Shockwave Medical (SWAV) Risk Analysis

While the majority of our revenue to date has been in the United States, our current products are cleared in the EU and certain other international markets for the treatment of PAD, CAD and refractory angina, and international sales comprised 20% of our revenue for the year ended December 31, 2023. Our future growth may depend, in part, on our ability to develop and commercialize our planned and future products in foreign markets. Sales of our products outside of the United States are and will be subject to foreign regulatory requirements governing clinical trials and marketing approval. To obtain separate regulatory approval in many other countries we must comply with numerous and varying regulatory requirements regarding safety and efficacy and governing, among other things, clinical trials, commercial sales, pricing and distribution of our planned or future products. We will incur substantial expenses in connection with our international expansion. In addition, there can be no guarantee that we will receive approval to sell our products in every international market we target, nor can there be any guarantee that any sales would result even if such approval is received. Even if the FDA grants marketing approval for a product, comparable regulatory authorities of foreign countries must also approve the manufacturing or marketing of the product in those countries. Approval in the United States, or in any other jurisdiction, does not ensure approval in other jurisdictions. Obtaining foreign approvals could result in significant delays, difficulties, and costs for us and require additional trials and additional expenses. Regulatory requirements can vary widely from country to country and could delay the introduction of our products in those countries. Clinical trials conducted in one country may not be accepted by other countries, and regulatory approval in one country does not mean that regulatory approval will be obtained in any other country. If we fail to comply with these regulatory requirements or to obtain and maintain required approvals, our target market will be reduced and our ability to generate revenue will be diminished. Our inability to successfully enter all our desired international markets and manage business on a global scale could negatively affect our business, financial results, and results of operations.

From time to time, we may become involved in legal proceedings relating to patent and other intellectual property matters, product liability claims, employee claims, tort or contract claims, federal regulatory investigations, securities class action and other legal proceedings or investigations, which could have an adverse impact on our reputation, business and financial condition and divert the attention of our management from the operation of our business. Litigation is inherently unpredictable and can result in excessive or unanticipated verdicts and/or injunctive relief that may affect how we operate our business. We could incur judgments or enter into settlements of claims for monetary damages or for agreements to change the way we operate our business, or both. There may be an increase in the scope of these matters or there may be additional lawsuits, claims, proceedings, or investigations in the future, which could have a material adverse effect on our business, financial condition, and results of operations. Adverse publicity about regulatory or legal action against us could damage our reputation and brand, undermine our customers' confidence, and reduce long-term demand for our products, even if the regulatory or legal action is unfounded or not material to our operations.

Until the quarter ended December 31, 2022, we had maintained a full valuation allowance against our deferred tax assets due to our cumulative loss position and uncertainties regarding sustainable future profitability since inception. We released the valuation allowance against all of the U.S. federal deferred tax assets and other-than-California state deferred tax assets during the fourth quarter of fiscal year 2022. Each quarter, we consider both positive and negative evidence to determine whether all or a portion of the deferred tax assets are more likely than not to be realized. If we determine that some or all of our deferred tax assets are not realizable, it could result in a material expense in the period in which this determination is made which may have a material adverse effect on our financial condition and results of operations.

Federal, state, local and foreign laws regarding environmental protection, hazardous substances and human health and safety may adversely affect our business. Our research and development and manufacturing operations may involve the use of hazardous substances and are subject to a variety of federal, state, local and foreign environmental laws and regulations relating to the storage, use, discharge, disposal, remediation of, and human exposure to, hazardous substances and the sale, labeling, collection, recycling, treatment, and disposal of products containing hazardous substances. These operations are permitted by regulatory authorities, and the resultant waste materials are disposed of in material compliance with environmental laws and regulations. Using hazardous substances in our operations exposes us to the risk of accidental injury, contamination or other liability from the use, storage, importation, handling, or disposal of hazardous materials. If our or our suppliers' operations result in the contamination of the environment or expose individuals to hazardous substances, we could be liable for damages and fines, and any liability could significantly exceed our insurance coverage and have a material adverse effect on our business, financial condition, and results of operations. Liability under environmental laws and regulations can be joint and several and without regard to fault or negligence. Compliance with environmental laws and regulations may be expensive, and non-compliance could result in substantial liabilities, fines and penalties, personal injury and third-party property damage claims and substantial investigation and remediation costs. Environmental laws and regulations could become more stringent over time, imposing greater compliance costs, and increasing risks and penalties associated with violations. We cannot assure you that violations of these laws and regulations will not occur in the future or have not occurred in the past as a result of human error, accidents, equipment failure or other causes. The expense associated with environmental regulation and remediation could harm our business, financial condition, and results of operation.

Clinical development is a long, expensive, and uncertain process and is subject to delays and the risk that products may ultimately prove unsafe or ineffective in treating the indications for which they are designed. Completion of clinical trials may take several years or more. We may experience numerous unforeseen events in relation to a clinical trial process that could delay or prevent us from receiving regulatory clearance or approval for new products, modifications of existing products or new indications for existing products, including: - risks relating to clinical trial approvals, including: - delays or failure in obtaining approval of our clinical trial protocols from the FDA or other regulatory authorities, including in relation to the design, protocol or implementation of our clinical trials; and - delay or refusal of regulators or institutional review boards ("IRBs") to authorize us to commence a clinical trial at a prospective trial site. - risks relating to clinical trial enrollment and trial management, including: - delays or failures to reach agreement on acceptable terms with prospective clinical research organizations ("CROs") and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;- slower enrollment in our clinical trials than anticipated, high screen failure rates in our clinical trials, or delays in patient enrollment and variability in the number and types of patients available for clinical trials;- lower than anticipated retention rates of patients and volunteers in clinical trials or difficulty in maintaining contact with patients after treatment, resulting in incomplete data;- delays relating to adding new clinical trial sites or issues managing multiple clinical sites;- our CROs or clinical trial sites may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all, or deviate from the protocol or drop out of a trial;- we, the applicable IRBs, the Data Safety Monitoring Board for such trial, or the FDA or other applicable regulatory authorities may require that we or our investigators suspend or terminate our clinical trials for various reasons, including, among others, (i) failure to conduct the clinical trial in accordance with regulatory requirements, including the FDA's current GCP, regulations, or our clinical protocols, (ii) inspection of the clinical trial operations or trial site by the FDA or other applicable regulatory authority resulting in the imposition of a clinical hold, (iii) unforeseen safety issues or adverse side effects, (iv) failure to demonstrate safety and effectiveness, (v) changes in governmental regulations or administrative actions, (vi) lack of adequate funding to continue the clinical trial, (vii) exposure of participating patients to unacceptable health risks, (viii) noncompliance with regulatory requirements, and (ix) other safety concerns; and - we may exceed our budgeted costs due to difficulty in accurately predicting costs associated with clinical trials. - risks related to clinical trial results, including: - our clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials and/or preclinical testing which may be expensive and time-consuming, or we may elect to abandon projects that we expected to be promising;- reports from preclinical or clinical testing of other similar therapies that raise safety or efficacy concerns;- trial results may not meet the level of statistical significance required by the FDA or other regulatory authorities;- the FDA or similar foreign regulatory authorities may find the product is not sufficiently safe for investigational use in humans; and - the FDA or similar foreign regulatory authorities may interpret data from preclinical testing and clinical trials differently than we do. - risks related to investigation devices used in the clinical trial, including: - the quality of the investigation devices may fall below acceptable standards;- we may be unable to manufacture sufficient quantities of our products to commence or complete clinical trials; and - the FDA or similar foreign regulatory authorities may find our or our suppliers' manufacturing processes or facilities unsatisfactory. In addition, we may encounter delays if the FDA concludes that our financial relationships with investigators result in a perceived or actual conflict of interest. Principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and receive cash compensation and/or stock awards in connection with such services. If these relationships and any related compensation to or ownership interest by the clinical investigator carrying out the study result in perceived or actual conflicts of interest, or if the FDA concludes that the financial relationship may have affected interpretation of the study, the integrity of the data generated at the applicable clinical trial site may be questioned and the utility of the clinical trial itself may be jeopardized, which could result in the delay or rejection by the FDA. Any such delay or rejection could prevent us from commercializing any of our products currently in development. We do not know whether any of our future preclinical studies or clinical trials will commence as planned, will need to be restructured or will be completed on schedule, or at all. Any delays in completing our clinical trials will increase our costs, slow down our product development and approval process and jeopardize our ability to commence sales and generate associated revenue with respect to the applicable product. Any of these occurrences may significantly harm our business, financial condition, and prospects. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial, suspension, or revocation of expanded regulatory clearance or approval of our products. Significant preclinical study or clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our products or allow our competitors to bring products to market before we do and impair our ability to successfully commercialize our products.

As with other medical device companies, our success depends in large part on our ability to maintain and solidify a proprietary position for our products, which will depend upon our success in obtaining and enforcing effective intellectual property (including patent claims) that cover the use, functionality and manufacture of such products. With respect to patents specifically, the process for filing, maintaining and enforcing rights in or obtaining licenses for patents is complex and subject to many risks and uncertainties, including the following: - Protection of Confidential Information. Although we enter into non-disclosure and confidentiality agreements with parties who have access to confidential or patentable aspects of our research and development output, such as our employees, corporate collaborators, outside scientific collaborators, suppliers, consultants, advisors, and other third parties, any of these parties may breach the agreements and disclose such output before a patent application is filed, thereby jeopardizing our ability to seek patent protection. - Patentability. Our ability to obtain and maintain valid and enforceable patents depends on whether the differences between our inventions and the prior art allow our inventions to be patentable over the prior art. We cannot be certain that we were the first to make or file the inventions claimed in any of our patents or pending patent applications. Moreover, in some circumstances, we may not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the patents, covering technology that we license from or license to third parties and are therefore reliant on our licensors or licensees. Therefore, these and any of our patents and applications may be prosecuted and enforced in a manner inconsistent with the best interests of our business. - Patent Prosecution Process. The patent prosecution process is expensive, time-consuming, complex, and inconsistent between jurisdictions, and we may not be able to file, prosecute, maintain, enforce, or license 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 in time to obtain patent protection or be subject to a third-party preissuance submission of prior art to the U.S. Patent and Trademark Office (the "USPTO"). - Filing Defects. Defects of form in the preparation or filing of our patents or patent applications may exist, or may arise in the future, for example, with respect to proper priority claims, inventorship and the like, although we are unaware of any such defects that we believe are of material importance. In some instances, these defects will be expensive or not possible to remedy. - Duty of Disclosure. We are required to submit information to the USPTO that we are aware of that is material to the patentability of our patent applications. Failure to do so can affect the validity or enforceability of our patents. While we endeavor to the best of our ability to submit such disclosure statements, it is possible that we will fail to identify material known information and/or fail to submit such information in a timely manner. - Reduction in Scope of Patent. The coverage claimed in a patent application can be significantly reduced before the patent is issued, and its scope can be reinterpreted or reduced after issuance. Even if patent applications we license or own, currently or in the future, issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors or other third parties from competing with us, or otherwise provide us with any competitive advantage. - Patent Maintenance Requirements. Periodic maintenance fees, renewal fees, annuity fees and various other government fees on patents and applications will be due to be paid to the USPTO and various government patent agencies outside of the United States over the lifetime of our patents and applications. The USPTO and various non-U.S. government agencies require compliance with several procedural, documentary, fee payment and other similar provisions during the patent application process. Failure to comply with such requirements may result in the abandonment of a patent application or the lapse of a patent in one or more jurisdictions. - Patent Lifespan. Patents have a limited lifespan. In the United States, the natural expiration of a utility patent is generally 20 years after its effective filing date and the natural expiration of a design patent (having a filing date on or after May 13, 2015) is generally 15 years after its issue date. While various extensions may be available, the life of a patent, and the protection it affords, is limited. Such extensions may be offset all or in part by delays in prosecuting the applications. Further, one or more patents may be subject to a terminal disclaimer with related patents, reducing the life of the patents to match the expiration of the related patents. Without patent protection for our products and services, we may be open to competition. Further, if we encounter delays in our development efforts, the period of time during which we could market our products and services under patent protection would be reduced and, given the amount of time required for the development, testing and regulatory review of planned or future products, patents protecting such products might expire before or shortly after such products are commercialized. As a result, our patents may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours. - International Patent Protection. Filing, prosecuting, and defending patents on our current and future products in all countries throughout the world would be prohibitively expensive. The requirements for patentability may differ in certain countries, particularly developing countries. The laws of some foreign countries may not protect our patent rights to the same extent as the laws of the United States. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions. 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 where we have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our products, and our patents rights may not be effective or sufficient to prevent them from competing. - European Unitary Patent & Unified Patent Court. The European Unitary Patent and European Unified Patent Court (the "UPC") came into effect in 2023, which has changed the landscape for acquisition and enforcement of patents in Europe. With the implementation of the Unitary Patent, patents granted by the European Patent Office (the "EPO") have the option of being validated in individual European countries, issued as a Unitary Patent, or a combination of both. Because the Unitary Patent does not have complete scope over all European countries that are members of the EPO, validation of EPO patents into certain individual jurisdictions remains necessary to secure patent rights in those countries (e.g., Great Britian, Spain, Switzerland and Ireland). As our patent applications are allowed by the EPO, we are evaluating them on a case-by-case basis to determine whether or not to obtain a Unitary Patent, patents validated in individual European countries, or a combination of both. Unitary Patents are subject to the jurisdiction of the UPC, which has minimal precedent, and thus a higher uncertainty for any litigation. Patents under the jurisdiction of the UPC will be potentially vulnerable to a single UPC-based revocation challenge that, if successful, could invalidate the patent in all countries who are signatories to the UPC. For our European patents granted and validated in individual European countries before the UPC came into effect, we opted-out of the jurisdiction of the UPC for the transitional period (which will be at least seven years) until the UPC will hold jurisdiction over all patents granted by the EPO. Development of case law within the UPC may lead us to opt-in our earlier (non-Unitary) European patents at a later date before the end of the transitional period. We cannot predict with certainty the long-term effects of any potential changes. - Third-Party Claims. Even if patents do successfully issue from our patent applications, third parties may challenge the validity, enforceability, or scope of such patents, which may result in such patents being narrowed, invalidated, or held unenforceable. For more information on the risks relating to third party claims, see "-Patents covering our products could be found invalid or unenforceable if challenged in court or before administrative bodies in the United States or abroad."- Third-Party Rights. Some of our patents and patent applications may in the future be co-owned with third parties. If we are unable to obtain an exclusive license to any such third-party co-owners' interest in such patents or patent applications, such co-owners may be able to license their rights to other third parties, including our competitors, and our competitors could market competing products and technology. In addition, we may need the cooperation of any such co-owners of our patents in order to enforce such patents against third parties, and such cooperation may not be provided to us. We may not be successful in obtaining necessary rights to any products we may develop through acquisitions and in-licenses. - Patent Licenses. Many medical device companies and academic institutions are competing with us and filing patent applications potentially relevant to our business. We may find it necessary or prudent to obtain licenses from such third-party intellectual property holders. However, we may be unable to secure such licenses or otherwise acquire or in-license any intellectual property rights from third parties that we identify as necessary for planned or future products, for a variety of reasons, including actions of competitors and interests of the potential licensor. We also may be unable to license or acquire third-party intellectual property rights on terms that would allow us to make an appropriate return on our investment or 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. If we are unable to successfully obtain rights to required third-party intellectual property rights or maintain the existing intellectual property rights we have, we may have to abandon development of the relevant products. - Changes in Patent Laws. Changes in either the patent laws or their interpretation in the United States and other countries may diminish our ability to protect our inventions, obtain, maintain, and enforce our intellectual property rights and, more generally, could affect the value of our intellectual property or narrow the scope of our issued patents. For more information on the risks relating to changes in patent laws, see "-Changes in patent law could diminish the value of patents in general, thereby impairing our ability to protect our products." Consequently, we do not know whether our products and technologies will be protectable or remain protected by valid and enforceable patents. Our competitors or other third parties may be able to circumvent our patents by developing similar or alternative technologies or products in a non-infringing manner which could materially adversely affect our business, financial condition, and results of operations. If we or any current or future licensors or licensees fail to establish, maintain, protect, or enforce such patents and other intellectual property rights, such rights may be reduced or eliminated. Any such outcome could impair our ability to prevent competition from third parties, which may have an adverse impact on our business and results of operations.

We are continuing to develop our expertise in commercially manufacturing our products and our ability to manufacture these products at the volume that we anticipate will be required if we achieve planned levels of commercial sales. The forecasts of demand we use to determine order quantities and lead times for components purchased from outside suppliers may be incorrect. Our failure to obtain required components or sub-assemblies when needed and at a reasonable cost would adversely affect our business. As a result, we may not be able to develop and implement efficient, low-cost manufacturing capabilities and processes that will enable us to manufacture our existing, planned, or future products in significant volumes, while meeting the legal, regulatory, quality, price, durability, engineering, design, and production standards required to market our products successfully. Additionally, if we are unable to accurately predict our volume growth, we may not have a sufficient number of trained operators to deliver our products within the time frames our customers expect. We may encounter unforeseen situations in the manufacturing and assembly of our products that result in delays or shortfalls in our production. For example, we may be required to change our production processes and assembly methods in order to accommodate any significant future expansion of our manufacturing capacity, which may increase our manufacturing costs, delay production of our products, reduce our product margin and adversely impact our business. Conversely, if demand for our products shifts such that a manufacturing facility is operated below its capacity for an extended period, we may adjust our manufacturing operations to reduce fixed costs, which could lead to uncertainty and delays in manufacturing times and quality during any transition period. We produce a significant majority of our products at our facility in Santa Clara, California, therefore any contamination of the controlled environment, equipment malfunction or failure to strictly follow procedures could significantly reduce our yield. A drop in yield could increase our cost to manufacture our products or, in more severe cases, require us to halt the manufacture of our products until the problem is resolved. Identifying and resolving the cause of a drop in yield could require substantial time and resources. If our manufacturing activities are adversely impacted or if we are otherwise unable to keep up with demand for our products by successfully manufacturing, assembling, testing, and shipping our products in a timely manner, our revenue could be impaired, market acceptance of our products could be adversely affected and our customers might instead purchase our competitors' products, which would have a material adverse effect on our business, financial condition, and results of operations.

Our ability to increase our customer base, achieve broader market acceptance of our products, and increase our global sales depends to a significant extent on our ability to expand our sales and marketing operations. We have dedicated, and intend to continue to dedicate, significant financial and other resources to our marketing and sales programs, including the expansion of our international field presence through new distributors, the addition of sales and clinical personnel globally, and the addition of new sales territories in the United States and select global markets. However, there are a variety of factors that could adversely impact our ability to effectively market and sell our products, including: - continuing to build our sales, marketing or distribution capabilities is expensive and time-consuming and requires significant attention from management;- the competition for talented individuals experienced in selling and marketing medical device products is intense, and we cannot assure you that we can assemble or maintain an effective team; and - training qualified sales personnel on the use of our products, applicable federal and state laws and regulations and our internal policies and procedures requires significant time, expense and attention and it can take a significant amount of time before our sales representatives are fully trained and productive. Our recent hires and planned hires may not become productive as quickly as we expect, or at all, and we may be unable to hire or retain sufficient numbers of qualified individuals in the markets where we do business or plan to do business. Moreover, our international expansion may be slow or unsuccessful if we are unable to retain qualified personnel with international experience, language skills and cultural competencies in the geographic markets in which we target. Any failure or delay in the development of our sales, marketing, or distribution capabilities, to hire, train and retain our sales force, or of our sales force to meet required productivity levels within a reasonable period of time, may result in us failing to realize the expected benefits of our investments or increase our revenue, which in turn would adversely impact the commercialization of our products and harm our business.

Our manufacturing processes and those of our third-party suppliers must comply with the FDA's QSR, which covers the design controls, document controls, purchasing controls, identification and traceability, production and process controls, acceptance activities, nonconforming product requirements, corrective and preventive action requirements, labeling and packaging controls, handling, storage, distribution and installation requirements, complaint handling, records requirements, servicing requirements and statistical techniques potentially applicable to the production of our medical devices. We and our suppliers are also subject to the regulations of foreign jurisdictions regarding the manufacturing process where we market products in non-U.S. jurisdictions. In addition, we must engage in extensive recordkeeping and reporting and must make available our manufacturing facilities and records for periodic announced and unannounced inspections by governmental agencies, including the FDA, state authorities and comparable agencies in other countries. If we experience an unsuccessful QSR inspection, our operations could be disrupted, and our manufacturing could be interrupted. Failure to take adequate corrective action in response to an adverse QSR inspection could result in, among other things, a shut-down of our manufacturing operations, significant fines, suspension of marketing clearances and approvals, seizures or recalls of our device, operating restrictions, and criminal prosecutions, any of which would cause our business to suffer. Furthermore, our key component suppliers may not currently be or may not continue to be in compliance with applicable regulatory requirements, which may result in manufacturing delays for our products and cause our revenue to decline. We have registered with the FDA as a medical device manufacturer and have obtained a manufacturing license from the California Department of Health Services. The FDA has broad post-market and regulatory enforcement powers. We are subject to unannounced inspections by the FDA and the Food and Drug Branch of CDPH to determine our compliance with the QSR and other regulations, and these inspections may include the manufacturing facilities of our suppliers. We produce a significant majority of our products in-house at our facility in Santa Clara, California, which, together with our research and development, controlled environment room and office space, currently totals approximately 201,000 square feet. Our Santa Clara facility has been approved by the FDA and audited by the BSI. We have also entered into a contract manufacturing agreement with a third-party contract manufacturer to produce a portion of the demand for certain products. We can provide no assurance that the FDA or other inspecting bodies will continue to find us or our suppliers to be in compliance with the QSR. If our or our contract manufacturer's facilities are found to be in noncompliance or if we fail to take satisfactory corrective action in response to adverse QSR inspectional findings, the FDA could take legal or regulatory enforcement actions against us and/or our products, including but not limited to the cessation of sales or the recall of distributed products, which could impair our ability to manufacture our products in a cost-effective and timely manner in order to meet our customers' demands. We may also be required to bear other costs or take other actions that may have a negative impact on our future sales and our ability to generate profits. Taking corrective action may be expensive, time-consuming and a distraction for management, and if we experience a shutdown or delay at our manufacturing facilities, we may be unable to manufacture our products, which would harm our business. Current regulations depend heavily on administrative interpretation. If the FDA does not believe that we are in compliance with applicable FDA regulations, the agency could take legal or regulatory enforcement actions against us and/or our products. We are also subject to periodic inspections by the FDA and other governmental regulatory agencies, as well as certain third-party regulatory groups. Future interpretations made by the FDA or other regulatory bodies made during the course of these inspections may vary from current interpretations and may adversely affect our business and prospects. The FDA's and other comparable non-U.S. regulatory agencies' statutes, regulations or policies may change, and additional government regulation or statutes may be enacted, which could increase post-approval regulatory requirements, or delay, suspend or prevent marketing of any cleared or approved products or necessitate the recall of distributed products. We cannot predict the likelihood, nature or extent of adverse governmental regulation that might arise from future legislative or administrative action, either in the United States or abroad. The medical device industry has been under heightened FDA scrutiny as the subject of government investigations and enforcement actions. If our operations and activities are found to be in violation of any FDA laws or any other governmental regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines and other legal and/or agency enforcement actions. Any penalties, damages, fines or curtailment or restructuring of our operations or activities could adversely affect our ability to operate our business and our financial results. The risk of us being found in violation of FDA laws is increased by the fact that many of these laws are broad and their provisions are open to a variety of interpretations. Any action against us for violation of these laws, even if we successfully defend ourselves against that action and its underlying allegations, could cause us to incur significant legal expenses and divert management's attention from the operation of our business. Where there is a dispute with a federal or state governmental agency that cannot be resolved to the mutual satisfaction of all relevant parties, we may determine that the costs, both real and contingent, are not justified by the commercial returns to us from maintaining the dispute or pursuing the operations and activities in question, including the continued manufacturing and sale of any impacted product. Various claims, design features or performance characteristics of our medical devices that we may regard as permitted by the FDA without marketing clearance or approval, may be challenged by the FDA or state or foreign regulators. The FDA or state or foreign regulatory authorities may find that certain claims, design features or performance characteristics, in order to be made or included in our products, may have to be supported by further studies and marketing clearances or approvals, which could be lengthy, costly and possibly unobtainable.

We partner with distributors for our products in select geographies outside of the United States. Specifically, as of December 31, 2023, we have contracted with distributors who are actively selling our products in over 55 countries in North and South America, Europe, the UK, the Middle East, Asia, Africa, and Australia/New Zealand. For the year ended December 31, 2023, approximately 20% of our sales were outside of the United States. We may not be able to collect all of the funds owed to us by our foreign distributors. Some foreign distributors may experience financial difficulties, including bankruptcy, which may hinder our collection of accounts receivable. Where we extend credit terms to distributors, we periodically review the collectability and creditworthiness when determining the payment terms for such distributors. If our uncollectible accounts exceed our expectations, this could adversely impact our results of operations. Although we have a program for monitoring and periodically auditing our distributors' compliance with various anti-corruption rules and regulations, failure by our foreign distributors to comply with the FCPA or other applicable laws, rules and regulations, insurance requirements or other contract terms could have a negative impact on our business. Failure to manage the risks related to our foreign distributors would have a material adverse effect on our business, financial condition, and results of operations.

Our participation in the joint venture with Genesis in China is subject to general, as well as industry-specific, economic, political, tax and legal developments and risks in China. The Chinese government exercises significant control over the Chinese economy, including but not limited to controlling capital investments, allocating resources, setting monetary policy, controlling and monitoring foreign exchange rates, implementing and overseeing tax regulations, providing preferential treatment to certain industry segments or companies and issuing necessary licenses to conduct business. In addition, we could face additional risks resulting from changes in China's data privacy and cybersecurity requirements. Further, our operations and the sale of our products in China could be negatively impacted as a result of the recent healthcare industry-wide anti-corruption enforcement efforts by the Chinese government, which have impacted hospital and physician practices. Accordingly, any adverse change in the Chinese economy, the Chinese legal system or Chinese governmental, economic or other policies could have a material adverse effect on our business and operations in China and our prospects generally. Additionally, an escalation of recent trade tensions between the United States and China has resulted in trade restrictions that could harm our ability to participate in Chinese markets. Sustained uncertainty about, or a worsening of, current global economic conditions and further escalation of trade tensions between the United States and China could result in a global economic slowdown and long-term changes to global trade, including retaliatory trade restrictions that could restrict our ability to operate in China. Moreover, the cardiovascular field is highly competitive, and we expect increasing competition within China from manufacturers and distributors of cardiovascular medical devices. Certain of our products may compete with products manufactured or reportedly under development by other companies in China, including companies that are large and well-capitalized, having significantly greater market share and resources within China than we do. Due to China's historically limited recognition and enforcement of contractual and intellectual property rights, we may experience difficulty enforcing our intellectual property rights in China, including with respect to competitors or our partners. Unauthorized use of our technologies and intellectual property rights by our competitors or partners in China may dilute or undermine the strength of our brands. We also have received or may in the future receive claims from competitors or our partners in China that we are infringing upon their intellectual property rights. Any such claims could be costly to defend and divert management's attention and, in the event of an adverse result, put one or more of our patents in China at risk of being invalidated or interpreted narrowly. If we cannot adequately monitor the use of our technologies and products, or enforce our intellectual property rights in China or contractual restrictions relating to use of our intellectual property by Chinese companies, our revenue could be adversely affected. Our joint venture with Genesis is subject to laws and regulations applicable to foreign investment in China. There are uncertainties regarding the interpretation and enforcement of laws, regulations and policies in China. Because many of the laws, regulations and policies applicable to our operations in China are relatively new, the interpretations of such laws, regulations and policies are not always uniform. Moreover, the interpretation of statutes and regulations may be subject to government policies reflecting domestic political agendas. Enforcement of existing laws or contracts based on existing law may be uncertain and sporadic. As a result of the foregoing, it may be difficult for us to obtain swift or equitable enforcement of laws ostensibly designed to protect companies like ours, which could have a material adverse effect on our business and results of operations. Our ability to monetize our joint venture in China may also be limited. Although our joint venture with Genesis is an autonomous company, it is the exclusive seller of our products in China and is therefore our public face in China. Therefore, we face reputational and brand risk as a result of any negative publicity faced by the joint venture and any such reputational and brand risk could have a material adverse effect on our business, financial condition and results of operations.