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Financial report summary
?Competition
Orthofix Medical • Zimmer Biomet • Globus Medical • Alphatec • Xtant Medical • Medtronic • SeaSpine • Bioventus • Ozop Energy Solutions • ElutiaRisks
- Risks Related to our Proposed Combination with Globus Medical
- Risks Related to Our Business and Industry
- Risks Related to Regulatory and Compliance
- Risks Related to the Securities Markets and Ownership of Our Common Stock
- Failure to realize the anticipated benefits of the Combination, delay in realizing those benefits, or significant challenges in integrating with Globus Medical.
- Uncertainty about the Combination may adversely affect relationships with our customers, sales representatives, suppliers, partners, consultants, and employees, whether or not the Combination is completed.
- As a result of the Combination, our current and prospective employees could experience uncertainty about their future with us or the combined company. As a result, key employees may depart because of issues relating to such uncertainty or a desire not to remain with Globus Medical following the completion of the Combination.
- Restrictions under the Merger Agreement may adversely affect our business and operations.
- If the Combination is consummated, the combined company may not perform as we or the market expects or may fail to realize the anticipated benefits of the Combination, which could have an adverse effect on the price of Globus Medical’s Class A common stock that our current stockholders will own following the completion of the Combination.
- Because the consideration to be received by our stockholders in connection with the Combination will include a fixed number of shares of common stock of Globus Medical, and the market price of such shares has fluctuated and will continue to fluctuate, our stockholders cannot be sure of the value of the consideration they will receive in the Combination.
- The Merger Agreement contains provisions that could discourage or deter a potential competing acquirer from making a favorable alternative transaction proposal and, in specified circumstances, could require us to pay substantial termination fees to Globus Medical.
- Litigation may arise in connection with the Combination, which could be costly, prevent consummation of the Combination, divert management’s attention and otherwise materially harm our business.
- Global macroeconomic conditions, including inflation, supply chain disruptions, and fluctuations in foreign currency exchange rates, could continue to adversely affect our operations and profitability.
- We are subject to risks associated with public health threats, including the COVID-19 pandemic, which has had, and may continue to have, a material adverse effect on our business.
- To be commercially successful, we must effectively demonstrate to surgeons and hospitals the value proposition of our products and procedural solutions compared to those of our competitors.
- Our future success depends on developing innovative solutions and our ability to timely acquire, develop and introduce new products or product enhancements that will be accepted by the market.
- We operate in a highly competitive market segment that is subject to rapid change, and if we are unable to compete successfully, our sales and operating results may suffer.
- Many of our competitors have greater resources than we have.
- Third-party reimbursement policies and practices, including non-coverage decisions, can negatively impact our ability to sell our products and services.
- Pricing pressure from our competitors, hospital customers and insurance providers can negatively impact our ability to sell our products and services.
- Quality or safety issues affecting our products could harm our reputation, result in liability and adversely impact our business.
- The safety of many of our products is not yet supported by long-term clinical data and many of our products may therefore prove to be less safe and effective than initially thought.
- As we expand our offerings to include capital equipment and invest in related resources and expertise, we are exposed to additional risks.
- We may engage in strategic transactions, including acquisitions, investments, joint development agreements or divestitures that may have an adverse effect on our business.
- Healthcare policy changes may have a material adverse effect on us.
- Our IONM business exposes us to risks inherent with the sale of services.
- Our increased focus on specialized pediatric conditions exposes us to different risks.
- Our employees, independent sales representatives, consultants, distributors and other commercial partners may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements.
- If we are unable to maintain and expand our network of direct and independent sales representatives and third-party distributors, we may not be able to generate anticipated sales.
- We may be unable to manage our future growth effectively, which could make it difficult to execute our business strategy.
- Our reliance on a limited number of suppliers, manufacturers and vendors could limit our ability to meet demand for our products in a timely manner or within our budget.
- Performance issues, service interruptions or price increases by our shipping carriers could adversely affect our business and harm our reputation and ability to provide our products and services on a timely basis.
- Manufacturing risks may adversely affect our ability to manufacture products and could reduce our gross margins and negatively affect our operating results.
- The loss of key employees, or our inability to recruit, hire and retain skilled and experienced personnel, could negatively impact our ability to effectively manage and expand our business.
- We face risks associated with our international business.
- Our results have been and may continue to be impacted by changes in foreign currency exchange rates.
- If we fail to properly manage our anticipated international growth, our business could suffer.
- Cybersecurity risks and the failure to maintain the confidentiality, integrity, and availability of our computer hardware, software, and Internet applications and related tools and functions could result in harm to our business and/or subject us to costs, fines or lawsuits.
- We rely on the performance of our information technology systems, the failure of which could have an adverse effect on our business and performance.
- Our operations are vulnerable to interruption or loss due to natural or other disasters, power loss, strikes and other events beyond our control.
- Our insurance policies are expensive and protect us only from some business risks, which will leave us exposed to significant uninsured liabilities.
- We bear the risk of warranty claims on our products.
- Defending against litigation or other proceedings or third-party claims of intellectual property infringement could require us to spend significant time and money, and if we are unsuccessful, we may be obligated to pay damages and halt sales of our products.
- Our ability to protect our intellectual property and proprietary technology through patents and other means is uncertain.
- If we seek to enforce our intellectual property rights through litigation or other proceedings, it could require us to spend significant time and money, with uncertain results.
- If we are unable to protect the confidentiality of our trade secrets, our business and competitive position could be harmed.
- We may not be able to enforce our intellectual property rights throughout the world.
- Third parties may assert ownership or commercial rights to inventions we develop.
- Third parties may assert that our employees or consultants have wrongfully used or disclosed confidential information or misappropriated trade secrets or are in breach of non-competition or non-solicitation agreements with our competitors.
- If personal injury lawsuits are brought against us, our business may be harmed, and we may be required to pay damages that exceed our insurance coverage.
- We are subject to rigorous FDA and other governmental regulations regarding the development, manufacture, and sale of our products and we may incur significant expenses to comply with these regulations and develop products that satisfy these regulations.
- Failure or alleged failure to comply with FDA and other governmental regulations can result in investigations and other regulatory proceedings, which are expensive and could divert management attention.
- We are subject to federal, state and foreign fraud and abuse laws and health information privacy and security laws, which, if violated, could subject us to substantial penalties.
- We may fail to obtain or maintain foreign regulatory approvals to market our products in other countries.
- If we fail to obtain, or experience significant delays in obtaining, FDA clearances or approvals for our future products or product enhancements, our ability to commercially distribute and market our products could suffer.
- Legislative or regulatory reforms in the U.S. may make it more difficult and costly for us to obtain regulatory clearances or approvals for our products or to produce, market or distribute our products after clearance or approval is obtained.
- The misuse or off-label use of our products may harm our reputation 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.
- If we or our suppliers fail to comply with the FDA’s quality system regulations, ISO or other applicable regulations and standards, the manufacture and processing of our products could be delayed or interrupted and we may be subject to an enforcement action by the FDA or other government agencies.
- We or our suppliers may be the subject of claims for non-compliance with FDA regulations in connection with the processing or distribution of allograft products.
- As a U.S. federal government contractor, we are subject to a number of procurement rules and regulations.
- Compliance with Commission regulations relating to “conflict minerals” may increase our costs and adversely affect our business.
- Our relationships with physicians could be subject to additional scrutiny from regulatory enforcement authorities and could subject us to possible administrative, civil or criminal sanctions.
- Our business involves the use of hazardous materials and we and our third-party manufacturers must comply with environmental laws and regulations, which may be expensive and restrict how we do business.
- We may be unable to grow our net sales or earnings as anticipated, which may have a material adverse effect on our future operating results.
- We have a significant amount of outstanding indebtedness, and our financial condition and results of operations could be adversely affected if we do not effectively manage our liabilities.
- If we fail to comply with the covenants and other obligations under our credit facility, the lenders may be able to accelerate amounts owed under the facility and may foreclose upon the assets securing our obligations.
- We may need additional financing in the future to meet our capital needs or to make opportunistic acquisitions and such financing may not be available on favorable terms, if at all, and may be dilutive to existing stockholders.
- We could be subject to changes in tax rates, the adoption, evolution or change of new and/or amended U.S. or international tax legislation or exposure to additional tax liabilities.
- We expect that the price of our common stock will fluctuate substantially, potentially adversely affecting the ability of investors to sell their shares.
- Anti-takeover provisions in our organizational documents and Delaware law may discourage or prevent a change of control, even if an acquisition would be beneficial to our stockholders, which could affect our stock price adversely and prevent attempts by our stockholders to replace or remove our current management.
- We do not intend to pay cash dividends.
Management Discussion
- Our spinal hardware product line offerings include our implants and fixation products. Our surgical support product line offerings include IONM services and disposables, biologics, and our capital equipment, all of which are used to aid spine surgery.
- We expect continued adoption of our innovative less-invasive procedures and deeper penetration into existing accounts and international markets as our sales force executes on our strategy of selling the full mix of our products and services. However, the continued consolidation and increased purchasing power of our hospital customers and group purchasing organizations, continued changes in the public and private insurance markets regarding reimbursement, and ongoing policy and legislative changes in the U.S. have created less predictability. Although the market for procedurally-integrated spine surgery solutions is expected to continue to grow over the long term, economic, political and regulatory influences are subjecting our industry to significant changes that may slow the growth rate of the spine surgery market. Additionally, the COVID-19 pandemic and global macroeconomic conditions have had and may continue to have, an adverse effect on our business.
- Net sales from our spinal hardware product line offerings increased $11.8 million and $25.3 million, or 5% and 6%, during the three and six months ended June 30, 2023, respectively, compared to the same periods in 2022. Product volume within spinal hardware increased our net sales by approximately 7% and 8% during the three and six months ended June 30, 2023, respectively, compared to the same periods in 2022, primarily due to increased spine procedural volumes. There were unfavorable pricing changes of approximately 1% during both the three and six months ended June 30, 2023, compared to the same periods in 2022. Foreign currency fluctuations decreased our spinal hardware net sales by approximately 1% during both the three and six months ended June 30, 2023, compared to the same periods in 2022.