Establishment Labs Holdings Stock

Establishment Labs Holdings Inc. (Establishment Labs) operates as a medical technology company.

The company focuses on improving patient safety and aesthetic outcomes, initially in the breast aesthetics and reconstruction market.

The company’s line of silicone gel-filled breast implants, branded as Motiva Implants, is the centerpiece of the company’s medical technology platform. The company’s post-market surveillance data (which was not generated in connection with a United States Food and Drug Administration, or FDA, pre-market approval, or PMA, study collected at defined follow-ups, but was patient or practitioner reported) and published third-party data indicate that Motiva Implants show low rates of adverse events (including rupture, capsular contracture, and safety related reoperations) that compare favorably with those of the company’s competitors. The company has developed other complementary products and services, which are aimed at further enhancing patient outcomes.

As of December 31, 2022, the company’s Motiva Implants were registered to be sold in 85 countries outside of the United States. The company sells its products via exclusive distributors or its direct sales force (which accounted for approximately 40% of the company’s revenue in 2022) and has introduced five generations of Motiva Implants. The company commercially sells five product families: Round and Ergonomix Round, Ergonomix Oval, Anatomical TrueFixation, Ergonomix2 Round and Ergonomix2 Diamond and Flora Tissue Expander. The company’s products incorporate first of-its-kind safety features, including SmoothSilk / SilkSurface (an optimized biocompatible advanced smooth surface that is designed to reduce capsular contracture), Qid RFID technology (a non-invasive, readable serial number that enables product identification and enhances safety and patient peace of mind), BluSeal visual barrier layer (a proprietary indicator that allows for verification of complete barrier layer presence) and TrueMonobloc gel-shell-patch configuration (a highly durable, easy-to-insert performance shell, gel and patch system that allows for smaller incisions and smaller scars).

In November 2022, Motiva Implants and the Motiva Flora tissue expander received regulatory approval for use in Japan by the Pharmaceuticals and Medical Devices Agency, or PMDA. These products have also received reimbursement for post-mastectomy reconstruction under the Japanese National Health System. In January 2023, the company announced its partnership with Seishin Plastic and Aesthetic Surgery Clinic in Japan for Mia Femtech, patented technologies that can increase breast shape by 1 to 2 cups in a 15-minute procedure without the need for general anesthesia.

By June 30, 2022, all surgeries in the investigational device exemption, or IDE, the U.S. clinical trial were complete. The company also completed the study subject follow-up for the aesthetic cohort through three years. The Motiva IDE clinical trial enrolled 827 patients at 32 centers in the U.S., Germany, and Sweden. The study is designed to assess the safety and effectiveness of Motiva breast implants in primary breast augmentation, primary breast reconstruction, and revision breast procedures. The study included 562 patients in the augmentation cohorts and 265 in the reconstructive cohorts.

In April 2021, the company completed the enrollment in its one hundred patient Mia Femtech clinical case series in Costa Rica. The Institutional Review Board, or IRB, approved study began in December 2020 subsequent to the initial 2019 case series in Asia. Fifteen board-certified plastic surgeons from Costa Rica, Sweden, England, Brazil, Austria, Italy, Belgium, and the United States participated in the case series. The single-center study is a prospective, single-arm, feasibility study of women 18 years or older in primary minimally invasive breast enhancement. The collection of the two-year follow up data on this study has begun and is expected to be completed in 2023.

The Mia Femtech system is designed to provide a minimally invasive breast enhancement procedure in less time and with faster recovery than traditional breast surgery. The company has received registration in Costa Rica and a Free Sales Certificate, or FSC, for the components of the Mia Femtech system to begin regulatory approval processes worldwide. The Ergonomix2 Diamond implant used with Mia Femtech obtained CE marking in December 2020 and the company is pursuing CE mark approval for the tools used in the Mia Femtech procedure.

In September 2021, the company launched Motiva Flora tissue expander in Europe and other CE mark countries. The Motiva Flora tissue expander offers several notable innovations, including the company’s patented SmoothSilk surface technology, as well as an RFID-enabled, non-magnetic integrated port, which is the first Breast Tissue expander labeled as ‘MRI Conditional’. Both innovations offer potential improvements in imaging, treatment, overall clinical outcomes and patient satisfaction.

In October 2021, the company announced the launch of JOY, a new patient-centric breast aesthetics program. Women who select JOY will receive Establishment Labs’ newest generation Motiva Ergonomix2 Round implants through a network of highly trained plastic surgeons, as well as the most comprehensive patient support program available in the industry. Ergonomix2 incorporates the company’s latest innovations, including the company’s most advanced ultra-high purity chemistries for enhanced device mechanical properties and improved patient ergonomics. Ergonomix2 also features the company’s patented SmoothSilk surface technology, which is the basis of Motiva Implants’ low inflammatory characteristics that have contributed to the lowest capsular contracture rates in the industry. Ergonomix2 has CE mark labeling for use in both aesthetic and reconstruction procedures. JOY includes the Motiva Woman’s Choice Program. This first-of-its-kind program allows women with JOY, subject to certain terms and conditions, to receive financial support from Establishment Labs should they choose to have their implants removed. In addition to the Woman’s Choice Program, JOY also includes Establishment Labs’ Always Confident Warranty, the Motiva 5-Year Extended Warranty, and other benefits.

The Motiva Ergonomix2 Round implants included with JOY offer all the features of the company’s Ergonomix implants, including SmoothSilk surface technology, ProgressiveGel Ultimate, and RFID enablement, as well as several new technologies, including Motiva SuperSilicones, TrueMonobloc+, and BluSeal+. These advances offer enhanced patient safely, ergonomy, extra soft feel, and more natural movement. Motiva Ergonomix2 Round implants are available exclusively through the JOY program.

In February 2019, the FDA granted clearance of the 510(k) submitted for the Motiva Intraoperative Sizers. Sizers are used in breast augmentation or reconstruction procedures to assist in determining the desired breast implant volume and projection before implantation. Clearance was granted specifically for use as temporary intraoperative placement devices used during breast augmentation or reconstruction procedures to assist the surgeon in determining the appropriate size of the long-term breast implant. These devices are part of the platform to support the IDE study and in preparation for the potential PMA approval and commercialization of Motiva Implants in the U.S.A.

In March 2018, the company received approval of an IDE from the FDA to initiate the company’s Motiva Implants clinical trial in the United States for the Motiva Round and Motiva Ergonomix Round product families and the first patient was enrolled in the study in April 2018. In March 2019, the company filed its first IDE annual report with the FDA, and the company’s IDE study-defined enrollment targets for the aesthetic cohorts, which include primary augmentation and revision augmentation, had been reached with a total of 450 and 100 subjects, respectively. In August 2019, the company announced completion of all surgeries in the aesthetic cohorts. In August 2019, the company also announced that the company was implementing a bifurcated regulatory strategy in the United States, designed to allow the company to initiate rolling submission to the FDA of data in a PMA from the primary augmentation and revision augmentation cohorts, to be supplemented by data from the reconstruction cohorts. In April 2022, the company released preliminary results of the two-year patient follow-up data for the primary augmentation cohort of its IDE clinical trial. The second module was submitted in May 2022. In June 2022, full enrollment of the IDE clinical trial was complete, and all surgeries in the primary reconstruction cohort were performed. In August 2022, the third module was submitted to the FDA. By September 30, 2022, the company completed the three-year study subject follow-up for the aesthetic cohort. In February 2023, the final fourth module was submitted to the FDA.

Growth Strategy

The key elements of the company’s strategy are to expand revenues in existing markets; launch Motiva Implants in additional markets outside the United States; obtain FDA approval and enter the U.S. market; optimize patient conversion through sales and marketing programs; seek out and pursue strategic acquisitions; and continue a high level of engagement with key opinion leaders.

Products and Technologies

Motiva Implants

The Motiva breast implants are a Class III Medical Device indicated for breast augmentation and breast reconstruction, including revision surgeries to correct or improve the result of a previous breast implant surgery. The company launched Motiva Implants commercially in October 2010, and to date the company has sold approximately 2.7 million units in various countries outside the United States. Motiva Implants incorporate several proprietary features that contribute to their favorable safety profile, natural appearance and feel. The company’s latest generation of Motiva Implants utilizes the company’s proprietary Gravity Sensitive Ergonomix design, with a round base implant that responds to gravity by shifting its maximum point of projection, offering the more ‘natural’ projection of a shaped implant without the malposition and rotation issues frequently associated with shaped implants. Furthermore, the company’s fill material with the ProgressiveGel platform of silicone gel rheologies consists of highly purified biocompatible gels with specific visco-elastic properties that enables Motiva Implants to respond to the patient’s motion in ways that more closely mimic the appearance, feel and movement of natural breast tissue. The company’s catalog includes over 1,000 product variations, with round, oval and anatomical shapes, two different surfaces, SmoothSilk and VelvetSurface, and volumes ranging from 95cc to 1060cc, resulting in a wider range of options than those offered by the company’s major competitors.

Ergonomix2 incorporates the latest innovations, including the company’s most advanced ultra-high purity chemistries for enhanced device safety mechanical properties and improved patient ergonomics. Ergonomix2 also features the company’s patented SmoothSilk surface technology, which is the basis of Motiva Implants’ low inflammatory characteristics that have contributed to the lowest capsular contracture rates in the industry. Ergonomix2 was CE marked in December 2020 and labeled for use in both aesthetic and reconstruction procedures.

Shell Surface: SilkSurface/SmoothSilk

The surface topography of the breast implant shell surface varies between commercially available breast implants. The company’s SmoothSilk surface was designed to improve biocompatibility and to provide for the same surface topography around the entire implant for the benefit of the patients. The International Standard Organization, or ISO, through the new April 2018 standard (ISO 14607:2018), created a classification of implant surface textures according to roughness. This standard includes an objective method of defining the difference between smooth, micro and macro surfaces based on surface roughness average. The topology of SilkSurface/SmoothSilk is categorized in the smooth category, having a low roughness value of approximately 3.09 microns with thousands of contact features per square centimeter, which is significantly lower than the higher limit of the smooth surface clarification defined by ISO (< 10 microns).

The company’s retrospective implant data shows that Motiva Implants have a lower rate of capsular contracture and seromas when compared to published data from competitors. These results are due in large part to the proprietary surface of the company’s Motiva Implants. The company’s proprietary shell surfaces are smoother and have more regular surface features than those of the company’s primary competitors based on several studies using methods, such as scanning electron microscopy, profilometry testing and statistical parameters comparisons.

ProgressiveGel Family

The proprietary silicone chemistries that comprise the company’s ProgressiveGel family allow for a high degree of cohesiveness and strength but add characteristics, such as softness and high ductility that enable movement dynamics more like that of natural breast tissue.

In addition to the anticipated safety advantages, the company’s ProgressiveGel family, provides for movement characteristics that resemble natural breast tissue. The company’s later generation Ergonomix products, further mimic natural tissue, with a maximum point of projection that shifts downward to create a natural human breast shape when a patient is standing. This allows the company’s Motiva Implants to provide the more natural aesthetics of ‘shaped’ or ‘teardrop’ implants without the risk of associated drawbacks, such as breast deformation from rotation and unnaturally hard tactile feel. The images below illustrate the implants’ ability to change shape depending on the patient’s positioning.

TrueMonobloc

The company’s TrueMonobloc technology, which is incorporated into all generations of Motiva Implants sold, combines proprietary chemistry with the company’s proprietary manufacturing techniques to create a shell, gel and other components that are tightly bound to one another. This results in an implant that is more homogeneously elastic and resistant to separation of the gel from the shell, addressing one type of implant failure that can lead to shell ruptures and silicone leaks. This also enables Motiva Implants to be stretched and squeezed to a more significant degree, which enables breast augmentation through incision sizes smaller than one inch, compared with the published industry norm of approximately two inches. A surgical technique that the company has developed, which the company calls Minimally Invasive Aesthetics, or Mia Femtech, utilizes the company’s next-generation Ergonomix2 Diamond implant to take advantage of these physical properties to enable a less-invasive procedure for the patient. The implants associated with Mia Femtech received CE Mark approval in December 2020. Instruments and special accessory devices for the Mia Femtech procedure have been developed and are awaiting regulatory approvals worldwide prior to commercialization. The following image shows that TrueMonobloc enables significant manipulation of a Motiva Implant without separation of gel from shell.

RFID Technology

The company offers a Radio-Frequency Identification Device microtransponder (also referred to as Qid) that is placed in the filling gel as an optional feature for all implant styles. This microtransponder provides each device with a unique electronic serial number for traceability purposes.

The microtransponder contains only a unique 15-digit code that identifies the product and does not contain any patient information. This microtransponder can be read with a simple pass from the company’s non-invasive and inexpensive reading device, the Qid Safety Technology Reader, and the serial number corresponds with related information in the company’s MotivaImagine database such as implant type, size and other characteristics. Patients can create a secure account, register the products and include applicable patient information either through the MotivaImagine application or the company’s website, to access their implant information. The MotivaImagine application and Motiva Implants website also allow the patient to access the implant warranty information. This traceability is intended to give patients comfort that any future recalls can be positively identified as applying, or not applying, to that patient’s particular implant. This addresses a key concern that often discourages women who are otherwise interested in implants from making the choice to move forward with the surgery. Motiva Implants are the only breast implants on the international market with Qid Safety Technology; however, there is an opportunity to sell these microtransponders to other medical device companies in the space.

Each implant’s unique electronic serial number is encoded into the RFID circuitry as part of a three-point authentication system: the microtransponder, the reader and the database. This authentication system prevents unauthorized access to any personal information of the patient and is compliant with FDA regulations.

Additional functionality can be added to this microtransponder platform. Future potential applications under development include temperature sensing as a means of infection detection or pressure sensing as a means of detection of shell rupture.

BluSeal

The Motiva Implant shell is constructed of successive layers of silicone elastomer and a low diffusion barrier layer. The key function of the low diffusion barrier is to prevent diffusion of low molecular weight siloxane species from the implant to the tissues. This barrier layer embeds the company’s BluSeal indicator technology, which is a key feature used during the manufacturing process to verify that the barrier is present in a uniform way around the entire shell. It is also used as a visual quality control and safety measure to minimize potential gel diffusion. This patented manufacturing innovation is intended to highlight any imperfections in the barrier layer coverage with a distinct color. The company’s BluSeal indicator technology also provides the plastic surgeon with the ability to verify whether the barrier layer has coverage defects or other imperfections before implantation that might lead to post-implantation shell rupture or gel bleed. This is another safety innovation that contributes to the company’s substantially lower reported implant rupture rates as compared to reports for the company’s primary competitors.

Motiva Flora Tissue Expander

The Motiva Flora Tissue Expander is used in breast reconstruction surgery for temporary implantation (less than six months) to gradually expand the breast tissue prior to the placement of a long-term breast implant. After implantation, the device is periodically filled with saline solution via an injection port to increase its volume in order to stretch the skin and create a pocket for breast implant placement. The injection port is dome-shaped and includes an RFID coil, which can be accurately located utilizing the port locator. The Motiva Flora Tissue Expander is the first MRI Conditional expander and is the only tissue expander in the market with an integrated RFID port with no magnets, allowing for use of the expander safely alongside MRI scanning. The Motiva Flora received CE mark in June 2020 and has been registered in 33 countries. Motiva Flora also includes the SmoothSilk surface, which provides biocompatibility benefits described above. The company’s catalog includes 15 variations, including three different heights, and a range of volumes from 260 to 995 cc.

Mia Femtech System for Minimally Invasive Aesthetics

The company has developed Mia Femtech — a patient centric procedure designed to allow breast augmentation to be performed under local anesthesia rather than general anesthesia, through smaller incisions, with faster recovery times and a resulting reduction in surgical complications. The Mia Femtech system includes the specially-designed Ergonomix2 Diamond implant, which received CE mark in December 2020, and its proprietary tools, including the Motiva Inflatable Balloon and the Motiva Injector. The company received registration in Costa Rica and a Free Sales Certificate, or FSC, for the Mia Femtech devices and the company is submitting for regulatory approvals worldwide. Based on the company’s market research, Mia Femtech will be able to attract new customers and expand the market for breast aesthetic procedures. In November 2022, Motiva Implants and the Motiva Flora tissue expander received regulatory approval for use in Japan by the PMDA. These products have also received reimbursement for post-mastectomy reconstruction under the Japanese National Health System.

Designed Surgeries

The company’s suite of products and technologies enables surgical techniques that the company intend to develop and promote as ‘designed surgeries.’ The company’s first such designed surgery, MotivaHybrid, combines 3D pre-surgical assessment of existing breast tissue volume using a 3D scanning system, together with additional contouring using adipose tissue for more natural balanced results and improved patient satisfaction.

The company’s second designed surgery, Motiva MinimalScar, allows surgeons to significantly reduce the size of the surgical incision. The company has developed Mia Femtech — a safer, faster and more predictable breast enhancement performed through a small and inconspicuous incision hidden in the axilla. The company intends for Mia Femtech to allow breast augmentation procedures to be performed without general anesthesia with faster recovery times and a resulting reduction in surgical complications. In December 2020, the company received a CE mark for the company’s Motiva Ergonomix2 Diamond breast implant, which is the implant that will be used in the Mia Femtech procedure. In early 2021, the company completed enrollment in the company’s one hundred patient Mia Femtech case series in Costa Rica. The IRB approach study began in December 2020 and one year follow up was completed in early 2022 and the two-year follow up started in December 2022 and will be completed by mid-2023. Instruments and special accessory devices for the Mia Femtech procedure have been developed and are currently awaiting regulatory approvals prior to commercialization in specific regions. Based on the company’s market research, Mia Femtech will be able to attract new consumers and expand the market for breast aesthetic procedures.

Clinical Data

12-Year Safety Post-Market Surveillance Data

Dating from the commercial launch of Motiva Implants in October 2010 through December 2022, the company has sold approximately 2.7 million breast implants in various countries outside the United States and Canada. The company maintains a Quality Management System database to track and report complaints received from patients or physicians. From October 2010 through December 2022, a total of 2,968 complaints have been reported, investigated and processed, representing approximately 0.1% of the total Motiva Implants sold through December 2022. There were no reported cases of double capsule formation or breast-implant associated anaplastic large-cell lymphoma, or BIA- ALCL, in this data set, and there were 24 cases of early seroma and 1 case of late seroma.

Independent Clinical Experience

Beginning in March of 2014, the company started supplying its products to Dolan Park under a series of long-term supply agreements with Dolan Park’s affiliated companies. The last supply agreement expired in July of 2019.

Study to Support a PMA

The company is conducting a prospective IDE clinical trial in the United States on the company’s Motiva Round and Motiva Ergonomix Round product families. The company’s IDE submission was approved by the FDA on March 20, 2018 to perform a single open-label, prospective, multi-center trial, with follow-up visit data reported annually and at the time of filing. The company will continue to monitor patients for ten years post-implantation. The primary endpoints of the trial are safety, effectiveness and patient satisfaction. In August 2019, the company was implementing a bifurcated regulatory strategy in the United States, which is designed to allow the company to initiate the rolling submission of data to the FDA from the primary augmentation and revision augmentation cohorts, and then subsequently supplement the company’s PMA with data from the reconstruction cohorts. All the enrollment procedures and the three-year study subject follow-up have been completed in the aesthetics cohort, which includes primary augmentation and revision augmentation, with a total targeted enrollment of 450 and 100 subjects, respectively. In the fourth quarter of 2021, the company initiated a modular PMA submission process with the FDA and submitted the first of four expected modules. In April 2022, the company released preliminary results of the two-year patient follow-up data for the primary augmentation cohort of its IDE clinical trial. The second module was submitted in May 2022. In June 2022, full enrollment of the IDE clinical trial was complete, and all surgeries in the primary reconstruction cohort were performed. In August 2022, the third module was submitted to the FDA. The final fourth module was submitted to the FDA in February 2023.

Sales and Marketing

The company primarily derives revenue from sales of its Motiva Implants from two types of customers: medical device distributors and direct sales to physicians, hospitals, and clinics. The company’s products are commercially available in 85 countries through exclusive distributors, except in Brazil, Argentina and several European countries where the company sells through its direct sales force. As of December 31, 2022, the company’s sales organization included 181 employees and contractors. All of these sales personnel are supported through a suite of tools, including marketing and training materials, mobile smartphone applications, and access to a robust schedule of physician education events.

Intellectual Property

As of December 31, 2022, the company owned or had rights to 19 issued and 18 pending patents in the United States related to various aspects of the company’s Motiva Implants (such as implant barrier layers, surface texture technology, minimally invasive implant delivery systems, and the company’s Qid Safety Technology radio frequency identification devices). In addition, the company owns or has rights to 87 issued, three allowed and 98 pending foreign applications and one pending Patent Cooperation Treaty, or PCT, applications. The company’s owned and licensed patents are expected to expire at various times between February 2025 and February 2039. The company’s owned and licensed pending applications, if granted, likely would expire between September 2033 and December 2043.

The company owns, or has rights to, trademarks and trade names that the company uses in connection with the operation of its business, including Establishment Labs and the company’s logo, as well as other brands, such as Motiva Implants, SilkSurface/SmoothSilk, VelvetSurface, ProgressiveGel, TrueMonobloc, BluSeal, Divina, Ergonomix, Ergomonix2, Ergonomix2 Diamond, Mia Femtech and MotivaImagine, among others.

Research and Development

The company’s R&D expenses were $20.3 million for the year ended December 31, 2022.

Suppliers

The company obtains NuSil brand medical-grade silicone from Avantor, which is a sole-source supplier of such products to the majority of the silicone breast implant industry. In May 2022, the company entered into a master supply agreement with Avantor, which provides for specified prices per unit of each relevant component, has an initial term ending on December 31, 2026 and automatically renews for successive terms of one year each for up to five successive renewal terms. The agreement superseded and replaced the previous master supply agreement originally executed in 2016, as amended, that expired on May 13, 2022.

Regulation

While the company’s instruments are cleared as class II devices, breast implants are classified as Class III devices requiring an approved PMA for commercial distribution.

Related to the company’s devices specifically, the FDA’s guidance document ‘Saline, Silicone Gel, and Alternative Breast Implants’ recommends that a core study, which can be a single, open label, multi-center study, be conducted with ten years or more of prospective patient follow-up.

The company’s clinical study sites are additionally subject to possible inspection by the FDA.

The company is subject to various laws governing the privacy and security of health information and other personally identifiable information. The Health Insurance Portability and Accountability Act of 1996, or HIPAA, established comprehensive U.S. federal protection for the privacy and security of protected health information. HIPAA standards apply to ‘Covered Entities,’ which health plans, health care clearing houses, and certain health care providers which conduct certain health care transactions electronically, and to ‘Business Associates,’ entities that perform services on behalf of a Covered Entity that involves the creation, use, maintenance or disclosure of protected health information. Both Covered Entities and Business Associates must have in place administrative, physical, and technical standards to guard against the misuse of protected health information. Some of the institutions and physicians from which the company obtains biological specimens that the company uses in its research and validation work are Covered Entities and must obtain proper authorization from their patients for the subsequent use of those samples and associated clinical information.

The company’s activities must also comply with other applicable privacy laws, including the EU General Data Protection Regulation, or GDPR.

The company is subject to transparency requirements (also known as ‘sunshine laws’) in France, including obligations to report payments or transfers of value to, and the nature of the agreements the company sign with, a broad class of French healthcare professionals and organizations.

The company is subject to applicable anti-corruption laws, such as the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act, and similar anti-corruption laws in the countries in which the company distribute the company’s products.

The FCPA also obligates companies whose securities are listed in the United States to comply with accounting provisions requiring the company to maintain books and records that accurately and fairly reflect all transactions of the company, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations. The company has implemented policies, procedures, and internal controls that are designed to comply with these laws and regulations.

History

Establishment Labs Holdings Inc. was founded in 2004. The company was incorporated as Establishment Labs, S.A., a Sociedad Anónima in Costa Rica in 2004 and subsequently reorganized under a parent holding company in the British Virgin Islands in 2013.