prior to the acquisition. Even if we are aware of such liabilities, claims or issues, we may not be able to accurately estimate the magnitude of the related liabilities and damages. In particular, to the extent that prior owners of any acquired businesses or properties failed to comply with or otherwise violated applicable laws or regulations, failed to fulfill their contractual obligations to their customers, or failed to satisfy legal obligations to employees or third parties, we, as the successor, may be financially responsible for these violations and failures and may suffer reputational harm or otherwise be adversely affected. Acquisitions also frequently result in the recording of goodwill and other intangible assets which are subject to potential impairment in the future that could harm our financial results. If we were to issue additional equity in connection with such acquisitions, this may dilute our stockholders.

Pricing pressure from our competitors or hospitals may affect our ability to sell our products at prices necessary to support our current business strategies.

Medical device companies, healthcare systems, IDNs and GPOs have intensified competitive pricing pressure as a result of industry trends and new technologies. Purchasing decisions are gradually shifting to hospitals, IDNs and other hospital groups, with surgeons and other physicians increasingly acting only as “employees.” Changes in the purchasing behavior of hospitals or the amount that third-party payers are willing to reimburse our customers for procedures using our products, including ~~those~~ as a result of healthcare reform initiatives, could create additional pricing pressure on us. In addition to these competitive forces, we continue to see pricing pressure as hospitals introduce new pricing structures into their contracts and agreements, including fixed price formulas, capitated pricing and episodic or bundled payments intended to contain healthcare costs. If such trends continue to drive down the prices we are able to charge for our products, our profit margins will shrink, adversely affecting our business, results of operations and financial condition.

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If we fail to successfully enter into purchasing contracts for our ~~BGS~~Surgical Solutions products or engage in contract bidding processes internationally, we may not be able to receive access to certain hospital facilities and our sales may decrease.

In the United States, the hospital facilities where physicians treat patients with our ~~BGS~~Surgical Solution products typically require us to enter into purchasing contracts. The process of securing a satisfactory contract can be lengthy and time-consuming and require extensive negotiations and management time. In certain international jurisdictions, from time to time, certain institutions require us to engage in a contract bidding process in the event that such institutions are considering making purchase commitments that exceed specified cost thresholds, which vary by jurisdiction. These processes are only open at certain periods of time, and we may not be successful in the bidding process. If we do not receive access to hospital facilities through these contracting processes or otherwise, or if we are unable to secure contracts or tender successful bids, our sales may stagnate or decrease and our operating results may be harmed. Furthermore, we may expend significant effort in these time-consuming processes and still may not obtain a purchase contract from such hospitals.

Governments outside the United States may not provide coverage or reimbursement of our products, which may adversely affect our business, results of operations and financial condition.

Acceptance of our products in international markets may depend, in part, upon the availability of coverage and reimbursement within prevailing healthcare payment systems. Reimbursement and healthcare payment systems in international markets vary significantly by country, and include both government-sponsored healthcare and private insurance. Our products may not obtain international coverage and reimbursement approvals in a timely manner, if at all, which may require consumers desiring our products to purchase them directly. Third-party coverage and reimbursement for our products or any of our products in development for which we may receive regulatory approval may not be available or adequate in international markets, which could adversely affect our business, results of operations and financial condition.

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Our future growth depends on physician awareness of the distinctive characteristics, benefits, safety, clinical efficacy and cost-effectiveness of our products.

We focus our sales, marketing and training efforts on physicians, surgeons and other health care professionals. The acceptance of our products depends in part on our ability to educate physicians as to the distinctive characteristics, benefits, safety, clinical efficacy and cost-effectiveness of our products compared to alternative products, procedures and therapies. If physicians, surgeons or other healthcare professionals are not properly trained, they may misuse or ineffectively use our products, which may result in unsatisfactory patient outcomes, patient injury, negative publicity or lawsuits against us. In addition, a failure to educate physicians, surgeons or other healthcare professionals regarding our products may impair our ability to achieve market acceptance of our products.

We compete and may compete in the future against other companies, some of which have longer operating histories, more established products or greater resources than we do, which may prevent us from achieving increased market penetration or improved operating results.

The medical device industry is characterized by intense competition, subject to rapid change and is significantly affected by market activities of industry participants, new product introductions and other technological advancements. We believe that our competitors have historically dedicated and will continue to dedicate significant resources to promote their products or to develop new products. We have competitors in the United States and internationally, including major medical device and pharmaceutical companies, biotechnology companies and universities and other research institutions.

These companies and other industry participants may develop alternative treatments, products or procedures that compete directly or indirectly with our products. If alternative treatments are, or are perceived to be, superior to our products, sales of our products could be adversely affected and our results of operations could suffer. Our competitors may also develop and patent processes or products earlier than we can or obtain regulatory ~~clearance~~clearances, approvals or ~~approvals~~certifications for competing products more rapidly than we can, which could impair our ability to develop and commercialize similar processes or products.

Many of our current and potential competitors are major medical device and pharmaceutical companies that have substantially greater financial, technical and marketing resources than we do, and they may succeed in developing products that would render our products obsolete or noncompetitive. It is also possible that our competition will be able to leverage their large market share to set prices at a level below that which is profitable for us.

Some of our competitors ~~enjoy~~have several competitive advantages over us, including:

•greater financial, human and other resources for product research and development, sales and marketing and litigation;

•significantly greater name recognition;

•control of intellectual property and more expansive portfolios of intellectual property rights, which could impact future products under development;

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•greater experience in obtaining and maintaining regulatory clearances, approvals or ~~approvals~~certifications for products and product enhancements;

•established relationships with hospitals and other healthcare providers, physicians, suppliers, customers and third-party payers;

•additional lines of products, and the ability to bundle products to offer greater incentives to gain a competitive advantage; and

•more established sales, marketing and worldwide distribution networks.

The potential introduction by competitors of products that compete with our existing or planned products may also make it difficult to market or sell our products. In addition, the entry of multiple new products and competitors may lead some of our competitors to employ pricing strategies that could adversely affect the pricing of our products and pricing in the market generally.

As a result, our ability to compete successfully will depend on our ability to develop proprietary products that reach the market in a timely manner, receive adequate coverage and reimbursement from third-party payers, and are safer, less invasive and more effective than alternatives available for similar purposes. If we are unable to do so, our sales or margins could decrease, which would adversely affect our business, results of operations and financial condition.

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The reclassification of our HA products from medical devices to drugs in the United States by the FDA could negatively impact our ability to market these products and may require that we conduct costly additional clinical studies to support current or future indications for use of those products.

On December 18, 2018, the FDA published notice in the Federal Register announcing its intention to reconsider the appropriate classification of HA intra-articular products intended for the treatment of pain in OA of the knee. Although HA products intended for this use have previously been regulated as medical devices, in its notice the FDA stated that current published scientific literature supports that HA products achieve their primary intended purpose of treatment of pain in OA of the knee through biological action in the body which would require such products being classified as drugs. The FDA has encouraged organizations intending to submit applications for changes in indications for use, formulation, or route of administration of their HA products to obtain from the FDA an informal or formal classification and jurisdiction determination as a drug or device through a pre-request for designation or request for designation, respectively, prior to submission of such application. However, the FDA to date has taken no action to reclassify HA products from medical devices to drugs, or indicated what the potential ramifications would be for currently marketed HA products if a reclassification were to occur.

~~We currently market three HA products: Durolane, GELSYN-3 and SUPARTZ FX.~~ If the reclassification of HA products were to occur, the FDA may not allow us to continue to market ~~these~~our HA products without submitting additional clinical trial data, obtaining approval of a NDA for these products, or without otherwise complying with new conditions or limitations on how those products are marketed. Clinical testing can take years to complete, can be expensive and carries uncertain outcomes, and there is no guarantee that would be able to successfully obtain and maintain any required regulatory approvals. These new regulatory obligations could result in increased regulation ~~of Durolane, GELSYN-3 and SUPARTZ FX~~ and would subject ~~these~~our HA products to a new set of regulatory requirements to which they have not been previously subject. These changes could ultimately increase our costs, change levels of coverage and/or reimbursement for our HA products and adversely impact our business, results of operations and financial condition if they were to be implemented. See Part I, Item 1A. Risk Factors—Risks related to our ~~business—~~business—If we are unable to achieve and maintain adequate levels of coverage and/or reimbursement for our products, the procedures using our products, or any future products we may seek to commercialize, the commercial success of these products may be severely ~~hindered.”~~hindered.

Our ability to maintain our competitive position depends on our ability to attract, retain and motivate our senior management team and highly qualified personnel, and our failure to do so could adversely affect our business, results of operations and financial condition.

We believe that our continued success depends to a significant extent upon the skill, experience and performance of members of our senior management team, who have been critical to the management of our operations and implementation of our strategy, as well as our ability to continue to attract, retain and motivate additional executive officers, and other key employees and consultants, such as those individuals who are engaged in our research and development efforts. The replacement of any of our key personnel likely would involve significant time and costs and may significantly delay or prevent the achievement of our business objectives and could therefore adversely affect our business, results of operations and financial condition. In addition, we do not carry any “key person” insurance policies that could offset potential loss of service under applicable circumstances.

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Competition for experienced employees in the medical device industry can be intense. To attract, retain and motivate qualified employees, we may utilize equity-based incentive awards such as employee stock options. If the value of such equity incentive awards does not appreciate as measured by the performance of the price of our Class A common stock, ~~and ceases~~as seen in current market conditions, such awards may cease to be viewed as a valuable ~~benefit,~~and our ability to attract, retain and motivate our employees could be adversely impacted, which could adversely affect our business, results of operations and financial condition and/or require us to increase the amount we expend on cash and other forms of compensation.

~~Since inception, our history of operations has included periods of net losses, and we may not be able to sustain profitability.~~

For the years ended December 31, 2020, 2019 and 2018, we had net income from continuing operations of $14.7 million, $8.1 million and $4.4 million, respectively. We had an accumulated deficit of $144.5 million and $141.7 million as of December 31, 2020 and 2019, respectively. Our ability to generate sufficient net sales from our existing products or from any of our products indevelopment or products that we acquire, in order to sustain profitability, is uncertain, and, since inception, our history of operations has previously included periods of net loss. We expect that our operating expenses will continue to increase as we continue to develop, enhance~~and commercialize new products and incur additional operational costs associated with being a public company. Furthermore, we may not be able tosustain or increase profitability on an ongoing basis. If we do not achieve sustained profitability, it will be more difficultfor us to finance our business and accomplish our strategic objectives.~~

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If we fail to properly manage ~~our anticipated~~ growth, our business could suffer.

We ~~have been growing steadily~~may, in ~~recent periods, prior to~~ the ~~impact of COVID-19. We intend to continue to grow and may~~future, experience periods of rapid growth and expansion, which could place a significant additional strain on our limited personnel, information technology systems and other resources. In particular, our sales force and distributor network ~~requires~~require significant management, training, financial and other supporting resources. Any failure by us to manage our growth effectively could ~~have an adverse effect on~~adversely affect our ability to achieve our development and commercialization goals.

To achieve our long-term revenue goals, we ~~must~~ also will need to successfully increase supply of our products to meet expected customer demand. In the future, we may experience difficulties with yields, quality control, component supply and shortages of qualified personnel, among other problems. These problems could result in delays in product availability and increases in ~~expenses. Any such delay or increased expense~~expenses which could adversely affect our ability to generate revenue.

Future growth will also impose significant added responsibilities on management, including the need to identify, recruit, train and integrate additional employees. In addition, rapid and significant growth will place a strain on our administrative and operational infrastructure.

In order to manage our operations ~~and~~during any growth period, we will need to continue to improve our operational and management controls, reporting and information technology systems and financial internal control procedures. If we are unable to manage our growth effectively, it may be difficult for us to execute our business strategy and our operating results and business could suffer.

We may not be able to strengthen our brand and the brands associated with our products.

We believe that strengthening the Bioventus brand and the brands associated with our products is critical to achieving widespread acceptance of our products, particularly because of the rapidly developing nature of the market for active healing ~~products.~~products as well as the expansion of our product portfolio due to our recent acquisitions. Promoting and positioning our brand will depend largely on the success of our marketing efforts and the reliability of our products. Historically, our efforts to build our brand have involved marketing expenses, and it is likely that our future marketing efforts will require us to incur additional expenses. These brand promotion activities may not yield increased sales and, even if they do, any sales increases may not offset the expenses we incur to promote our brand and our products. If we fail to successfully promote and maintain our brand, or if we incur substantial expenses in an unsuccessful attempt to promote and maintain our brand and the brands of our products, our products may not be accepted by healthcare providers, which would cause our sales to decrease and would adversely affect our business, results of operations and financial condition.

We face the risk of product liability claims that could be expensive, divert management’s attention and harm our reputation and business. We may not be able to maintain adequate product liability insurance.

Our business exposes us to the risk of product liability claims that are inherent in the testing, manufacturing and marketing of our products. This risk exists even if a product is cleared, approved or ~~approved~~certified for commercial sale by the FDA, foreign regulatory authorities or notified bodies and manufactured in facilities regulated by the FDA or an applicable foreign regulatory authority. Our products are designed to affect, and any future products will be designed to affect, important bodily functions and processes. Any side effects, manufacturing defects, misuse or abuse associated with our products or our products in development could result in patient injury or death. The medical device industry has historically been subject to extensive litigation over product liability claims, and we cannot assure you that we will not face product liability claims. We may be subject to product liability claims if our products or products in development cause, or merely appear to have caused, patient injury or death, even if such injury or death was as a result of supplies or components that are produced by third-party suppliers. Product liability claims may be brought against us by consumers, healthcare providers or others selling or otherwise coming into contact with our products, among others. If we cannot successfully defend ourselves against product liability claims, we will incur substantial liabilities and reputational harm. In addition, regardless of merit or eventual outcome, product liability claims may result in:

•costs of litigation;

•distraction of management’s attention from our primary business;

•the inability to commercialize existing or new products;

•decreased demand for our products or, if cleared or approved, products in development;

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•damage to our business reputation;

•product recalls or withdrawals from the market;

•withdrawal of clinical trial participants;

•substantial monetary awards to patients or other claimants; and

•loss of net sales.

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While we have attempted and may continue to attempt to manage our product liability exposure by proactively recalling or withdrawing from the market any defective products, any recall or market withdrawal of our products may delay the supply of those products to our customers and may impact our reputation. For example, we have in the past instituted a voluntary recall for certain of our products. We cannot assure you that we will be successful in initiating appropriate market recall or market withdrawal efforts that may be required in the future or that these efforts will have the intended effect of preventing product malfunctions and the accompanying product liability that may result. Such recalls and withdrawals may also be used by our competitors to harm our reputation for product safety or be perceived by patients as a safety risk when considering the use of our products, either of which could adversely affect our business, results of operations and financial condition.

In addition, although we have product liability and clinical study liability insurance that we believe is appropriate, this insurance is subject to deductibles and coverage limitations. Our current product liability insurance may not continue to be available to us on acceptable terms, if at all, and, if available, coverage may not be adequate to protect us against any future product liability claims. If we are unable to obtain insurance at an acceptable cost or on acceptable terms or otherwise protect against potential product liability claims, we could be exposed to significant liabilities. A product liability claim, recall or other claim with respect to uninsured liabilities or for amounts in excess of insured liabilities could adversely affect our business, results of operations and financial condition.

Fluctuations in the demand for our products or our inability to forecast demand accurately may influence the ability of our suppliers to meet our delivery needs or result in excess product inventory.

We are required by some of our contracts with suppliers of our products to forecast future product demand or meet minimum purchase requirements. Our HA product supply ~~agreement for Durolane is~~agreements are subject to a minimum ~~order volume for each order and purchase amounts are~~volumes based in part on ~~forecasts. We are also subject to certain~~forecasts, annual minimum purchase requirements ~~for GELSYN-3 and SUPARTZ FX~~ and purchase amounts ~~are~~ based on rolling annual forecasts. Our forecasts are based on multiple assumptions of product and market demand, which may cause our estimates to be inaccurate. If we underestimate demand, we may not have adequate supplies and could have reduced control over pricing, availability and delivery schedules with our suppliers, which could prevent us from meeting increased customer or consumer demand and harm our business. However, if we overestimate our demand, we may have underutilized assets and may experience reduced margins. If we do not accurately align our supplies with demand and/or fail to meet contractual minimum purchase requirements, our business, results of operations and financial condition may be adversely affected. For example, if we fail to order the minimum order quantity of SUPARTZ FX from SKK we are obligated to pay SKK a specified fee equal to the number of units needed to meet the minimum order quantity multiplied by a specified percentage of the purchase price.

We may face issues with respect to the supply of our products or their components, including increased costs, disruptions of supply, shortages, contamination or mislabeling.

We are dependent on a limited number of suppliers for our products and components used in the manufacturing process of our products. Our top three ~~suppliers provide~~single-source third-party manufacturers supply us with our HA products and ~~components that~~ constituted ~~53%~~43%, ~~54%~~42% and ~~49%~~51% of total net sales for the years ended December 31, ~~2020, 2019~~2023, 2022 and ~~2018,~~2021, respectively. ~~Durolane, GELSYN-3~~Many of the acquired Bioness and ~~SUPARTZ FX~~Misonix products are ~~supplied by single-source third-party manufacturers. Our Exogen system undergoes final assembly with components procured from various~~also dependent on a limited number of suppliers ~~including a transducer, which is a key component that is supplied by a single source supplier.~~for these products and their components. We may not be able to renew or enter into new contracts with our existing suppliers following the expiration of such contracts on commercially reasonable terms, or at all. Additionally, certain of our devices require circuit boards and other electronic components that could be in short supply. The unavailability of such components from our suppliers may impact our ability to meet the customer demand for these products.

~~In particular, the~~The success of ~~our bone graft substitutions product portfolio,~~certain Surgical products depends on our suppliers continuing to have access to donated human cadaveric tissue, as well as the maintenance of high standards in their processing methodology. The supply of such donors can fluctuate over time. We cannot be certain that our current suppliers who rely on allograft bone, ~~tissue,~~ plus any additional sources that our suppliers identify in the future, will be sufficient to meet our product needs. Our dependence on a limited number of third-party suppliers and the challenges that they may face in obtaining adequate supplies of allograft bone tissue involve several risks, including limited control over pricing, availability, quality and delivery schedules. We may be unable to find an alternative supplier in a reasonable time period or on commercially reasonable terms, if at all, which would adversely affect our business, results of operations and financial condition.

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If any of our products or the components used in our products are alleged or proven to include quality or product defects, including as a result of improper methods of tissue recovery from donors and disease transmission from donated tissue or illegal harvesting, we may need to find alternate supplies, delay production of our products, discard or otherwise dispose of our products, or engage in a product recall, all of which may adversely affect our business, results of operations and financial condition. If our products or the components in our products are affected by adverse prices or quality or other concerns, we may not be able to identify alternate sources of components or other supplies that meet our quality controls and standards to sustain our sales volumes or on commercially reasonable terms, or at all.

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We rely on a limited number of third-party manufacturers to manufacture certain of our products.

Third-party manufacturers generally manufacture ~~Durolane, GELSYN-3, SUPARTZ FX,~~our HA products, Exogen components, certain Surgical Solutions products, PNS and our ~~bone graft substitutions product portfolio.~~rehabilitation devices. We have developed in-house assembly capabilities for our Exogen system. We and our third-party manufacturers are required to comply with the QSR which is a set of FDA regulations that establishes cGMP requirements for medical devices and covers the methods and documentation of the design, testing, production, control, quality assurance, labeling, packaging, sterilization, storage and shipping of such devices. Moreover, certain of our products may be re-classified as drugs, and we are planning to seek approval of a product pursuant to the BLA pathway. In each case, such products would be required to comply with the cGMP requirements that apply to drugs and biologics, respectively.

There are a limited number of suppliers and third-party manufacturers that operate under FDA’s QSR requirements and that have the necessary expertise and capacity to manufacture our products or components for our products. As a result, it may be difficult for us to locate manufacturers for our anticipated future needs, and our anticipated growth could strain the ability of our current suppliers and third-party manufacturers to deliver products, materials and components to us. Upon expiration of our existing agreements with these third-party manufacturers, we may not be able to renegotiate the terms of our agreements with these third-party manufacturers on a commercially reasonable basis, or at all.

If we or our third-party manufacturers fail to maintain facilities in accordance with the FDA’s QSR, the noncomplying party could lose the ability to manufacture our products on a commercial scale. Loss of this manufacturing capability would limit our ability to sell some of our products, including Durolane, GELSYN-3, SUPARTZ FX and our bone graft substitutions product portfolio, which are manufactured by single-source third-party manufacturers. See “Business—Manufacturing and supply.”products.

The manufacturing of our products may not be easily transferable to other sites in the event that any of our third-party manufacturers experience breakdown, failure or substandard performance of equipment, disruption of supply or shortages of, or quality issues with, components of our products and other supplies, labor problems, power outages, adverse weather conditions, natural disasters (including natural events caused by or intensified by climate change), global pandemics, ~~such as COVID-19,~~ or the need to comply with environmental and other directives of governmental agencies. From time to time, a third-party manufacturer may experience financial difficulties, bankruptcy or other business disruptions, which could disrupt our supply of finished goods or require that we incur additional expense by providing financial accommodations to the third-party manufacturer or taking other steps to seek to minimize or avoid supply disruption, such as establishing a new third-party manufacturing arrangement with another provider. The loss of any of these third-party manufacturers or the failure for any reason of any of these third-party manufacturers to fulfill their obligations under their agreements with us, including a failure to meet our quality controls and standards, may result in disruptions to our supply of finished goods. We may be unable to locate an additional or alternate third-party manufacturing arrangement that meets our quality controls and standards in a timely manner or on commercially reasonable terms, if at all. If this occurs, our business, results of operations and financial condition will be adversely affected.

If our facilities are damaged or become inoperable, we will be unable to continue to research, develop and manufacture our products and, as a result, our business, results of operations and financial condition may be adversely affected until we are able to secure a new facility.

We do not have redundant facilities for the final assembly of our Exogen system. Our other facilities and equipment would be costly to replace and could require substantial lead-time to repair or replace. Our facilities may be harmed or rendered inoperable by natural or man-made disasters, including, but not limited to, tornadoes, flooding, fire and power outages. Such disasters may render it difficult or impossible to manufacture and commercialize our products and conduct our research and development activities for new products, line extensions and expanded indications. The inability to perform those activities, combined with our limited inventory of supplies, components and finished product, may result in the inability to continue manufacturing or supplying our products during such periods and the loss of customers or harm to our reputation. Although we possess insurance for damage to our facilities and the disruption of our business, this insurance may not be sufficient to cover all of our potential losses and this insurance may not continue to be available to us on acceptable terms, or at all.

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If we fail to maintain our numerous contractual relationships, our business, results of operations and financial condition could be adversely affected.

We are party to numerous contracts in the normal course of our business, including our supply and distribution agreements for Durolane, which has a current term expiring in December 2115, GELSYN-3, which has a current term expiring in February 2026, and SUPARTZ FX, which has a current term expiring in December 2028.agreements. We have contractual relationships with suppliers, distributors and agents, as well as service providers. In the aggregate, these contractual relationships are necessary for us to operate our business. From time to time, we amend, terminate or negotiate our contracts. We may also periodically be subject to, or make claims of breach of contract, or threaten legal action relating to our contracts. These actions may result in litigation. At any one time, wehave a number of negotiations under way for new or amended commercial agreements. We devote substantial time, effort and expense to the administration and negotiation of contracts involved in our business. However, these contracts may not continue in effect past their current term or we may not be able to negotiate satisfactory contracts in the future with current or new business partners, which may adversely affect our business, results of operations and financial condition.

If we are unable to manage, train, maintain and grow our direct sales team and network of independent distributors, we may not be able to generate anticipated sales or we may be subject to regulatory or enforcement action.

Our operating results are directly dependent upon the sales and marketing efforts of not only our direct sales team, but also our independent distributors. If our direct sales team or independent distributors fail to adequately promote, market and sell our products, our sales could significantly decrease.

We face significant challenges and risks in managing our geographically dispersed distribution network and retaining the individuals who make up that network. If any members of our direct sales team were to leave us, or if any of our independent distributors were to cease to do business with us, our sales could be adversely affected. In such a situation, we may need to seek alternative independent distributors or increase our reliance on our direct sales team, which may not prevent our sales from being adversely affected. If a member of our direct sales team or independent distributor were to depart and be retained by one of our competitors, we may be unable to prevent them from helping competitors solicit business from our existing customers, which could further adversely affect our sales. Because of the competition for their services, we may be unable to recruit or retain additional qualified independent distributors or to hire additional direct sales team members to work with us on favorable or commercially reasonable terms, if at all. Failure to hire or retain qualified members of our direct sales team or independent distributors would prevent us from maintaining or expanding our business and generating sales.

If we launch new products or increase our marketing efforts with respect to existing products, we will need to expand the reach of our marketing and sales networks. Our future success will depend largely on our ability to continue to hire, train, retain and motivate skilled members of our direct sales team and independent distributors with significant technical knowledge in active healing products. New hires require training and take time to achieve full productivity. If we fail to train new hires adequately, or if we experience high turnover in our sales force in the future, we cannot be certain that new hires will become as productive as may be necessary to maintain or increase our sales. Further, if we are unable to adequately train new hires and/or members of our direct sales team, if new hires and/or members of our direct sales team engage in practices such as the promotion of unapproved or off-label uses of our devices or if new hires and/or members of our direct sales team assist with the reimbursement process in a manner that results in false or fraudulent claims for reimbursement being submitted to government or private payers, we may be subject to investigations or regulatory or enforcement actions by governmental authorities or third party payers for reasons such as the promotion of unapproved or off-label uses of our devices, inappropriate actions and involvement in the reimbursement process, or inappropriate completion of reimbursement forms. See “—Risks related to government regulation—We may be subject to enforcement action if we engage in improper claims submission practices and resulting audits or denials of our claims by government agencies could reduce our net sales or profits.”

If we are unable to expand our sales and marketing capabilities domestically and internationally, we may not be able to effectively commercialize our products, which would adversely affect our business, results of operations and financial condition.

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Actual or attempted breaches of security, unauthorized access to or disclosure of information, ~~denial of service attacks~~cyberattacks, or other incidents or the perception that personal and/or other sensitive or confidential information in our possession or control or in the possession or control of our third-party vendors or service providers is not secure, could result in a material loss of business, substantial legal liability or significant harm to our reputation.

We receive, collect, process, use and store directly and through third-party vendors and service providers a large amount of information, including personally identifiable information, protected health information and other sensitive and confidential information. This data is often accessed by us through transmissions over public and private networks, including the Internet. The secure transmission of such information over the Internet and other mechanisms is essential to maintain confidence in our ~~Information Technology (IT)~~information technology systems. Despite the privacy and security measures we have in place to ~~ensure compliance~~comply with applicable laws, regulations and contractual requirements, our facilities and systems, and those of our third-party vendors and service providers, are vulnerable to privacy and security incidents including, but not limited to, computer hacking, breaches, acts of vandalism or theft, computer viruses and other malware, including ransomware orand other forms of ~~cyber-attack,~~cyberattacks, misplaced or lost data, programming and/or human errors, orand other similar events. A party, whether internal or external, that is able to circumvent our security ~~systems~~measures or those of our third-party vendors and service providers could, among other things, misappropriate or misuse sensitive or confidential information, misappropriate user information or other proprietary information, or cause significant interruptions in our operations. Internal or external parties have and will continue to attempt to circumvent our security systems and those of our vendors and service providers, and we expect that we may in the future continue to experience, among other things, external attacks on our network, and attempts to gain unauthorized access to sensitive and confidential information, such as reconnaissance probes, denial of service attempts, malware attacks, malicious software attacks and phishing ~~attacks.~~

attacks, such as an external phishing incident that occurred in January 2023, targeting an employee with plausible-sounding prompts to send information to Company leadership. This security incident did not expose protected health information, or affect any of the company’s systems, and was reported to authorities in the relevant regions. Because the techniques used to circumvent security systems can be highly sophisticated and change frequently, and often are not recognized until launched against a target and may originate from less regulated and remote areas around the world, we may be unable to proactively address all possible techniques or implement adequate preventive measures for all situations. Attacks upon information technology systems are also increasing in their frequency, level of persistence, and sophistication, and are being conducted by sophisticated and organized groups and individuals with a wide range of motives and expertise. We may also face increased cybersecurity risks due to our reliance on internet technology and the number of our employees who are working remotely, which may create additional opportunities for cybercriminals to exploit vulnerabilities. Furthermore, because the techniques used to obtain unauthorized access to, or to sabotage, systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures. We may also experience security breaches that may remain undetected for an extended period. Recent, well-publicized ~~attacks~~cyberattacks on ~~prominent~~ companies have resulted in the ~~theft~~unauthorized access to and acquisition of significant amounts of sensitive and ~~personal~~confidential information and the disruption of important systems and services. These incidents demonstrate the sophistication of the ~~perpetrators~~threat actors and magnitude of the threat posed to companies across the nation, including the health care industry. For example, a third-party vendor recently informed us that Change Healthcare, a subsidiary of UnitedHealth Group that acts as an intermediary for processing certain of our claims for reimbursement related to our Exogen device to commercial payers, experienced an incident in which a cybersecurity threat actor gained access to some of its information technology systems. As a result of the Change Healthcare incident, certain of our patient billing and collections processes have been disrupted. While we have identified an alternative claim processing intermediary and have resumed claims submissions to some payers, this event may cause delays in a portion of our claims submissions to some commercial payers thereby delaying the related cash remittances to us. As of the date of this Annual Report, UnitedHealth Group is still investigating this incident, including any potential impact on claims and patient data. On March 7, 2024, UnitedHealth Group issued a statement indicating that it expects to begin testing and reestablish connectivity to the effected claims network to restore service beginning March 18, 2024. We do not presently believe that the Change Healthcare incident has materially affected, or is reasonably likely to materially affect the Company, including with respect to our claims collection and cash flows. We continue to evaluate the impact of the Change Healthcare incident on our Company.

If someone is able to ~~circumvent~~gain unauthorized access to our systems or ~~breach~~those of our ~~security systems,~~third-party vendors or service providers, they could ~~steal~~access, acquire, or alter any information located therein or cause interruptions to our operations. Security breaches ~~or attempts~~and attempted security breaches thereof could also damage our reputation and expose us to a risk of monetary loss and/or litigation, fines, sanctions, and ~~sanctions.~~reputational damage. We also face risks associated with security breaches affecting third parties that conduct business with us or our customers and others who interact with our data. While we maintain insurance that covers certain security and privacy breaches, we may not carry ~~appropriate insurance~~ or maintain sufficient coverage to compensate for all potential liability. Additionally, the costs incurred to remediate any data security or privacy incident could be substantial.

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We cannot assure you that our third-party service providers or service providers with access to our or our customers’, suppliers’, trial patients’, and employees’ personally identifiable and other sensitive or confidential information in relation to which we are responsible will not breach contractual obligations imposed by us, or that they will not experience data security breaches, cyber-attacks or ~~attempts thereof,~~other incidents negatively impacting the privacy or security of sensitive or confidential information or our service providers’ ability to provide services to us, which could have a corresponding effect on our business including putting us in breach of our obligations under privacy laws and regulations and/or which could in turn adversely affect our business, results of operations and financial condition. While we attempt to address the associated risks by performing security assessments and detailed due diligence, we cannot assure you that these contractual measures and our own privacy and security-related due diligence safeguards will protect us from the risks associated with the ~~third-party~~ processing, storage and transmission of such ~~information.~~information by service providers and others acting on our behalf.

Failure of a key information technology and communication system, process or site could adversely affect our business, results of operations and financial condition.

We rely extensively on information technology and communication systems and software and hardware products, including those of external providers, to conduct business. These systems and software and hardware impact, among other things, ordering and managing components of our products from suppliers, shipping products to customers on a timely basis, processing transactions, coordinating our sales activities across all of our products, summarizing and reporting results of operations, complying with regulatory, legal or tax requirements, data security and other processes necessary to manage our business.

Despite any precautions we may take, our systems and software and hardware could be exposed to damage or interruption from circumstances beyond our control, such as fire, natural disasters, systems failures, power outages, cyber-attacks, terrorism, energy loss, telecommunications failure, security breaches and attempts thereof, computer viruses and similar disruptions affecting the global Internet. Although we have taken steps to prevent system failures and have back-up systems and procedures to prevent or reduce disruptions, such steps may not prevent an interruption of services and our disaster recovery planning may not be adequate or account for all contingencies. Additionally, our insurance may not adequately compensate us for all losses or failures that may occur. If our systems or software and hardware are damaged or cease to function properly and our business continuity plans do not effectively compensate on a timely basis, we may suffer interruptions in our operations, which could adversely affect our business, results of operations and financial condition.

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We will need to improve and upgrade our systems and infrastructure as our operations grow in scale in order to maintain the reliability and integrity of our systems and infrastructure. The expansion of our systems and infrastructure will require us to commit substantial financial, operational and technical resources before the volume of our business increases, with no assurance that the volume of business will increase. Any service outages or delays due to the installation of any new or upgraded technology (and customer issues therewith), or the impact on the reliability of our data from any new or upgraded technology could adversely affect our business, results of operations and financial condition.

The ongoing conflict in Israel could have an adverse impact our business and the extent to which the conflict will impact our future operations and financial condition remains uncertain.

We have a manufacturing facility in Hod Hasharon, Israel which produces certain of our rehabilitation products, including with product components from third-party suppliers located elsewhere in Israel. Together, these products account for less than 10% of our total net sales for the year ended December 31, 2023.

In October 2023, Hamas infiltrated Israel’s southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets. Hamas also launched extensive rocket attacks on the Israeli population and industrial centers located along Israel’s border with the Gaza Strip and in other areas within the State of Israel. Following the attack, Israel’s security cabinet declared war against Hamas. In addition, the clash between Israel and Hezbollah in Lebanon, may escalate in the future into a greater regional conflict.

Hostilities involving Israel could have an adverse impact on our future operations and financial condition. In the event that the Company’s facility in Hod Hasharon is damaged or otherwise materially disrupted as a result of hostilities in Israel, the Company’s ability to manufacture and deliver certain rehabilitation products to its customers could be materially adversely affected.

The conflict in Israel also could cause situations where medical product certifying or auditing bodies cannot visit our manufacturing facility in Israel in order to review relevant certifications or clearances, which could lead to temporary suspensions or even cancellations of our product clearances or certifications. The conflict in Israel could result in parties with whom we have agreements involving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions in such agreements.

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Delays and disruptions as related to exports from Israel also may be imposed in the future and adversely impact our ability to manufacture and deliver some rehabilitation products in a timely manner.

In addition, approximately 25 of our employees currently reside in Israel and work at the manufacturing facility in Hod Hasharon. Government-imposed restrictions on movement and travel and other precautions taken to address the ongoing conflict may temporarily disrupt our employees’ ability to effectively perform their daily tasks. The Israel Defense Force (the “IDF”), the national military of Israel, is a conscripted military service, subject to certain exceptions. Some of our employees may be subject to military service in the IDF and may be called to serve. It is possible that there will be further military reserve duty call-ups in the future, which may affect our business due to a shortage of skilled labor at our manufacturing facility in Israel.

The ultimate impact of the ongoing hostilities in Israel on our operations and financial condition remains uncertain and depends on many factors, including, but not limited to, the duration and severity of the conflict in Israel, the extent to which we can successfully rely on our other manufacturing facilities and third-party suppliers with respect to certain of our rehabilitation products and the cost of any necessary mitigation efforts. To the extent the conflict in Israel adversely impacts our business, operations and financial condition, they may also have the effect of heightening many of the other risks described in our SEC filings.

Our business subjects us to economic, political, regulatory and other risks associated with international sales and operations that could adversely affect our business, results of operations and financial condition.

Since we sell our products in many different jurisdictions outside the United States, our business is subject to risks associated with conducting business internationally. We anticipate that net sales from international operations will continue to represent a portion of our total net sales. In addition, ~~a number~~some of our ~~third-party~~ manufacturing facilities and suppliers of our products and product components are located outside the United ~~States.~~States, including in Israel. Accordingly, our future results could be harmed by a variety of factors associated with international sales and operations, including:

•economic weakness, including inflation, or political instability in particular foreign economies and markets;

•foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doing business in another country;

•customers in some foreign countries potentially having longer payment cycles;

•~~disadvantages~~exposure of ~~competing against companies from countries that are not subject~~our foreign operations to liability under U.S. laws and regulations, including the U.S. Foreign Corrupt Practices Act ~~(FCPA)~~(“FCPA”), regulations of the U.S. Office of Foreign Assets Controls, and U.S. anti-money laundering regulations, as well as ~~exposure~~disadvantages of ~~our foreign operations~~competing against companies from countries that are not subject to ~~liability under~~ these regulatory regimes;

•training of ~~third-parties~~third parties on our products and the procedures in which they are used;

•reduced protection for and greater difficulty enforcing our intellectual property rights;

•unexpected changes in tariffs, trade barriers and regulatory requirements, export licensing requirements or other restrictive actions by foreign governments;

•difficulty in staffing and managing widespread operations, including compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;

•foreign taxes, including withholding of payroll taxes;

•workforce uncertainty in countries where labor unrest is more common than in the United States;

•exposure to liability under a variety of local, national and multinational laws and regulations in multiple jurisdictions, including data privacy laws, healthcare and pharmaceutical laws, antitrust and competition laws, anti-bribery and anti-corruption laws and international trade laws;

•international regulators and third-party payers requiring additional clinical studies prior to approving or allowing reimbursement for our products;

•complexities associated with managing multiple payer reimbursement regimes, government payers or patient self-pay systems;

•production shortages resulting from any events affecting material supply or manufacturing capabilities abroad; and

•business interruptions resulting from geopolitical actions, including war and terrorism (including the current conflicts between Russia and Ukraine and between Israel and Hamas), global pandemics or natural disasters including earthquakes, ~~typhoons,~~hurricanes, floods and fires. If the current conflicts between Russia and Ukraine and between Israel and Hamas escalate or spill over to or otherwise impacts additional regions, it could heighten many of the other risk factors included in our SEC filings.

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In addition, further expansion into new international markets may require significant resources and the efforts and attention of our management and other personnel, which may divert resources from our existing business operations. As we expand our business internationally, our success will depend, in large part, on our ability to anticipate and effectively manage these and other risks associated with our operations outside of the United States.

We are exposed to foreign currency risks, which may adversely affect our business, results of operations and financial condition.

External events such as the withdrawal by the United Kingdom from the EU, global pandemics, the ongoing uncertainty regarding actual and potential shifts in U.S. and foreign trade, economic and other policies and the passage of U.S. taxation reform legislation ~~each~~ have caused, and may continue to cause, significant volatility in currency exchange rates. Because some of our revenue, expenses, assets and liabilities are denominated in foreign currencies, we are subject to exchange rate and currency risks. ~~In preparing our~~Our financial statements ~~which~~ are presented in U.S. dollars ~~we must convert all non-U.S. dollar financial results to U.S. dollars at varying exchange rates. This~~which may ~~ultimately~~ result in currency gain or loss, the outcome of which we cannot predict. Furthermore, to the extent that we incur expenses or earn revenue in currencies other than in U.S. dollars, any change in the values of those foreign currencies relative to the U.S. dollar could cause our profits to decrease or our products to be less competitive against those of our competitors. To the extent that our current assets denominated in foreign currency are greater or less than our current liabilities denominated in foreign currencies, we face potential foreign exchange exposure.

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To minimize such exposures, we have entered, and may in the future enter, into derivative instruments related to forecasted foreign currency transactions or currency hedges from time to time. Losses from changes in the value of the Euro or other foreign currencies relative to the U.S. dollar could adversely affect our business, results of operations and financial condition.

~~We are subject to differing tax rates in several jurisdictions in which we operate, which may adversely affect our business, results of operations and financial condition.~~

We will be subject to taxes in the United States and certain foreign jurisdictions. Due to economic and political conditions, tax rates in various jurisdictions, including the United States, may be subject to change. Our future effective tax rates could be affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities and changes in tax laws or their interpretation. In addition, we may be subject to income tax audits by various tax jurisdictions. Although we believe our income tax liabilities are reasonably estimated and accounted for in accordance with applicable laws and principles, an adverse resolution by one or more taxing authorities could have a material impact on the results of our operations

International tariffs applied to goods traded between the United States and China for restrictions on goods imported from certain regions of China may adversely affect our business, results of operations and financial condition.

International tariffs, including tariffs applied to goods traded between the United States and China, may adversely affect our business, results of operations and financial condition. Since the beginning of 2018, there has been increasing ~~rhetoric,~~discussion, in some cases coupled with legislative or executive action, from several U.S. and foreign leaders regarding the possibility of instituting tariffs against foreign imports of certain materials. ~~More specifically, in March and April of 2018, the U.S. and China applied tariffs to certain of each other’s exports.~~ The institution of trade tariffs both globally and between the U.S. and China specifically carries the risk of adversely affecting overall economic condition, which could have a negative impact on us as imposition of tariffs could cause an increase in the cost of our products and the components for our products, specifically with respect to our Exogen system, which may adversely affect our business, results of operations and financial condition.

~~The 2019 Credit Agreement contains financial~~ In addition, the U.S. has previously enacted, and ~~operating restrictions that may limit our access to credit. If we fail to comply with financial~~it or other ~~covenants~~countries may in the ~~2019 Credit Agreement, we may be required~~future enact legislation that limits or prohibits the use of foreign manufactured equipment or supplies from China, such as the Uyghur Forced Labor Prevention Act, which imposes a ban on virtually all imports from the Xinjiang region of China unless companies are able to ~~repay indebtedness to our existing lenders,~~prove that the products were not made with forced labor, which ~~may harm our liquidity.~~

On December 6, 2019, we entered into a $250.0 million credit and guaranty agreement, or the 2019 Credit Agreement, with Wells Fargo Bank National Association, as administrative agent and collateral agent, and a syndicate of other entities as lenders. As of December 31, 2020, we had outstanding indebtedness of $190.0 million under our term loan (leaving $49.9 million available under our revolving credit facility after giving effect to $0.1 million in an outstanding letter of credit). We are subject to certain covenants under the 2019 Credit Agreement, including, but not limited to:

•~~a minimum interest coverage ratio and a maximum debt leverage ratio requirement as defined in our credit agreement;~~

•~~restrictions on the declaration or payment of certain distributions on or in respect of our equity interests;~~

•~~restrictions on acquisitions, investments and certain other payments;~~

•~~limitations on the incurrence of new indebtedness;~~

•~~limitations on the incurrence of new liens on property or assets;~~

•~~limitations on transfers, sales and other dispositions;~~

•~~limitations on entering into transactions with affiliates; and~~

•~~limitations on making any material change in any of our business objectives that could reasonably be~~is expected to have ~~a material adverse effect on the repayment of our credit agreement.~~

~~Such indebtedness could have significant consequences, including:~~

•~~requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of funding growth, working capital, capital expenditures, investments or other cash requirements;~~

•~~reducing our flexibility to adjust to changing business conditions or obtain additional financing;~~

•exposing us to the risk of increased interest rates as certain of our borrowings, including borrowings under our term loan, are at variable rates, making it more difficult for us to make payments on our indebtedness;

•~~restricting us from making strategic acquisitions or causing us to make non-strategic divestitures;~~

•~~subjecting us to restrictive covenants that may limit our flexibility in operating our business; and~~

•~~limiting our ability to obtain additional financing for working capital, capital expenditures, debt service requirements and general corporate or other purposes.~~

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In addition, we may not be able to comply with these financial covenants described above in the future. In the absence of a waiver from our lenders, any failure by us to comply with these covenants in the future may result in the declaration of an ~~event of default, which could adversely affect our business, results of operations and financial position. See~~ ~~Part II, Item 7. Management’s discussion and analysis of financial condition and results of operations—Indebtedness.~~

~~Uncertainty relating to the LIBOR calculation process and potential phasing out of LIBOR in the future may adversely affect our financing costs.~~

Currently, the 2019 Credit Agreement utilizes the London Interbank Offered Rate (LIBOR), or various alternative methods set forth in the 2019 Credit Agreement to calculate interest on any borrowings. National and international regulators and law enforcement agencies have conducted investigations into a number of rates or indices known as “reference rates.” Actions by such regulators and law enforcement agencies may result in changes to the manner in which certain reference rates are determined, their discontinuance or the establishment of alternative reference rates. In particular, on July 27, 2017, the Chief Executive of the United Kingdom Financial Conduct Authority (FCA), which regulates LIBOR, announced that the FCA will no longer persuade or compel banks to submit rates for the calculation of LIBOR after 2021 or, in certain cases, 2023, pursuant to an updated announcement in November 2020. Such announcements indicate that the continuation of LIBOR on the current basis cannot and will not be guaranteed after such dates, as applicable, and it appears highly likely that LIBOR will be discontinued or modified by 2021 or, in certain cases 2023.

At this time, it is not possible to predict the effect that these developments, any discontinuance, modification or other reforms to LIBOR or any other reference rate, or the establishment of alternative reference rates may have on LIBOR, other benchmarks or LIBOR-based debt instruments. Uncertainty as to the nature of such potential discontinuance, modification, alternative reference rates or other reforms could cause the interest rates calculated for the 2019 Credit Agreement to be materially different than expected, which could have a material adverse effect on our ~~financing costs.~~

Due to the high degree of uncertainty regarding the implementation and impact of the CARES Act and other legislation related to COVID-19, there can be no assurance as to the total amount of financial assistance we will receive or that we will be able to comply with the applicable terms and conditions for retaining such assistance.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act was signed into law, which is aimed at providing emergency assistance and health care for individuals, families, and businesses affected by the COVID-19 pandemic and generally supporting the U.S. economy. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, and modifications to the net interest deduction limitations. The CARES Act and similar legislation intended to provide assistance related to the COVID-19 pandemic also authorized $175.0 billion in funding to be distributed by HHS to eligible health care providers. This funding, known as the Provider Relief Fund, is designated to fund eligible healthcare providers’ healthcare-related expenses or lost revenues attributable to COVID-19. On December 27, 2020, the Consolidated Appropriations Act, 2021 was signed into law, which adds $3.0 billion to the Provider Relief Fund. Payments from the Provider Relief Fund are subject to certain eligibility criteria, as well as reporting and auditing requirements, but do not need to be repaid to the U.S. government if recipients comply with the applicable terms and conditions.

In reliance on the CARES Act, we deferred our employer social security payroll tax payments from May 2020 until the remainder of the 2020 calendar year of which, 50% is deferred until December 31, 2021, with the remaining 50% deferred until December 31, 2022. The Company has deferred $1.9 million of payroll tax payments as of December 31, 2020, half of which has been recorded in accrued liabilities and the remainder in other long-term liabilities on the condensed consolidated balance sheet. We are in the process of analyzing other provision of the CARES Act to determine the financial impact on our condensed consolidated financial statements.

In April 2020, we received, without request, a $1.2 million payment from the Provider Relief Fund from HHS. We determined that we complied with the conditions to be able to keep and use the funds as reimbursement for health care related expenses and lost revenue attributable to the public health emergency resulting from COVID-19 and submitted to HHS the required attestation to agree to the applicable terms and conditions of the Provider Relief Fund Phase I General Distribution. In July 2020, we applied for and received a second Provider Relief Fund payment totaling $2.9 million, which is subject to the same conditions as the initial payment. The payments were recorded as other income on the condensed consolidated statement of operations and comprehensive income (loss) for year ended December 31, 2020.

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Due to the high degree of uncertainty regarding the implementation of the CARES Act, the Consolidated Appropriations Act, 2021 and other stimulus legislation, there can be no assurance that the terms and conditions of the Provider Relief Fund or other relief programs will not change or be interpreted in ways that affect our ability to ~~comply with such terms and conditions in the future, which could affect~~conduct our ability to retain such assistance. We will continue to monitor our compliance with the terms and conditions of the Provider Relief Fund, including demonstrating that the distributions received have been used for healthcare-related expenses or lost revenue attributable to COVID-19. If we are unable to comply with current or future terms and conditions, our ability to retain some or all of the distributions received may be impacted, and we may be subject to actions including payment recoupment, audits and inquiries by governmental authorities, and criminal, civil or administrative penalties.

~~Our future capital needs are uncertain and we may need to raise additional funds in the future, and such funds may not be available on acceptable terms or at all.~~

~~We believe that our current cash and cash equivalents, in combination with the borrowing availability under our credit facility~~business and our expected cash from operations, will be sufficient to meet our projected operating requirements for the foreseeable future. However, we may seek additional funds from public and private stock offerings, borrowings under our existing or new credit facilities or other sources in order to fund future initiatives related to the expansion of our business, which financing may not be available on acceptable or commercially reasonable terms, if at all. For example, pursuant to the Option and Equity Purchase Agreement with CartiHeal and its shareholders, CartiHeal has a put option that would require us to purchase 100% of CartiHeal’s shares for $350.0 million under certain conditions, or the Put Option. The Put Option is only exercisable by CartiHeal upon pivotal clinical trial success of the Agili-C device and we may terminate the Put Option at any time ending 30 days after receipt by CartiHeal of the statistical report regarding the final results of ~~the pivotal clinical upon payment of $30.0 million to CartiHeal. See~~ ~~Part II, Item 7. Management’s discussion and analysis of financial condition and results of operations—Strategic transactions—CartiHeal (developer of Agili-C) investment and option and equity purchase agreement.~~operations.

Furthermore, if we issue equity or debt securities to raise additional capital, our existing stockholders may experience dilution, and the new equity or debt securities may have rights, preferences and privileges senior to those of our existing stockholders. In addition, if we raise additional capital through collaboration, licensing or other similar arrangements, it may be necessary to relinquish valuable rights to our products, potential products or proprietary technologies, or grant licenses on terms that are not favorable to us. If we cannot raise capital on acceptable terms, we may not be able to develop or enhance our products, execute our business plan, take advantage of future opportunities, or respond to competitive pressures, changes in our supplier relationships, or unanticipated customer requirements. Any of these events could adversely affect our business, results of operations and financial condition.

Risks related to government regulation

The risk factors listed below describe the risks we face related to government regulation. The companies who manufacture or produce certain of the products we distribute face similar risks with respect to government regulation relating to such products. If such suppliers are unable to comply with government regulations, they may not be able to continue to supply us with products, which could adversely affect our business, results of operations and financial condition.

Our products and operations are subject to extensive governmental regulation, and our failure to comply with applicable requirements could cause our business to suffer.

The healthcare industry, and in particular the medical device industry, are regulated extensively by governmental authorities, principally the FDA and corresponding state and foreign regulatory agencies and authorities. The FDA and other U.S. and foreign governmental agencies and authorities regulate and oversee, among other things:

•design, development and manufacturing;

•testing, labeling, content and language of instructions for use and storage;

•clinical trials;

•product safety;

•marketing, sales and distribution;

•premarket clearance, approval and ~~approval;~~certification;

•conformity assessment procedures;

•record-keeping procedures;

•advertising and promotion;

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•recalls and other field safety corrective actions;

•~~postmarket~~post market surveillance, including reporting of deaths or serious injuries and malfunctions that, if they were to recur, could lead to death or serious injury;

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•~~postmarket~~post market studies; and

•product import and export.

The failure to comply with applicable regulations could jeopardize our ability to sell our products and result in enforcement actions such as:

•administrative or judicially imposed sanctions;

•unanticipated expenditures to address or defend such actions;

•injunctions, consent decrees or the imposition of civil penalties or fines;

•recall or seizure of our products;

•total or partial suspension of production or distribution;

•refusal to grant pending or future clearances, approvals or ~~approvals~~certifications for our products;

•withdrawal or suspension of regulatory clearances, approvals or ~~approvals;~~certifications;

•clinical holds;

•untitled letters or warning letters;

•refusal to permit the import or export of our products; and

•criminal prosecution of us or our employees.

Any of these sanctions could result in higher than anticipated costs or lower than anticipated sales and harm our reputation, business, results of operations and financial condition.

Moreover, governmental authorities outside the United States have become increasingly stringent in their regulation of medical devices, and our products may become subject to more rigorous regulation by ~~non U.S.~~non-U.S. governmental authorities in the future. U.S. or non-U.S. government regulations may be imposed in the future that adversely affect our business, results of operations and financial condition. The European Commission has harmonized national regulations for the control of medical devices through European Medical Device ~~Directives~~Regulations with which manufacturers must comply. Under these new regulations, manufacturing plants must have received a full Quality Assurance Certification from a “Notified Body” in order to be able to sell products within the member states of the EU. This certification allows manufacturers to stamp the products of certified plants with a “CE” mark. Products covered by European Commission regulations that do not bear the CE mark cannot be sold or distributed within the EU. ~~We have received~~Refer to Part I, Item 1A. Risk Factors—Risks related to government regulation—Regulatory reforms, such as the EU Medical Devices Regulation, could limit our ability to market and distribute our products after clearance, approval or certification is obtained and make it more difficult or costly for ~~all~~us to obtain regulatory clearance, approval or certification of any future products, which could adversely affect our ~~manufacturing facilities.~~competitive position and materially affect our business and financial results.

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We may be subject to enforcement action if we engage in improper claims submission practices and resulting audits or denials of our claims by government agencies could reduce our net sales or ~~profits.~~profits and could lead to significant civil or criminal penalties and other liability.

In connection with our Exogen system, we submit claims directly to, and receive payments directly from, the Medicare and Medicaid programs and private payers. Therefore, we are subject to extensive government regulation, including detailed requirements for submitting claims under appropriate codes and maintaining certain documentation, including evidence that all medical necessity requirements are met to support our claims. Billing for our Exogen system is complex, time-consuming and expensive, particularly for items and services provided to government healthcare program beneficiaries, such as Medicare and Medicaid. Reimbursement claims may be adversely affected by improper completion of the ~~CMN~~Certificates of Medical Necessity (“CMN”) required in connection with Medicare claims for the Exogen system and we may be subject to investigations by governmental authorities or ~~third party~~third-party payers and required to prove the validity of the claims or the authenticity of the signatures on the CMNs under investigation. Reimbursement claims may also be adversely affected by the promotion of our devices for unapproved or off-label uses or assistance with the reimbursement process that could result in false or fraudulent claims for reimbursement being submitted to government or private payers. Depending on the billing arrangement and applicable law, we bill various payers, all of which may have different prior authorization, patient qualification and medical necessity requirements, as well as patients for any applicable co-payments or co-insurance amounts. In addition, we may also face increased risk in our collection efforts, including potential write-offs of doubtful accounts and long collection cycles, any of which could adversely affect our business, results of operations and financial condition.

We are also required to implement compliance procedures and ~~oversight,~~to oversee, train and monitor our ~~employees,~~employees’ compliance with those procedures, appeal coverage and payment denials, and perform internal audits periodically to assess compliance with applicable laws and regulations as well as internal compliance policies and procedures. We are required to report and return any overpayments received from government payers within 60 days of identification and exercise of reasonable diligence to investigate credible information regarding potential overpayments. Failure to identify and return such overpayments exposes the provider or supplier to liability under federal false claims laws. For example, in February 2021 we entered into a settlement agreement with the United States Attorney’s Office for the Middle District of North Carolina and the Office of Inspector General of the U.S. Department of Health and Human Services (“OIG”) to resolve potential liabilities associated with a self-disclosure we made to the OIG in November 2018 regarding violations of certain Medicare claim submission requirements. See Part I, Item 1A. Risk ~~Factors~~—Factors—Risks related to government regulation—We are subject to federal, state and foreign laws and regulations relating to our healthcare business, and could face substantial penalties if we are determined not to have fully complied with such laws, which would adversely affect our business, results of operations and financial condition. Moreover, Medicare contractors and state Medicaid agencies periodically conduct pre- and post-payment reviews and other audits of claims and are under increasing pressure to more closely scrutinize healthcare claims and supporting documentation. We may be subject to prepayment and post-payment reviews, as well as audits of claims in the future. Private payers may from time to time conduct similar reviews and audits. Any third-party payer reviews and audits of our claims could result in material delays in payment, material recoupments, overpayments, claim denials, fines, revocations of billing privileges, bars on re-enrollment in federal or state healthcare programs, cancellation of our agreements or damage to our reputation, any of which would reduce our net sales and profitability.

For example, in July of 2018 we became aware of allegations that certain of our sales personnel may have been completing Section B of the CMN required in connection with Medicare claims for the Exogen system, which, under federal law, must be completed by the physician and/or physician staff. Together with our outside counsel, Ropes & Gray LLP, we initiated an investigation into these allegations, and we determined that the CMN forms for a portion of Medicare claims for the Exogen system were in fact improperly completed by our sales representatives, some of which also failed to meet CMS coverage requirements. As a result of our findings, we made a self-disclosure on November 30, 2018 to the OIG, under the Provider Self-Disclosure Protocol. Our self-disclosure disclosed the extent of our findings relating to the inappropriate completion of CMN forms by our sales personnel and offered to make repayment for such claims which failed to meet CMS coverage requirements and which we submitted to the Medicare program between October 1, 2012 and September 30, 2018, the statutory period applicable to such conduct. The total value of impacted claims was $30.1 million in the aggregate. In October 2019, our outside counsel received a letter from the Office of the United States Attorney in the Middle District of North Carolina (USAO), stating that the USAO would be working with the OIG to resolve our self-disclosure. After settlement discussions with the USAO and OIG, on January 25, 2021 we reached a settlement agreement with the USAO and the OIG with respect to the submission of Medicare claims that did not meet CMS coverage requirements and for which our sales representatives completed Section B of the CMN forms. On February 22, 2021, we finalized all terms related to the settlement and entered into a formal settlement agreement with the USAO and OIG consistent with our previous agreement in principle and which included releases from associated False Claims Act liability and further Civil Monetary Penalties that are customary in self-disclosures of this type. Under the agreement, we resolved the potential liability related to our self-disclosure for $3.6 million, of which $2.4 million had already been paid through our 2019 return of overpayments described previously, leaving a net payment to be made of $1.2 million. We made payment of the $1.2 million net settlement amount due under the agreement on February 23, 2021. The settlement amount noted above was recorded in the consolidated financial statements for the year ended December 31, 2020. In connection with this settlement, we were not subjected to any non-monetary penalties, such as monitoring agreements or requirements to conduct audits and submit reports to the HHS.

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The FDA regulatory process is expensive, time-consuming and uncertain, and the failure to obtain and maintain required regulatory clearances and approvals could prevent us from commercializing our products.

Before we can market or sell a new medical device or other product or a new use of or a claim for or significant modification to an existing medical device in the United States, we must obtain either clearance from the FDA under 510(k) pathway or approval of a ~~PMA,~~Pre-Market Approval (“PMA”), unless an exemption applies. In the United States, we have obtained 510(k) ~~premarket~~ clearance from the FDA to market certain of our products such as Signafuse Bioactive Bone Graft Putty, Interface Bioactive Bone Graft and Signafuse Mineralized Collagen Scaffold. Our ~~OA joint pain treatment and joint preservation~~Pain Treatment products, including Durolane, GELSYN-3 and SUPARTZ FX, and our Exogen system, have an obtained ~~PMA approval.~~PMA. In the 510(k) clearance process, ~~before a device may be marketed,~~ the FDA must determine that a proposed device is “substantially equivalent” to a legally-marketed “predicate” device, which includes a device that has been previously cleared through the 510(k) process, a device that was legally marketed prior to May 28, 1976 (preamendments device), a device that was originally on the U.S. market pursuant to an approved PMA application and later downclassified, or a 510(k)-exemptpredicate device. To be “substantially equivalent,” the proposed device must have the same intended use as the predicate device, 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 are sometimes required to support substantial equivalence.~~ In the PMA process, the FDA must determine that a proposed product is safe and effective for our intended use based, in part, on extensive data, including, but not limited to, technical, preclinical, clinical trial, manufacturing and labeling data. The PMA process is typically required for products that are deemed to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices.

Modifications to products that are approved through a PMA application generally require FDA approval. Similarly, certain modifications made to products cleared through a 510(k) may require a new 510(k) clearance.

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Both the PMA approval and the 510(k) clearance process can be expensive, lengthy and uncertain. The FDA’s 510(k) clearance process usually takes from three to twelve months, but can last longer. The process of obtaining a PMA is much more costly and uncertain than the 510(k) clearance process and generally takes from six to 18eighteen months, or even longer, from the time the application is filed with the FDA. In addition, a PMA generally requires the performance of one or more clinical trials. Despite the time, effort and cost, we cannot assure you that any particular device will be approved or cleared by the FDA. Any delay or failure to obtain necessary regulatory approvals could harm our business.

Any modification to one of our 510(k) cleared products that would constitute a major change in its intended use, or any change that could significantly affect the safety or effectiveness of the device would require us to obtain a new 510(k) marketing clearance and may even, in some circumstances, require the submission of a PMA application, if the change raises complex or novel scientific issues or the product has a new intended use. The FDA requires every manufacturer to make the determination regarding the need for a new 510(k) submission in the first instance, but the FDA may review any manufacturer’s decision. We may make changes to our 510(k)-cleared products in the future that we may determine do not require a new 510(k) clearance or PMA approval. If the FDA disagrees with our decision not to seek a new 510(k) or PMA approval for changes or modifications to existing devices and requires new clearances or approvals, we may be required to recall and stop marketing our products as modified, which could require us to redesign our products, conduct clinical trials to support any modifications, and pay significant regulatory fines or penalties. If there is any delay or failure in obtaining required clearances or approvals or if the FDA requires us to go through a lengthier, more rigorous examination for future products or modifications to existing products than we had expected, our ability to introduce new or enhanced products in a timely manner would be adversely affected, which in turn would result in delayed or no realization of revenue from such product enhancements or new products and could also result in substantial additional costs which could decrease our profitability.

The FDA can delay, limit or deny clearance or approval of a device for many reasons, including:

•if we ~~may not be able~~are unable to demonstrate to the FDA’s satisfaction that the product or modification is substantially equivalent to the proposed predicate device or safe and effective for its intended use;

•if the data from our preclinical studies and clinical trials may be insufficient to support clearance or approval, where required; and

•if the manufacturing process or facilities we use may not meet applicable requirements.

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In addition, the FDA may change its clearance and approval policies, adopt additional regulations or revise existing regulations, or take other actions, which may prevent or delay approval or clearance of our future products under development or impact our ability to modify our currently cleared or approved products on a timely basis. Even after clearance or approval for our products is obtained, we and the products are subject to extensive ~~postmarket~~post market regulation by the FDA, including with respect to advertising, marketing, labeling, manufacturing, distribution, import, export, and clinical evaluation. For example, as a condition of approving a PMA application, the FDA 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 FDA on the clinical status of those patients when necessary to protect the public health or to provide additional safety and effectiveness data for the device. The product labeling must be updated and submitted in a PMA supplement once results, including any adverse event data from the post-approval study, become available. Failure to conduct post-approval studies in compliance with applicable regulations or to timely complete required post-approval studies or comply with other post-approval requirements could result in withdrawal of approval of the PMA, which would harm our business.

We are also required to timely file various reports with regulatory agencies. If these reports are not timely filed, regulators may impose sanctions and sales of our products may suffer, and we may be subject to product liability or regulatory enforcement actions, all of which could harm our business. In addition, if we initiate a correction or removal for one of our devices, issue a safety alert, or undertake a field action or recall to reduce a risk to health posed by the device, we may be required to submit a report to the FDA, and in many cases, to other regulatory agencies. Such reports could lead to increased scrutiny by the FDA, other international regulatory agencies and our customers regarding the quality and safety of our devices and to negative publicity, including FDA alerts, press releases, or administrative or judicial actions. Furthermore, the submission of these reports has been and could be used by competitors against us in competitive situations and cause customers to delay purchase decisions or cancel orders, which would harm our reputation and business.

The FDA, state and ~~state~~foreign authorities have broad enforcement powers. Our failure to comply with applicable regulatory requirements could result in enforcement action by the FDA, state or ~~state~~foreign regulatory agencies, which may include any of the following sanctions:

•adverse publicity, warning letters, untitled letters, fines, injunctions, consent decrees and civil penalties;

•repair, replacement, refunds, recalls, termination of distribution, administrative detention or seizures of our products;

•operating restrictions, partial suspension or total shutdown of production;

•customer notifications or repair, replacement or refunds;

•refusing our requests for 510(k) clearance or PMA approvals or foreign regulatory approvals of new products, new intended uses or modifications to existing products;

•withdrawals of current 510(k) clearances or PMAs or foreign regulatory approvals, resulting in prohibitions on sales of our products;

•FDA refusal to issue certificates to foreign governments needed to export products for sale in other countries; and

•criminal prosecution.

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Any of these sanctions could also result in higher than anticipated costs or lower than anticipated sales and adversely affect our business, results of operations and financial condition.

In addition, the FDA’s and other regulatory authorities’ policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates. We also cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or executive action, either in the United States or abroad. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance as a result of a changing regulatory landscape, we may lose any marketing approvals or clearances that we have already obtained or fail to obtain new marketing approvals or clearances, and we may not be able to achieve or sustain profitability, which would adversely affect our business, prospects, financial condition and results of operations.

We also cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or executive action, either in the United States or abroad. The results of the 2020 Presidential election may impact our business and industry. Moreover, the Trump administration took several executive actions, including the issuance of a number of Executive Orders, that could impose significant burdens on, or otherwise materially delay, FDA’s ability to engage in routine regulatory and oversight activities such as implementing statutes through rule making, issuance of guidance, and review and approval of marketing applications. It is difficult to predict whether or how these executive actions, including the Executive Orders, will be implemented, or whether they will be rescinded or replaced under the Biden administration. The policies and priorities of an incoming administration are unknown and could materially impact the regulatory framework governing our products.

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Once obtained, we cannot guarantee that FDA or international product approvals will not be withdrawn or rescinded or that relevant regulatory authorities will not require other corrective action, and any withdrawal, rescission or corrective action could materially affect our business and financial results.

Once obtained, marketing approval can be withdrawn by the FDA or comparable foreign regulatory authorities for a number of reasons, including the failure to comply with ongoing regulatory requirements or the occurrence of unforeseen problems following initial approval. Regulatory authorities could also limit or prevent the manufacture or distribution of our products. Any regulatory limitations on the use of our products or any withdrawal, suspension or rescission of approval by the FDA or a comparable foreign regulatory authority could have a material adverse effect on our business, financial condition, and results of operations.

Legislative or regulatory reforms, including those currently under consideration by FDA and the EU, could make it more difficult or costly for us to obtain regulatory clearance, approval or ~~approval~~certification of any future products and to manufacture, market and distribute our products after clearance, approval or ~~approval~~certification is obtained, which could adversely affect our competitive position and materially affect our business and financial results.

From time to time, legislation is ~~drafted and~~ introduced ~~in Congress~~ that could significantly change the statutory provisions and regulations governing the ~~regulatory clearance or~~ approval, manufacture and marketing of regulated products or the reimbursement thereof. In addition, FDA may change its clearance and approval policies, adopt additional regulations or revise existing regulations, propose new reclassification orders, or take other actions, which may prevent or delay approval or clearance of our future products under development or impact our ability to market or modify our currently cleared products on a timely basis. FDA and foreign regulations depend heavily on administrative interpretation, and we cannot assure you that future interpretations made by the FDA or other regulatory bodies, with possible retroactive effect, will not adversely affect us. Additionally, any changes, whether in interpretation or substance, in existing regulations or policies, or any future adoption of new regulations or policies by relevant regulatory bodies, could prevent or delay approval of our products. In the event our future, or current, products, including HA generally, are classified, or re-classified, as human drugs, combination products, or biologics by the FDA or an applicable international regulatory body, the applicable review process related to such products is typically substantially longer and substantially more expensive than the review process to which they are currently subject as medical devices. In 2018, FDA publicly indicated its intent to consider HA products for certain indications as drugs and has indicated that sponsors of HA products who submit PMAs or PMA supplements for changes in indications for use, formulation or route of administration should obtain an informal or formal classification and jurisdictional determination through a pre-request for determination or request for determination prior to submission. There exists uncertainty with respect to the final interpretation, implementation, and consequences of this development, and this or any other potential regulatory changes in approach or interpretation similar in substance to those mentioned in this paragraph and affecting our products could materially impact our competitive position, business, and financial results.

~~Moreover,~~For example, over the last several years, the FDA has proposed reforms to its 510(k) clearance process, and such proposals could include increased requirements for clinical data and a longer review period, or could make it more difficult for manufacturers to utilize the 510(k) clearance process for their products. For example, in November 2018, FDA officials announced ~~forthcoming~~ steps that the FDA ~~intends~~intended to take to modernize the 510(k) premarket notification pathway, under Section 510(k) of the FDCA. Among other things, the FDA announced that it planned to develop proposals to drive manufacturers utilizing the 510(k) pathway toward the use of newer predicates. These proposals includedincluding plans to potentially sunset certain older devices that were used as predicates under the 510(k) clearance ~~pathway, and to potentially publish a list of devices that have been cleared on~~pathway. In September 2019, the ~~basis of demonstrated substantial equivalence to predicate devices that are more than 10 years old. The~~ FDA also ~~announced that it intended to finalize~~issued revised final guidance ~~to establish~~establishing a ~~premarket review pathway~~“Safety and Performance Based Pathway” for “manufacturers of certain well-understood device types” ~~as an alternative to the 510(k) clearance pathway and that such premarket review pathway would allow~~allowing manufacturers to rely on objective safety and performance criteria recognized by the FDA to demonstrate substantial equivalence, obviating the need for manufacturers to compare the safety and performance of their medical devices to specific predicate devices in the clearance process.

~~In May 2019, the~~ The FDA ~~solicited public feedback on its plans to develop proposals to drive manufacturers utilizing the 510(k) pathway toward the use of newer predicates, including whether the FDA should publish~~has developed and maintains a list of ~~devices~~device types appropriate for the “safety and performance based” pathway and continues to develop product-specific guidance documents that ~~have been cleared on~~identify the ~~basis~~performance criteria and recommended testing methodologies for each such device type, where feasible. Some of demonstrated substantial equivalence to predicate devices that are more than 10 years old. The FDA requested public feedback on whether it should consider certain actions that might require new authority, such as whether to sunset certain older devices that were used as predicates under the 510(k) clearance pathway. Thesethese proposals have not yet been finalized or adopted, and the FDA announced that it would seek public feedback prior to publication of any such proposals, and may work with Congress to implement such proposals through legislation. Accordingly, it is unclear the extent to which any ~~proposals, if adopted,~~changes could impose additional regulatory requirements on us that could delay our ability to obtain ~~new 510(k)~~ clearances, increase the costs of compliance, or restrict our ability to maintain our current ~~clearances, or otherwise create competition that may negatively affect our business.~~

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More recently, in September 2019, the FDA finalized the aforementioned guidance to describe 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 demonstrating that such device meets objective safety and performance criteria established by the FDA, 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 maintain a list device types appropriate for the “safety and performance based pathway” and 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, where feasible. The FDA may establish performance criteria for classes of devices for which we or our competitors seek or currently have received clearance, and it is unclear the extent to which such performance standards, if established, could impact our ability to obtain new 510(k) clearances, or otherwise create competition that may negatively affect our business.

In addition, FDA regulations and guidance are often revised or reinterpreted by the FDA in ways that may significantly affect our business and our products. Any new statutes, regulations or revisions or reinterpretations of existing regulations may impose additional costs or lengthen review times of any future products or make it more difficult to obtain clearance or approval for, manufacture, market or distribute our products. We cannot determine what effect changes in regulations, statutes, legal interpretation or policies, when and if promulgated, enacted or adopted may have on our business in the future. Such changes could, among other things, ~~require:~~require additional testing prior to obtaining clearance or approval; changes to manufacturing methods; recall, replacement or discontinuance of our products; or additional record keeping. ~~Additionally, the implementation~~

Table of the new EU MDR set to take full effect on May 26, 2021 after a one-year postponement due to the COVID-19 pandemic, is expected to change several aspects of the existing regulatory framework in Europe. Specifically, the EU MDR will require changes in the clinical evidence required for medical devices, post-market clinical follow-up evidence, annual reporting of safety information for Class III products, and bi-annual reporting for Class II products, Unique Device Identification (UDI) for all products, submission of core data elements to a European UDI database prior to placement of a device on the market, reclassification of medical devices, and multiple other labeling changes. While we will be able to continue marketing our currently CE-marked products in the EEA after the EU MDR enters into full effect and until the associated CE mark certificates expire, acquiring approvals for new products or renewing our existing CE mark certificates once these expire could be more challenging and costly.Contents

Our HCT/P products are subject to extensive government regulation and our failure to comply with these requirements could cause our business to suffer.

In the United States, we sell human tissue-derived ~~BGSs, such as PureBone and OsteoAMP,~~Surgical Solutions products, which are referred to by the FDA as human cells, tissues and cellular or tissue-based products or (“HCT/~~Ps.~~Ps”). In the ~~U.S.,~~United States, we are marketing our HCT/Ps pursuant to Section 361 of the PHSA and 21 CFR Part 1271 of FDA’s regulations. We do not manufacture these HCT/P products, but serve as a distributor for them. ~~So-called~~ Section 361 HCT/Ps are not currently subject to the FDA requirements to obtain marketing authorizations as long as they meet certain criteria provided in FDA’s regulations. HCT/Ps regulated as “361 HCT/Ps” are currently subject to requirements relating to registering facilities and listing products with the FDA, screening and testing for tissue donor eligibility, cGTP, when processing, storing, labeling and distributing HCT/Ps, including required labeling information, stringent record keeping and adverse event reporting. If we or our suppliers fail to comply with these requirements, we could be subject to FDA enforcement action, including, for example, warning letters, fines, injunctions, product recalls or seizures, and, in the most serious cases, criminal penalties. To be regulated as Section 361 HCT/Ps, these products must meet FDA’s criteria to be considered “minimally manipulated” and intended for “homologous use,” among other requirements. HCT/Ps that do not meet the criteria to be considered Section 361 HCT/Ps are subject to the FDA’s regulatory requirements applicable to medical devices, biologics or drugs. Device, biologic or drug HCT/Ps must comply both with the requirements exclusively applicable to Section 361 HCT/Ps and, in addition, with other requirements, including requirements for marketing ~~authorization. For example, Section 361 HCT/Ps do not require~~authorization, such as 510(k) clearance or PMA ~~approval, approval of a~~or BLA ~~or other premarket authorization from FDA~~approvals before marketing. ~~Except as described below with regard to MOTYS, we~~We believe our HCT/Ps are regulated solely under Section 361 of the PHSA, and therefore, we have not sought or obtained 510(k) clearance, PMA approval, or licensure through a BLA for such HCT/Ps.

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The FDA could disagree with our determination that these human tissue products are Section 361 HCT/Ps and could determine that these products are biologics requiring a BLA or medical devices requiring 510(k) clearance or PMA approval, and could require that we cease marketing such products and/or recall them pending appropriate clearance, approval or licensure from the FDA. For example, the FDA’s CDRH issued us a letter in March 2016 in which it asserted that OsteoAMP meets the definition of a medical device, and requested that we provide CDRH with information in support of our position that OsteoAMP does not require 510(k) clearance or PMA approval. We provided CDRH with the requested information in support of this position in May 2016 and we have received no further inquiries to date. We believe that CDRH’s assertion is unfounded and inconsistent with a 2011 letter from the FDA concluding that OsteoAMP meets the criteria for regulation solely as a Section 361 HCT/P. However, if the FDA were to disagree, and if we are otherwise unsuccessful in asserting our position, the FDA may then require that we obtain 510(k) clearance or PMA approval and that we cease marketing OsteoAMP and/or recall OsteoAMP unless and until we receive clearance or approval. If we have to cease marketing and/or have to recall any of our ~~BGSs~~Surgical Solutions products ~~including OsteoAmp,~~ our net sales would decrease, which would adversely affect our business, results of operations and financial condition.

HCT/Ps that do not meet the criteria of Section 361 are regulated under Section 351 of the PHSA. ~~Unlike Section 361 HCT/Ps,~~ HCT/Ps regulated as ~~“351”~~“Section 351” HCT/Ps are subject to premarket review and approval by the FDA. In November 2017, the FDA released a guidance document entitled “Regulatory Considerations for Human Cells, Tissues, and Cellular and Tissue—Based Products: Minimal Manipulation and Homologous Use—Guidance for Industry and Food and Drug Administration Staff.” The guidance outlined the FDA’s position that all lyophilized amniotic products are more than minimally manipulated and would therefore require a BLA to be lawfully marketed in the United States. The ~~guidance also indicated that the~~ FDA ~~would exercise~~resumed enforcement ~~discretion, using a risk-based approach,~~of IND and premarket approval requirements with respect to ~~the IND application and pre-market approval requirements for certain HCT/Ps for a period~~these products as of 36 months from the issuance date of the guidance to allow manufacturers to pursue its IND application. Under this approach, FDA indicated that high-risk products and uses could be subject to immediate enforcement action; FDA has not clearly stated what must happen by the end of its enforcement discretion period in order to avoid enforcement (i.e., whether a BLA must be approved by that time, or merely submitted). In July 2020, the FDA extended its period of enforcement discretion to May 31,June 1, 2021.

We plan to market MOTYS under the FDA’s policy of enforcement discretion as we pursue marketing authorization under a BLA for the product. We may be required to cease selling MOTYS if the FDA changes the scope of its enforcement discretion or changes the criteria used to assess which products qualify. In addition, following the period of enforcement discretion articulated in FDA’s guidance, we may be required to cease selling MOTYS until such time as we obtain BLA approval or be subject to another enforcement action or penalties. We may also be subject to enforcement on the grounds that we are marketing a product at the same time we are investigating that product pursuant to an IND, in violation of FDA’s prohibition on the preapproval promotion of an investigational product. The loss of our ability to market and sell this product could have an adverse impact on our business, results of operations and financial condition. In addition, we expect the cost to manufacture our products will be higher than our other HCT/Ps because of the costs to comply with the more stringent requirements that apply to products regulated as biologics for which a BLA is required (and not just as Section 361 HCT/Ps). These requirements include satisfying cGMP manufacturing standards and performing ongoing product testing. If we do receive BLA approval for this product, changes such as adding new indications, manufacturing changes and additional labeling claims, will be subject to further testing requirements and FDA review and approval.

In addition, the FDA may in the future modify the scope of its enforcement discretion with respect to Section 361 HCT/Ps or change its position on which current or future products qualify as Section 361 HCT/Ps, or determine that some or all of our HCT/P products may not be lawfully marketed under the FDA’s policy of enforcement discretion. Any regulatory changes could have adverse consequences for us and make it more difficult or expensive for us to conduct our business by requiring pre-market clearance or approval and compliance with additional post-market regulatory requirements with respect to those products.

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If clinical studies of our future products do not produce results necessary to support regulatory clearance, approval or ~~approval~~certification in the United States or elsewhere, we will be unable to expand the indications for or commercialize these products.

We will likely need to conduct additional clinical studies in the future to support new indications for our products or for clearances, approvals or ~~approvals~~certifications of new product lines, or for the approval or certification of the use of our products in some foreign countries. Clinical testing can take many years, can be expensive and carries uncertain outcomes. The initiation and completion of any of these studies may be prevented, delayed, or halted for numerous reasons. Conducting successful clinical studies requires the enrollment of large numbers of patients, and suitable patients may be difficult to identify and recruit. Patient enrollment in clinical trials and completion of patient participation and follow-up depends on many factors, including the size of the patient population, the nature of the trial protocol, the attractiveness of, or the discomforts and risks associated with, the treatments received by enrolled subjects, the availability of appropriate clinical trial investigators and support staff, proximity of patients to clinical sites, patient ability to meet the eligibility and exclusion criteria for participation in the clinical trial and patient compliance. For example, patients may be discouraged from enrolling in our clinical trials if the trial protocol requires them to undergo extensive post-treatment procedures or follow-up to assess the safety and effectiveness of our products or if they determine that the treatments received under the trial protocols are not attractive or involve unacceptable risks or discomforts. Patients may also not participate in our clinical trials if they choose to participate in contemporaneous clinical trials of competitive products. In addition, patients participating in clinical trials may die before completion of the trial or suffer adverse medical events unrelated to investigational products.

~~For example, in late 2017 we began enrollment for the B.O.N.E.S. clinical study, a uniquely designed trial to further broaden the label~~

Table of our Exogen system to include a fuller range of bones that may be treated as fresh fractures in predisposed patients at risk of nonunion. The B.O.N.E.S clinical study design includes prospective inclusion of 3,000 Exogen-treated patients presenting certain risk factors observed over the course of 12 months. See ~~Part I, Item 1. Business~~—Business—Development and Clinical Pipeline—Exogen clinical data—Ongoing Bioventus-sponsored clinical studies (B.O.N.E.S.). If we are unable to successfully complete enrollment and conclude the B.O.N.E.S. study, or the data generated from the study does not support these new indications, future demand for our Exogen system may be affected. In October 2020, we received FDA confirmation indicating its authorization of our IND, which will allow us to conduct a clinical trial to support a BLA submission for MOTYS, as well as an additional clinical trial based on a registry of patients who receive MOTYS after our initial commercial launch in the cash pay market. If we are unable to complete enrollment of these trials or if these trials do not support our desired clinical indications for use or show clinical efficacy of the MOTYS product, we may not obtain approval of the BLA and may not be able to continue to sell MOTYS or obtain coverage or reimbursement for the product.Contents

Clinical failure can occur at any stage of testing. Our clinical studies may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical and non-clinical studies in addition to those we have planned. In addition, failure to adequately demonstrate the safety and efficacy of any of our devices would prevent receipt of regulatory clearance, approval or ~~approval~~certification and, ultimately, the commercialization of that device or indication for use. Even if our future products are cleared in the United States, commercialization of our products in foreign countries would require approval or certification by regulatory authorities or notified bodies in those countries. Approval and certification procedures vary among jurisdictions and can involve requirements and administrative review periods different from, and greater than, those in the United States, including additional preclinical studies or clinical trials. Any of these occurrences could adversely affect our business, results of operations and financial condition.

Interim, “top-line” and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.

From time to time, we may publish interim, “top-line” or preliminary data from our clinical trials. Interim, top-line, or preliminary data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. Preliminary, “top-line,” or interim data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, interim, “top-line,” and preliminary data should be viewed with caution until the final data are available. Differences between preliminary, interim, or “top-line” data and final data could significantly harm our business prospects and may cause the trading price of our common stock to fluctuate significantly.

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Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular product candidate or product and our business in general. In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is based on what is typically extensive information, and you or others may not agree with what we determine is the material or otherwise appropriate information to include in our disclosure, and any information we determine not to disclose may ultimately be deemed significant with respect to future decisions, conclusions, views, activities or otherwise regarding a particular product candidate or our business. If the interim, “top-line,” or preliminary data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for and commercialize our product candidates, our business, operating results, prospects or financial condition may be harmed.

We may be subject to enforcement action if we engage in improper marketing or promotion of our products, and the misuse or off-label use of our products may harm our image in the marketplace, result in injuries that lead to product liability suits or result in costly investigations, fines and/or sanctions by regulatory bodies if we are deemed to have engaged in the promotion of these uses, any of which could be costly to our business.

~~The medical devices~~Certain products that we currently market have been cleared, approved or ~~approved~~certified by the FDA and other foreign regulatory authorities and notified bodies for specific treatments. ~~However, we~~We cannot prevent a physician from using our products outside of such cleared or approved indications for use, known as off-label ~~uses, when in the physician’s independent professional medical judgment, he or she deems it appropriate, and~~uses. While we do not analyze the ordering practices of physicians with respect to off-label ~~uses. In cases where prescriptions~~uses, we are aware of certain off-label uses of our ~~Exogen system are written for off-label uses,~~EXOGEN and StimRouter products. As a result, we could be subject to regulatory or enforcement actions if we ~~were~~are determined to have engaged in promotion of our products for off-label uses, or otherwise determined to have made false or misleading statements about our products. There may be increased risk of injury to patients if physicians attempt to use our products off-label. Furthermore, the use of our products for indications other than those cleared, approved or ~~approved~~certified by the FDA or any foreign regulatory authority or notified body may not effectively treat such conditions, which could harm our reputation in the marketplace among physicians and patients.

In addition, physicians may misuse our products or use improper techniques if they are not adequately trained, potentially leading to injury and an increased ~~risk of~~liability risks to us for product ~~liability.~~and medical malpractice related claims. If our products are misused or used with improper technique, we may become subject to costly litigation by our customers or their patients. Product liability and related claims could divert management’s attention from our core business, be expensive to defend and result in sizeable damage awards against us that may not be covered by insurance.

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Further, our promotional materials and training methods must comply with FDA and other applicable laws and regulations, including the prohibition of the promotion of off-label use. If the FDA or any foreign regulatory body determines that our promotional materials or training constitute promotion of an off-label use, the FDA could request that we modify our training, promotional materials or subject us to regulatory or enforcement actions, including the issuance of an untitled letter, a warning letter, injunction, seizure, civil fine or criminal penalties. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our business activities to constitute promotion of an off-label use, which could result in significant penalties under other statutory authorities, such as laws prohibiting false claims for reimbursement. Such enforcement actions may include, but are not limited to, criminal, civil and administrative penalties, treble damages, fines, disgorgement, exclusion from participation in government healthcare programs, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws and the curtailment or restructuring of our operations.

Our products may cause or contribute to adverse medical events that we are required to report to the FDA, and if we fail to do so, we would be subject to sanctions that could materially harm our business.

Some of our marketed products are subject to ~~MDR~~medical device reporting obligations, which require that we report to the FDA any incident in which our products may have caused or contributed to a death or serious injury, or in which our products malfunctioned and, if the malfunction were to recur, it could likely cause or contribute to a death or serious injury. The timing of our obligation to report under the MDR regulations is triggered by the date we become aware of the adverse event as well as the nature of the event. We may fail to report adverse events of which we become aware within the prescribed timeframe. We may also fail to recognize that we have become aware of a reportable adverse event, especially if it is not reported to us as an adverse event or if it is an adverse event that is unexpected or removed in time from the use of our products. If we fail to comply with our reporting obligations, the FDA could take action including warning letters, untitled letters, administrative actions, criminal prosecution, imposition of civil monetary penalties, revocation of our device clearances, seizure of our products, or delay in clearance of future products.

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We and our third-party manufacturers and suppliers are subject to various governmental regulations related to the manufacturing of our products.

Our products and the manufacturing processes, reporting requirements, post-approval clinical data and promotional activities for such products, will be subject to continued regulatory review, oversight and periodic inspection by the FDA and other domestic and foreign regulatory bodies. In particular, the methods used in, and the facilities used for, the manufacture of the products that we own and distribute that are regulated as medical devices must comply with the FDA’s ~~QSR,~~Quality System Regulation (“QSR”), which covers the procedures and documentation of the design, testing, production, control, quality assurance, labeling, packaging, sterilization, storage and shipping of medical devices. The FDA enforces the QSR through periodic announced or unannounced inspections of manufacturing facilities, and both we and our third-party manufacturers and suppliers are subject to such inspections. Similarly, the devices we distribute on behalf of third-party manufacturers that are regulated as Section 361 HCT/Ps must be manufactured in compliance with FDA’s cGTP requirements and other related requirements. Moreover, should any of our HA products be re-classified as drugs, such products would be required to comply with a different set of manufacturing requirements under FDA’s cGMP requirements for drugs. Similarly, if we are successful in obtaining BLA approval for MOTYS, that product will need to comply with the cGMP requirements for biologics, instead of the cGTP requirements that will apply to the product upon our planned launch of the product as a Section 361 HCT/P. The need to comply with different manufacturing requirements may require us to seek new suppliers.

Failure to comply with applicable FDA requirements, or later discovery of previously unknown problems with our products or the manufacturing processes of our third-party manufacturers and suppliers, including any failure to take satisfactory corrective action in response to an adverse regulatory inspection, can result in, among other things:

•administrative or judicially imposed sanctions;

•injunctions or the imposition of civil penalties or fines;

•recall or seizure of our products;

•total or partial suspension of production or distribution;

•refusal to grant pending or future clearances, approvals or ~~approvals~~certifications for our products;

•withdrawal or suspension of regulatory clearances, approvals or ~~approvals;~~certifications;

•clinical holds;

•untitled letters or warning letters;

•refusal to permit the import or export of our products; and

•criminal prosecution of us or our employees.

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Any of these actions could prevent or delay us from marketing, distributing or selling our products and would likely harm our business. Furthermore, our suppliers may not currently be or may not continue to be in compliance with all applicable regulatory requirements, which could result in our failure to produce our products on a timely basis and in the required quantities, if at all.

Our products may be subject to product recalls. A recall of our products, either voluntarily or at the direction of the FDA or another governmental authority, or the discovery of serious safety issues with our products, could adversely affect us.

The FDA and similar foreign governmental authorities have the authority to require the recall of commercialized drugs, devices and similar products in the event of material deficiencies or defects in their design or manufacture. ~~The~~For example, the FDA’s authority to require a recall for medical devices must be based on a finding that there is reasonable probability that the device would cause serious injury or death. WeIn addition, we have in the past and may ~~also~~in the future decide to voluntarily recall our products if certain deficiencies are found. ~~We have~~For example, in ~~the past instituted a voluntary recall for certain of our products, and~~December 2020 we ~~are currently undertaking~~undertook a voluntary Class II recall of certain vials of ultrasound gel that we provide with our Exogen system due to particulates, which were microbial in nature, found in the gel. The gel iswas manufactured by a third-party supplier, and we have discontinued the use of that suppliers’ gel and have replaced that gel with that of another ~~manufacturer. We have identified the affected lots~~manufacturer and ~~have~~ notified patients to discard gel bottles from ~~those~~affected lots. A government-mandated or voluntary recall could occur as a result of an unacceptable risk to health, component failures, malfunctions, manufacturing errors, design or labeling defects or other deficiencies and issues. Recalls of any of our products would divert managerial and financial resources and could adversely affect our reputation and business, which could impair our ability to produce our products in a cost-effective and timely manner in order to meet our customers’ demands. We may also be subject to liability claims, be required to bear other costs, or take other actions that could adversely affect our business, results of operations and financial condition.

Companies are required to maintain certain records of recalls and corrections, even if they are not reportable to the ~~FDA.~~FDA or foreign regulatory authorities. We may initiate voluntary recalls or corrections for our products in the future that we determine do not require notification of the ~~FDA.~~FDA or foreign regulatory authorities. If the FDA ~~disagrees~~or foreign regulatory authorities disagree with our determinations, they could require us to report those actions as recalls and we may be subject to enforcement action.

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As we conduct clinical studies designed to generate long-term data on some of our existing products, the data we generate may not be consistent with our existing data and may demonstrate less favorable safety or efficacy. Data we generate may ultimately not be favorable, or could even hurt the commercial prospects for our products.

We are currently collecting and plan to continue collecting long-term clinical data regarding the quality, safety and effectiveness of some of our existing products. The clinical data collected and generated as part of these studies will further strengthen our clinical evaluation concerning safety and performance of these products. ~~We believe that this additional data will help with the marketing of our products by providing surgeons and physicians with additional confidence in their long-term safety and efficacy.~~ If the results of these clinical studies are negative, these results could reduce demand for our products and significantly reduce our ability to achieve expected net sales. ~~We do not expect to undertake such studies for all of our products and will only do so in the future where we anticipate the benefits will outweigh the costs and risks. For these reasons, surgeons~~Surgeons and physicians could be less likely to purchase our products than competing products for which longer-term clinical data are available. Also, we may not choose or be able to generate the comparative data that some of our competitors have or are generating and we may be subject to greater regulatory and product liability risks. If we are unable to or unwilling to collect sufficient long-term clinical data supporting the quality, safety and effectiveness of our existing products, our business, results of operations and financial condition could be adversely affected.

We may rely on third parties to conduct our clinical studies and to assist us with preclinical development and if they fail to perform as contractually required or expected, we may not be able to obtain regulatory clearance, approval or ~~approval~~certification to commercialize our products.

We have relied upon and may continue to rely upon third parties, such as contract research organizations (“CROs”), medical institutions, clinical investigators and contract laboratories to assist in conducting our clinical studies, which must be conducted in accordance with applicable regulations, including GCP and our preclinical development activities. We rely on these parties for execution of our studies, and control only certain aspects of their activities. Nevertheless, we are responsible for ensuring that each of our clinical studies is conducted in accordance with the applicable protocol, legal, regulatory, and scientific standards, and our reliance on these third parties does not relieve us of our regulatory responsibilities. GCPs are regulations and guidelines enforced by the FDA and other regulatory authorities for products in clinical development. Regulatory authorities enforce these GCPs through periodic inspections of trial sponsors, principal investigators, trial sites, and CROs. We cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that any of our clinical trials comply with GCP regulations. In addition, our clinical trials must be conducted with product produced under applicable manufacturing requirements.

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If these third parties fail to successfully carry out their contractual duties, comply with applicable regulatory obligations, including GCP requirements, or meet expected deadlines, or if these third parties must be replaced, or if the quality or accuracy of the data they obtain is compromised due to the failure to adhere to clinical protocols or applicable regulatory requirements or for other reasons, our pre-clinical development activities or clinical studies may be extended, delayed, suspended or terminated. Under these circumstances we may not be able to obtain regulatory clearance, approval or ~~approval~~certification for, or successfully commercialize, our products on a timely basis, if at all, and our business, results of operations and financial condition may be adversely affected.

If any of our relationships with these third parties terminate, we may not be able to enter into arrangements with alternative third parties or to do so on commercially reasonable terms. In addition, our ~~third parties~~third-party contractors are not our employees, and except for remedies available to us under our agreements with them, we cannot control whether or not they devote sufficient time and resources to our on-going clinical, nonclinical and preclinical programs. Switching or adding additional ~~third parties~~third-party contractors involves additional cost and requires management time and focus. In addition, there is a natural transition period when a new ~~contract research organization (CRO)~~CRO or other ~~third party~~third-party vendor commences work. As a result, delays occur, which can materially impact our ability to meet our desired development timelines. Though we carefully manage our relationships with our ~~third party~~third-party vendors, including CROs, there can be no assurance that we will not encounter similar challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business, financial condition and prospects.

Healthcare regulatory reform may affect our ability to sell our products profitably and could adversely affect our business, results of operations and financial condition.

In the United States and in certain foreign jurisdictions, there have been a number of legislative and regulatory proposals to change the regulatory and healthcare systems in ways that could prevent or delay marketing approval or certification of our products in development, restrict or regulate post-approval or certification activities of our products and impact our ability to sell our products profitably. In the United States in recent years, new legislation has been proposed and adopted at the federal and state level that is effecting major changes in the healthcare system. In addition, new regulations and interpretations of existing healthcare statutes and regulations are frequently adopted.

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~~In March 2010,~~By way of example, the Affordable Care Act was signed into law. While the goal of healthcare reform is to expand coverage to more individuals, it also involves increased government price controls, additional regulatory mandates and other measures designed to constrain medical costs. The Affordable Care Act(“ACA”) substantially ~~changes~~changed the way healthcare is financed by both governmental and private insurers, encourages improvements in the quality of healthcare items and services and significantly impacts the medical device industry. Among other things, the ~~Affordable Care Act:~~ACA:

•increased the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program;

•created a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected;

•extended manufacturers’ Medicaid rebate liability to individuals enrolled in Medicaid managed care organizations;

•expanded eligibility criteria for Medicaid programs;

•established a new Patient-Centered Outcomes Research Institute to oversee and identify priorities in comparative clinical effectiveness research in an effort to coordinate and develop such 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.

Since its enactment, there have been judicial, executive and Congressional challenges to certain aspects of the ~~Affordable Care Act, as well as efforts~~ACA. On June 17, 2021, the U.S. Supreme Court dismissed the most recent judicial challenge to the ACA brought by several states without specifically ruling on the ~~former Trump administration to repeal or replace certain aspects~~constitutionality of the ACA. Prior to the Supreme Court's decision, President Biden issued an executive order to initiate a special enrollment period for purposes of obtaining health insurance coverage through the ACA marketplace, from February 15, 2021 through August 15, 2021. The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA. Efforts to reform the marketplace for healthcare services is ongoing, and we expect such challenges and amendments to continue. For example, the Tax Cuts and Jobs Act of 2017 includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” On December 14, 2018, a U.S. District Court Judge in the Northern District of Texas, ruled that the individual mandate is a critical and inseverable feature of the Affordable Care Act, and therefore, because it was repealed as part of the U.S. Tax Act, the remaining provisions of the Affordable Care Act are invalid as well. On December 18, 2019, the U.S. Court of Appeals for the 5th Circuit upheld the District Court ruling that the individual mandate was unconstitutional and remanded the case back to the District Court to determine whether the remaining provisions of the Affordable Care Act are invalid as well. On March 2, 2020, the United States Supreme Court granted the petitions for writs of certiorari to review this case, and the Court held oral argument on November 10, 2020. The case is expected to be decided in mid-2021. It is unclear how this decision and other efforts to challenge, repeal or replace the Affordable Care Act will impact the Affordable Care Act or our business. We expect there will be additional challenges and amendments to the Affordable Care Act in the future.

The results of the 2020 U.S. presidential and congressional elections have created regulatory uncertainty, including with respect to the U.S. government’s role, in the U.S. healthcare industry. As a result of such elections, there are renewed and reinvigorated calls for health insurance reform, which could cause significant uncertainty in the U.S. healthcare market, could increase our costs, decrease our revenues or inhibit our ability to sell our products. We cannot predict with certainty what impact any U.S. federal and state health reforms will have on us, but such changes could impose new and/or more stringent regulatory requirements on our activities or result in reduced reimbursement for our products, any of which could adversely affect our business, results of operations and financial condition.

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In addition, ~~third-party payers regularly update payments to physicians~~other legislative changes have been proposed and ~~hospitals where our products are used. For example,~~adopted since the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) ended the use of the Sustainable Growth Rate Formula, and provided for a 0.5% annual increase in payment rates under the Medicare Physician Fee Schedule through 2019, but no annual update from 2020 through 2025. MACRA also introduced a merit based incentive bonus program for Medicare physicians beginning in 2019. At this time, it is unclear how the introduction of the merit based incentive program will impact overall physician reimbursement under the Medicare program. In addition, theACA was enacted. The Budget Control Act of 2011, ~~imposed reductions to~~among other things, reduced Medicare payments to providers ofby 2% per fiscal year, ~~which went into effect~~effective on April 1, ~~2013. Subsequent~~2013 and, due to subsequent legislative amendments ~~related~~ to the ~~COVID-19 pandemic suspended this Medicare sequestration payment reduction~~statute, will remain in effect through 2030, with the exception of a temporary suspension from May 1, 2020, through March 31, ~~2021, but extended sequestration through 2030. In January 2013, President Obama signed into law~~2022, unless additional Congressional action is taken. Additionally, the American Taxpayer Relief Act of 2012, ~~which,~~ among other things, further reduced Medicare payments to several ~~types of~~ providers, including hospitals, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. Third-party payers also regularly update payments to physicians and hospitals where our products are used. By way of example, the Medicare Access and CHIP Reauthorization Act of 2015, or MACRA, enacted on April 16, 2015, repealed the formula by which Medicare made annual payment adjustments to physicians and replaced the former formula with fixed annual updates and a new system of incentive payments that are based on various performance measures and physicians’ participation in alternative payment models such as accountable care organizations. Legislative and regulatory reforms and executive actions intended to reduce the costs of prescription drugs and medical devices are also ongoing in the United States and abroad. It is unclear what effect new quality and payment programs, such as MACRA, may have on our business, financial condition, results of operations or cash flows. These and other payment updates could directly impact the demand for our products or any products we may develop in the future, if cleared or approved.

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We expect that ~~the Affordable Care Act, as well as~~ other healthcare reform measures that may be adopted in the future, ~~may~~could result in additional reductions in Medicare and other healthcare funding, more rigorous coverage criteria, new payment methodologies and in additional downward pressure on the price that we receive for any cleared or approved products. Furthermore, we believe that many individuals who have obtained insurance coverage through the health insurance exchanges which arose as a result of the ~~Affordable Care Act~~ACA have done so with policies that have significantly higher deductibles than policies they may have obtained prior to its enactment. Because the out-of-pocket costs of undergoing certain procedures for patients who have not met their deductible for a given year would be significantly higher than they historically would have been, these patients may be discouraged from undergoing certain procedures due to the cost. Any reluctance on the part of patients to undergo procedures utilizing our products due to cost could impact our ability to expand sales of our products and could adversely impact our business, results of operations and financial condition.

We are subject to federal, state and foreign laws and regulations relating to our healthcare business, and could face substantial penalties if we are determined not to have fully complied with such laws, which would adversely affect our business, results of operations and financial condition.

~~Both in~~In our capacity as a pharmaceutical and medical device manufacturer, ~~and/or~~ as a supplier of covered items and services to federal health care program beneficiaries, and with respect to ~~which~~ items and services for which we submit claims for reimbursement from such programs, we are subject to healthcare fraud, waste and abuse regulation and enforcement by federal, state and foreign governments, which could adversely impact our business, results of operations and financial condition. Healthcare fraud and abuse and health information privacy and security laws potentially applicable to our operations include:

•the federal Anti-Kickback Statute (“AKS”), which ~~applies to our marketing practices, educational programs, pricing~~prohibits the knowing and ~~discounting policies and relationships with healthcare providers, by prohibiting, among~~willful offer, payment, solicitation or receipt of any bribe, kickback, rebate or other ~~things, persons and entities from knowingly and willfully soliciting, receiving, offering or providing~~ remuneration ~~intended to induce or reward, or~~for referring an individual, in return for ~~either~~ordering, leasing, purchasing or recommending or arranging for or to induce the referral of an individual ~~for,~~ or the ~~purchase, order~~ordering, purchasing or ~~recommendation~~leasing of ~~an item~~items or ~~service reimbursable under a~~services covered, in whole or in part, by any federal healthcare program, such as ~~the~~ Medicare ~~or Medicaid programs.~~and Medicaid. A person or entity does not need to have actual knowledge of ~~this~~the statute or specific intent to violate it to have committed a violation. ~~Violations are also subject~~Penalties for violating the AKS include civil penalties of up to ~~civil monetary~~$120,816 per violation plus three times the amount of the improper remuneration, criminal penalties up to $100,000 ~~for each~~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 of the federal Anti-Kickback Statute may also result civil and criminal penalties, including criminal fines of up to $100,000 and imprisonmentprison terms of up to ten years, orand exclusion from ~~Medicare, Medicaid~~participation in the Federal health care programs. Under the Civil Monetary Penalties statute, physicians who pay or ~~other governmental programs;~~accept kickbacks also face penalties of up to $50,000 per kickback plus three times the amount of the prohibited remuneration;

•the ~~“Stark~~federal physician self-referral law, the Stark Law,” which, subject to certain enumerated statutory and regulatory exceptions, prohibits ~~a physician~~physicians from referring Medicare or Medicaid patients to an entity ~~providing “designated~~for the provision of certain designated health services,” or “DHS”, which includes ~~durable~~both prescription drugs and medical ~~equipment,~~devices, if the physician or a member of such physician’s immediate family ~~member~~has a direct or indirect financial relationship (including an ownership interest or a compensation arrangement) with the entity, and prohibits the entity from billing Medicare or Medicaid for such DHS. In addition to reimbursing the government any associated overpayment, violations of the ~~physician, has an ownership or investment interest~~Stark Law can lead to: (1) civil penalties of nearly $29,000 per claim (in 2023, adjusted annually for inflation); (2) three times the amount of damages suffered by the government; and (3) potential exclusion from participation in ~~or compensation arrangement with such entity that does not comply with the requirements~~federal healthcare programs;

Table of ~~a Stark exception;~~Contents

•~~the federal civil and criminal false claims laws, including~~ the False Claims Act, or “FCA”, which ~~impose~~imposes civil and criminal ~~penalties through governmental, civil whistleblower or qui tam actions, against~~liability on individuals or entities ~~for, among other things,~~that knowingly ~~presenting,~~submit false or ~~causing to be presented,~~fraudulent claims for payment ~~or approval~~ to the ~~federal~~ government ~~that are false~~ or ~~fraudulent,~~ knowingly ~~making~~make, or cause to be made, a false statement ~~material~~in order to ~~an obligation to pay~~have a false claim paid, including qui tam or transmit money or property to the federal government or knowingly concealing or knowingly and improperly avoiding or decreasing an obligation to pay or transmit money or property to the federal government. Suits filed under the False Claims Act, can be brought by any individual on behalfwhistleblower suits. Penalties for a violation of the ~~government, known as ‘‘qui tam’’ actions, and such individuals, commonly known as ‘‘whistleblowers,’’ may share in any amounts paid by the entity~~FCA include fines up to the government in fines or settlement. The frequency of filing qui tam actions has increased significantly in recent years, causing greater numbers of pharmaceutical, medical device and other healthcare companies to have to defend a False Claims Act action. When an entity is determined to have violated the False Claims Act, the government may impose civil fines and penalties ranging from $11,665 to $23,331$27,894 for each false claim, plus ~~treble~~up to three times the amount of damages ~~and exclude~~caused by each false claim. In addition, the ~~entity from participation in Medicare, Medicaid and other federal healthcare programs. The~~ government may assert that a claim including items or services resulting from a violation of the ~~federal Anti-Kickback Statute~~AKS or Stark Law constitutes a false or fraudulent claim for purposes of the ~~false claims statutes;~~FCA;

•the ~~federal civil monetary penalties laws,~~beneficiary inducement provisions of the Civil Monetary Penalties Law, which ~~impose civil fines for, among other things, the~~prohibits, an individual or entity from offering ~~or transfer of~~ remuneration to a ~~Medicare or state~~federal healthcare program beneficiary ifthat the ~~person~~individual or entity knows or should know it is likely to influence the ~~beneficiary’s selection of~~beneficiary to order or receive healthcare items or services from a particular ~~provider, practitioner,~~provider. Violations of the CMPL may result in administrative penalties ranging from $5,000 to $100,000 per violation depending on the conduct involved;

•the criminal healthcare fraud provisions of Health Insurance Portability and Accountability Act, or ~~supplier of services reimbursable by Medicare or a state healthcare program, unless an exception applies;~~

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•~~HIPAA~~“HIPAA”, and ~~its implementing regulations, which created federal criminal laws~~related rules that prohibit ~~among other things,~~knowingly and willfully executing ~~or attempting to execute~~ a scheme or artifice to defraud any healthcare benefit program or falsifying, concealing or covering up a material fact or making any material false, ~~statements relating to~~fictitious or fraudulent statement in connection with the delivery of or payment for healthcare ~~matters.~~benefits, items or services. Similar to the ~~federal Anti-Kickback Statute,~~AKS, 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;

•HIPAA, as amended by HITECH, and its implementing regulations, which also imposes certain regulatory and contractual requirements regarding the privacy, security and transmission of protected health information, or PHI;

•the federal Physician Payments Sunshine Act, which requires certain applicable manufacturers of drugs, devices, biologics and medical supplies for which payment is available under ~~Medicare, Medicaid or the Children’s Health Insurance Program (with~~ certain ~~exceptions)~~federal healthcare programs, to monitor and report ~~annually~~ to ~~the government information related to~~CMS, certain payments orand other ~~“transfers~~transfers of ~~value” made~~value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain other healthcare providers (physician assistants, nurse practitioners, clinical nurse specialists, anesthesiologist assistants, certified registered nurse anesthetists, anesthesiology assistants and certified nurse midwives) and teaching hospitals, and ~~beginning in 2022, physician assistants, nurse practitioners,~~applicable manufacturers and ~~other practitioners, and requires applicable manufacturers~~group purchasing organizations, to report annually ~~to the government~~ ownership and investment interests held by ~~the providers described above~~such physicians and their immediate family ~~members and payments or other “transfers of value” to such provider owners. Failure to submit required information may result in civil~~members. Civil monetary penalties of ~~$11,766 per failure~~ up to ~~an aggregate of $176,495 per year (or up~~$1,000,000 as adjusted annually may be imposed on reporting entities if they fail to ~~an aggregate of $1.177 million per year for “knowing failures”), for all payments, transfers of value~~report information in a timely, accurate or ~~ownership or investment interests that are not timely, accurately, and completely reported in an annual submission, and may result in liability under other federal laws or regulations;~~complete manner;

•federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm ~~consumers;~~customers;

•federal government price reporting ~~laws, which require us to calculate~~laws; and ~~report complex pricing metrics in an accurate and timely manner to government programs, and where the failure to report such prices may expose us to potential liability; and~~

•analogous state ~~and foreign~~ law equivalents of each of the above federal laws, ~~and regulations, such as~~state anti-kickback ~~self-referral, fee-splitting~~ and false claims ~~laws that may apply to items or services reimbursed by any third-party payer, including commercial insurers;~~laws; state laws ~~that require pharmaceutical and~~requiring device companies to comply with ~~the industry’s voluntary~~specific compliance ~~guidelines and the relevant compliance guidance promulgated by the federal government or otherwise that~~standards, restrict payments ~~that may be~~ made to healthcare ~~providers; state laws that require drug~~providers and ~~device manufacturers to~~other potential referral sources, and report information related to payments and other transfers of value to ~~physicians and other~~ healthcare providers or marketing ~~expenditures and pricing information;~~expenditures; and state ~~and foreign~~ laws ~~governing the privacy and security of certain health information, such as GDPR, which imposes obligations and restrictions on the collection and use of personal data relating~~related to ~~individuals located~~insurance fraud in the ~~EU (including health data), many~~case of ~~which differ from each other in significant ways and some of which may be more stringent than HIPAA or HITECH.~~claims involving private insurers.

The risk of us being found in violation of these laws and regulations is increased by the fact that many of them have not been fully interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of interpretations. We are unable to predict what additional federal, state or foreign legislation or regulatory initiatives may be enacted in the future regarding our business or the healthcare industry in general, or what effect such legislation or regulations may have on us. Federal, state or foreign governments may impose additional restrictions or adopt interpretations of existing laws that could adversely affect us.

Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available under such laws, it is possible that some of our business activities, including certain sales and marketing practices and financial arrangements with physicians and other healthcare providers, some of whom recommend, use, prescribe or purchase our products, and other customers, could be subject to challenge under one or more of such laws. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. If our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to substantial penalties, including administrative, civil and criminal penalties, damages, fines, additional reporting requirements and oversight if we become subject to a Corporate Integrity Agreement or similar agreement to resolve allegations of non-compliance with these laws, exclusion from governmental healthcare programs, disgorgement and related overpayment obligations, contractual damages, reputational harm, diminished profits and future earnings, and the curtailment or restructuring of our operations, any of which could adversely impact our business, results of operations and financial condition.

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In 2018, we identified non-compliance with certain U.S. federal statutes and requirements governing the Medicare program in related to improper completion of Certificate for Medical Necessity (“CMN”) forms. In November 2018, we made a voluntary self-disclosure related to this matter to the Office of Inspector General of the U.S. Department of Health and Human Services (“OIG”) pursuant to the OIG’s Provider Self-Disclosure Protocol. After settlement discussions with the Office of the United States Attorney in the Middle District of North Carolina (“USAO”) and OIG, on February 22, 2021, we entered into a formal settlement agreement, which included releases from associated False Claims Act liability and further Civil Monetary Penalties that are customary in self-disclosures of this type, and agreed to pay $3.6 million in resolution of this matter.

We are subject to governmental regulation and other legal obligations, particularly related to privacy, data protection and information security, and we are subject to consumer protection laws that regulate our marketing practices and prohibit unfair or deceptive acts or practices. Our actual or perceived failure to comply with such obligations could harm our business.

We are subject to diverse laws and regulations relating to ~~data~~ privacy and data security, including, in the United States, HIPAA and, in the EU, ~~EEA, Regulation 2016/679, known as~~ the GDPR. New privacy ~~rules~~laws and regulations are being enacted in the United States, particularly at the state level, and globally, and existing ones are being updated and strengthened. Complying with these numerous, complex and often changing regulations is expensive and ~~difficult,~~difficult. We strive to comply with all applicable laws and other legal obligations relating to privacy, data security, and data protection. However, given that the scope, interpretation, and application of these laws and regulations are often uncertain and may be conflicting, it is possible that these obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and/or in a manner that conflicts with our practices. Failure or perceived failure by us or our service providers to comply with any privacy, data security, or data protection laws or ~~data security laws~~other obligations, or any security incident or data breach ~~involving the misappropriation, loss or other unauthorized use or disclosure of sensitive or confidential patient or consumer information, whether~~experienced by us, one of our ~~business associates~~service providers, or another ~~third-party,~~party, could adversely affect our ~~business, results of operations and financial condition, including~~business. Such impacts include but are not limited to: investigation costs, ~~material~~legal fees, fines and penalties; compensatory, special, punitive, and statutory damages; enforcement actions; litigation; reputational damage; consent orders regarding our privacy and security practices; requirements that we provide consumer notices, credit monitoring services and/or credit restoration services or other relevant services to individuals impacted ~~individuals;~~by a data breach; adverse actions against our licenses to do business; and injunctive relief. ~~Furthermore,~~

In the United States, HIPAA, as amended, and regulations implemented thereunder (collectively referred to as “HIPAA”) imposes, among other things, certain standards relating to the privacy, security, transmission and breach reporting of protected health information (“PHI”) on certain healthcare providers, health plans, and healthcare clearinghouses, known as covered entities, as well as their business associates that perform certain services that generally involve creating, receiving, maintaining or transmitting PHI for or on behalf of such covered entities, and their covered subcontractors. HIPAA requires covered entities, such as us, as well as business associates to develop and maintain administrative, physical and technical safeguards to protect PHI, and meet certain notification requirements in the event of a breach of unsecured PHI.

Additionally, under HIPAA, covered entities must report breaches of unsecured PHI to affected individuals without unreasonable delay, not to exceed 60 days following discovery of the breach or, if earlier, the date on which the breach would have been discovered through the exercise of reasonable diligence. Notification also must be made to the U.S. Department of Health and Human Services Office for Civil Rights and, in certain circumstances, to the media. Business associates must report breaches of unsecured PHI to covered entities within 60 days of discovery of the breach by the business associate or its agents or, if earlier, the date on which the breach would have been discovered through the exercise of reasonable diligence. All U.S. states, the District of Columbia, Guam, Puerto Rico, and the U.S. Virgin Islands have enacted data breach notification laws. Some of these ~~rules~~breach notification laws impose notification obligations that are ~~constantly changing.~~in addition to, or inconsistent with, the HIPAA Breach Notification Rule, which can present compliance challenges.

Entities that are found to be in violation of HIPAA, which may occur in connection with, among other things, a breach of unsecured PHI, a complaint about privacy practices or an audit by the U.S. Department of Health and Human Services (“HHS”), may be subject to significant civil, criminal and administrative fines and penalties and/or additional reporting and oversight obligations if required to enter into a resolution agreement and corrective action plan with HHS to settle allegations of HIPAA non-compliance. The HHS Office for Civil Rights actively enforces HIPAA and frequently issues significant fines and penalties. HIPAA also authorizes state Attorneys General to file suit on behalf of residents of their states. Courts may award damages, costs and attorneys’ fees related to violations of HIPAA in such cases. While HIPAA does not create a private right of action allowing individuals to sue us in civil court for violations of HIPAA, its standards have been used as the basis for duty of care in state civil suits such as those for negligence or recklessness in the misuse or breach of PHI.

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U.S. states have adopted various privacy and security laws and regulations, some of which may be more stringent than HIPAA. Such laws and regulations will be subject to interpretation by various courts and other governmental authorities, thus creating potentially complex compliance issues for us and our future customers and strategic partners. For example, the ~~CCPA took effect on January 1, 2020. The CCPA establishes a new privacy framework for covered businesses and provides new and enhanced data~~California Consumer Privacy Act (“CCPA”) creates individual privacy rights tofor California residents ~~such as affording consumers~~and increases the ~~right to access~~privacy and ~~delete their information and to opt out~~security obligations of entities handling certain ~~sharing and sales of~~ personal information. The CCPA ~~imposes severe statutory damages~~provides for civil penalties for violations, as well as a private right of action for ~~certain~~ data breaches that ~~result in the loss of personal information. This private right of action~~ is expected to increase ~~the likelihood of, and risks associated with,~~ data breach litigation. Further, the California Privacy Rights Act (“CPRA”), which amended the CCPA, imposes additional data protection obligations on covered businesses, including additional consumer rights processes, limitations on data uses, new audit requirements for higher risk data, and opt-out rights for certain uses of sensitive data. It ~~remains unclear how various provisions~~also created the California Privacy Protection Agency, which is authorized to issue substantive regulations and enforce law. Additional states, including Colorado, Connecticut, Delaware, Florida, Indiana, Iowa, Montana, Oregon, Tennessee, Texas, Utah and Virginia have enacted similar comprehensive privacy laws. Other states, including Nevada and Washington, have recently enacted robust health privacy laws. Legislation has been proposed in other states and at the federal level, reflecting a trend toward more stringent privacy legislation in the United States. These developments are likely to result in increased privacy and data security enforcement. Additional compliance investment and potential business process changes may be required, and the enactment of new laws could have potentially conflicting requirements that would make compliance challenging and burdensome.

The Federal Trade Commission (“FTC”) and many state Attorneys General also continue to enforce federal and state consumer protection laws against companies for online collection, use, dissemination and security practices that appear to be unfair or deceptive. For example, according to the FTC, failing to take appropriate steps to keep consumers’ personal information secure can constitute unfair acts or practices in or affecting commerce in violation of Section 5(a) of the ~~CCPA will~~FTC Act. The FTC expects a company’s data security measures to be ~~interpreted~~reasonable and ~~enforced. The CCPA contains an exemption for medical~~appropriate in light of the sensitivity and volume of consumer information ~~governed by~~it holds, the ~~CMIA~~size and ~~for PHI collected by a covered entity or~~complexity of its business, ~~associate governed by~~and the ~~privacy,~~cost of available tools to improve security and ~~breach notification rules established pursuant~~reduce vulnerabilities. In addition to ~~HIPAA, but~~enforcing against organizations, the ~~precise application and scope~~FTC has made clear that it may seek to hold officers personally liable for privacy or security violations of ~~this exemption is not yet clear, and~~their organizations, having done so in the ~~law may still apply to certain aspects~~past.

In Europe, the GDPR imposes strict requirements for processing the personal data of ~~our business. The CCPA may lead other states to pass comparable legislation, with potentially greater penalties, and more rigorous compliance requirements relevant to our business, and~~individuals within the EEA. Companies that may not include exemptions for businesses subject to HIPAA. The effects of the CCPA, and other similar state or federal laws, are potentially significant and may require us to modify our data processing practices and policies and to incur substantial costs and potential liability in an effort tomust comply with ~~such legislation.~~

~~The privacy laws in the EU have been significantly reformed. On May 25, 2018,~~ the GDPR ~~entered into force~~face increased compliance obligations and ~~became directly applicable in all EU member states. The GDPR implements~~risk, including more stringent operational requirements than its predecessor legislation. For example, the GDPR requires us to make more detailed disclosures to data subjects, requires disclosure of the legal basis on which we can process personal data, makes it harder for us to obtain valid consent for processing, requires the appointmentrobust regulatory enforcement of data protection ~~officers when sensitive personal data, such as health data, is processed on a large scale, provides more robust rights~~requirements and potential fines for data subjects, introduces mandatory data breach notification through the EU, imposes additional obligations on us when contracting with service providers and requires us to adopt appropriate privacy governance including policies, procedures, training and data audit. If we do not comply with our obligations under the GDPR, we could be exposed to finesnoncompliance of up to ~~the greater of~~ €20 million or ~~up to~~ 4% of ~~our total~~the annual global annual revenue in the event of a significant breach. In addition, we may be the subject of litigation and/or adverse publicity, which could adversely affect our business, results of operations and financial condition.

~~Prior to the effectiveness~~revenues of the noncompliant company, whichever is greater. Among other requirements, the GDPR ~~the US-EU Safe Harbor framework provided a method which permitted the transfer~~regulates transfers of personal data subject to the GDPR to third countries that have not been found to provide adequate protection to such personal data, including the United States, and the efficacy and longevity of current transfer mechanisms between the EU and the United States remains uncertain. For example, in 2016, the EU and United States agreed to a transfer framework for data transferred from the EU to the United States, ~~under European privacy law; in 2015 it was declared invalid and replaced with~~called the ~~US-EU Privacy Shield framework, or~~ Privacy Shield. OnIn July ~~16,~~ 2020, the Court of Justice of the ~~European Union, or CJEU, invalidated~~EU (“CJEU”) limited how organizations could lawfully transfer personal data from the EU/EEA to the United States by invalidating the Privacy ~~Shield. While~~Shield for purposes of international transfers and imposing further restrictions on the ~~CJEU upheld the adequacy~~use of ~~the~~ standard contractual clauses ~~(a standard form~~(“SCCs”). The European Commission issued revised SCCs on June 4, 2021 to account for the decision of ~~contract approved~~the CJEU and recommendations made by the European ~~Commission as an adequate personal~~Data Protection Board (“EDPB”). The United States and the EU recently agreed to a new data transfer mechanism ~~and potential alternative~~ to replace the Privacy ~~Shield), it made clear that reliance on them alone~~Shield known as the EU-U.S. Data Privacy Framework, which may ~~not necessarily~~ be ~~sufficient in all circumstances; this has created increasing uncertainty. This recent development will require us~~subject to ~~review and amend the~~ legal ~~mechanisms by which we make and/or receive personal data transfers to/in the U.S.~~challenges. As supervisory authorities issue further guidance on personal data export mechanisms, including circumstances where the ~~standard contractual clauses~~SCCs cannot be used, ~~and/or start taking~~and take additional enforcement ~~action,~~actions, we could suffer additional costs, complaints and/or regulatory investigations or fines, and/or if we are otherwise unable to transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we provide our services, the geographical location or segregation of our relevant systems and operations, and could adversely affect our financial results.

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Additionally, ~~starting on~~from January 1, 2021, ~~(following~~following the United Kingdom’s departure from the ~~EU),~~EU, we ~~will~~ have had to comply with the GDPR and the UK GDPR (i.e., the GDPR as implemented into UK law) ~~if we offer services to UK users, monitor their behavior or are established in the United Kingdom.~~. Failure to comply with the UK GDPR can result in fines up to the greater of ~~£17~~£17.5 million (approximately ~~$20~~$21 million), or 4% of global revenue. However, the relationship between the United Kingdom and the European Union in relation to certain aspects of data protection law remains unclear. ~~For example, it is unclear what the role~~The European Commission has adopted an adequacy decision in favor of the Information Commissioner’s Office will be following the end of the transitional period. In addition, it is likely that documentation will need to be put in place between UK entities and entities in EuropeanUnited Kingdom, enabling data transfers from EU member states to ~~ensure adequate safeguards are~~the United Kingdom without additional safeguards. However, the UK adequacy decision will automatically expire in ~~place for data transfers, which may result in increased costs with respect to transfers of personal data between~~June 2025 unless the European ~~Union and the UK, which would increase our expenses. We may find it necessary or advantageous to join industry bodies or self-regulatory organizations~~Commission extends that impose stricter compliance requirements than those set out in applicable laws, including the GDPR. We may also be bound by contractual restrictions that prevent us from participating in data processing activities that would otherwise be permissible under applicable laws, including the GDPR. Such strategic choices may impact our ability to use and exploit data, and may have an adverse impact on our business.decision.

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Failure to comply with the FCPA and laws associated with our activities outside the United States could adversely affect our business, results of operations and financial condition.

We are subject to the FCPA and other anti-bribery legislation around the world. The FCPA generally prohibits covered entities and their intermediaries from engaging in bribery or making other prohibited payments, offers or promises to foreign officials for the purpose of obtaining or retaining business or other advantages. In addition, the FCPA imposes recordkeeping and internal controls requirements on publicly traded corporations and their foreign affiliates, which are intended, ~~to,~~ among other things, to prevent the diversion of corporate funds to the payment of bribes and other improper payments, and to prevent the establishment of “off books” slush funds from which such improper payments can be made. As we conduct our business in jurisdictions outside of the United States, we face significant risks if we fail to comply with the FCPA and other laws that prohibit improper payments, offers or promises of payment to foreign governments and their officials and political parties by us and other business entities for the purpose of obtaining or retaining business or other advantages. In many foreign countries, ~~particularly in countries with developing economies,~~ it may be a local custom that businesses operating in such countries engage in business practices that are prohibited by the FCPA or other laws and regulations. Although we have implemented a company policy requiring our employees and consultants to comply with the FCPA and similar laws, such policy may not be effective at preventing all potential FCPA or other violations. Although our agreements with our international distributors clearly state our expectations for our distributors’ compliance with U.S. laws, including the FCPA, and provide us with various remedies upon any non-compliance, including the ability to terminate the agreement, we also cannot guarantee our distributors’ compliance with U.S. laws, including the FCPA. Therefore, there can be no assurance that our employees and agents, or those companies to which we outsource certain of our business operations, have not and will not take actions that violate our policies or applicable laws, for which we may be ultimately held responsible. Any violation of the FCPA, other anti-bribery legislation, including the UK Bribery Act and the Brazil Clean Company Act, or related policies could result in severe criminal or civil sanctions, which could adversely affect our business, results of operations and financial condition.

Furthermore, we are subject to the export controls and economic embargo rules and regulations of the United States, including, but not limited to, the Export Administration Regulations and trade sanctions against embargoed countries, which are administered by the Office of Foreign Assets Control within the Department of the Treasury, as well as the laws and regulations administered by the Department of ~~Commerce.~~Commerce and the Department of State. These regulations limit our ability to market, sell, distribute or otherwise transfer our products or technology to prohibited countries or ~~persons.~~persons, or for prohibited end-uses. A determination that we have failed to comply, whether knowingly or inadvertently, may result in substantial penalties, including fines, enforcement actions, civil and/or criminal sanctions, the disgorgement of profits, the imposition of a court-appointed monitor, as well as the denial of export privileges, and may adversely affect our business, results of operations and financial condition.

If we fail to meet Medicare accreditation and surety bond requirements or DMEPOS supplier standards, it could adversely affect our business, results of operations and financial condition.

Our Exogen system is classified by CMS and third-party payers as durable medical equipment. Suppliers of Medicare durable medical equipment, prosthetics, orthotics and supplies ~~(DMEPOS)~~(“DMEPOS”) must be accredited by an approved accreditation organization as meeting DMEPOS quality standards adopted by CMS and are required to meet surety bond requirements. In addition, Medicare DMEPOS suppliers must comply with Medicare supplier standards in order to obtain and retain billing privileges, including meeting all applicable federal and state licensure and regulatory requirements. CMS periodically expands or otherwise clarifies the Medicare DMEPOS supplier standards, and states periodically change licensure requirements, including licensure rules imposing more stringent requirements on out-of-state DMEPOS suppliers. We believe we are currently in compliance with these requirements. If we fail to maintain our Medicare accreditation status and/or do not comply with Medicare surety bond or supplier standard requirements or state licensure requirements in the future, or if these requirements are changed or expanded, it could adversely affect our business, results of operations and financial condition.

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Our operations involve the use of hazardous and toxic materials, and we must comply with environmental, health and safety laws and regulations, which can be expensive, and could adversely affect our business, results of operations and financial condition.

We are subject to a variety of federal, state, local and foreign laws and regulations relating to the protection of the environment or of human health and safety, including laws pertaining to the use, handling, storage, disposal and human exposure to hazardous and toxic materials. Liability under environmental laws can be imposed on a joint and several basis (which could result in an entity paying more than its fair share) and without regard to comparative fault, and environmental laws are likely to become more stringent over time, imposing greater compliance costs and increasing risks and penalties associated with violations, which could adversely affect our business, results of operations and financial condition.

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Our employees, independent distributors, independent contractors, suppliers and other third parties may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could expose us to liability and hurt our reputation.

We are exposed to the risk that our employees, independent distributors, independent contractors, suppliers and others may engage in fraudulent conduct or other illegal activity. Misconduct by these parties could include intentional, reckless and/or negligent conduct or disclosure of unauthorized activities to us that violates: (1) FDA laws and regulations, including those laws that require the reporting of true, complete and accurate information to the FDA, (2) manufacturing standards, (3) healthcare fraud and abuse laws, or (4) laws that require the true, complete and accurate reporting of financial, billing, and claims information or data. Activities subject to these laws also involve the improper use or misrepresentation of information obtained in the course of clinical trials, creating fraudulent data in our preclinical studies or clinical trials or illegal misappropriation of product, which could result in regulatory sanctions and cause serious harm to our reputation. It is not always possible to identify and deter misconduct by employees and other third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. Additionally, we are subject to the risk that a person or government could allege such fraud or other misconduct, even if none occurred.

If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and financial results, including, without limitation, the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, reputational harm, diminished profits and future earnings, and curtailment of our operations, any of which could adversely affect our business, results of operations and financial condition.

~~Risks related~~Regulatory reforms, such as the EU Medical Devices Regulation, could limit our ability to ~~intellectual property matters~~market and distribute our products after clearance, approval or certification is obtained and make it more difficult or costly for us to obtain regulatory clearance, approval or certification of any future products, which could adversely affect our competitive position and materially affect our business and financial results.

The ~~risk factors listed below describe~~EU Medical Devices Regulation, which became effective in May 2021, was adopted with the ~~risks~~aim of ensuring better protection of public health and patient safety. Among other things, the EU Medical Devices Regulation (“MDR”) imposed changes in the clinical evidence for medical devices, post-market clinical follow-up evidence, annual reporting of safety information for Class III products, and bi-annual reporting for Class II products, Unique Device Identification (“UDI”) for all products, submission of core data elements to a European UDI database prior to placement of a device on the market, reclassification of medical devices, and multiple other labeling changes.

While we face related to intellectual property matters. The companies who own certain of the products we distribute face similar risks with respect to intellectual property relating to such products. If such suppliers are ~~unable to protect their intellectual property rights, they may not be~~ able to continue marketing our currently CE-marked products in the Europe after the effective date of the EU MDR until the associated CE mark certificates expire, securing renewals of our existing CE mark certificates to allow for continued marketing of the product after CE mark expiration or obtaining certifications for new products requires the performance of certain conformity assessment procedures by a notified body. Notified bodies are independent organizations designated by EU member states which are responsible for, among other things, auditing and examining a product’s technical dossiers and the manufacturers’ quality system. If satisfied that the relevant product conforms to the relevant essential requirements, the notified body issues a certificate of conformity, which allows the manufacturer to place the CE mark on the device and for it to be marketed throughout the EU. Given the additional requirements of the MDR, the renewal of our existing CE mark certificates once they expire or obtaining certifications for new products is more challenging, time consuming and costly.

For example, technical documentation for certain of our products requiring recertification, such as our single injection HA treatment Durolane®, and EXOGEN Bone Stimulation System have been submitted to our notified body. While we are actively engaged with our notified body to renew the CE marks for these and our other products, CE mark renewals for these products are still pending. Our inability to timely review and obtain CE mark certificates for these and other of our products could prohibit their distribution and marketing in EU member states, which would adversely affect our business, prospects, financial condition and results of operations.

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Recent environmental regulatory actions regarding medical device sterilization facilities could result in disruptions in the supply ~~us with~~of certain of our products ~~which~~and could adversely affect our business, results of operations and financial condition.

Our disposable products that are used with our neXus® Ultrasonic Surgical Aspirator System require sterilization using ethylene oxide prior to sale. Ethylene oxide sterilization is a common and scientifically proven sterilization method that is widely used in the medical device industry. We contract with third-party sterilizers to perform this service. Concerns about unsafe levels of ethylene oxide emissions in the air around some sterilization facilities have resulted in certain state environmental protection agency actions against those facilities that have impacted available capacity for medical device manufacturers’ to sterilize their devices. For example, recently the operations of certain of our contracted sterilization providers were temporarily suspended by the supplier as a voluntary response to a state environmental agency investigation. While such actions have not disrupted our ability to supply products and the previously shut down facilities have been permitted to resume certain operations after implementation of increased emissions controls, it is uncertain as to whether these facilities will be shut down or experience capacity reductions related to environmental, health and safety concerns. The U.S. Environmental Protection Agency has proposed new rules governing emissions from ethylene oxide sterilization facilities and has announced their intent to finalize the rule during 2024. It is unknown whether any other sterilization facilities we may contract with in the future will experience reduced capacity related to new regulatory requirements or will be required to shut down, either temporarily related to upgrading emissions controls or permanently due to inability to comply with new environmental regulation. To the extent that our third-party sterilizers are unable to sterilize our products, whether due to these regulatory or other limitations (such as capacity, reductions in operations, or availability of materials for sterilization), we may be unable to transition to other third-party sterilizers, sterilizer locations or sterilization methods in a timely or cost effective manner, or at all, which could have a material adverse impact on our results of operations and financial condition.

We do not have redundant manufacturing facilities. Our other facilities and equipment would be costly to replace and could require substantial lead-time to repair or replace. Our facilities may be harmed or rendered inoperable by natural disasters (including events caused by or intensified by climate change) or man-made disasters, including, but not limited to, tornadoes, flooding, fire and power outages. Such disasters may render it difficult or impossible to manufacture and commercialize our products and conduct our research and development activities for new products, line extensions and expanded indications. The inability to perform those activities, combined with our limited inventory of supplies, components and finished product, may result in the inability to continue manufacturing or supplying our products during such periods and the loss of customers or harm to our reputation. Although we possess insurance for damage to our facilities and the disruption of our business, this insurance may not be sufficient to cover all of our potential losses and this insurance may not continue to be available to us on acceptable terms, or at all.

Risks related to intellectual property matters

Protection of our intellectual property rights may be difficult and costly, and our inability to protect our intellectual property could adversely affect our competitive position.

Our success depends in part on our ability to protect our proprietary rights to the technologies and inventions used in, or embodied by, our products. To protect our proprietary technology, we rely on patent protection, as well as a combination of copyright, trade secret and trademark laws, as well as nondisclosure, confidentiality and other contractual restrictions in our consulting and employment agreements. These legal means afford only limited protection, however, and may not adequately protect our rights or permit us to gain or keep any competitive advantage. Our existing confidentiality and/or invention assignment agreements with employees, contractors, and others who participate in IP development activities could be breached, or we may not enter into sufficient and adequate agreements with those individuals in the first instance, and we may not have adequate remedies for such breaches. Furthermore, we may be subject to, and forced to defend against, third-party claims of ownership to our intellectual property. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or rights to use, valuable intellectual property. Such an outcome could adversely affect our business, results of operations and financial condition. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

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~~Patents~~

The process of applying for patent protection is time-consuming and expensive and we cannot assure you that all of our patent applications will issue as patents or that, if issued, they will issue in a form that will be advantageous to us. The rights granted to us under our patents ~~including prospective rights sought in our pending patent applications,~~ may not be meaningful or provide us with any commercial advantage, and they could be opposed, contested, narrowed, or circumvented by our competitors or declared invalid or unenforceable in judicial or administrative proceedings. We may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. As a result, some of our products are not, and in the future may not be, protected by patents. We generally apply for patents in those countries where we intend to make, have made, use, offer for sale, or sell products and where we assess the risk of infringement to justify the cost of seeking patent protection. However, we do not seek protection in all countries where we sell products and we may not accurately predict all the countries where patent protection would ultimately be desirable. If we fail to timely file a patent application in any such country or major market, we may be precluded from doing so at a later date. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories in which we have patent protection but where such protection may not be sufficient to terminate infringing activities. Furthermore, we may not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the rights to patents licensed to us by ~~third-parties.~~third parties. Therefore, these patents and applications may not be prosecuted or enforced in a manner consistent with the best interests of our business. If such licensors fail to maintain such patents, or lose rights to those patents, the rights we have licensed may be reduced or eliminated, which could also adversely affect our business, results of operations and financial condition.

~~We own numerous issued patents and pending patent applications relating to our technology and products.~~ The rights granted to us under these patents, including prospective rights sought in our pending patent applications, could be opposed, contested or circumvented by our competitors or other third parties or declared invalid or unenforceable in judicial or administrative proceedings. If any of our patents are challenged, invalidated or legally circumvented by ~~third-parties,~~third parties, and if we do not own other enforceable patents protecting our products, competitors could market products and use processes that are substantially similar to, or superior to, or otherwise competitive with those of ours, and our business ~~will~~could suffer. In addition, the patents we own or have licenses to may not be of sufficient scope or strength to provide us with any meaningful protection or commercial advantage, and competitors may be able to design around our patents or develop products that provide outcomes comparable to those of ours without infringing on our ~~intellectual~~patent property rights.

~~Even if~~Further, our patents ~~are determined by the U.S. Patent and Trademark Office (USPTO) foreign patent office, or a court to be valid and enforceable, they~~ may not be drafted or interpreted sufficiently broadly to prevent others from marketing products and services similar to ours or designing around our patents. ~~For example, third parties may be able to develop products that are similar to ours but that are not covered by the claims of our patents. Third~~Third- parties may assert that we or ~~our licensors~~the inventors of any patents licensed to us were not the first to make the inventions covered by our issued patents or pending patent applications. The claims of our issued patents or patent applications when issued may not cover our commercial technology or the future products and services that we develop. We may not have freedom to operate unimpeded by the patent rights of others. ~~Third~~Third- parties may have dominating, blocking or other patents relevant to our technology of which we are not aware. In addition, because patent applications in the United States and many foreign jurisdictions are typically not published until 18eighteen months after the filing of certain priority documents (or, in some cases, are not published until they issue as patents) and because publications in the scientific literature often lag behind actual discoveries, we cannot be certain that others have not filed patent applications ~~for~~or published information which could invalidate our ~~technology~~patents or a portion of the claims of our ~~contemplated technology.~~patents. Any such patent applications may have priority over our patent applications or issued patents, which could require us to obtain rights from third parties to issued patents or pending patent applications covering such technologies to allow us to commercialize our technology. If another party has filed a U.S. patent application on inventions similar to ours, depending on when the timing of the filing date falls under certain patent laws, we may have to participate in a priority contest (such as an interference proceeding) declared by the USPTO to determine priority of invention in the United States. ~~There may be prior public disclosures of which we are not aware that could invalidate our patents or a portion of the claims of our patents.~~ Further, we may not develop additional proprietary technologies and, even if we do, they may not be patentable.

In addition, patent reform legislation may pass in the future that could lead to additional uncertainties and increased costs surrounding the prosecution, enforcement, and defense of our patents and applications. We may be subject to a third-party preissuance submission of prior art to the USPTO, or become involved in opposition, derivation, reexamination, inter partes review, post-grant review or other patent office proceedings or litigation, in the United States or elsewhere, challenging our patent rights. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, allow ~~third-parties~~third parties to commercialize our technology or products and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights.

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Moreover, the USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. In addition, periodic maintenance fees on issued patents often must be paid to the USPTO and foreign patent agencies over the lifetime of the patent. ~~While an unintentional lapse can in many~~In some cases, ~~be cured by payment of a late fee or by other means in accordance~~noncompliance with ~~the applicable rules, there are situations in which noncompliance~~such requirements can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Non-compliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. If we or the owners of any patent rights licensed to us fail to maintain the patents and patent applications covering our products or procedures, we may not be able to stop a competitor from marketing products that are the same as or similar to our products, which would adversely affect our business, results of operations and financial condition.

Filing, prosecuting and defending patents on our products in all countries throughout the world would be prohibitively expensive. The requirements for patentability may differ in certain countries, particularly developing countries, and the breadth of patent claims allowed can be inconsistent. In addition, the laws of some foreign countries may not protect our intellectual property rights to the same extent as laws in the United States. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories in which we have patent protection that may not be sufficient to terminate infringing activities.

~~Due to differences between foreign and U.S. patent laws, our patented intellectual property rights may not receive the same degree of protection in every jurisdiction in which we obtain patents.~~ Furthermore, we do not have patent rights in certain foreign countries in which a market may exist in the future. We may need to expend additional resources to protect or defend our intellectual property rights in these countries, and the inability to protect or defend the same could impair our brand or adversely affect the growth of our business internationally. For example, we may not be able to stop a competitor from marketing and selling in foreign countries products that are the same as, or similar to, or competitive with our products.

Patents have a limited lifespan, and the protection patents affords is limited. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest U.S. non-provisional filing date. Even if patents covering our products are obtained, once the patent life has expired for patents covering a product, we may be open to competition from competitive products and services. As a result, our patent portfolio may not provide us with sufficient rights to exclude others from commercializing product candidates similar or identical to ours.

Trademarks

We rely on our trademarks as one means to distinguish our products from the products of our competitors, and have registered or applied to register many of these trademarks. However, we may not be able to successfully secure trademark registrations for all such ~~applications.~~applications in each jurisdiction in which the product is marketed. Third-parties may oppose our trademark applications, or otherwise challenge our use of both registered and unregistered trademarks. In the event that our trademarks are successfully challenged, we could be forced to rebrand our products, which could result in loss of brand recognition and could require us to devote resources to advertising and marketing new brands. Our competitors may infringe our trademarks and we may not have adequate resources to enforce our trademarks. Over the long term, if we are unable to establish name recognition based on our trademarks, then we may not be able to compete effectively and our business, results of operations and financial condition may be adversely affected.

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Trade secrets and know-how

We may not be able to prevent the unauthorized disclosure or use of our technical knowledge or other trade secrets by consultants, vendors, former employees or current employees, despite the existence generally of confidentiality agreements and other contractual restrictions. Monitoring unauthorized uses and disclosures of our intellectual property is difficult, and we do not know whether the steps we have taken to protect our intellectual property will be effective.

Moreover, our competitors may independently develop equivalent knowledge, methods and know-how. For example, the FDA, as part of its Transparency Initiative, is currently considering whether to make additional information publicly available on a routine basis, including information that we may consider to be trade secrets or other proprietary information, and it is not clear at the present time how the FDA’s disclosure policies may change in the future, if at all. Our competitors could use any of the information we may be required to disclose by the FDA to develop independently technology similar to ~~those of~~ ours. Competitors could purchase our products and attempt to replicate some or all of the competitive advantages we derive from our development efforts, willfully infringe our intellectual property rights, design around our protected technology or develop their own competitive technologies that fall outside of our intellectual property rights. If our intellectual property is not adequately protected so as to protect our market against competitors’ products and methods, our competitive position could be adversely affected, as could our business, results of operations and financial condition.

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If we were to enforce a claim that a third-party had illegally obtained, misappropriated or was using our trade secrets, it would be expensive and time consuming, and the outcome would be unpredictable. In addition, courts outside the United States may be less willing to protect trade secrets. If any of the technology or information that we protect as trade secrets were to be independently developed by a competitor, we would have no right to prevent them from using that technology or information to compete with us. Misappropriation or unauthorized disclosure of our trade secrets could impair our competitive position and may adversely affect our business, results of operations and financial condition. Additionally, if the steps taken to maintain our trade secrets are deemed inadequate, we may have insufficient recourse against third parties for misappropriating the trade secret.

We depend on certain technologies that are licensed to us. We do not control the intellectual property rights covering these technologies and any loss of our rights to these technologies or the rights licensed to us could prevent us from selling our products, which could adversely impact our business, results of operations and financial condition.

We are a party to license agreements under which we are granted rights to intellectual property that is ~~important~~material to our business, and we may need to enter into additional license agreements in the future. We rely on these licenses in order to be able to use and sell various proprietary technologies that are material to our business, as well as technologies which we intend to use in our future commercial activities. Our rights to use these technologies and the inventions claimed in the licensed patents are subject to the continuation of and our compliance with the terms of those licenses. Our existing license agreements impose, and we expect that future license agreements will impose on us, various diligence obligations, payment of milestones or royalties and other obligations. If we fail to comply with our obligations under these agreements, or we are subject to a bankruptcy, the licensor may have the right to terminate the license, in which case we would not be able to market products covered by the license, which would adversely affect our business, results of operations and financial condition.

As we have done previously, we may need to obtain licenses from third parties to advance our research or allow commercialization of our products and technologies. We may fail to obtain any of these licenses on commercially reasonable terms, if at all. Even if we are able to obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. In the event that we are not able to acquire a license, we may be required to expend significant time and resources to develop or license replacement technology. If we are unable to do so, we may be unable to develop or commercialize the affected products and technologies, which could materially harm our business. In addition, the third parties owning such intellectual property rights could seek either an injunction prohibiting our sales, or, with respect to our sales, an obligation on our part to pay royalties or other forms of compensation and damages.

In some cases, we may not have the right to control the prosecution, maintenance, or filing of the patents that are licensed to us, or the enforcement of these patents against infringement by third parties. Some of our patents and patent applications were not filed by us, but were either acquired by us or are licensed from third parties. Thus, these patents and patent applications were not drafted by us or our attorneys, and we did not control or have any input into the prosecution of these patents and patent applications prior to our acquisition of, or our entry into a license with respect to, such patents and patent applications. We cannot be certain that the drafting or prosecution of the patents and patent applications licensed to us will result or has resulted in valid and enforceable patents. Further, we do not always retain complete control over our ability to enforce our licensed patent rights against third-party infringement. In those cases, we cannot be certain that our licensor or other ultimate owner of such patents will elect to enforce these patents to the extent that we would choose to do so, or in a way that will ensure that we retain the rights we currently have under our license. If our licensor or other ultimate owners of such patents fails to properly enforce the patents subject to our license in the event of third-party infringement, our ability to retain our competitive advantage with respect to our products may be materially and adversely affected.

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Licensing of intellectual property is an important part of our business and involves complex legal, business and scientific issues. Disputes may arise between us and our licensors regarding intellectual property that is subject to a license agreement, including:

•the scope of rights granted under the license agreement and other interpretation-related issues;

•whether and the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the license agreement;

•our right to sublicense patent and other rights to third parties under collaborative development relationships;

•our diligence obligations with respect to the use of the licensed technology in relation to our development and commercialization of our products and technologies, and what activities satisfy those diligence obligations; and

•the ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our partners.

In addition, we may become the owner of intellectual property that was obtained through assignments which may be subject to re-assignment back to the original assignor upon our failure to prosecute or maintain such intellectual property, upon our breach of the agreement pursuant to which such intellectual property was assigned, or upon our bankruptcy.

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If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on acceptable terms, or if intellectual property is re-assigned back to the original assignor, we may be unable to successfully develop and commercialize the affected products and technologies.

Our intellectual property agreements with third parties may be subject to disagreements over contract interpretation, which could narrow the scope of our rights to the relevant intellectual property or technology.

Certain provisions in our intellectual property agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could affect the scope of our rights to the relevant intellectual property or technology, or affect financial or other obligations under the relevant agreement, either of which could adversely affect our business, results of operations and financial condition.

In addition, while it is our policy to require our employees and contractors who may be involved in the conception or development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact conceives or develops intellectual property that we regard as our own. Our assignment agreements may not be self-executing or may be breached, and we may be forced to bring claims against third parties, or defend claims they may bring against us, to determine the ownership of what we regard as our intellectual property.

We may in the future be a party to patent and other intellectual property litigation and administrative proceedings that could be costly and could interfere with our ability to successfully market our products.

The medical device industry has been characterized by frequent and extensive intellectual property litigation and is highly competitive. Our competitors or other patent holders may assert that our products and/or the methods employed in our products are covered by their patents or that we are infringing, misappropriating, or misusing their trademark, copyright, trade secret, and/or other proprietary rights.

If our products or methods are found to infringe, we could be prevented from manufacturing or marketing our products. In the event that we become involved in such a dispute, we may incur significant costs and expenses and may need to devote resources to resolving any claims, which would reduce the cash we have available for operations and may be distracting to management and other employees, including those involved in the development of intellectual property. We do not know whether our competitors or potential competitors have applied for, will apply for, or will obtain patents that will prevent, limit or interfere with our ability to make, use, sell, import or export our products. Because patent applications can take many years to issue, third parties may have currently pending patent applications which may later result in issued patents that our products and technologies may infringe, or which such third parties claim are infringed by the use of our products or technologies. There is no guarantee that patents will not issue in the future from currently pending applications that may be infringed by our technology or products. In addition, identification of third-party patent rights that may be relevant to our technology is difficult because patent searching is imperfect due to differences in terminology among patents, incomplete databases, and difficulty in assessing the meaning of patent claims. ~~Moreover, as the medical device industry expands and more patents are issued in this area, the risk increases that we may be subject to claims of infringement of the patent rights of third parties.~~ We cannot assure you that we will prevail in such actions, or that other actions alleging misappropriation or misuse by us of third-party trade secrets or infringement by us of third-party patents, copyrights, trademarks or other rights or challenging the validity of our patents, copyrights, trademarks or other rights will not be asserted against us. ~~Competing products may also be sold in other countries in which our patent coverage might not exist or be as strong. If we lose a foreign patent lawsuit alleging our infringement~~

Table of ~~a competitor’s patents, we could be prevented from marketing our products in one or more foreign countries.~~Contents

We may also initiate litigation against ~~third-parties~~third parties to enforce our patent and proprietary rights or to determine the scope, enforceability or validity of the proprietary rights of others. Our intellectual property has not been tested in litigation. If we initiate litigation to protect our rights, we run the risk of having our patents and other proprietary rights invalidated, canceled or narrowed, which could undermine our competitive position. Further, if the scope of protection provided by our patents or patent applications or other proprietary rights is threatened or reduced as a result of litigation, it could discourage third parties from entering into collaborations with us that are important to the commercialization of our products.

We may be subject to ownership disputes relating to intellectual property, including disputes arising from conflicting obligations of consultants or others who are involved in developing our product. Furthermore, if a license to necessary technology is terminated, the licensor may initiate litigation claiming that our processes or products infringe or misappropriate its patent or other intellectual property rights and/or that we breached our obligations under the license agreement, and we and our collaborators would need to defend against such proceedings.

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These lawsuits and proceedings, regardless of merit, are time-consuming and expensive to initiate, maintain, defend or settle, and could divert the time and attention of managerial and technical personnel, which could materially adversely affect our business, results of operations and financial condition. Any such claim could also force use to do one or more of the following:

•incur substantial monetary liability for infringement or other violations of intellectual property rights, which we may have to pay if a court decides that the product, service, or technology at issue infringes or violates the third-party’s rights, and if the court finds that the infringement was willful, we could be ordered to pay treble damages and the third-party’s attorneys’ fees;

•pay substantial damages to our customers or end users to discontinue use or replace infringing technology with non-infringing technology;

•stop manufacturing, offering for sale, selling, using, importing, exporting or licensing the product or technology incorporating the allegedly infringing technology or stop incorporating the allegedly infringing technology into such product, service, or technology;

•obtain from the owner of the infringed intellectual property right a license, which may require us to pay substantial upfront fees or royalties to sell or use the relevant technology and which may not be available on commercially reasonable terms, or at all;

•redesign our products, services, and technology so they do not infringe or violate the third-party’s intellectual property rights, which may not be possible or may require substantial monetary expenditures and time;

•enter into cross-licenses with our competitors, which could weaken our overall intellectual property position;

•lose the opportunity to license our technology to others or to collect royalty payments based upon successful protection and assertion of our intellectual property against others;

•find alternative suppliers for non-infringing products and technologies, which could be costly and create significant delay; or

•relinquish rights associated with one or more of our patent claims, if our claims are held invalid or otherwise unenforceable.

Some of our competitors may be able to sustain the costs of complex intellectual property litigation more effectively than we ~~can because they have substantially greater resources.~~can. In addition, intellectual property litigation, regardless of its outcome, may cause negative publicity, adversely impact prospective customers, cause product shipment delays, divert the time, attention and resources of management, or prohibit us from manufacturing, marketing or otherwise commercializing our products, services and technology. Any uncertainties resulting from the initiation and continuation of any litigation could adversely affect our ability to raise additional funds or otherwise adversely affect our business, results of operations and financial condition.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. In addition, during the course of this kind of litigation, there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If these results are perceived to be negative, the price of our Class A common stock could be adversely affected.

In addition, certain of our agreements with suppliers, distributors, customers and other entities with whom we do business may require us to defend or indemnify these parties to the extent they become involved in infringement claims relating to our technologies or products, or rights licensed to them by us. ~~We could also voluntarily agree to defend or indemnify third parties in instances where we are not obligated to do so if we determine it would be important to our business relationships.~~ If we are required or agree to defend or indemnify any of these third parties in connection with any infringement claims, we could incur significant costs and expenses that could adversely affect our business, results of operation and financial condition.

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We may be subject to damages resulting from claims that we or our employees have wrongfully used or disclosed alleged trade secrets of our competitors or former employers or are in breach of non-competition or non-solicitation agreements with our competitors or former employers.

We could in the future be subject to claims that we or our employees have inadvertently or otherwise used or disclosed alleged trade secrets or other proprietary information of former employers or competitors. In addition, we may in the future be subject to claims that we caused an employee to breach the terms of his or her non-competition or non-solicitation agreement. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial costs and could be a distraction to management. If our defense to those claims fails, in addition to paying monetary damages, a court could prohibit us from using technologies or features that are essential to our products, if such technologies or features are found to incorporate or be derived from the trade secrets or other proprietary information of the competitors or former employers. An inability to incorporate technologies or features that are important or essential to our products could adversely affect our business, results of operations and financial condition, and may prevent us from selling our products. In addition, we may lose valuable intellectual property rights or personnel. Any litigation or the threat thereof may adversely affect our ability to hire employees or contract with independent sales representatives. A loss of key personnel or their work product could hamper or prevent our ability to commercialize our products, which could adversely affect our business, results of operations and financial condition.

Any product candidates that we develop as biologics subject to the BLA pathway may be subject to competition sooner than anticipated.

We expect to submit a BLA to allow for the marketing of MOTYS following the expiration of FDA’s enforcement discretion period for certain HCT/Ps. See “—Risks related to government regulation—Our HCT/P products are subject to extensive government regulation and our failure to comply with these requirements could cause our business to suffer. These products could be subject to significant additional regulatory requirements.” The Biologics Price Competition and Innovation Act of 2009 ~~(BPCIA)~~(“BPCIA”) was enacted as part of the Affordable Care Act to establish an abbreviated pathway for the approval of biosimilar and interchangeable biological products. The regulatory pathway establishes legal authority for the FDA to review and approve biosimilar biologics, including the possible designation of a biosimilar as “interchangeable” based on its similarity to an approved biologic. Under the BPCIA, an application for a biosimilar product cannot be approved by the FDA until 12 years after the reference product was approved under a BLA. The law is complex and is still being interpreted and implemented by the FDA. As a result, its ultimate impact, implementation, and meaning are subject to uncertainty. While it is uncertain when processes intended to implement BPCIA may be fully adopted by the FDA, any of these processes could have a material adverse effect on the future commercial prospects for our biological products.

We believe that any of the product candidates we develop that is approved in the United States as a biological product under a BLA should qualify for the 12-year period of exclusivity. However, there is a risk that this exclusivity could be shortened due to congressional action or otherwise, or that the FDA will not consider the subject product candidates to be reference products for competing products, potentially creating the opportunity for generic competition sooner than anticipated. Moreover, the extent to which a biosimilar, once approved, will be substituted for any one of the reference products in a way that is similar to traditional generic substitution for non-biological products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing.

In addition, the approval of a biologic product biosimilar to one of our products could have a material adverse impact on our business as it may be significantly less costly to bring to market and may be priced significantly lower than our products.

Intellectual property rights do not necessarily address all potential threats to our business.

Once granted, patents may remain open to invalidity challenges including opposition, interference, re-examination, post-grant review, inter partes review, nullification or derivation action in court or before patent offices or similar proceedings for a given period after allowance or grant, during which time third parties can raise objections against such grant. In the course of such proceedings, which may continue for a protracted period of time, the patent owner may be compelled to limit the scope of the allowed or granted claims thus attacked, or may lose the allowed or granted claims altogether.

In addition, the degree of future protection afforded by our intellectual property rights is uncertain because even granted intellectual property rights have limitations, and may not adequately protect our business, provide a barrier to entry against our competitors or potential competitors or permit us to maintain our competitive advantage. Moreover, if a third-party has intellectual property rights that cover the practice of our technology, we may not be able to fully exercise or extract value from our intellectual property rights.

The following examples are illustrative:

•others may be able to develop and/or practice technology that is similar to our technology or aspects of our technology, but that are not covered by the claims of the patents that we own or control, assuming such patents have issued or do issue;

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•we, ~~or our licensors~~the inventors of any in-licensed patent rights, or any future strategic partners might not have been the first to conceive or reduce to practice the inventions covered by the issued patent or pending patent application that we own or have exclusively licensed;

•we, ~~or our licensors~~the investors of any in-licensed patent rights, or any future strategic partners might not have been the first to file patent applications covering certain of our inventions;

•others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights;

•our pending patent applications may not lead to issued patents;

•issued patents that we own or exclusively license may not provide us with any competitive advantage, or may be held invalid or unenforceable, as a result of legal challenges by our competitors;

•our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets;

•third parties performing manufacturing or testing for us using our products or technologies could use the intellectual property of others without obtaining a proper license;

•parties may assert an ownership interest in our intellectual property and, if successful, such disputes may preclude us from exercising exclusive rights over that intellectual property;

•we may not develop or in-license additional proprietary technologies that are patentable;

•we may not be able to obtain and maintain necessary licenses on commercially reasonable terms, or at all; and

•the patents of others may adversely affect our business.

Should any of these events occur, they could adversely affect our business, results of operations and financial condition.

Risks related to our organizational structure and the Tax Receivable Agreement

Our principal asset is our interest in BV LLC, and, accordingly, we depend on distributions from BV LLC to pay our taxes and expenses, including payments under the Tax Receivable Agreement. BV LLC’s ability to make such distributions may be subject to various limitations and restrictions.

We are a holding company and have no material assets other than our ownership of LLC Interests of BV LLC. As such, we have no independent means of generating net sales or cash flow, and our ability to pay our taxes and operating expenses or declare and pay dividends in the future, if any, will be dependent upon the financial results and cash flows of BV LLC and its subsidiaries and distributions we receive from BV LLC. There can be no assurance that BV LLC and its subsidiaries will generate sufficient cash flow to distribute funds to us or that applicable state law and contractual restrictions, including negative covenants in our debt instruments, will permit such distributions.

BV LLC will continue to be treated as a partnership for U.S. federal income tax purposes and, as such, generally will not be subject to any entity-level U.S. federal income tax. Instead, taxable income will be allocated to holders of LLC Interests, including us. Accordingly, we will incur income taxes on our allocable share of any net taxable income of BV LLC. Under the terms of the Bioventus LLC Agreement, BV LLC will be obligated to make tax distributions to holders of LLC Interests, including us, subject to any limitations or restrictions in our debt arrangements. In addition to tax expenses, we will also incur expenses related to our operations, including payments under the Tax Receivable Agreement ~~(TRA)~~(“TRA”), which we expect could be significant. See Part III, Item 13. Certain Relationships and Related Transactions, and Director Independence-Tax Receivable Agreement in this Annual Reportfor further information. We intend, as its managing member, to cause BV LLC to make cash distributions to the owners of LLC Interests, including us, in an amount sufficient to (i) fund their or our tax obligations in respect of allocations of taxable income from BV LLC and (ii) cover our operating expenses, including payments under the TRA. However, BV LLC’s ability to make such distributions may be subject to various limitations and restrictions, such as restrictions on distributions that would either violate any contract or agreement to which BV LLC is then a party, including debt agreements, or any applicable law, or that would have the effect of rendering BV LLC insolvent. If we do not have sufficient funds to pay taxes or other liabilities or to fund our operations, we may have to borrow funds, which could materially adversely affect our liquidity and financial condition and subject us to various restrictions imposed by any such lenders. To the extent that we are unable to make payments under the TRA for any reason, such payments generally will be deferred and will accrue interest until paid; provided, however, that nonpayment for a specified period may constitute a material breach of a material obligation under the TRA and therefore accelerate payments due under the TRA. ~~See~~ ~~Part III, Item 13. Certain Relationships and Related Transactions, and Director Independence—Tax Receivable Agreement.~~ In addition, if BV LLC does not have sufficient funds to make distributions, our ability to declare and pay cash dividends will also be restricted or impaired.

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The TRA with the Continuing LLC Owner requires us to make cash payments to it in respect of certain tax benefits to which we are or may become entitled, and we expect that the payments we will be required to make could be significant.

We are a party to a TRA with ~~the~~ Smith & Nephew, Inc. (“Continuing LLC ~~Owner.~~Owner”). Under the TRA, we are required to make cash payments to the Continuing LLC Owner equal to 85% of the tax benefits, if any, that we actually realize, or in certain circumstances are deemed to realize, as a result of (1) increases in the tax basis of assets of BV LLC resulting from (a) any future redemptions or exchanges of LLC Interests ~~described under~~ ~~Part III, Item 13. Certain Relationships and Related Party Transactions, and Director of Independence—Bioventus LLC Agreement—LLC Interest Redemption Right,~~ and (b) certain distributions (or deemed distributions) by BV LLC and (2) certain other tax benefits arising from payments under the TRA. We expect the amount of the cash payments that we will be required to make under the TRA will be significant. The actual amount and timing of any payments under the TRA will vary depending upon a number of factors, including the timing of redemptions or exchanges by the Continuing LLC Owner, the amount of gain recognized by the Continuing LLC Owner, the amount and timing of the taxable income we generate in the future, and the federal tax rates then applicable. Any payments made by us to the Continuing LLC Owner under the TRA will generally reduce the amount of overall cash flow that might have otherwise been available to us. To the extent that we are unable to make timely payments under the TRA for any reason, the unpaid amounts will be deferred and will accrue interest until paid by us. Furthermore, our obligation to make payments under the TRA could make us a less attractive target for an acquisition, particularly in the case of an acquirer that cannot use some or all of the tax benefits that are the subject of the TRA.

Payments under the TRA are not conditioned on the Continuing LLC Owner’s continued ownership of LLC Interests or our Class A common stock. ~~For more information, see~~ ~~Part III, Item 13.Certain Relationships and Related Party Transactions, and Director of Independence~~—Tax Receivable Agreement. Assuming no material changes in the relevant tax laws and that we earn sufficient taxable income to realize all tax benefits that are subject to the TRA, we expect that the tax savings associated with future redemptions or exchanges of all remaining LLC Interests owned by the Continuing LLC Owner pursuant to the Bioventus LLC Agreement as described above, would aggregate to approximately $73.8 million over 20 years from the date of our IPO based on the IPO price of $13.00 per share of our Class A common stock and assuming all future redemptions or exchanges would occur by February 11, 2022. Under such scenario, assuming future payments are made on the date each relevant tax return is due, without extensions, we would be required to pay approximately 85% of such amount, or approximately $62.7 million, over the 20-year period from February 11, 2021. The ~~actual~~ amounts we will be required to pay under the TRA will depend on, among other things, the timing of subsequent redemptions or exchanges of LLC Interests by the Continuing LLC Owner, the price of our shares of Class A common stock at the time of each such redemption or exchange, and the amounts and timing of our future taxable income, and may be significantly different from the amounts described in the preceding sentence. Additionally, in certain cases such payments may be accelerated or significantly exceed the actual benefits we realize. See “—In certain cases, payments under the TRA to the Continuing LLC Owners may be accelerated or significantly exceed the actual benefits we realize in respect of tax attributes subject to the TRA.”

Our organizational structure, including the TRA, confers certain tax benefits upon the Continuing LLC Owner that may not benefit Class A common stockholders to the same extent as they will benefit the Continuing LLC Owner.

~~Our~~Moreover, our organizational structure, including the TRA, confers certain tax benefits upon the Continuing LLC Owner that may not benefit the holders of our Class A common stock to the same extent as they will benefit the Continuing LLC Owner. ~~We entered into~~Refer to risk factor—In certain cases, payments under the TRA ~~with BV LLC and the Continuing LLC Owner that provides for our payment~~ to the Continuing LLC ~~Owner of 85% of~~Owners may be accelerated or significantly exceed the ~~amount~~actual benefits we realize in respect of tax ~~benefits, if any, that we actually realize (or in some circumstances are deemed~~attributes subject to ~~realize) as a result of (i) increases in~~ the ~~tax basis of assets of BV LLC resulting from (a) any future redemptions or exchanges of LLC Interests described under~~ ~~Part III, Item 13. Certain Relationships and Related Transactions, and Director Independence~~—Bioventus LLC Agreement—LLC Interest Redemption Right, and (b) certain distributions (or deemed distributions) by BV LLC and (ii) certain other tax benefits arising from payments under the TRA. Although Bioventus will retain 15% of such tax benefits, this and other aspects of our organizational structure may adversely impact the future trading market for the Class A common stock.TRA.

In certain cases, payments under the TRA to the Continuing LLC Owner may be accelerated or significantly exceed the actual benefits we realize in respect of the tax attributes subject to the ~~TRA~~TRA.

The TRA provides that if (i) we materially breach any of our material obligations under the TRA, (ii) we undertake certain mergers, ~~asset~~assets sales, other forms of business combinations or other changes of control ~~were to occur on or before December 31, 2021~~ or (iii) we elect an early termination of the TRA, then our obligations or our successor’s obligations under the TRA to make payments thereunder would be based on certain assumptions, including an assumption that we would have sufficient taxable income to fully utilize all potential future tax benefits that are subject to the TRA (or, in the case of certain mergers, ~~asset~~assets sales, other forms of business combinations or other ~~changes~~charges of control, ~~occurring after December 31, 2021,~~ that we would have taxable income at least equal to four times the highest taxable income in any of the four fiscal quarters ending prior to the closing date of such transaction (increased by 10% for each taxable year beginning with the second taxable year following ~~such~~the closing date)).

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As a result of the foregoing, (i) we could be required to make payments under the TRA that are greater than the specified percentage of the actual benefits we ultimately realize in respect of the tax benefits that are subject to the TRA and (ii) if we materially breach any of our material obligations under the TRA or if we elected to terminate the TRA early, we would be required to make an immediate cash payment equal to the present value of the anticipated future tax benefits that are the subject of the TRA, which payment may be made significantly in advance of the actual realization, if any, of such future tax benefits.

In these situations, our obligations under the TRA could have a substantial negative impact on our liquidity and could have the effect of delaying, deferring or preventing certain mergers, asset sales, other forms of business combinations or other changes of control. For example, had we elected to terminate the TRA immediately following our IPO, assuming no material changes in the relevant tax laws or tax rates and that we earn sufficient taxable income to realize all tax potential benefits that are subject to the TRA, we estimate that the aggregate of termination payments would have been approximately $54.3 million based on our IPO price of $13.00 per share of our Class A common stock, and assuming LIBOR were to be 0.36%. There can be no assurance that we will be able to fund or finance our obligations under the TRA. We may elect to completely terminate the TRA early only with the written approval of a majority of our directors other than any directors that have been appointed or designated by the Continuing LLC Owner or any of such person’s affiliates.

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We may make payments to the Continuing LLC Owner under the TRA that exceed the tax benefits actually realized by us in the event that any tax benefits are disallowed by a taxing authority.

Payments under the TRA are be based on the tax reporting positions that we determine, and the Internal Revenue Service ~~(IRS)~~(“IRS”) or another tax authority may challenge all or part of the tax basis increases, as well as other related tax positions we take, and a court could sustain such challenge. Pursuant to the TRA, the Continuing LLC Owner is required to reimburse us for any cash payments previously made to it under the TRA in the event that any tax benefits actually realized by us and for which payment has been made under the TRA are subsequently challenged by a taxing authority and are ultimately disallowed. In addition, but without duplication of any amounts previously reimbursed by the Continuing LLC Owner, any excess cash payments made by us to the Continuing LLC Owner will be netted against any future cash payments that we might otherwise be required to make to the Continuing LLC Owner under the terms of the TRA. However, we might not determine that we have effectively made an excess cash payment to the Continuing LLC Owner for a number of years following the initial time of such payment. Moreover, there can be no assurance that any excess cash payments for which the Continuing LLC Owner has a reimbursement obligation under the TRA will be repaid to us. As a result, payments could be made under the TRA in excess of the tax savings that we realize in respect of the tax attributes with respect to the Continuing LLC Owner that are the subject of the TRA.

Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our results of operations and financial condition.

We are subject to taxes by the U.S. federal, state, local and foreign tax authorities, and our tax liabilities will be affected by the allocation of expenses to differing jurisdictions. Our future effective tax rates could be subject to volatility or adversely affected by a number of ~~factors, including:~~

•~~changes in the valuation of our deferred tax assets and liabilities;~~

•~~expected timing and amount of the release of any tax valuation allowances;~~

•~~tax effects of equity-based compensation;~~

•~~changes in tax laws, regulations or interpretations thereof; or~~

•~~future earnings being lower than anticipated in countries where we have lower statutory tax rates and higher than anticipated earnings in countries where we have higher statutory tax rates.~~

factors. In addition, we may be subject to audits of our income, sales and other transaction taxes by U.S. federal, state, local and foreign taxing authorities. Outcomes from these audits could adversely affect our business, results of operations and financial condition.

If we were deemed to be an investment company under the Investment Company Act of 1940, as amended, or the 1940 Act, as a result of our ownership of BV LLC, applicable restrictions could make it impractical for us to continue our business as contemplated and could adversely affect our business, results of operations and financial condition.

Under Sections 3(a)(1)(A) and (C) of the 1940 Act, a company generally will be deemed to be an “investment company” for purposes of the 1940 Act if (i) it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities or (ii) it engages, or proposes to engage, in the business of investing, reinvesting, owning, holding or trading in securities and it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. We do not believe that we are an “investment company,” as such term is defined in either of those sections of the 1940 Act.

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As the sole managing member of BV LLC, we control and operate BV LLC. On that basis, we believe that our interest in BV LLC is not an “investment security” as that term is used in the 1940 Act. However, if we were to cease participation in the management of BV LLC, our interest in BV LLC could be deemed an “investment security” for purposes of the 1940 Act.

We and BV LLC intend to conduct our operations so that we will not be deemed an investment company. However, if we were to be deemed an investment company, restrictions imposed by the 1940 Act, including limitations on our capital structure and our ability to transact with affiliates, could make it impractical for us to continue our business as contemplated and could adversely affect our business, results of operations and financial condition.

Bioventus is controlled by the Original LLC Owners, whose interests may differ from those of our public stockholders.

As of ~~March 22, 2021,~~December 31, 2023, the Original LLC Owners control approximately ~~83.8%~~41.8% of the combined voting power of our common stock through their ownership of both Class A common stock and Class B common stock. The Original LLC Owners will, for the foreseeable future, have the ability to substantially influence us through their ownership position over corporate management and affairs, and will be able to control virtually all matters requiring stockholder approval. The Original LLC Owners are able to, subject to applicable law, and the voting arrangements, ~~described in~~ ~~Part III, Item 13. Certain Relationships and Related Transactions, and Director Independence~~, elect a majority of the members of our Board, control actions to be taken by us and our Board, including amendments to our certificate of incorporation and bylaws and approval of significant corporate transactions, including mergers and sales of substantially all of our assets. The directors so elected will have the authority, subject to the terms of our indebtedness and applicable rules and regulations, to issue additional stock, implement stock repurchase programs, declare dividends and make other decisions. It is possible that the interests of the Original LLC Owners may in some circumstances conflict with our interests and the interests of our other stockholders, including you. For example, the Continuing LLC Owner may have different tax positions from us, especially in light of the TRA that could influence our decisions regarding whether and when to dispose of assets, whether and when to incur new or refinance existing indebtedness, and whether and when Bioventus should terminate the TRA and accelerate its obligations thereunder. In addition, the determination of future tax reporting positions and the structuring of future transactions may take into consideration the Continuing LLC Owner’s tax or other considerations, which may differ from the considerations of us or our other stockholders.

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Risks ~~Related~~related to our ownership of our Class A common stock

~~In the past, we identified material weaknesses in~~Our stock price may be volatile or may decline regardless of our ~~internal control over financial reporting. If we experience additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, we~~operating performance, and you may not be able to ~~accurately or timely requirements applicable to public companies, which may adversely affect investor confidence in us, and, as a result, the market price~~resell your shares of ~~our~~ Class A common ~~stock.~~stock at or above the price at which you purchase them.

~~Ensuring that we have adequate internal financial~~The stock market historically has experienced extreme price and ~~accounting controls and procedures in place so that we can produce accurate financial statements on~~volume fluctuations. As a timely basis is a costly and time-consuming effort that needs to be re-evaluated frequently. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliabilityresult of ~~financial reporting and the preparation of financial statements in accordance with GAAP.~~

A material weakness is a deficiency, or combination of deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our financial statements willthis volatility, you might not be ~~prevented~~able to sell your Class A common stock common stock at or ~~detected on a timely basis.~~

~~In connection with~~above the ~~audit of~~price at which you purchase it. From our ~~consolidated financial statements as of and for~~initial public offering in February 2021 through February 27, 2024, the year ended December 31, 2020, we determined that we no longer have a material weakness associated with the proper processing of Exogen reimbursement claims in accordance with regulations and contractual terms. We implemented measures designed to improve our internal control over financial reporting to remediate such material weakness. These efforts included:

•the augmentation, reorganization and training of our prescription to cash staff, which includes our direct sales team, order management personnel, patient financial services personnel and reimbursement services and accounts receivable personnel, regarding key aspects of regulations and requirements and how to deal with inconsistencies within patient medical records;

•~~implementation of monthly sales order testing on sampling basis by our Compliance department including a review of medical necessity;~~

•establishment of a cross functional governance committee, reporting to an executive steering committee to review and approve our Exogen Medicare policy and oversee future Exogen policy and process interpretations and changes; and

•~~implementation of a checklist to be completed for each Medicare order to ensure compliance with our policy for Medicare claims and then further automating this checklist.~~

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We cannot assure you that the measures we have taken to date, and actions we may take in the future, will be sufficient to prevent or avoid potential future material weaknesses. If we identify any additional material weaknesses, the accuracy and timing of our financial reporting may be adversely affected, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence in our financial reporting, and the marketper share trading price of our Class A common stock ~~may decline~~has been as ~~a result. We could also become subject~~high as $19.94 and as low as $0.80. It might continue to ~~investigations by~~fluctuate significantly in response to various factors, some of which are beyond our control. These factors include:

•our operating performance and the ~~SEC or other regulatory authorities, which could require additional financial and management resources.~~operating performance of similar companies;

~~Failure to establish and maintain effective internal controls in accordance with Section 404~~•the overall performance of the ~~Sarbanes-Oxley Act could adversely affect our business and stock price.~~equity markets;

~~We are required to comply with the SEC’s rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act, which require management to certify financial and other information~~•any major change in our ~~quarterly~~management;

•changes in laws or regulations relating to our products;

•announcements by us or our competitors of acquisitions, business plans, or commercial relationships;

•threatened or actual litigation;

•publication of research reports or news stories about us, our competitors, or our industry, or positive or negative recommendations;

•general political and ~~annual reports and provide an annual management report on the effectiveness~~economic conditions.

Additionally, securities class action litigation has often been instituted against companies following periods of internal controls over financial reporting. Though we will be required to disclose changes made in our internal controls and procedures on a quarterly basis, we will not be required to make our first annual assessment of our internal control over financial reporting pursuant to Section 404 until the year following our first annual report required to be filed with the SEC. However, as an emerging growth company, our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 until the later of the year following our first annual report required to be filed with the SEC or the date we are no longer an emerging growth company. At such time, our independent registered public accounting firm may issue a report that is adversevolatility in the ~~event it is not satisfied with~~overall market and in the ~~level at which our controls are documented, designed or operating.~~

~~To comply with the requirements~~market price of ~~being~~ a public company, we have undertaken various actions, and may need to take additional actions, such as implementing new internal controls and procedures and hiring additional accounting or internal audit staff. Testing and maintaining internal controls cancompany’s securities. This litigation, if instituted against us, could result in substantial costs, divert our management’s attention ~~from other matters that are important to the operation of~~and resources, and harm our ~~business. Additionally, when evaluating our internal controls over~~business, operating results, and financial reporting, we may identify material weaknesses that we may not be able to remediate in time to meet the applicable deadline imposed upon us for compliance with the requirements of Section 404. If we identify any material weaknesses in our internal controls over financial reporting or are unable to comply with the requirements of Section 404 in a timely manner or assert that our internal controls over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal controls over financial reporting once we are no longer an emerging growth company, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our Class A common stock could be adversely affected, and we could become subject to investigations by the stock exchange on which our securities are listed, the SEC or other regulatory authorities, which could require additional financial and management resources.

We are a “controlled company” within the meaning of Nasdaq listing standards and, as a result, will qualify for, and intend to rely on, exemptions from certain corporate governance requirements. You will not have the same protections afforded to stockholders of companies that are subject to such requirements.

The Former LLC Owners and Continuing LLC Owner (Voting Group), which holds Class A common stock and Class B common stock representing approximately 83.8% of the combined voting power of our common stock, entered into a Stockholders Agreement (Stockholders Agreement) (see ~~Part III, Item 13. Certain Relationships and Related Party Transactions, and Director of Independence~~). For a period of time, the parties to the Stockholders Agreement will agree to vote their shares of Class A common stock and Class B common stock in favor of the election of the nominees of certain members of the Voting Group to our Board upon their nomination by the nominating and corporate governance committee of our Board.

Because of the Stockholders Agreement and the aggregate voting power over our Class A common stock and Class B common stock held by the parties to the Stockholders Agreement, we are considered a “controlled company” for the purposes of Nasdaq. As such, we are exempt from certain corporate governance requirements of Nasdaq, including (1) the requirement that a majority of the Board consist of independent directors, (2) the requirement that we have a nominating and corporate governance committee that is composed entirely of independent directors and (3) the requirement that we have a compensation committee that is composed entirely of independent directors. We intend to rely on some or all of these exemptions. As a result, we do not have a majority of independent directors and our compensation and nominating and corporate governance committees do not consist entirely of independent directors. Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of Nasdaq.

~~Taking advantage of the reduced disclosure requirements applicable to “emerging growth companies” may make our Class A common stock less attractive to investors.~~

~~The JOBS Act provides that, so long as a company qualifies as an “emerging growth company,” it will, among other things:~~

•be exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that its independent registered public accounting firm provide an attestation report on the effectiveness of its internal control over financial reporting;

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•~~be exempt from the “say on pay” and “say on golden parachute” advisory vote requirements of the Dodd-Frank Wall Street Reform and Customer Protection Act, or the Dodd-Frank Act;~~

•be exempt from certain disclosure requirements of the Dodd-Frank Act relating to compensation of its executive officers and be permitted to omit the detailed compensation discussion and analysis from proxy statements and reports filed under the Exchange Act; and

•be permitted to provide a reduced level of disclosure concerning executive compensation and be exempt from any rules that have been adopted by the Public Company Accounting Oversight Board requiring a supplement to the auditor’s report on the financial statements or that may be adopted requiring mandatory audit firm rotations.

We are an “emerging growth company,” as defined in the JOBS Act, and we could be an emerging growth company for up to five years following our IPO. For as long as we continue to be an emerging growth company, we may choose to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies. We have irrevocably elected not to take advantage of the extension of time to comply with new or revised financial accounting standards available under Section 107(b) of the JOBS Act. We have also taken advantage of certain reduced reporting burdens in this Annual Report. We could be an emerging growth company for up to five years after our IPO and will continue to be an emerging growth company unless our total annual gross revenues are $1.07 billion or more, we have issued more than $1 billion in non-convertible debt in the past three years or we become a “large accelerated filer” as defined in the Exchange Act. If we remain an “emerging growth company”, we may take advantage of other exemptions, including the exemptions from the advisory vote requirements and executive compensation disclosures under the Dodd-Frank Act and the exemption from the provisions of Section 404(b) of the Sarbanes-Oxley Act. We cannot predict if investors will find our Class A common stock less attractive if we elect to rely on these exemptions, or if taking advantage of these exemptions would result in less active trading or more volatility in the price of our Class A common stock. Also, as a result of our intention to take advantage of some or all of the reduced regulatory and reporting requirements that will be available to us as long as we qualify as an “emerging growth company,” our financial statements may not be comparable to those of companies that fully comply with regulatory and reporting requirements upon the public company effective dates.

~~We do not currently expect to pay any cash dividends.~~

We do not anticipate declaring or paying any cash dividends to holders of our Class A common stock in the foreseeable future. We currently intend to retain future earnings, if any, to finance our growth. Any determination to pay cash dividends in the future will be at the sole discretion of our Board, subject to limitations under applicable law and may be discontinued at any time. In addition, our ability to pay cash dividends is currently restricted by the terms of our 2019 Credit Agreement. Therefore, you are not likely to receive any dividends on your Class A common stock for the foreseeable future, and the success of an investment in our Class A common stock will depend upon any future appreciation in its value. Consequently, investors may need to sell all or part of their holdings of our Class A common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment. There is no guarantee that our Class A common stock will appreciate in value or even maintain the price at which our stockholders have purchased our Class A common stock. Investors seeking cash dividends should not purchase our Class A common stock.

In addition, our operations are currently conducted entirely through BV LLC and its subsidiaries and our ability to generate cash to meet our debt service obligations or to make future dividend payments, if any, is highly dependent on the earnings and the receipt of funds from BV LLC and its subsidiaries via dividends or intercompany loans.condition.

Our amended and restated certificate of incorporation, to the extent permitted by applicable law, contains provisions renouncing our interest and expectation to participate in certain corporate opportunities identified or presented to certain of our Original LLC Owners.

Certain of the Original LLC Owners are in the business of making or advising on investments in companies and these Original LLC owners may hold, and may, from time to time in the future, acquire interests in or provide advice to businesses that directly or indirectly compete with certain portions of our business or the business of our suppliers. Our amended and restated certificate of incorporation provides that, to the fullest extent permitted by law, none of the Original LLC Owners or any director who is not employed by us or his or her affiliates will have any duty to refrain from engaging in a corporate opportunity in the same or similar lines of business as us. The Original LLC Owners may also pursue acquisitions that may be complementary to our business, and, as a result, those acquisition opportunities may not be available to us. As a result, these arrangements could adversely affect our business, results of operations, financial condition or prospects if attractive business opportunities are allocated to any of the Original LLC Owners instead of to us.

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We may issue shares of preferred stock in the future, which could make it difficult for another company to acquire us or could otherwise adversely affect holders of our Class A common stock, which could depress the price of our Class A common stock.

Our amended and restated certificate of incorporation will authorize us to issue one or more series of preferred stock. Our Board will have the authority to determine the preferences, limitations and relative rights of the shares of preferred stock and to fix the number of shares constituting any series and the designation of such series, without any further vote or action by our stockholders. Our preferred stock could be issued with voting, liquidation, dividend and other rights superior to the rights of our Class A common stock. The potential issuance of preferred stock may delay or prevent a change in control of us, discourage bids for our Class A common stock at a premium to the market price, and materially and adversely affect the market price and the voting and other rights of the holders of our Class A common stock.

~~Anti-takeover~~Certain anti-takeover provisions in our governing documents and under Delaware law could make an acquisition of our ~~company~~Company more difficult, limit attempts by our stockholders to replace or remove our current management, and depress the market price of our common stock.

~~Our~~Certain provisions of our amended and restated certificate of incorporation, amended and restated bylaws and Delaware law ~~contain provisions that~~ could ~~have the effect of rendering~~render more difficult, ~~delaying~~delay or ~~preventing an acquisition deemed undesirable~~prevent transactions that stockholders consider favorable, including transactions in which you might otherwise receive a premium for your shares of our common stock. These provisions might also prevent or frustrate attempts by our ~~Board~~stockholders to replace or remove management, and include ~~the following provisions:~~provisions that:

•~~authorizing~~authorize the issuance of “blank check” preferred stock that could be issued by our Board to increase the number of outstanding shares and thwart a takeover attempt;

•~~establishing~~establish a classified Board so that not all members of our Board are elected at one time;

•provide the removal of directors only for cause;

•~~prohibiting~~prohibit the use of cumulative voting for the election of directors;

•~~limiting~~limit the ability of stockholders to call special meetings or amend our bylaws;

•~~requiring~~require all stockholder actions to be taken at a meeting of our stockholders; and

•~~establishing~~establish advance notice and duration of ownership requirements for nominations for election to the Board or for proposing matters that can be acted upon by stockholders at stockholder meetings.

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These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our ~~management. As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the DGCL,~~management, which ~~prevents interested stockholders, such as certain stockholders holding more than 15% of our outstanding common stock from engaging~~could in certain business combinations unless (i) prior to the time such stockholder became an interested stockholder, the board approved the transaction that resulted in such stockholder becoming an interested stockholder, (ii) upon consummation of the transaction that resulted in such stockholder becoming an interested stockholder, the interested stockholder owned 85% of the common stock or (iii) following board approval, the business combination receives the approval of the holders of at least two-thirds of our outstanding common stock not held by such interested stockholder. Because we have “opted out” of Section 203 of the DGCL in our amended and restated certificate of incorporation, the statute will not apply to business combinations involving us.

~~Any provision of our amended and restated certificate of incorporation, amended and restated bylaws or Delaware law that has the effect of delaying, preventing or deterring a change in control could~~turn limit the opportunity for our stockholders to receive a premium for their shares of our common stock and ~~could also~~ affect the price that some investors are willing to pay for our common stock.

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Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be, to the fullest extent permitted by law, the sole and exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our amended and restated certificate of incorporation provides that, unless we consent to the selection of an alternative forum, the Court of Chancery of the State of Delaware, isor the Court of Chancery, will be, to the fullest extent permitted by law, the sole and exclusive forum for: (a) any derivative action, suit or proceeding brought on our behalf; (b) any action, suit or proceeding asserting a claim of breach of fiduciary duty owed by any of our directors, officers or stockholders to us or to our stockholders; (c) any action, suit or proceeding arising pursuant to any provision of the DGCL, our amended and restated certificate of incorporation or amended bylaws (as either may be amended from time to time); or, (d) any action, suit or proceeding asserting a claim governed by the internal affairs doctrine; provided that the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. The choice of forum provision in our amended and restated certificate of incorporation does not designate the Court of Chancery as the exclusive forum for any claim for which the applicable statute creates exclusive jurisdiction in another forum and, accordingly, does not apply to any claims brought to enforce any liability or duty created by the Exchange Act. The choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees. Alternatively, if a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, results of operations and financial condition.

We are an emerging growth company and a smaller reporting company, and we cannot be certain if the reduced disclosure requirements applicable to us will make our Class A common stock less attractive to investors.

We are an “emerging growth company” pursuant to the provisions of the JOBS Act. For as long as we are an “emerging growth company,” we may take advantage of certain exemptions from reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including, for example, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended, reduced disclosure obligations relating to the presentation of financial statements in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our periodic reports, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding advisory “say-on-pay” votes on executive compensation and shareholder advisory votes on golden parachute compensation. We have availed ourselves of some of these reduced reporting obligations and exemptions in our SEC filings and expect to continue to do so in future SEC filings.

In addition, emerging growth companies can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. However, we have chosen to “opt out” of such extended transition period, and as a result, we plan to comply with any new or revised accounting standards on the relevant dates on which non-emerging growth companies must adopt such standards. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

We will continue to qualify as an emerging growth company until the earliest of:

•The last day of our fiscal year following the fifth anniversary of the date of our IPO;

•The last day of our fiscal year in which have annual gross revenues of at least $1.235 billion or more;

•The date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt;

•The date on which we are deemed to be a “large accelerated filer,” as such terms is defined in the Exchange Act rules.

Even after we no longer qualify as an emerging growth company, we may still qualify as a smaller reporting company and rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations including regarding executive compensation.

We cannot predict if investors will find our Class A common stock less attractive because we may rely on the reduced disclosure requirements and exemptions applicable to emerging growth companies and/or smaller reporting companies. If some

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investors find our Class A common stock less attractive as a result, there may be a less active trading market for our Class A common stock and our stock price may be more volatile

Item 1B.Unresolved Staff Comments.

None.

Item 1C. Cybersecurity.

Risk Management and Strategy

Bioventus maintains a cybersecurity risk management program that is designed to enable us to assess, identify, and manage risk associated with cybersecurity threats (the “Cybersecurity Program”). Our Cybersecurity Program is based on standards promulgated by the National Institute of Standards and Technology (“NIST”) and the United States Cybersecurity and Infrastructure Security Agency (“CISA”) and includes the following elements:

•Identification and assessment of cybersecurity threats based on periodic internal and external assessments and monitoring, information from internal stakeholders, and external publications and resources such as those made available by CISA.

•Technical and organizational safeguards designed to protect against identified threats, including documented policies and procedures, technical controls, and employee education and awareness.

•Processes designed to detect the occurrence of cybersecurity events and to respond to and recover from cybersecurity incidents.

•A third-party risk management process designed to manage cybersecurity risks associated with our service providers, suppliers, and vendors.

Our Cybersecurity Program is regularly evaluated by internal and external experts with the results of those reviews reported to senior management and the Audit and Risk Committee of the Board of Directors. We also actively engage with key vendors, industry participants and threat intelligence communities as part of our continuing efforts to evaluate and enhance the effectiveness of the Cybersecurity Program.

Integration of Risk Management Process

Assessing, identifying, and managing cybersecurity-related risks is integrated into our overall risk management framework. The Cybersecurity Program is integrated into our enterprise risk management program and framework. These programs are designed to foster a company-wide culture of appropriate cybersecurity risk management. Our IT Security team works closely with stakeholders across technology, legal, risk, and business operations to implement and monitor the effectiveness of the Cybersecurity Program.

Engagement of Third Parties in Connection with Risk Management

The Company engages a range of external experts to assist in its assessment, identification, and management of risks from cybersecurity threats. These include cybersecurity consultants and external auditors to review the Company’s cybersecurity posture and responsive efforts. Our relationships with these external partners enable us to leverage their expertise with the goal of maintaining best practices.

Oversight of Third-Party Risks

Our third-party service providers, suppliers, and vendors face their own risks from cybersecurity threats that could impact Bioventus in certain circumstances. We have implemented processes for overseeing and managing these risks. Those processes include assessing the third parties’ information security practices before allowing them to access our information systems or data, requiring the third parties to implement appropriate cybersecurity controls and otherwise agree to contractual requirements designed to address cybersecurity risks in our agreements with them, and conducting ongoing monitoring of their compliance with those requirements.

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Risks from Cybersecurity Threats

As of the date of this Annual Report, we have not encountered any risks from cybersecurity threats that have materially affected or are reasonably likely to materially affect the Company, including its business strategy, results of operations, or financial condition. However, a third-party vendor recently informed us that Change Healthcare, a subsidiary of UnitedHealth Group that acts as an intermediary for processing certain of our claims for reimbursement related to our Exogen device to commercial payers experienced an incident in which a cybersecurity threat actor gained access to some of its information technology systems. As a result of the Change Healthcare incident, certain of our patient billing and collections processes have been disrupted. While we have identified an alternative claim processing intermediary and have resumed claims submissions to some payers, this event may cause delays in a portion of our claims submissions to some commercial payers thereby delaying the related cash remittances to us. As of the date of this Annual Report, UnitedHealth Group is still investigating this incident, including any potential impact on claims and patient data. On March 7, 2024, UnitedHealth Group issued a statement indicating that it expects to begin testing and reestablish connectivity to the effected claims network to restore service beginning March 18, 2024. We do not presently believe that the Change Healthcare incident has materially affected, or is reasonably likely to materially affect the Company, including with respect to our claims collection and cash flows. We continue to evaluate the impact of the Change Health incident on our Company.

Governance

The oversight of Bioventus’ Cybersecurity Program falls under the purview of the Company’s Director of IT Security, Risk and Compliance, who has over 25 years of combined technical and leadership experience, with the past 18 years focused on information security and technology risk management, and holds Certified Information Systems Security Professional (CISSP) and Certified Information Security Manager (CISM) certifications.

The Audit and Risk Committee of the Board of Directors is primarily responsible for the oversight of risks from cybersecurity threats, and is regularly briefed on the Company’s Cybersecurity Program by the Vice President of Information Technology and/or Director of IT Security, Risk and Compliance. These briefs include updates on the Company’s cyber risks and threats, the status of projects to strengthen our information security systems, assessments of the information security program, and the emerging cybersecurity threat landscape.

The Director of IT Security, Risk and Compliance implements and oversees our processes for regularly monitoring our information systems and detecting and reporting cybersecurity incidents. That process includes convening an incident response team composed of the Director of IT Security, Risk and Compliance, Vice President of Information Technology, Chief Compliance Officer, and General Counsel. The incident response team is responsible for overseeing the assessment of and response to any cybersecurity incident and for monitoring the Company’s mitigation and remediation efforts. The incident response team is also responsible for informing executive management, the Audit and Risk Committee and, where appropriate, the Board of Directors, regarding the detection, mitigation, and remediation of cybersecurity incidents.

Item 2.Properties.

Our principal executive offices are located on leased property in Durham, North Carolina. We also occupy leased office and manufacturing space in Cordova, ~~Tennessee.~~Tennessee, Farmingdale, New York, and Valencia, California. In addition, our international operations occupy leased office spaces in Hoofddorp, Netherlands, Mississauga, Canada and ~~Mississauga, Canada.~~Hod Hasharon, Israel. We believe that our facilities are sufficient to meet our current needs and that suitable additional space will be available as and when needed on acceptable terms.

Item 3.Legal Proceedings.

WeBioventus stockholder litigation

On January 12, 2023, the Company and certain of its current and former directors and officers were named as defendants in a putative class action lawsuit filed in the Middle District of North Carolina, Ciarciello v. Bioventus, Inc., No. 1:23– CV – 00032-CCE-JEP (M.D.N.C. 2023). The complaint asserts violations of Sections 10(b) and 20(a) of the Exchange Act and of Sections 11 and 15 of the Securities Act and generally alleges that the Company failed to disclose certain information regarding rebate practices, its business and financial prospects, and the sufficiency of internal controls regarding financial reporting. The complaint seeks damages in an unspecified amount. On April 12, 2023, the Court appointed Wayne County Employees’ Retirement System as lead plaintiff. The plaintiff’s amended consolidated complaint was filed with the Court on June 12, 2023. On July 17, 2023, the defendants filed a motion to dismiss the complaint raising a number of legal and factual deficiencies with the amended consolidated complaint. In response to the defendants’ motion to dismiss, the lead plaintiff filed a second amended complaint on July 31, 2023. The defendants moved to dismiss the second amended complaint on August 21, 2023, which the Court granted in part and denied in part on November 6, 2023. The Court dismissed the plaintiff’s Securities Act claims, but allowed the plaintiff’s Exchange Act claims to proceed into discovery.

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On October 4, 2023, certain of the Company’s current and former directors and officers were named as defendants in a derivative shareholder lawsuit (in which the Company was a nominal defendant) filed in the United States District Court for the District of Delaware, Grogan, on behalf of Bioventus Inc., v. Reali, et.al., No. 1:23-CV-01099-RGA (D. Del. 2023). The complaint asserts violations of Section 14(a) of the Exchange Act, breaches of fiduciary duties and related state law claims, and a claim for contribution, and generally alleges the same purported misconduct as alleged in the Ciarciello case. On January 12, 2024, the Court agreed to stay this case pending resolution of the Ciarciello case.

The Company believes the claims alleged in each of the above matters lack merit and intends to defend itself vigorously. The outcome of the these matters is not ~~currently~~presently determinable, and any loss is neither probable nor reasonably estimable.

Misonix former distributor litigation

On March 23, 2017, Misonix’s former distributor in China, Cicel (Beijing) Science & Technology Co., Ltd., filed a lawsuit against Misonix and certain of its officers and directors in the United States District Court for the Eastern District of New York. The complaint alleged that Misonix improperly terminated its contract with the former distributor. The complaint sought various remedies, including compensatory and punitive damages, specific performance and preliminary and post judgment injunctive relief, and asserted various causes of action, including breach of contract, unfair competition, tortious interference with contract, fraudulent inducement, and conversion. On October 7, 2017, the court granted Misonix’s motion to dismiss each of the tort claims asserted against Misonix, and also granted the individual defendants’ motion to dismiss all claims asserted against them. On January 23, 2020, the court granted Cicel’s motion to amend its complaint, to include claims for alleged defamation and theft of trade secrets in addition to the breach of contract claim. Discovery in the matter ended on August 5, 2021. On January 20, 2022, the court granted Misonix’s summary judgment motion on Cicel’s breach of contract and defamation claims. Cicel’s motion for reconsideration of the court’s summary judgment ruling in Misonix’s favor was dismissed by the Court on April 29, 2022. On July 18, 2022, Cicel voluntarily dismissed the remaining claim for trade secret theft and later filed an appeal to the United States Court of Appeals for the Second Circuit. On March 6, 2024, the Second Circuit Court of Appeals issued its ruling affirming the lower Court’s summary judgement in favor of Misonix in all respects.

Bioness stockholder litigation

On February 8, 2022, a minority shareholder of Bioness filed an action in the Delaware State Court of Chancery in connection with the Company’s acquisition of Bioness. Teuza, a Fairchild Technology Venture Ltd. v. Lindon, et. al., No. 2022-0130 -SG. This action names the former Bioness directors, the Alfred E. Mann Trust (Trust), which was the former majority shareholder of Bioness, the trustees of the Trust and Bioventus as defendants. The complaint alleges, among other things, that the individual directors, the Trust, and the trustees breached their fiduciary duty to the plaintiff in connection with their consideration and approval of the Company’s transaction. The complaint also alleges that the Company aided and abetted the other defendants in breaching their fiduciary duties to the plaintiff and that the Company breached the Merger Agreement by failing to pay the plaintiff its pro rata share of the merger consideration. The Company believes that it is indemnified under the indemnification provisions contained in the Bioness Merger Agreement for these claims. On July 20, 2022, the Company filed a motion to dismiss all claims made against it on various grounds, as did all the other named defendants in the suit. A hearing on Bioness’ and other the defendant’s motions was held before the Court of Chancery on January 19, 2023. On April 27, 2023, the Court issued an order which, among other things, dismissed Bioventus from the case.

Please refer to Part II, Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 12. Commitments and contingencies of this Annual Report for additional information pertaining to legal proceedings. In addition, we are party to ~~any material~~ legal ~~proceedings. We may at times be involved in litigation~~proceedings incidental to our business. While our management currently believes the ultimate outcome of these proceedings, individually and ~~other legal claims~~ in the ~~ordinary course~~aggregate, will not have a material adverse effect on our consolidated financial statements, litigation is subject to inherent uncertainties. Were an unfavorable ruling to occur, there exists the possibility of ~~business. When appropriate in our estimation, we may record reserves in~~a material adverse impact on our financial ~~statements for pending litigation~~condition and ~~other claims.~~results of operations.

Item 4.Mine Safety Disclosures.

Not ~~applicable.~~Applicable.

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PART II

Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer

Purchases of Equity Securities.

Market Information and Holders

On February 11, 2021, we closed an initial public offering ~~(IPO)~~(“IPO”) and our Class A common stock began trading on the Nasdaq Global Select Market under the symbol ~~“BVS”.~~“BVS.” Prior to that time, there was no public market for our stock. There is no established public trading market for our Class B common stock.

~~Holders~~

As of ~~March 22, 2021,~~February 27, 2024, we had 12approximately 167 holders of record of our Class A common stock. This amount does not take into account shareholders whose shares are held in “street name” by brokerage houses or other intermediaries. The closing price of our common stock on February 27, 2024 was $4.93. As of ~~March 22, 2021,~~February 27, 2024, we had 1 holder of record of our Class B common stock.

Dividends

We do not anticipate declaring or paying any cash dividends to holders of our Class A common stock in the foreseeable future. We currently intend to retain all available funds and any future earnings to finance the growth of our business. If we decide to pay cash dividends in the future, the declaration and payment of such dividends will be at the sole discretion of our board of directors ~~(Board)~~(“Board”) and may be discontinued at any time. Holders of our Class B common stock are not entitled to participate in any dividends declared by our Board. In determining the amount of any future dividends, our Board will take into account any legal or contractual limitations, our actual and anticipated future earnings, cash flow, debt service and capital requirements and other factors that our Board may deem relevant.

In the event Bioventus Inc. declares any cash dividend, we intend to cause Bioventus LLC ~~(BV LLC)~~(“BV LLC”) to make distributions to Bioventus Inc., in an amount sufficient to cover such cash dividends declared by us. If BV LLC makes such distributions to Bioventus Inc., the Class B common stock owner will also be entitled to receive the respective equivalent pro rata distributions in accordance with the percentages of their respective LLC Interests.

In addition, the terms of our financing arrangements contain covenants that may restrict BV LLC and its subsidiaries from paying such distributions, subject to certain exceptions. Any financing arrangements that we enter into in the future may include restrictive covenants that limit our ability to pay dividends. In addition, BV LLC is generally prohibited under Delaware law from making a distribution to a member to the extent that, at the time of the distribution, after giving effect to the distribution, liabilities of BV LLC (with certain exceptions) exceed the fair value of its assets. Subsidiaries of BV LLC are generally subject to similar legal limitations on their ability to make distributions to BV LLC.

~~Use~~Equity Compensation Plans

The information required by Item 5 of ~~Proceeds~~Form 10-K regarding equity compensation plans is incorporated herein by reference to Part III, Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

~~On February 10, 2021, our Registration Statement on Form S-1 (File No. 333-252238) was declared effective by~~Performance Graph

The following performance graph is not deemed to be “soliciting material” or to be “filed” with the SEC ~~for our IPO pursuant~~or subject to ~~which~~Regulation 14A or 14C or to the liabilities of Section 18 of the Exchange Act. This information will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent we ~~registered and sold an aggregate of 9,200,000 shares of~~specifically incorporate this information by reference.

The following performance graph compares the cumulative total return to stockholders on our Class A common stock ~~(including 1,200,000 shares sold pursuant~~relative to the ~~underwriters' over-allotment option) at a price of $13.00 per share. Morgan Stanley & Co. LLC, J.P. Morgan Securities LLC~~cumulative total returns on the Nasdaq Composite Index and ~~Goldman Sachs & Co. LLC acted as joint book-running managers in~~ the ~~offering. Canaccord Genuity Securities LLC acted as lead manager in~~S&P 500 Health Care Equipment Index for the ~~offering. The offering commenced~~period commencing on February 11, 2021 and did not terminate before all of the securities registered in the registration statement were sold. The offering closed on February 16, 2021, resulting in net proceeds of $111.2 million after deducting underwriters' discounts and commissions of $8.4 million. No payments were made by us to directors, officers, general partners or persons owning 10% or more of(the date our ~~common stock or to their associates, or to our affiliates.~~

~~We used the net proceeds to us from the IPO to purchase 9,200,000 newly-issued LLC Interests from BV LLC at a purchase price per interest equal to the IPO price per share of~~ Class A common ~~stock. As sole managing member~~stock commenced trading on Nasdaq) through December 31, 2023 assuming an initial investment of ~~BV LLC,~~$100. Nasdaq Composite Index and S&P 500 Health Care Equipment Index will not be deemed incorporate by reference into any other filings under the Exchange Act or the Securities Act, except to the extent we ~~caused BV LLC to use the proceeds it received as follows: (i) to pay fees and expenses~~specifically incorporate. Note that historic stock price performance is not necessarily indicative of ~~approximately $3.8 million in connection with the IPO and the Transactions (ii) to satisfy the $3.3 million cash entitlement~~future stock price performance.

Table of ~~the Continuing LLC Owner in respect of the EPR Unit held by the Continuing LLC Owner, (iii) to pursue future potential acquisition opportunities and (iv) for general corporate purposes.~~Contents

~~There has been no material change in the use of proceeds as described in the final prospectus filed on February 12, 2021.~~ 3946


	2/11/21		3/31/21		6/30/21		9/30/21		12/31/21		3/31/22		6/30/22		9/30/22		12/31/22		3/31/23		6/30/23		9/30/23		12/31/23
Bioventus Inc.	$	100.00	$	79.54	$	91.62	$	73.71	$	75.43	$	73.40	$	35.50	$	36.44	$	13.59	$	5.57	$	15.04	$	17.18	$	27.43
NASDAQ Composite	$	100.00	$	94.45	$	103.41	$	103.01	$	111.54	$	101.39	$	78.63	$	75.40	$	74.62	$	87.14	$	98.30	$	94.25	$	107.03
S&P 500 Health Care Equipment	$	100.00	$	96.27	$	104.57	$	109.55	$	113.11	$	106.11	$	85.61	$	79.47	$	90.75	$	93.13	$	102.06	$	88.00	$	97.83

Item 6.~~[Reserved.~~ [Reserved.]

~~Table o~~f ~~contents~~

Item 7. ~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with Part I, Item ~~1A,~~1A. Risk Factors and our consolidated financial statements and the related notes to those statements included elsewhere in this Annual Report on Form 10-K ~~(Annual Report)~~(“Annual Report”). In addition to historical consolidated financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Some of the numbers included herein have been rounded for the convenience of presentation. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under Part 1, Item 1A. Risk Factors and elsewhere in this Annual Report. A discussion of the year ended December 31, ~~2019~~2022 compared to the year ended December 31, ~~2018~~2021 has been reported previously in our ~~final prospectus~~Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on ~~February 12, 2021,~~March 31, 2023, under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations."

Executive ~~summary~~Summary

We are a global medical device company focused on developing and commercializing clinically differentiated, cost efficient and minimally invasive treatments that engage and enhance the body’s natural healing process. We operate our business through two reportable segments, U.S. and International, and our portfolio of products is grouped into three areas:

•Pain Treatments is comprised of non-surgical pain injection therapies as well as peripheral nerve stimulation (“PNS”) products to help the ~~following three verticals:~~patient get back to their normal activities.

•~~OA joint pain treatment and joint preservation products, which are HA viscosupplementation therapies approved by the FDA through a PMA;~~

Table of Contents

•~~BGSs, which are human tissue allograft and synthetic products used primarily~~Surgical Solutions is comprised of bone graft substitutes (“BGS”) that increase bone formation to stimulate bone healing in spine surgery which have either (i) received 510(k) clearance, which is a premarket submission made to the FDA to demonstrate that the device to be marketed is at least as safe and effective, that is, substantially equivalent, to a legally marketed device, or (ii) are regulated solely as Section 361 HCT/Ps, which means they are human cells, tissues and cellular and tissue-based products that do not require a PMA in the United States; and

•~~minimally invasive fracture treatment, which is a FDA-approved Exogen system prescribed for long bone stimulation for fracture healing.~~

Our U.S. segment offers our full existing portfolio of products. This includes our OA joint pain treatment and joint preservation products, which address the entire market for HA viscosupplementation with offerings for single, three and five injection therapies: (i) Durolane, a single injection therapy, which we launched in the United States in the first half of 2018 and also market outside the United States in more than 30 countries; (ii) GELSYN-3, a three injection therapy, which we have marketed in the United States since the second half of 2016; and (iii) SUPARTZ FX, a five injection therapy, which we have marketed in the United States since May 2012. Our U.S. segment also offers our BGS products, which are targeted at improving bone fusion rates following spinal ~~fusion~~fusions and other orthopedic ~~surgeries. These~~surgeries, as well as a portfolio of ultrasonic products ~~include allograft-derived~~used for precise bone ~~graft with growth factors (OsteoAMP)~~cutting and sculpting, soft tissue management (i.e., ~~a DBM (Exponent), cancellous bone~~tumor and liver resections) and tissue debridement, in ~~different preparations (PureBone), bioactive synthetics (Signafuse and Interface),~~various surgeries, including minimally invasive applications.

•Restorative Therapies is comprised of a collagen ceramic matrix (OsteoMatrix) and two bone marrow isolation systems (CellXtract and Extractor). Further, our U.S. segment offers our Exogen system, which we believe offers significant advantages over electrical based long bone stimulation ~~systems, including documented mechanism of action, shorter treatment times and superior nonunion heal rates.~~

~~Our International segment offers Durolane,~~system, as well as devices designed to help patients regain leg or ~~single injection therapy, OsteoAMP, our allograft-derived bone graft with growth factors, and our Exogen system.~~hand function due to stroke, multiple sclerosis or other central nervous system disorders.

The following table sets forth total net sales, net (loss) income ~~from continuing operations,~~and Adjusted EBITDA ~~and pro forma net income (loss) per unit attributable to common unit holders - basic and diluted:~~for the periods presented:

Years Ended December 31,
2020 2019
Net sales $ 321,161 $ 340,141
Net income from continuing operations $ 14,722 $ 8,113
Adjusted EBITDA(1)
$ 72,443 $ 79,188
Net income (loss) per unit attributable to common unit holders - basic and diluted(2)
$ 0.89 $ (0.13)


	Years Ended December 31,
(in thousands, except for loss per share)		2023		2022
Net sales		$	512,345	$	512,117
Net loss from continuing operations		$	(121,196)	$	(144,651)
Adjusted EBITDA(1)		$	88,862	$	68,610
Loss per Class A common stock, basic and diluted
Continuing operations		$	(1.54)	$	(1.70)
Discontinued operations		(0.95)		(0.89)
Loss per Class A common stock, basic and diluted		$	(2.49)	$	(2.59)

(1)See below under ~~Components~~ Results of ~~our results of operations-Adjusted~~Operations-Adjusted EBITDA ~~for a definition of Adjusted EBITDA and~~ ~~Results from continuing operations~~ for a reconciliation of net (loss) income ~~from continuing operations~~ to Adjusted EBITDA.

~~(2)See below for a computation of pro forma net income per unit attributable to common unit holders - basic and diluted after the recapitalization described below which was in conjunction with our IPO.~~

~~Table o~~f ~~contents~~Significant transactions

Wound Business

On ~~February 16, 2021,~~May 22, 2023, we closed the sale of certain assets within our ~~limited liability company agreement was amended~~Wound Business, including the TheraSkin and ~~restated~~TheraGenesis products (collectively, the “Wound Business” or the “Disposal Group”), for potential consideration of $84.7 million, including $34.7 million at closing, $5.0 million deferred for 18 months and up to ~~among other things, (i) provide~~$45.0 million in potential earn-out payments (“Earn-out Payments”), which are based on the achievement of certain revenue thresholds by the purchaser of the Wound Business for ~~a new single class~~sales of ~~common membership interests~~the TheraSkin and TheraGenesis products during the 2024, 2025 and 2026 fiscal years.

We incurred $3.9 million in transactional fees resulting from the sale of the Wound Business. The deconsolidation of the Disposal Group resulted in the ~~Company (LLC Interests)~~recognition of a $1.5 million loss on disposal of a business recorded within the consolidated statements of operations and ~~(ii) exchange all~~comprehensive (loss) income for the year ended December 31, 2023. The proceeds were used to prepay $30.0 million of long-term debt principal obligations.

We evaluated the ~~existing membership interests~~Wound Business for ~~LLC Interests. For purposes~~impairment prior to its sale and recorded a $78.6 million impairment within the consolidated statements of ~~calculating pro forma earnings per unit, we have adjusted the number of outstanding membership units retroactively to give effect to the amendment~~operations and ~~resulting recapitalization.~~

~~Pro forma basic net~~comprehensive (loss) income ~~per unit is computed by dividing net income by the pro forma weighted-average number of units outstanding~~ during the period. Pro forma diluted net income per unit is computed by dividing net income by the pro forma weighted-average number of units outstanding adjusted to give effect to potentially dilutive securities. Asyear ended December 31, 2023 as a result of this evaluation to reduce the ~~recapitalization and the New LLC Owner assuming the obligations~~intangible assets of the ~~Company’s Phantom Plan awards there are no dilutive securities.~~

Disposal Group to reflect their respective fair values, less any costs to sell. The ~~following table sets forth a reconciliation~~fair value of the ~~numerators and denominators used to compute pro forma basic and diluted net income per unit~~Disposal Group’s intangibles were determined based on the consideration received for the ~~years ended December 31 as follows:~~

2020 2019
Net income from continuing operations attributable to
common unit holders $ 16,411 $ 8,666
Loss from discontinued operations, net of tax — 1,815
Net income attributable to common unit holders $ 16,411 $ 6,851
Pro forma net income per unit attributable to common unit holders
—basic and diluted
Pro forma net income from continuing operations $ 0.29 $ 0.15
Pro forma loss from discontinued operations, net of tax — 0.03
Pro forma net income attributable to common unit holders $ 0.29 $ 0.12
Pro forma weighted average units used in computing basic and diluted
net income per common unit 56,825,325 56,825,325

~~Strategic transactions~~

We have pursued and continue to pursue business development opportunities that leverage our significant customer presence across orthopedics, broaden our portfolio and increase our global footprint. Below is a summary of some of our recent transactions:

~~Collaboration and development agreement for MOTYS~~

On May 29, 2019, we entered into a collaboration and development agreement (Development Agreement), with Musculoskeletal Transplant Foundation, Inc., or MTF, to develop an injectable placental tissue product, MOTYS, for use in the OA joint pain treatment. The development and commercialization of the product is anticipated to take place in two stages. In consideration for achieving its development milestones, we paid MTF $1.5 million and are obligated to pay additional payments totaling $0.8 million if certain further milestones are achieved. We began selling MOTYS in the fourth quarter of 2020, subject to the terms of an exclusive commercial supply agreement entered into with MTF on June 18, 2020.

~~Development collaboration agreement for PROcuff~~

On August 23, 2019, we entered into an exclusive Collaboration Agreement with Harbor, to develop and license the rights to commercialize a woven-suture-collagen composite implant product. Concurrently with the execution of the agreement, we purchased $1.0 million of shares of Harbor. As a result of Harbor’s achievement of certain milestones, on October 5, 2020, we purchased $1.0 million of additional shares of Harbor. Furthermore, we are obligated to make two additional one-time payments totaling $6.0 million in aggregate upon Harbor’s achievement of (i) receiving regulatory approval and (ii) achieving a certain net sales target. The sole use of proceeds from these investments is for the development of the implant product that is the subject of our agreement. We intend to negotiate and enter into a definitive supply agreement with Harbor if and when the product is cleared for marketing by the FDA at a price per unit not to exceed an agreed upon maximum.Wound Business.

CartiHeal ~~(developer of Agili-C) investment and option and equity purchase agreement~~

On July ~~15, 2020,~~12, 2022, we ~~made~~acquired 100% of CartiHeal (2009) Ltd. (“CartiHeal”), a ~~$15.0 million equity investment in CartiHeal, a privately-held~~privately held company headquartered in Israel and the developer of the proprietary Agili-C implant for the treatment of joint surface lesions in traumatic and osteoarthritic joints. ~~This investment follows~~We purchased CartiHeal (the “CartiHeal Acquisition”) for an aggregate purchase price of approximately $315.0 million and an additional $135.0 million, becoming payable after closing upon the ~~recently completed enrollment~~achievement of a certain sales milestone (“Sales Milestone Consideration”). We paid $100.0 million of the aggregate purchase price upon closing, consisting of a $50.0 million escrow deposit and ~~outcome~~$50.0 million from a financing arrangement. We also paid approximately $8.6 million of ~~interim analysis in~~ CartiHeal’s ~~IDE multinational pivotal study for Agili-C. This new round~~transaction-related fees and expenses and deferred $215.0 million (“Deferred Amount”) of ~~funding is expected to enable CartiHeal to complete all patient follow-up in~~ the ~~Agili-C study and submit an application for PMA~~aggregate purchase price otherwise due at closing until the earlier of the achievement of certain milestones or the occurrence of certain installment payment dates. We recognized a gain of $23.7 million due to the ~~FDA. Under~~change in fair value of our equity method investment in CartiHeal as a result of the ~~agreement, CartiHeal can secure an additional $5.0~~purchase during the third quarter of 2022. The gain was recognized in other income within the consolidated statement of operations and comprehensive (loss) income.

8671

Table oof Contents f ~~contents~~

~~million equity investment from us, if needed, for IDE study completion.~~ We previously ~~made an initial $2.5 million investment in CartiHeal in January 2018 and a subsequent investment of $0.2 million in January 2020.~~

~~Contemporaneous with the July 2020 investment, we also~~ entered into an Option and Equity Purchase Agreement with CartiHeal ~~and its shareholders, which provides~~(“Option Agreement”) in July 2020. The Option Agreement provided us with an exclusive option to acquire 100% of CartiHeal’s shares ~~under certain conditions, or the~~ (“Call ~~Option,~~Option”), and ~~provides~~provided CartiHeal with a put option that would require us to purchase 100% of CartiHeal’s shares under certain ~~conditions, or the Put Option. The Call Option is exercisable by us at any time after the closing of the investment. The Put Option is only exercisable by~~conditions. In August 2021, CartiHeal ~~upon~~achieved pivotal clinical trial success, ~~including achievement of certain secondary endpoints~~as defined in the Option Agreement, for the Agili-C implant. In order to preserve our Call Option, in accordance with the Option Agreement and ~~FDA~~upon approval of the ~~Agili-C device with a label consistent~~Board of Directors (“BOD”), we deposited $50.0 million into escrow in ~~all respects with pivotal clinical trial success. The pivotal clinical trial’s objective is~~August 2021 for the potential acquisition of CartiHeal.

In April 2022, we exercised our Call Option to ~~demonstrate the superiority~~acquire all of the ~~Agili-C implant over the surgical standard~~remaining shares of care, including microfracture and debridement, for the treatment of cartilage or osteochondral defects, in both osteoarthritic knees and knees without degenerative changes. If not previously exercised,CartiHeal, excluding shares we already owned. Our decision to exercise the Call Option ~~and~~followed the ~~Put Option terminate 45 days following the FDA~~FDA’s March 29, 2022 premarket approval of CartiHeal’s Agili-C orimplant. On June 17, 2022, the Company entered into an amendment to the Option Agreement with CartiHeal (“CartiHeal Amendment”) and Elron Ventures Limited, in its capacity as the ~~event of failure~~shareholder representative, that provided for deferred payment of the ~~pivotal clinical trial. We also have~~consideration for CartiHeal to be paid in multiple tranches, one of which was $50.0 million due upon the ~~right~~earliest to ~~terminate the Call Option and Put Option at any time ending 30 days after receipt from CartiHeal~~occur of the ~~statistical report regarding~~publication in a peer-reviewed orthopedic journal of an article that presents the ~~final~~ results of the pivotal clinical trial ~~upon~~(“First Paper Milestone”) or July 1, 2023.

Pursuant to the CartiHeal Amendment, we agreed to pay interest on each tranche of the Deferred Amount at a rate of 8.0% annually, until such tranche is paid.

The First Paper Milestone under the Option Agreement occurred on February 13, 2023, triggering our obligation to make the first $50.0 million payment, plus applicable interest, under the Option Agreement.

On February 27, 2023, we entered into a settlement agreement (the “Settlement Agreement”) with Elron Ventures Ltd. (“Elron” and together with the Company, the “Parties”) as representative of CartiHeal’s selling securityholders under the Option Agreement collectively, the “Former Securityholders”). Pursuant to the Settlement Agreement, Elron, on behalf of the Former Securityholders, agreed to forbear from initiating any legal action or proceedings relating to non-payment of any obligations arising under the Option Agreement during a period of 30 calendar days (the “Interim Period”) in exchange for (i) a one-time non-refundable amount of $10.0 million and (ii) a one-time non-refundable payment of ~~a break fee of $30.0 million. Consideration for the acquisition of all of the shares of CartiHeal pursuant~~$0.2 million to the Call Option or Put Option would be $350.0 million, all of which would be payable at closing, with an additional $150.0 million payable upon achievement of certain sales milestones related to Agili-C. Such closing would be subject to customary closing conditions.

Certain of the foregoing transactions have had a significant impact on our financial results of operations for the periods in which they occurred, and they have affected the comparability of these statements for the corresponding comparative periods.

~~Outlook~~

~~We plan to continue to expand our business and to increase our net sales and profitability by executing on the following strategies:~~

•~~continue to expand market share in HA viscosupplementation;~~

•~~introduce new OA joint pain treatment and joint preservation products;~~

•~~further develop and commercialize our BGS portfolio;~~

•~~expand indications for use for our Exogen system;~~

•~~invest in research and development;~~

•~~pursue business development opportunities; and~~

•~~opportunistically grow our international markets.~~

We expect to face challenges as we execute on our business strategy. Our industry is highly competitive, subject to rapid change and significantly affected by market activities of industry participants, new product introductions and other technological advancements. We believe our experienced management team positions us for success in facing these and other challenges. However, there are several factors affecting our business that are beyond our control, such as our ability to successfully introduce new products and line extensions, expand labels, continue to obtain reimbursement for our products at acceptable rates and receive necessary governmental approvals. In addition, we expect that market demand, government regulation, third-party coverage and reimbursement policies and societal pressures will continue to change the healthcare industry worldwide, resulting in further business consolidations and alliances among our customers, which may exert further downward pressure on the prices of our products. For information about additional factors that may affect our outlook, see ~~Part I, Item 1A. Risk Factors~~ ~~and “Special note regarding forward-looking statements” sections of this Annual Report.~~

~~COVID-19 Update and Outlook~~

~~During 2020, the COVID-19 pandemic spread around the world and in the U.S. and, more recently, new variants of the virus have emerged, some of which have shown~~Elron to be more contagious. The COVID-19 pandemic has had widespread, rapidly evolving and unpredictable impacts on global society, economies, financial markets and business practices. Federal and state governments responded by implementing a number of measures designed to prevent or minimize its spread and the ongoing effects of the pandemic, including stay-at-home or shelter-in-place orders, quarantines and closure of all non-essential businesses, social distancing, travel restrictions, border closures, and other measures, which have caused global business disruptions and significant volatility in U.S. and international debt and equity markets.

~~Table o~~f ~~contents~~

The COVID-19 pandemic has rapidly escalated in the United States, creating significant uncertainty and economic disruption, and leading to record levels of unemployment nationally. Due to the evolving nature of the COVID-19 crisis, we continue to monitor the situation closely and assess the impact on our business. In response to various governmental orders and public health advisories, we have implemented a number of measures to protect the health and safety of our workforce, conserve liquidity and position us to emerge from the current crisis in a healthy financial position. These measures include closing our offices and instituting work-from-home policies with the exception of essential personnel in March 2020. In addition, we temporarily imposed employee salary reductions for our U.S. employees for the month of June 2020 and suspended, until December 31, 2020, a portion of the employer contribution we make under our 401(k) plan. All temporary salary reductions have now been reversed and all salaries have been reinstated to pre-COVID-19 levels. To the extent permitted andused in accordance with guidance from public health officials and government agencies, we have begun to reopen our locations and resume normal operations where appropriate. It is possible our operations will continue to be impacted in 2021, however, the ~~magnitude and duration~~expense fund provisions of the ~~impact is impossible~~Option Agreement. The Interim Period expired on March 29, 2023 and we did not exercise our right to ~~predict due to:~~

•~~uncertainties regarding~~extend the ~~duration~~Interim Period. In addition, the Parties mutually released any further claims under the Option Agreement and related transaction documents, including without limitation a release by the Former Securityholders of any rights to enforce the provisions of the ~~COVID-19 pandemic~~Option Agreement or make further monetary claims against us and/or our respective affiliates and ~~the length of time over which the disruptions caused by COVID-19 will continue;~~representatives.

•~~the impact of governmental orders and regulations that have been, and may in the future be, imposed in response to the pandemic;~~

•~~the impact of COVID-19 on our suppliers, manufacturers and other third parties on which we rely;~~

•~~the deterioration of economic conditions in the United States, as well as record high unemployment levels, which could have an adverse impact on discretionary consumer spending; and~~

•~~uncertainty regarding the potential for additional waves~~Upon execution of the ~~COVID-19 crisis~~Settlement Agreement, we transferred 100% of our shares in CartiHeal to ~~occur.~~a trustee (the “Trustee”) for the benefit of the Former Securityholders. We had no ownership interest and no voting rights during the Interim Period. We have concluded that upon execution of the Settlement Agreement, the Company ceased to control CartiHeal for accounting purposes, and therefore, deconsolidated CartiHeal (the “Deconsolidation”, or “Disposal”) effective February 27, 2023. We treated the Disposal as a discontinued operation. The loss upon disposal totaled $60.6 million and was recorded within loss from discontinued operations, net.

~~The COVID-19 pandemic began~~Credit and Guaranty Agreement

On July 11, 2022, we amended our Credit and Guaranty Agreement, dated as of December 6, 2019 (as previously amended on August 29, 2021 and October 29, 2021) in conjunction with the CartiHeal Acquisition to, ~~have a material impact on~~among other things, provide for an $80.0 million term loan facility (“Term Loan Facility”). On March 31, 2023, we further amended our ~~business during~~Credit and Guaranty Agreement to, among other things, modify certain financial covenant provisions, waive the noncompliance at December 31, 2022 and increase the applicable interest rate. We were in compliance as of December 31, 2023 with the financial covenants as stated within the Credit and Guaranty Agreement. On January 18, 2024, we further amended our Credit and Guaranty Agreement to modify certain financial covenants. Refer to Liquidity and Capital Resources—Credit Facilities for further information.

MOTYS Update

During the second quarter of ~~2020. Since March 2020, various governmental orders~~2022, prior to obtaining the results from our Phase 2 trial, we elected to discontinue the development of MOTYS to focus our resources on other priorities, including the integration of our 2021 and public health advisories, including “shelter-in-place” orders and quarantines, have reduced or prevented patient access to hospitals and physicians. As a result, the number of both elective and non-elective procedures have been reduced2022 acquisitions and our ~~sales have decreased.~~

~~In addition,~~expanded R&D and product development portfolio we ~~could be further impacted if we begin to see delays~~inherited with these acquisitions. We incurred $1.0 million and $4.3 million in ~~payments from customers, return to more stringent “shelter-in-place” orders or advisories, facility closures or other reasons related to~~expenditures during the ~~pandemic. Despite the COVID-19 pandemic, we had positive cash flows for the year~~years ended December 31, ~~2020, due~~2023 and 2022, respectively, related to a lack of significant delays in payments from customers, decreases in expenses correlating to a related decrease in sales, reduction in travel expenses and the institution of various cost cutting measures provided us with positive cash flow during the year ended December 31, 2020. However, the extent to which COVID-19 could materially impact our future liquidity is uncertain.MOTYS. No further costs are expected on MOTYS.

Consolidated Appropriations Act

In ~~April 2020, we received $1.2 million~~July 2022, in ~~funds from the HHS as part of the CARES Act Provider Relief Fund. We determined we have complied~~connection with the ~~CARES~~Consolidated Appropriations Act, ~~Provider Relief Fund conditions so that we may use~~2021 (“CAA”), the ~~funds~~Centers for Medicare and Medicaid Services (“CMS”) began utilizing new pricing information the Company reported to ~~reimburse for health care related expenses and lost revenues attributable~~it pursuant to the ~~public health emergency resulting from COVID-19. An additional $2.9 million was received from~~newly adopted reporting obligations to adjust the ~~CARES Act Provider Relief Fund in July 2020. We have recognized these payments as other income within~~Medicare payment to healthcare providers using our ~~consolidated statement~~Durolane and Gelsyn-3 products.

Table of ~~operations and comprehensive income (loss) for the year ended December 31, 2020.~~Contents

Under the CARES Act, we have also taken advantage of the deferral of employer social security payroll tax payments. In April 2020, we began deferring all employer social security payroll tax payments for the remainder of the 2020 calendar year, with 50% of the taxes is deferred until December 31, 2021 and the remaining 50% deferred until December 31, 2022.

We are continuing to evaluate other aspects of the CARES Act, including the use of the employee retention tax credit. The employee retention tax credit provides an additional tax credit to employers that (i) have either fully or partially suspended operations because of government orders associated with COVID-19 or (ii) experience a substantial decline in income but continue to pay employees their wages.

Components of our results of operations

Net sales

We generate net sales from a portfolio of active healing products that serve physicians spanning the orthopedic continuum, including sports medicine, total joint reconstruction, hand and upper extremities, foot and ankle, podiatric surgery, trauma, spine and neurosurgery. We report sales net of contractual allowances, rebates and returns.

~~Table o~~f ~~contents~~

We sell our ~~OA joint pain treatment and joint preservation~~ products ~~and minimally invasive fracture treatment~~primarily through our direct sales team, who manage and maintain the sales relationship with healthcare providers, distribution centers or specialty pharmacies. Certain surgical products are sold through independent distributors to hospitals so our neurosurgeon and orthopedic spine surgeon customers can use them in procedures. In certain international markets, we also sell to independent distributors on prearranged business terms, who manage or maintain the sales relationship with their physician customers. Refer to Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note 2. ~~Summary of significant~~Significant accounting policies ~~to our Notes to consolidated financial statements~~ for further ~~information~~ information.

We generally recognize revenue at the point in time when control is transferred to the customer, ~~typically, in~~for example, when the ~~case of our OA joint pain treatment and joint preservation products, when these products are~~product is shipped to the customer, ~~and, in the case of our Exogen system,~~ when the patient has accepted the ~~product.~~

Our BGSs are primarily sold in the U.S. market through independent distributors. We generally consign our BGS products to hospitals so our neurosurgeon and orthopedic spine surgeon customers can use them in procedures. We recognize revenue basedproduct or upon consumption in a surgical procedure.

Cost of sales

Our cost of sales primarily ~~consist~~consists of costs of products purchased from our third-party suppliers, direct labor and allocated overhead associated with ~~the~~manufacturing and assembly, ~~of our Exogen system,~~ excess and obsolete inventory charges, shipping, inspection and related costs incurred in making our products available for sale or use. In addition, cost of sales includes depreciation related to production as well as amortization of product-related intellectual property and distribution rights associated with commercialized products. ~~Our OA joint pain treatment and joint preservation products and BGS~~Certain products are manufactured by or obtained from third-party suppliers primarily located in Japan, Switzerland, Sweden and the United States. We receive the components for our Exogen system from suppliers and assemble each system in-house at our Cordova, Tennessee facility. In the future, we expect our cost of sales to increase due to increased sales volume.

Gross profit and gross margin

Gross profit consists of net sales less cost of sales. We calculate gross margin as gross profit divided by net sales. Our gross margin has been and will continue to be affected by a variety of factors, including costs of products purchased from our third-party suppliers, manufacturing costs, product mix and implementation over time of cost-reduction strategies. We expect net sales and product mix to vary quarter by quarter and therefore our gross profit will likely fluctuate from quarter to quarter.

Selling, general and administrative expense

Selling, general and administrative expense primarily consists of salaries, benefits and other related costs, including equity-based compensation, for personnel employed in sales, marketing, finance, legal, compliance, administrative, information technology, medical education and training, quality and human resource departments. Selling, general and administrative expense also includes third-party marketing, supply chain and distribution, product recall costs, information technology, legal, human resources, insurance and facilities expenses, selling, general and administrative expenses also include commissions, generally based on a percentage of sales, to our direct sales team and independent distributors. We expect our selling, general and administrative expenses will increase with the continued expansion of our sales organization and commercialization of our current and pipeline products. We plan to hire more personnel to support the growth of our business. In addition, as a public company, we will be implementing additional procedures and processes to address the standards and requirements applicable to public companies. We expect to incur additional annual selling, general and administrative expenses related to these additional procedures and processes including, among other things, equity-based compensation, increased liability insurance for our directors and officers, director fees, reporting requirements of the SEC, transfer agent fees, hiring additional accounting, legal and administrative personnel, increased auditing and legal fees and similar expenses. We also expect a change in the timing over which compensation expense is recognized as a result of the termination of the Phantom Plan and the receipt by participants of shares of Class A common stock upon settlement of their awards, which settlement is expected to take place twelve months after the date of such termination. However, over time, as we grow our net sales, we expect selling, general and administrative expenses to decline as a percentage of net sales.

~~Table o~~f ~~contents~~

Research and development expense

Research and development expense primarily consists of employee compensation, equity compensation and related expenses, as well as contract research organization service expenses related to clinical trials. We expense internal research and development costs as incurred and research and development costs incurred by third parties as they perform contracted work. Our research and development expenses may vary substantially from period to period based on the timing of research and development activities. We are focused on internal research and development to broaden our ~~product~~ portfolio across all ~~verticals, expand our Exogen system product label~~products and undertake clinical research to support ~~commercialization of all of our products.~~their commercialization. As a result, we expect our research and development expenses to ~~increase~~vary from low to the mid-single digits as a percentage of net sales as we introduce new products, extend existing product lines and expand indications. We see significant opportunity to develop innovative and clinically differentiated products in-house with our experienced research and development team. We are currently funding our B.O.N.E.S. clinical study, which began enrollment in 2018 and is aimed at broadening the label of our Exogen system to include a broader range of bones that may be treated as fresh fractures in predisposed patients at risk of nonunion. In addition, we are planning preclinical and animal model studies for MOTYS and PROcuff. Clinical and preclinical development timelines, the probability of success and development costs can differ materially from expectations.

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Restructuring costs

We have restructured portions of our operations and future restructuring activities are possible. Identifying and calculating the cost to exit operations requires certain assumptions to be made, the most significant of which are anticipated future liabilities. Although our estimates have been reasonably accurate in the past, significant judgment is required, and these estimates and assumptions may change as additional information becomes available and facts or circumstances change. Restructuring costs are recorded at estimated fair value. Key assumptions in determining the restructuring costs include negotiated terms and payments to terminate contractual obligations.

Restructuring costs primarily consist of employee severance, legal, consulting and temporary labor expenses. ~~During~~Restructuring costs recorded in 2023 and 2022 are the ~~periods presented, restructuring costs were associated with~~result of: i) aligning our organizational and management cost structure to improve profitability and cash flow; and ii) headcount reductions related to 2021 acquisitions. Restructuring costs recorded in ~~our international business to improve operating efficiency. Key assumptions in determining~~2021 were the ~~restructuring costs include~~result of headcount reductions ~~as well as terms and negotiated payments~~related to ~~terminate certain contractual obligations.~~acquisitions.

Depreciation and amortization

Depreciation expense primarily consists of depreciation of computer equipment and software as well as demonstration and consignment inventory, leasehold improvements, furniture, fixtures, machinery and equipment. Amortization expense primarily consists of amortization expense related to customer relationships and other intangible assets.

Interest expense

Interest expense primarily consists of interest on our indebtedness, which currently consists of our term loan and revolving credit facility, which was incurred pursuant to the Amended 2019 Credit Agreement. We have previously entered into interest rate swaps to limit our exposure to changes in the variable interest rate on our term loan. Interest expense includes any fair value gain or losses on these swaps. Interest expense also includes the revaluation for the liability related to our Equity Participation Right, or EPR, Unit. The EPR Unit’s entitlement is 0.55% of available distributions arising from a distribution event as defined in the Bioventus LLC Agreement and was settled in cash as part of our IPO.

Other expense (income) ~~expense~~

Other expense (income) ~~expense~~ primarily consists of foreign currency transaction and remeasurement gains and losses on transactions denominated in currencies other than our functional currency. Our foreign currency transaction and remeasurement gains and losses are primarily related to foreign currency denominated cash, liabilities and intercompany receivables and payables. Other expense (income) ~~expense~~ may also include certain nonrecurring items.

Income tax expense

The Company’s subsidiary, Bioventus LLC ~~(BV LLC)~~(“BV LLC”), is a partnership for U.S. federal tax purposes. Accordingly, the members include the profits and losses of BV LLC in their income tax returns. Certain wholly-owned subsidiaries of BV LLC are taxable entities for U.S. or foreign tax purposes and file tax returns in their local jurisdictions. Income tax expense includes U.S. federal and state and international income taxes, including certain taxes applicable to BV LLC and U.S. federal income taxes for one of our subsidiaries that is treated as a corporation for U.S. federal tax purposes. Certain income and expense items in income tax returns are not reported in the same year as financial statements. We report the income tax effects of these differences as deferred income taxes. Valuation allowances recognized reduce the related deferred tax assets to an amount which will, more likely than not, be realized. We recognize interest and penalties related to unrecognized tax benefits as a component of income tax expense.

~~Table o~~f ~~contents~~

Bioventus Inc. is subject to U.S. federal, state and local income taxes at the prevailing corporate tax rates with respect to our taxable income. In addition to tax expenses, we are obligated to make payments under the TRA, which could be significant. The TRA obligates us to pay to the Continuing LLC Owner 85% of the amount of any realized tax benefits (or in some circumstances are deemed to realize) resulting from (i) increases in the tax basis of assets of BV LLC as a result of (a) any future redemptions or exchanges of LLC Interests ~~described under~~ ~~Part III, Item 13. Certain Relationships and Related Transactions, and Director Independence—Bioventus LLC Agreement—LLC Interest Redemption Right,~~ and (b) certain distributions (or deemed distributions) by BV LLC and (ii) certain other tax benefits arising from our making payments under the TRA. For more information, see ~~Part III,~~ Item ~~13.~~8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note 11. Income taxes for additional information.

Income tax expense includes U.S. federal, state and international income taxes, including certain taxes applicable to BV LLC. Certain ~~Relationships~~income and ~~Related Transactions,~~expense items in income tax returns are not reported in the same year as financial statements. We report the income tax effects of these differences as deferred income taxes. Valuation allowances recognized reduce the related deferred tax assets to an amount which will, more likely than not, be realized. We recognize interest and ~~Director Independence—Tax Receivable Agreement.~~penalties related to unrecognized tax benefits as a component of income tax expense.

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Non-GAAP Financial Measures - Adjusted EBITDA

We present Adjusted EBITDA, a non-GAAP financial measure, because we believe it is a useful indicator ~~of our operating performance. Our~~that management uses ~~Adjusted EBITDA principally~~ as a measure of ~~our~~ operating performance as well as for planning purposes, including the preparation of our annual operating budget and ~~believes~~financial projections. We believe that Adjusted EBITDA is useful to our investors because it is frequently used by securities analysts, investors and other interested parties ~~frequently use it~~ in their evaluation of the operating performance of companies in industries similar to ours. ~~Our management also uses Adjusted EBITDA for planning purposes, including the preparation of our annual operating budget and financial projections.~~ We define Adjusted EBITDA as net (loss) income ~~(loss)~~ from continuing operations before depreciation and amortization, provision of income taxes and interest expense, net, adjusted for the impact of certain cash, non-cash and other items that we do not consider in our evaluation of ongoing operating performance. These items include acquisition and related costs, impairment of goodwill, impairment of assets, restructuring and succession charges, equity compensation ~~change in fair value of contingent consideration, COVID-19 benefits, succession and transition charges,~~expense, financial restructuring costs, loss on ~~impairment~~disposal of ~~intangible assets, losses associated with debt refinancing, restructuring costs, foreign currency impact~~a business and other ~~non-recurring costs.~~items. Adjusted EBITDA by segment is comprised of net sales and costs directly attributable to a segment, as well as an allocation of corporate overhead ~~costs. The allocation of corporate overhead~~ costs ~~is determined based on various methods but is~~ primarily based on a ratio of net sales by segment to total consolidated net sales. ~~See table within Results from continuing operations~~

Non-GAAP financial measures have limitations as an analytical tool and should not be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with U.S. GAAP. These measures might exclude certain normal recurring expenses. Therefore, these measures might not provide a complete understanding of the Company's performance and should be reviewed in conjunction with the U.S. GAAP financial measures. Additionally, other companies might define their non-GAAP financial measures differently than we do. Investors are encouraged to review the reconciliation of ~~net income from continuing operations~~the non-GAAP measure provided in this Annual Report, including in all tables referencing Adjusted EBITDA, to ~~Adjusted EBITDA.~~its most directly comparable U.S. GAAP measure.

~~Interim Periods~~

The Company reports quarterly interim periods on a 13-week basis within a standard calendar year. Each annual reporting period begins on January 1 and ends on December 31. Each quarter ends on the Saturday closest to calendar quarter-end, with the exception of the fourth quarter, which ends on December 31. The 13-week quarterly periods ended on March 28, June 27 and September 26 for the year ended December 31, 2020. As a result, the fourth and first quarters may vary in length depending on the calendar year.

Results of Continuing Operations

The following table sets forth components of our ~~condensed~~ consolidated statements of ~~operations from continuing~~ operations as a percentage of net sales for the periods presented:


		Years Ended December 31,
		2020		2019
	Years Ended December 31,										Years Ended December 31,
	2023								2023			2022
Net sales	Net sales	100.0	%	100.0	%	Net sales	100.0	%		100.0	%
Cost of sales (including depreciation and amortization)	Cost of sales (including depreciation and amortization)	27.3	%	26.7	%	Cost of sales (including depreciation and amortization)	35.9	%		35.4	%
Gross profit	Gross profit	72.7	%	73.3	%	Gross profit	64.1	%		64.6	%
Selling, general and administrative expense	Selling, general and administrative expense	60.1	%	58.3	%	Selling, general and administrative expense	59.4	%		64.9	%
Research and development expense	Research and development expense	3.5	%	3.3	%	Research and development expense	2.6	%		4.7	%
Restructuring costs	Restructuring costs	0.2	%	0.2	%	Restructuring costs	0.2	%		1.3	%
Change in fair value of contingent consideration						Change in fair value of contingent consideration	0.1	%		0.2	%
Depreciation and amortization	Depreciation and amortization	2.3	%	2.3	%	Depreciation and amortization	1.7	%		1.9	%
Operating income		6.6	%	9.2	%
Impairment of assets						Impairment of assets	15.4	%		—	%
Impairment of goodwill						Impairment of goodwill	—	%		24.3	%
Loss on disposals						Loss on disposals	0.7	%		—	%
Operating loss						Operating loss	(16.0	%)		(32.7	%)

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The following table presents a reconciliation of net ~~income~~loss from continuing operations to Adjusted EBITDA for the periods presented:

Years Ended December 31,
(in thousands) 2020 2019
Net income from continuing operations $ 14,722 $ 8,113
Depreciation and amortization(a)
28,643 30,316
Income tax expense 1,192 1,576
Interest expense 9,751 21,579
Equity compensation(b)
10,103 10,844
COVID-19 benefits, net(c)
(4,123) —
Succession and transition charges(d)
5,609 —
Restructuring costs(e)
563 575
Foreign currency impact(f)
(117) 8
Equity loss in unconsolidated investments(g)
467 —
Other non-recurring costs(h)
5,633 6,177
Adjusted EBITDA $ 72,443 $ 79,188


	Years Ended December 31,
(in thousands)		2023		2022
Net loss from continuing operations		$	(121,196)	$	(144,651)
Interest expense, net		40,676		12,021
Income tax expense (benefit), net		85		(44,374)
Depreciation and amortization(a)		57,365		55,398
Acquisition and related costs(b)		5,694		21,731
Restructuring and succession charges(c)		2,331		7,453
Equity compensation(d)		2,722		17,585
Financial restructuring costs(e)		7,291		—
Impairment of assets(f)		78,615		10,285
Impairment of goodwill(g)		—		124,697
Loss on disposal of a business(h)		1,539		—
Other items(i)		13,740		8,465
Adjusted EBITDA		$	88,862	$	68,610

(a)Includes for the years ended December 31, ~~2020~~2023 and ~~2019~~2022, respectively, depreciation and amortization of ~~$21.2 million~~$48,503 and ~~$22.4 million~~$45,622 in cost of sales and ~~also includes $7.4 million~~$8,862 and ~~$7.9 million, respectively,~~$9,776 in operating expenses presented in the consolidated statements of operations and comprehensive ~~income~~ (loss)~~, with the balance in research~~ income.

(b)Includes acquisition and ~~development.~~

~~(b)Represents compensation as well as the change in fair market value resulting from two equity-based compensation plans, the MIP and the Phantom Plan.~~

~~(c)Represents income resulting from the CARES Act offset by additional cleaning and disinfecting expenses and contract termination fees for canceled events.~~

~~(d)Primarily represents~~integration costs related to ~~the CEO transition.~~

~~(e)Represents costs~~completed acquisitions, amortization of inventory step-up associated with acquired entities, loss on disposal of fixed assets related to acquired businesses, and changes in fair value of contingent consideration.

(c)Costs incurred were the result of adopting restructuring plans to reduce headcount, contract termination, reorganize management structure and consolidate certain facilities.

(d)Includes compensation expense resulting from awards granted under our equity-based compensation plans. The year ended December 31, 2023 includes the reversal of equity compensation expenses totaling $3.8 million related to the transition of our executive leadership.

(e)Financial restructuring costs include advisory fees and debt amendment related costs.

(f)Represents a ~~shift~~non-cash impairment charge for intangible assets attributable to our Wound Business due to its divestiture during the year ended December 31, 2023. Represents asset impairment charges on Trice Medical, Inc. for the year ended December 31, 2022.

(g)Represents a non-cash impairment charge due to the decline in the Company’s market capitalization.

(h)Represents the loss on the disposal of the Wound Business.

(i)Other items primarily includes charges associated with strategic transactions, such as potential acquisitions or divestitures, projects associated with improving business capabilities/efficiencies and costs attributable to MOTYS. During the 2022 fiscal year, prior to obtaining the results from ~~direct~~our Phase 2 trial, we elected to discontinue the development of MOTYS to focus our resources on other priorities, including the integration of our acquisitions and our expanded R&D and product development portfolio we inherited with these acquisitions. We incurred $1.0 million and $4.3 million in costs during the years ended December 31, 2023 and 2022, respectively, related to MOTYS. No further costs are expected on MOTYS.

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Net sales


	Years Ended December 31,				Change
(in thousands, except for percentage)	2023		2022		$		%
U.S.
Pain Treatments	$	197,954	$	194,830	$	3,124	1.6	%
Restorative Therapies	116,851		134,214		(17,363)		(12.9	%)
Surgical Solutions	135,055		126,207		8,848		7.0	%
Total U.S. net sales	449,860		455,251		(5,391)		(1.2	%)

International
Pain Treatments	22,847		21,495		1,352		6.3	%
Restorative Therapies	20,222		20,420		(198)		(1.0	%)
Surgical Solutions	19,416		14,951		4,465		29.9	%
Total International net sales	62,485		56,866		5,619		9.9	%

Total net sales	$	512,345	$	512,117	$	228	—	%

U.S.

Net sales decreased $5.4 million, or 1.2%, compared to the prior year. Changes by major product groups were: (i) Pain Treatments—$3.1 million increase due to volume partially offset with lower reported ASP during most of 2023, thereby generating lower reimbursement levels; (ii) Restorative Therapies—$17.4 million net sales decrease due primarily to the divestiture of our Wound Business; and (iii) Surgical Solutions—$8.8 million net sales increase due to volume growth.

International

Net sales increased $5.6 million, or 9.9%, due to volume growth in Pain Treatments and Surgical Solutions, partially offset with a volume decline in Restorative Therapies from advanced rehabilitation.

Gross profit and gross margin


	Years Ended December 31,				Change
(in thousands, except for percentage)	2023		2022		$		%
U.S.	$	294,366	$	296,782	$	(2,416)	(0.8	%)
International	33,827		34,298		(471)		(1.4	%)
Total	$	328,193	$	331,080	$	(2,887)	(0.9	%)


	Years Ended December 31,
	2023		2022		Change
U.S.	65.4	%	65.2	%	0.2	%
International	54.1	%	60.3	%	(6.2	%)
Total	64.1	%	64.6	%	(0.5	%)

U.S.

Gross profit decreased $2.4 million, or 0.8%, primarily due to the divestiture of our Wound Business, the decrease in selling price within Pain Treatments and an ~~indirect distribution model~~increase in ~~our~~ cost of sales due to inventory write-offs. The change in gross margin included a decrease from product mix and selling price, offset with a decrease in rebates and the absence of amortization of acquisition related assets in 2022 compared with 2023.

International ~~business~~

Gross profit remained consistent with prior period. Gross margin decreased due to product mix.

Selling, general and administrative expense


	Years Ended December 31,				Change
(in thousands, except for percentage)	2023		2022		$		%
Selling, general and administrative expense	$	303,879	$	332,134	$	(28,255)	(8.5	%)

Table of Contents

Selling, general and administrative expense decreased $28.3 million, or 8.5%, primarily due to a decrease in equity-based compensation of $14.5 million due to employee turnover and the decline in stock price and cost saving initiatives. These initiatives resulted in a decrease of $7.3 million in other administrative and marketing related costs and a decline of $6.3 million in bad debt due to increased collections.

Research and development expense


	Years Ended December 31,				Change
(in thousands, except for percentage)	2023		2022		$		%
Research and development expense	$	13,446	$	23,854	$	(10,408)	(43.6	%)

Research and development expense decreased $10.4 million, or 43.6%, primarily due to: (i) a decrease of $8.2 million in consulting costs; (ii) a decline of $1.0 million in supplies expense due to cost reduction efforts; and (iii) a decrease of $0.4 million in equity-based compensation due to employee turnover.

Restructuring costs


	Years Ended December 31,				Change
(in thousands, except for percentage)	2023		2022		$		%
Restructuring costs	$	840	$	6,779	$	(5,939)	(87.6	%)

Restructuring costs for the year ended December 31, 2023 primarily included costs incurred as a result of an initiative to align the Company’s organizational and management cost structure to improve ~~performance. Various international subsidiaries~~profitability and cash flow through headcount reduction and reducing third-party related costs. Costs incurred for the year ended December 31, 2022 included costs to reduce headcount, reorganize management structure and to consolidate certain facilities for acquired businesses.

Change in fair value of contingent consideration


	Years Ended December 31,				Change
(in thousands, except for percentage)	2023		2022		$		%
Change in fair value of contingent consideration	$	719	$	1,102	$	(383)	(34.8	%)

The fair value of contingent consideration during year ended December 31, 2023 remained consistent with the prior year comparable period. The activity for both periods relates to contingent consideration associated with the acquisition of Bioness in March 2021.

Depreciation and amortization


	Years Ended December 31,				Change
(in thousands, except for percentage)	2023		2022		$		%
Depreciation and amortization	$	8,842	$	9,748	$	(906)	(9.3	%)

Depreciation and amortization decreased during year ended December 31, 2023 compared with the prior year primarily due to: (i) the impairment of intellectual property intangible assets associated with the Wound Business, which was divested during the second quarter of 2023; and (ii) a decline in amortization for certain customer relationships that became fully amortized during the first quarter of 2023. These decreases were ~~dissolved~~partially offset with an increase in depreciation expense for information technology assets, right-of-use assets associated with finance leases and ~~or merged into other BV LLC entities.~~consignment and demo assets.

~~(f)Foreign currency impact represents realized~~Impairment of assets

Our decision to divest the Wound Business required us to evaluate whether certain of its assets were impaired. We recorded a $78.6 million non-cash impairment charge as a result of this evaluation to reduce the intangible assets to their fair values less costs to sell. The fair value of intangibles of the Wound Business was determined based on the consideration offered for the Wound Business.

Impairment of goodwill

We concluded that the carrying value of the U.S. reporting unit exceeded its fair value and ~~unrealized gains~~recorded a non-cash goodwill impairment charge of $189.2 million during the year ended December 31, 2022, of which $124.7 million was recorded in the impairment of assets and ~~losses from fluctuations~~$64.5 million in ~~foreign currency and is included~~loss on discontinued operations, net of tax, respectively, within ~~other (income) loss in~~ the consolidated statements of operations and comprehensive ~~income~~ (loss).

~~(g)Represents our share in the losses of CartiHeal for the year ended December 31, 2020.~~

~~(h)~~Other non-recurring items in 2020 includes settlement and legal costs of $1.9 million with the OIG. The remaining activities in 2020 and the balance in 2019 are primarily comprised of charges associated with potential strategic transactions, such as potential acquisitions and preparing to become a public company, primarily accounting and legal fees.

~~Net sales~~

Years Ended December 31, Change
(in thousands, except for percentage) 2020 2019 $ %
U.S. $ 293,697 $ 305,072 $ (11,375) (3.7 %)
International 27,464 35,069 (7,605) (21.7 %)
Net Sales $ 321,161 $ 340,141 $ (18,980) (5.6 %)

~~U.S.~~

~~Net sales decreased $11.4 million, or 3.7%, for year ended December 31, 2020, compared to the year ended December 31, 2019. The changes in net sales by vertical are as follows:~~


•~~Minimally invasive fracture treatment~~			~~($11.5) million~~
•~~OA joint pain treatment and joint restoration~~			~~($6.3) million~~
•~~Bone graft substitutes~~			~~$6.4 million~~

income.

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Minimally invasive fracture treatment decreased primarily due to sales volume declines resulting from the disruption caused by the COVID-19 pandemic. OA joint pain and joint preservation decreased primarily due to the COVID-19 pandemic as well as more treatments being sold under contracts with major insurers at lower prices, partially offset by sales volume growth. These decreases were also offset by sales volume growth within our BGS vertical.Loss on disposals

~~International~~

Net sales decreased $7.6 million, or 21.7%, for the year ended December 31, 2020, compared to the year ended December 31, 2019, primarily due to a decline in order volumes due to the disruption caused by the COVID-19 pandemic.

~~Gross profit and gross margin~~

Years Ended December 31, Change
(in thousands, except for percentage) 2020 2019 $ %
Gross profit
U.S. $ 214,572 $ 224,957 $ (10,385) (4.6 %)
International 18,947 24,249 (5,302) (21.9 %)
Total $ 233,519 $ 249,206 $ (15,687) (6.3 %)

Years Ended December 31, Change
2020 2019
Gross margin
U.S. 73.1 % 73.7 % (0.6 %)
International 69.0 % 69.1 % (0.1 %)
Consolidated 72.7 % 73.3 % (0.6 %)

~~U.S.~~

Gross profit decreased $10.4 million, or 4.6%, for the year ended December 31, 2020, compared to the year ended December 31, 2019, primarily due to the decline in net sales above described. Manufacturing variances created by maintaining consistent production levels in a period of low demand coupled with idle time attributed to the COVID-19 pandemic caused a slight decrease of 0.6% in gross margin during 2020.

~~International~~

Gross profit decreased $5.3 million, or 21.9%, for the year ended December 31, 2020, compared to the year ended December 31, 2019, primarily due to the decrease in sales from the disruption caused by COVID-19 pandemic.

~~Selling, general and administrative expense~~

Years Ended December 31, Change
(in thousands, except for percentage) 2020 2019 $ %
Selling, general and administrative expense $ 193,078 $ 198,475 $ (5,397) (2.7 %)

~~Selling, general and administrative expense declined $5.4 million, or 2.7%, for the year ended December 31, 2020, compared to the year ended December 31, 2019, primarily due to:~~


•~~COVID-19 related decreases, including declines in travel and meetings from doing business virtually, lower compensation related expenses as well as various cost-reduction initiatives~~			~~$9.3 million~~
•~~Lower legal and accounting expenses, which were higher in 2019 due to the OIG matter discussed in~~ ~~Note 12. Commitment and contingencies~~ ~~within~~ ~~Part II, Item 8. Financial Statements and Supplementary data~~			~~$5.8 million~~

~~These items were partially offset by the following increases:~~


•~~Succession and transition charges associated with the transition to our new Chief Executive Officer~~			~~$5.6 million~~
•~~Costs and services related to strategic transactions, product recall expenses and other non-recurring charges~~			~~$4.1 million~~

~~Table o~~f ~~contents~~

~~Research and development expense~~

Years Ended December 31, Change
(in thousands, except for percentage) 2020 2019 $ %
Research and development expense $ 11,202 $ 11,055 $ 147 1.3 %

Research and development expense increased $0.1 million, or 1.3%, for the year ended December 31, 2020, compared to the year ended December 31, 2019, primarily due to costs relating to the development agreement for MOTYS being almost entirely offset by cost reduction initiatives undertaken as a result of the COVID-19 pandemic.

~~Depreciation and amortization~~

Years Ended December 31, Change
(in thousands, except for percentage) 2020 2019 $ %
Depreciation and amortization $ 7,439 $ 7,908 $ (469) (5.9) %

~~Depreciation and amortization~~The loss on disposals during the year ended December 31, ~~2020 remained consistent~~2023 resulted from $1.5 million in working capital adjustments associated with the ~~year ended December 31, 2019, as it slightly decreased $0.5~~sale of our Wound Business and a $2.0 million ~~or 5.9%.~~loss on fixed assets disposed of during the integration of acquisitions.

Other (income) expense ~~(income)~~

Years Ended December 31, Change
(in thousands, except for percentage) 2020 2019 $ %
Interest expense $ 9,751 $ 21,579 $ (11,828) (54.8 %)
Other (income) loss $ (4,428) $ (75) $ (4,353) NM


	Years Ended December 31,				Change
(in thousands, except for percentage)	2023		2022		$		%
Interest expense, net	$	40,676	$	12,021	$	28,655	238.4	%
Other (income) expense	$	(1,290)	$	9,770	$	(11,060)	(113.2	%)

Interest expense, ~~decreased $11.8~~net increased $28.7 million ~~or 54.8%, for the year ended December 31, 2020, compared to the year ended December 31, 2019, primarily~~due to: (i) an increase in interest of $16.0 million due to ~~decreased debt~~higher interest ~~resulting from refinancing our debt in December 2019 as well as~~rates; (ii) the ~~decline in interest rates. This decrease was partially offset with an increase~~absence of ~~$1.6~~$6.4 million ~~primarily~~benefit resulting from the ~~decline~~change in fair value of our interest rate ~~swap.~~swap, which was discontinued during the fourth quarter of 2022; (iii) an increase of $3.9 million due to higher margin rates on our Term Loan; (iv) a $0.9 million increase in amortization of discount and deferred financing costs; and (v) an increase of $0.8 million in lease finance interest expense.

Other ~~income during year ended December 31, 2020 was primarily the result of receiving Provider Relief Fund payments of approximately $4.1~~(income) expense changed $11.1 million ~~in the aggregate pursuant~~due to the ~~CARES Act.~~

~~Income tax expense~~

Years Ended December 31, Change
(in thousands, except for percentage) 2020 2019 $ %
Income tax expense $ 1,192 $ 1,576 $ (384) (24.4 %)
Effective tax rate 7.5 % 16.3 % (8.8 %)
$10.3 million impairment of the Trice Medical, Inc. investment during 2022 and the receipt of $1.5 million from the settlement of a legal claim during 2023, partially offset with changes in foreign currency.

Income tax expense ~~decreased $0.4~~(benefit), net


	Years Ended December 31,						Change
(in thousands, except for percentage)	2023			2022			$		%
Income tax expense (benefit), net	$	85		$	(44,374)		$	44,459	(100.2)	%
Effective tax rate	0.1		%	23.5		%			(23.4	%)

The $44.5 million ~~or 24.4%, for the year ended December 31, 2020, compared to the year ended December 31, 2019, primarily due to the~~ change in income ~~from continuing operations~~taxes was driven by movement in net losses before income ~~taxes. Our change in effective tax rate is~~taxes and the ~~result~~implementation of a full valuation allowance during the first quarter of 2023.

Noncontrolling interest


	Years Ended December 31,				Change
(in thousands, except for percentage)	2023		2022		$		%
Continuing LLC Owner	$	39,395	$	54,240	$	(14,845)	(27.4	%)
Other noncontrolling interest	—		447		(447)		(100.0	%)
Total	$	39,395	$	54,687	$	(15,292)

Subsequent to the IPO and related transactions, we are the sole managing member of BV ~~LLC’s pass-through structure for U.S. income tax purposes, while being treated as taxable~~LLC in ~~certain states~~which we own 80.0%. We have a majority economic interest, the sole voting interest in, and ~~various foreign jurisdictions as well as for certain subsidiaries.~~control the management of BV LLC. As a result, we consolidate the financial results of BV LLC and report a non-controlling interest representing the 20.0% that is owned by the Continuing LLC Owner.

Segment Adjusted EBITDA

Adjusted EBITDA for each of our reportable segments is as follows:


		Years Ended December 31,				Change
	Years Ended December 31,															Years Ended December 31,					Change
(in thousands, except for percentage)	(in thousands, except for percentage)	2020		2019		$		%		(in thousands, except for percentage)	2023			2022				$				%
U.S.	U.S.	$	69,252	$	71,673	$	(2,421)	(3.4	%)	U.S.	$	78,668	$	$	56,513		$	$	22,155	39.2			39.2	%
International	International	$	3,191	$	7,515	$	(4,324)	(57.5	%)	International	$	10,194	$	$	12,097		$	$	(1,903)	(15.7)			(15.7)	%


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, $0.001 par value ~~$0.001~~ per share	BVS	The Nasdaq Global Select Market


	BIOVENTUS INC.

	TABLE OF CONTENTS

		Page
PART I
	Item 1. Business	1
	Item 1A. Risk Factors	3522
	Item 1B. Unresolved Staff Comments	8366
	Item 1C. Cybersecurity	66
	Item 2. Properties	8367
	Item 3. Legal Proceedings	8367
	Item 4. Mine Safety Disclosures	8368
~~PART II~~
PART II
	Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	8469
	Item 66. [Reserved]. [~~Reserved]~~	8470
	Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	8570
	I~~Item~~tem 7A. Quantitative and Qualitative Disclosures ~~About~~about Market Risk	~~104~~86
	Item 8. Financial Statements and Supplementary Data	~~105~~88






Item 9. Changes in and Disagreements ~~With~~with Accountants on Accounting and Financial ~~Disclosure~~Disclosures	~~144~~129
	Item 9A. Controls and Procedures	~~144~~129
	Item 9B. Other Information	~~145~~132
	~~PART II~~Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent InspectionsI	132

PART III
	Item 10. Directors, Executive Officers and Corporate Governance	~~146~~133
	Item 11. Executive Compensation	~~150~~136
	Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	~~159~~136
	Item 13. Certain Relationships and Related Transactions and Director Independence	~~162~~137
	Item 14. Principal Accounting Fees and Services	~~168~~137
~~PART I~~V
PART IV
	Item 15. Exhibits, Financial Statement Schedules	~~169~~138
	Item 16. Form ~~10-~~K10-K Summary	~~173~~142

SIGNATURES		~~174~~143


(in thousands)	Current		Long-Term		Total
Long-term debt(a)	$	27,848	$	354,600	$	382,448
Interest payments on long-term debt obligations(a)	37,615		58,585		96,200
Lease liabilities(b)	4,816		20,959		25,775
Purchase commitments(c)	35,146		12,973		48,119
	$	105,425	$	447,117	$	552,542


	Years Ended December 31,				Change
(in thousands, except for percentage)	2020		2019		$		%
Consolidated statement of cash flow data:
Net cash provided by (used in):
Operating activities from continuing operations	$	72,199	$	42,545	$	29,654	69.7	%
Investing activities from continuing operations	(20,672)		(7,912)		(12,760)		161.3	%
Financing activities	(29,569)		(10,951)		(18,618)		170.0	%
Discontinued operations	(228)		(1,832)		1,604		(87.6)	%
Effect of exchange rate changes on cash and cash equivalents	589		(104)		693		NM
Net change in cash and cash equivalents	$	22,319	$	21,746	$	573


	Payments Due by Period
Contractual Obligations (in thousands)	Less than 1 year		1-3 Years		3-5 Years		More than 5 years		Total
Long-term debt obligations	$	15,000	$	35,000	$	140,000	$	—	$	190,000
Interest on long-term debt obligations	4,606		8,073		3,139		—		15,818
Operating lease obligations	1,960		3,955		4,232		5,921		16,068
Purchase obligations	19,655		25,920		25,920		—		71,495
	$	41,221	$	72,948	$	173,291	$	5,921	$	293,381


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


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


			*p~~<0.000 compared to Synvisc~~
			#p~~<0.000 compared to DUROLANE baseline~~
			*p~~=0.008 compared to Synvisc baseline~~


	2020		2019
Net income from continuing operations attributable to common unit holders	$	16,411	$	8,666
Loss from discontinued operations, net of tax	—		1,815
Net income attributable to common unit holders	$	16,411	$	6,851
Pro forma net income per unit attributable to common unit holders —basic and diluted
Pro forma net income from continuing operations	$	0.29	$	0.15
Pro forma loss from discontinued operations, net of tax	—		0.03
Pro forma net income attributable to common unit holders	$	0.29	$	0.12

Pro forma weighted average units used in computing basic and diluted net income per common unit	56,825,325		56,825,325


	2020		2019
Expected dividend yield	0.0	%	0.0	%
Expected volatility	50.0	%	35.0	%
Risk-free interest rate	0.1	%	1.5	%
Time to exit event (in years)	0.4		1.5


~~Computer software and hardware~~			~~3-5~~
~~Leasehold improvements~~			7
~~Machinery and equipment~~			7
~~Furniture and fixtures~~			7


			~~Weighted~~ ~~Average~~ ~~Useful Life~~
~~Intellectual property~~			~~17.3~~
~~Distribution rights~~			~~12.7~~
~~Customer relationships~~			10
~~Developed technology~~			~~8.3~~


			Page
			~~Page~~
Bioventus Inc.
Report of Independent Registered Public Accounting Firm (PCAOB ID Number 248)			~~106~~89
~~Balance sheets~~Consolidated Statements of Operations and Comprehensive (Loss) Income			~~107~~90
~~Notes to~~Consolidated Balance ~~sheets~~Sheets			~~108~~91


~~Bioventus LLC~~
~~Report of Independent Registered Public Accounting Firm~~			~~111~~
Consolidated ~~statements~~Statements of ~~operations~~Changes in Stockholders’ and ~~comprehensive incom~~Members’ Equity e ~~(loss)~~			~~113~~92
Consolidated ~~balance sheets~~Statements of Cash Flows			~~114~~93
~~Consolidated statements of members' equity~~			~~115~~
~~Consolidated statements of cash flow~~			~~116~~
Notes to the ~~consolidated statements~~Consolidated Financial Statements			~~117~~94


~~GRANT THORNTON LLP~~						~~REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM~~
~~4140 ParkLake Ave., Suite 130~~
~~Raleigh, NC 27612-3723~~

~~D +1 919 881 2700~~
~~F +1 919 881 2795~~


	2020		2019
Assets	$	—	$	—
Liabilities	—		—
Commitments and contingencies
Stockholders’ equity	—		—
Common stock, $0.01 par value - 10 shares authorized, issued and outstanding	—		—
Total liabilities and stockholders’ equity	$	—	$	—


	2020		2019		2018
Net sales	$	321,161	$	340,141	$	319,177
Cost of sales (including depreciation and amortization of $21,169, $22,399 and $20,614, respectively)	87,642		90,935		84,168
Gross profit	233,519		249,206		235,009
Selling, general and administrative expense	193,078		198,475		191,672
Research and development expense	11,202		11,055		8,095
Change in fair value of contingent consideration	—		—		(739)
Restructuring costs	563		575		1,373
Depreciation and amortization	7,439		7,908		8,615
Loss on impairment of intangible assets	—		—		489
Operating income	21,237		31,193		25,504
Interest expense	9,751		21,579		19,171
Other (income) loss	(4,428)		(75)		226
Other expense	5,323		21,504		19,397
Income from continuing operations before income taxes	15,914		9,689		6,107
Income tax expense	1,192		1,576		1,664
Net income from continuing operations	14,722		8,113		4,443
Loss from discontinued operations, net of tax	—		1,815		16,650
Net income (loss)	14,722		6,298		(12,207)
Loss attributable to noncontrolling interest	1,689		553		—
Net income (loss) attributable to unit holders	16,411		6,851		(12,207)
Other comprehensive income (loss), net of tax
Change in prior service cost and unrecognized (loss) gain for defined benefit plan adjustment	(54)		(78)		131
Change in foreign currency translation adjustments	2,126		(322)		(334)
Other comprehensive income (loss)	2,072		(400)		(203)
Comprehensive income (loss)	$	18,483	$	6,451	$	(12,410)

Net income from continuing operations attributable to unit holders	$	16,411	$	8,666	$	4,443
Accumulated and unpaid preferred distributions	(6,133)		(5,955)		(5,781)
Net income allocated to participating shareholders	(5,895)		(1,555)		—
Net income (loss) from continuing operations attributable to common unit holders	4,383		1,156		(1,338)
Loss from discontinued operations, net of tax	—		1,815		16,650
Net income (loss) attributable to common unit holders	$	4,383	$	(659)	$	(17,988)
Net income (loss) per unit attributable to common unit holders - basic and diluted
Net income (loss) from continuing operations	$	0.89	$	0.24	$	(0.27)
Loss from discontinued operations, net of tax	—		0.37		3.40
Net income (loss) attributable to common unit holders	$	0.89	$	(0.13)	$	(3.67)

Weighted average units used in computing basic and diluted net income (loss) per common unit	4,900,000		4,900,000		4,900,000


	2023		2022		2021
Net sales	$	512,345	$	512,117	$	430,898
Cost of sales (including depreciation and amortization of $48,503, $45,622 and $26,471 respectively)	184,152		181,037		128,192
Gross profit	328,193		331,080		302,706
Selling, general and administrative expense	303,879		332,134		254,253
Research and development expense	13,446		23,854		19,039
Restructuring costs	840		6,779		2,487
Change in fair value of contingent consideration	719		1,102		829
Depreciation and amortization	8,842		9,748		8,363
Impairment of assets	78,615		—		—
Impairment of goodwill	—		124,697		—
Loss on disposals	3,577		—		—
Impairment of variable interest entity assets	—		—		5,674
Operating (loss) income	(81,725)		(167,234)		12,061
Interest expense, net	40,676		12,021		1,112
Other (income) expense	(1,290)		9,770		1,461
Other expense	39,386		21,791		2,573
(Loss) income before income taxes	(121,111)		(189,025)		9,488
Income tax expense (benefit), net	85		(44,374)		(1,966)
Net (loss) income from continuing operations	(121,196)		(144,651)		11,454
Loss from discontinued operations, net of tax	(74,429)		(68,740)		(1,868)
Net (loss) income	(195,625)		(213,391)		9,586
Loss attributable to noncontrolling interest - continuing operations	24,458		40,732		9,789
Loss attributable to noncontrolling interest - discontinued operations	14,937		13,955		—
Net (loss) income attributable to Bioventus Inc.	$	(156,230)	$	(158,704)	$	19,375

Net (loss) income	$	(195,625)	$	(213,391)	$	9,586
Other comprehensive (loss) income, net of tax
Change in prior service cost and unrecognized (loss) gain for defined benefit plan adjustment	(8)		133		60
Change in foreign currency translation adjustments	1,140		(501)		(1,318)
Comprehensive (loss) income	(194,493)		(213,759)		8,328
Comprehensive loss attributable to noncontrolling interest - continuing operations	24,230		40,811		9,789
Comprehensive loss attributable to noncontrolling interest - discontinued operations	14,937		13,955		—
Comprehensive (loss) income attributable to Bioventus Inc.	$	(155,326)	$	(158,993)	$	18,117

Loss per share of Class A common stock from(1):
Continuing operations, basic and diluted	$	(1.54)	$	(1.70)	$	(0.11)
Discontinued operations, basic and diluted	(0.95)		(0.89)		(0.04)
Loss per share of Class A common stock, basic and diluted	$	(2.49)	$	(2.59)	$	(0.15)

Weighted-average shares of Class A common stock outstanding, basic and diluted(1):	62,647,554		61,389,107		45,472,483
(1) Per share information for the year ended December 31, 2021 represents loss per share of Class A common stock and weighted-average shares of Class A common stock outstanding from February 16, 2021 through December 31, 2021, the period following Bioventus Inc.'s initial public offering and related transactions described in Note 8. Stockholders’ equity and Note 9. Earnings per share within the Notes to the Consolidated Financial Statements.


	Members’ Equity		Class A Common Stock			Class B Common Stock			Additional Paid-in Capital		Accumulated other comprehensive income (loss)		Accumulated Deficit		Non- controlling Interest		Total Stockholders' and Members’ Equity
			Shares	Amount		Shares	Amount
December 31, 2020	$	144,160	—	$	—	—	$	—	$	—	$	—	$	—	$	—	$	144,160
Prior to Organizational Transactions:
Refund from members	123		—	—		—	—		—		—		—		—		123
Equity-based compensation	(39)		—	—		—	—		—		—		—		—		(39)
Net income	25,977		—	—		—	—		—		—		—		—		25,977
Other comprehensive loss	(1,507)		—	—		—	—		—		—		—		—		(1,507)
Effect of Organizational Transactions	(168,714)		31,838,589	32		15,786,737	16		41,813		—		—		79,119		(47,734)
Subsequent to Organizational Transactions:
Initial public offering, net of offering costs	—		9,200,000	9		—	—		106,441		—		—		—		106,450
Issuance of Class A common stock for equity plans	—		169,125	—		—	—		1,617		—		—		—		1,617
Issuance of Class A common stock for acquisitions, net of registration fees	—		18,340,790	18		—	—		272,706		—		—		—		272,724
Distribution to Continuing LLC Owner	—		—	—		—	—		—		—		—		(3,306)		(3,306)
Net loss	—		—	—		—	—		—		—		(6,602)		(9,789)		(16,391)
Deconsolidation of variable interest entity	—		—	—		—	—		—		—		—		3,746		3,746
Equity based compensation	—		—	—		—	—		15,059		—		—		4,825		19,884
Replacement equity awards in connection with acquisitions	—		—	—		—	—		27,636		—		—		—		27,636
Acquisition of noncontrolling interest	—		—	—		—	—		—		—		—		200		200
Change in noncontrolling interest allocations	—		—	—		—	—		8,046		—		—		65,821		73,867
Other comprehensive income	—		—	—		—	—		—		179		—		70		249
December 31, 2021	$	—	59,548,504	$	59	15,786,737	$	16	$	473,318	$	179	$	(6,602)	$	140,686	$	607,656
Issuance of Class A common stock for equity plans			2,514,510	3		—	—		5,819		—		—		—		5,822
Deferred taxes on equity rebalancing			—	—		—	—		(1,977)		—		—		—		(1,977)
Net loss			—	—		—	—		—		—		(158,704)		(54,687)		(213,391)
Tax withholdings on equity compensation awards			—	—		—	—		(3,352)		—		—		—		(3,352)
Deconsolidation of noncontrolling interest			—	—		—	—		—		—		—		247		247
Equity based compensation			—	—		—	—		14,180		—		—		3,405		17,585
Change in noncontrolling interest allocations			—	—		—	—		2,588		—		—		(2,588)		—
Other comprehensive loss			—	—		—	—		—		(289)		—		(79)		(368)
December 31, 2022			62,063,014	$	62	15,786,737	$	16	$	490,576	$	(110)	$	(165,306)	$	86,984	$	412,222
Issuance of Class A common stock for equity plans			1,204,422	1		—	—		777		—		—		—		778
Net loss			—	—		—	—		—		—		(156,230)		(39,395)		(195,625)
Equity based compensation			—	—		—	—		2,388		—		—		334		2,722
Change in noncontrolling interest allocations			—	—		—	—		513		—		—		(513)		—
Distributions to members			—	—		—	—		—		—		—		(111)		(111)
Other comprehensive income			—	—		—	—		—		904		—		228		1,132
December 31, 2023			63,267,436	$	63	15,786,737	$	16	$	494,254	$	794	$	(321,536)	$	47,527	$	221,118


	Members’ Equity		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Noncontrolling Interest		Total Members’ Equity
Balance at December 31, 2017	$	285,114	$	138	$	(119,795)	$	—	$	165,457
Profits interest compensation	39		—		—		—		39
Distribution to members	—		—		(7,819)		—		(7,819)
Net loss	—		—		(12,207)		—		(12,207)
Defined benefit plan adjustment	—		131		—		—		131
Translation adjustment	—		(334)		—		—		(334)
Balance at December 31, 2018	285,153		(65)		(139,821)		—		145,267
Profits interest forfeitures	(6)		—		—		—		(6)
Distribution to members	—		—		(8,730)		—		(8,730)
Acquisition of noncontrolling interest	—		—		—		3,188		3,188
Net income (loss)	—		—		6,851		(553)		6,298
Defined benefit plan adjustment	—		(78)		—		—		(78)
Translation adjustment	—		(322)		—		—		(322)
Balance at December 31, 2019	285,147		(465)		(141,700)		2,635		145,617
Profits interest forfeitures	(12)		—		—		—		(12)
Distribution to members	—		—		(19,250)		—		(19,250)
Other equity compensation	38		—		—		—		38
Debt conversion	—		—		—		973		973
Net income (loss)	—		—		16,411		(1,689)		14,722
Defined benefit plan adjustment	—		(54)		—		—		(54)
Translation adjustment	—		2,126		—		—		2,126
Balance at December 31, 2020	$	285,173	$	1,607	$	(144,539)	$	1,919	$	144,160


Consolidated Balance Sheets — December 31, 2022	As Previously Reported		Adjustments		As Adjusted
Deferred income taxes(b)(d)(e)	$	74,138	$	(71,890)	$	2,248
Total liabilities	1,032,317		(71,890)		960,427
Additional paid-in capital(a)(b)(c)(d)	481,919		8,657		490,576
Noncontrolling interest(a)(c)	23,751		63,233		86,984
Total stockholders’ equity	340,332		71,890		412,222


Computer software and hardware			3 - 5
Demonstration and consignment inventory			5
Furniture and fixtures			7
Leasehold improvements			7
Machinery and equipment			7


			Weighted Average Useful Life
Intellectual property			18.6
Distribution rights			11.2


Developed technology			9.8


		2020		2019
Accounts receivable		$	92,273	$	89,274
	2023					2023	2022
Accounts receivable(a)
Less: Allowance for credit losses	Less: Allowance for credit losses	(3,990)		(4,146)
		$	88,283	$	85,128
	$


	2020		2019
Raw materials and supplies	$	3,665	$	3,349
Finished goods	26,323		24,509
Gross	29,988		27,858
Excess and obsolete reserves	(868)		(532)
	$	29,120	$	27,326


	2023		2022
Raw materials and supplies(a)	$	21,062	$	18,454
Finished goods	70,271		66,312
	$	91,333	$	84,766


	2020		2019
Balance, beginning of period	$	(532)	$	(570)
Provision for losses	(904)		(870)
Write-offs	568		908
	$	(868)	$	(532)


	U.S.		International		Consolidated
Balance at December 31, 2021	$	138,863	$	8,760	$	147,623
Additions	55,295		4,999		60,294
Deconsolidation of noncontrolling interest	(494)		—		(494)
Purchase accounting adjustments	(4,467)		—		(4,467)
Impairment	(189,197)		—		(189,197)
Reclassification(a)	—		(6,297)		(6,297)
Balance at December 31, 2022	$	—	$	7,462	$	7,462
Balance at December 31, 2023(b)	$	—	$	7,462	$	7,462


Cash consideration	$	100,000
Transaction related costs	8,622
Subtotal of cash at closing	108,622
Deferred Amount	183,400
Sales Milestone	61,901
Fair value of previously held equity interest(a)	39,477
Total consideration	$	393,400


Fair value of consideration	$	393,400
Assets acquired and liabilities assumed:
Cash and cash equivalents and restricted cash	$3,781		~~1,430~~
~~Intellectual property (10-year useful life)~~Inventory	~~4,834~~ 642
~~IPR&D~~Prepaid and other current assets	~~1,445~~ 552
~~Other assets~~Property and equipment	70 259
Intangibles	410,200
Investment and other assets	727
Accounts payable ~~and accrued liabilities~~	~~(932)~~(18)
Accrued liabilities	(459)
Other current liabilities	~~(1,696)~~(171)
Deferred income taxes	(79,863)
Other liabilities	(2,544)
Net assets acquired	333,106
Resulting goodwill	$	60,294


	Useful Life		Fair Value
~~Other long-term liabilities~~Intellectual property - US segment	~~(697)~~20 years		$	351,500
~~Deferred income tax~~Intellectual property - International segment	~~(266)~~8 years		58,700
~~Estimated fair value of net assets acquired~~			$	~~4,188~~ 410,200
~~Bioventus purchase price~~	~~1,000~~
~~Fair value of Harbor’s noncontrolling interest~~	~~3,188~~
	$	—


	2020		2019
Cash and cash equivalents	$	803	$	1,127
Property and equipment, net	173		60
Intangible assets, net	5,635		6,122
Operating lease assets	178		231
Other assets	74		59
	$	6,863	$	7,599

Accounts payable and accrued liabilities	$	366	$	458
Other current liabilities	2,004		2,395
Deferred income tax	—		215
Other long-term liabilities	659		872
	$	3,029	$	3,940


	2023		2022
Amended Term Loan due October 2026 (9.89% at December 31, 2023)	$	382,448	$	420,712
Revolver due October 2025 (9.88% at December 31, 2023)	15,000		—
Less:
Current portion of long-term debt	(27,848)		(33,056)
Unamortized debt issuance cost	(917)		(1,338)
Unamortized discount	(1,685)		(1,308)
	$	366,998	$	385,010


	~~Quarterly~~ ~~payment~~
~~2021 and 2022~~	$	~~3,750~~
~~2023 and 2024~~	$	~~5,000~~


Leverage ratio	Eurodollar		BR
> 2.50 to 1.00	2.50	%	1.50	%
>1.50 to 1.00 and < 2.50 to 1.00	2.25	%	1.25	%
> 1.25 to 1.00 and <1.50 to 1.00	1.75	%	0.75	%
> 0.75 to 1.00 and <1.25 to 1.00	1.50	%	0.50	%
< 0.75 to 1.00	1.25	%	0.25	%


Leverage ratio	SOFR		BR
> 4.00 to 1.00	4.25	%	3.25	%
≥ 3.50 to 1.00 and < 4.00 to 1.00	3.75	%	2.75	%
≥ 3.00 to 1.00 and < 3.50 to 1.00	3.25	%	2.25	%
≥ 2.50 to 1.00 and < 3.00 to 1.00	3.00	%	2.00	%
< 2.50 to 1.00	2.75	%	1.75	%