Merit Medical Systems Stock

Merit Medical Systems, Inc. is a leading manufacturer and marketer of proprietary medical devices used in interventional, diagnostic and therapeutic procedures, particularly in cardiology, radiology, oncology, critical care and endoscopy. The company strives to be the most customer-focused company in healthcare.

The company’s first product was a specialized control syringe used to inject contrast solution into a patient’s arteries for a diagnostic cardiac procedure called an angiogram. Since that time, the company’s products and product lines have expanded substantially, both through internal research and development projects and through strategic acquisitions.

Business Strategy

The company’s business strategy focuses on various target areas as follows:

enhancing global growth and profitability through research and development, sales model optimization, cost discipline and operational focus;

optimizing its operational capability through lean processes, cost effective environments and asset utilization;

targeting high-growth, high-return opportunities by understanding, innovating and delivering in its core divisions;

maintaining a highly disciplined, customer-focused enterprise guided by strong core values to globally address unmet or underserved healthcare needs; and

creating sustainability of the company’s business for its employees, shareholders and community.

The company conducts its operations through a number of domestic and foreign subsidiaries and representative offices.

Products

The company designs, develops, markets and manufactures, through its own operations and contract manufacturers, medical products that offer a high level of quality, value and safety to its customers, as well as the patients they serve. The company’s products are used in the following clinical areas: radiology; diagnostic and interventional cardiology; interventional radiology; neurointerventional radiology; vascular, general and thoracic surgery; electrophysiology; cardiac rhythm management; interventional pulmonology; interventional nephrology; orthopedic spine surgery; interventional oncology; pain management; breast cancer surgery, outpatient access centers; intensive care; computed tomography; ultrasound; and interventional gastroenterology.

The company conducts its business through two operating segments: cardiovascular (which includes peripheral intervention, cardiac intervention, custom procedural solutions, and original equipment manufacturer (OEM)) and endoscopy.

The following sections describe the company’s principal product offerings by reporting segment and product category.

Cardiovascular

The company offers a broad line of medical devices used to gain and maintain vascular access. These products include the company’s micropuncture kits, angiographic needles, its family of Prelude Introducer Sheaths and a wide range of guide wires and safety products. The company’s cardiovascular segment includes the following product categories: peripheral intervention, cardiac intervention, custom procedural solutions, and OEM.

Peripheral Intervention

The company’s peripheral intervention products support the minimally invasive diagnosis and treatment of diseases in peripheral vessels and organs throughout the body, excluding the heart. Products in the company’s peripheral intervention product category are organized into the following product groups: peripheral intervention, spine, and oncology.

Merit Vascular – Peripheral

The company’s peripheral intervention products include product offerings in the following product portfolios: access (peripheral), angiography, drainage, delivery systems, embolotherapy, and intervention (peripheral). The principal product offerings in the company’s access (peripheral) portfolio include its:

HeRO (Hemodialysis Reliable Outflow) Graft, a fully subcutaneous vascular access system, which is intended for use in maintaining long-term vascular access for chronic hemodialysis patients;

CentrosFLO Long-Term Hemodialysis Catheter and ProGuide Chronic Dialysis Catheter;

Broad offering of peritoneal dialysis catheters, accessories and implantation kits for home dialysis therapy; and

Merit Wrapsody Endoprosthesis, a cell-impermeable endoprosthesis which is designed to maintain long-term vessel patency in patients with obstructions in the dialysis outflow circuit (this device is not available for use in the United States).

The products in the company’s angiography portfolio are used to identify blockages and other disease states in the blood vessel. The principal product offerings in its angiography portfolio include the company’s:

Extensive line of Merit Laureate Hydrophilic Guide Wires, a smooth-surface guide wire designed to minimize friction and promote rapid catheter exchanges;

The company’s newest offering of Merit SplashWire hydrophilic Steerable Guide Wires, combining optimum lubricity, exceptional torque response and enhanced visibility;

Performa and Impress Diagnostic Catheters, a catheter offering designed for traversing difficult to access peripheral blood vessels; and

Performa Vessel Sizing Catheters for vessel measurement.

The company offers a broad line of drainage products. The principal product offerings in its drainage portfolio include its:

Aspira Pleural Effusion Drainage and Aspira Peritoneal Drainage Systems, a compassionate treatment option for end-stage cancer, allowing patients to spend more time at home by reducing the need for frequent hospital visits to treat their drainage needs;

Family of ReSolve Drainage Catheters, including the company’s ReSolve ConvertX Stent System and ReSolve Mini Locking Drainage Catheter, and its related tubing sets and drainage bag;

One-Step and Valved One-Step Drainage Catheters, sold individually and in kits, for quickly removing unwanted fluid accumulation; and

Revolution Catheter Securement Device and StayFIX Fixation Device, used to stop migration, movement and accidental removal of percutaneous catheters.

The principal product offerings in the company’s delivery systems portfolio include its:

SwiftNINJA Steerable Microcatheter, an advanced microcatheter with a 180-degree articulating tip, sold through the company’s exclusive worldwide distribution agreement (excluding Japan) with SB-Kawasumi Laboratories, Inc.;

Merit Maestro and Merit Pursue Microcatheters, small microcatheters designed for pushability and trackability through small and tortuous vessels; and

True Form Reshapable Guide Wire, designed to be reshaped multiple times, reducing the need for multiple guide wires.

The company’s embolotherapy products treat disease by blocking or slowing the flow of blood into the arteries or delivering chemotherapy drugs in the treatment of primary and metastatic liver cancer. The principal product offerings in the company’s embolotherapy portfolio include its:

Embosphere Microspheres, a highly studied, round embolic for consistent and predictable results; and

HepaSphere Microspheres, soft embolics with a consistent cross-sectional diameter for predictable, flow-directed targeting.

The products in the company’s intervention (peripheral) portfolio are chiefly used to remove blood clots, retrieve foreign bodies in blood vessels and assist with placing balloons and stents to treat arterial disease. The principal product offerings in the company’s intervention (peripheral) portfolio include its:

ClariVein Specialty Infusion Catheter which is designed for controlled 360-degree dispersion of physician specified agents to the peripheral vasculature;

Dynamis AV PTA Dilatation Catheter, a line of balloon catheters that facilitates the opening of blockages located in the arteriovenous system of dialysis patients;

Q50X, Q50 and Q50 Plus Stent Graft Balloon Catheters, a line of catheters that treat abdominal and thoracic endovascular aortic repair procedures and reinterventions;

Fountain Infusion System and Mistique Infusion Catheters, a line of catheters that treat arterial and hemodialysis graft occlusions and deep vein thrombosis; and

EN Snare and One Snare Endovascular Snare Systems, a complete line of snares designed to manipulate, capture and retrieve foreign material in the body.

Merit Spine

The company’s spine products are used in the treatment of vertebral compression fractures and metastatic spinal tumors and in musculoskeletal biopsy procedures. The company’s spine product line includes the following product portfolios: vertebral augmentation, radiofrequency ablation, and bone biopsy systems. The company’s primary product offerings in the vertebral augmentation and radiofrequency ablation portfolios include its:

STAR Tumor Ablation System, designed to provide palliative treatment of painful metastatic spinal tumors in cancer patients by targeted radiofrequency ablation;

Arcadia Steerable and straight balloons, designed to achieve controlled, precise, targeted cavity creation in vertebral augmentation procedures; and

StabiliT MX Vertebral Augmentation System, which uses the company’s inflation devices to deliver bone cement.

The bone biopsy systems portfolio contains a full offering of manual bone biopsy products, including the company’s Madison, Huntington, Kensington, Preston and Westbrook biopsy products.

Merit Oncology

The company’s oncology products are dedicated to the accurate diagnosis and localization of breast and soft tissue tumors and the innovative treatment of early-stage breast cancer. The company also offers an extensive line of soft tissue biopsy products and accessories. The company’s primary product offerings in its oncology portfolio include its:

SCOUT Radar Localization System, a nonradioactive, wire-free tumor localization system that facilitates successful surgical removal of marked lesions and lymph nodes, improving workflow and the patient experience;

CorVocet Biopsy System, one of the company’s innovative soft tissue core needle biopsy and accessory products, designed to cut a full core of tissue and provide large specimens for pathological examination;

Achieve, Temno and Tru-Cut Soft Tissue Biopsy Devices; and

SAVI Brachytherapy, a precise, targeted approach to accelerated partial breast irradiation with lower toxicities and reduced treatment duration.

Cardiac Intervention

The company manufactures and sells a variety of products designed to treat various heart conditions. Products in the company’s cardiac intervention product category are organized into the following product portfolios: access (cardiac), angiography, electrophysiology and CRM, fluid management, hemodynamic monitoring, hemostasis, and intervention (cardiac).

Merit Vascular – Cardiac

The principal product offerings in the company’s access portfolio (cardiac) include its family of Prelude Introducer Sheaths, for both radial and femoral access, featuring its Prelude IDeal Hydrophilic Sheath Introducer, an ultra-thin wall introducer sheath that provides more room for the insertion of catheters and other devices in the radial artery.

The principal product offerings in the company’s angiography portfolio include its InQwire Guide Wires and Performa Diagnostic and Ultimate catheters for femoral and radial procedures.

Electrophysiology is the study of diagnosing and treating abnormal electrical activities of the heart. Cardiac rhythm management (CRM) is the field of cardiac disease therapy that relates to the diagnosis and treatment of cardiac arrhythmias or the improper beating of the heart. The principal product offerings in the company’s electrophysiology and CRM portfolio include its:

Worley Advanced LV Delivery System, used to aid in the insertion and implantation of left ventricular pacing leads;

HeartSpan Transseptal Needle, for left-heart access procedures; and

HeartSpan Steerable and Fixed Curve Sheath Introducer, featuring a neutral position indicator and tactile click to help physicians identify curve orientation with an expanded product line that includes fixed curve shapes.

The product offerings in the company’s fluid management portfolio include manifolds, control syringes and tubing.

The principal product offerings in the company’s hemostasis portfolio include its Prelude SYNC EVO and PreludeSYNC Distal Radial Compression devices, designed to reduce and stop blood flow after radial access procedures, and the SafeGuard Pressure Assisted Device which provides hemostasis after femoral procedures.

The principal product offerings in the company’s intervention (cardiac) portfolio include a full line of inflation devices and hemostasis valves, including the BasixCompak, basixTOUCH, Blue Diamond and DiamondTouch inflation devices and the PhD Hemostasis Valve, the latest addition to the company’s hemostasis valve portfolio.

Custom Procedural Solutions

The company’s custom procedural solutions product category consists of standard and custom kit and pack solutions that include items needed for peripheral procedures, safety and waste management products, and hemostasis accessories. The principal product offerings in this product category include:

Critical care products;

Dual Cap Disinfection Protection System and Medallion syringes;

Manifold Kits; and

Trays and Packs.

OEM

The company provides coating services for medical tubes and wires under OEM brands in addition to many of the products. The company offers coated tubes and wires to customers on a spool or as further manufactured components, including guide wire components, coated mandrels/stylets and coated needles.

The company also manufactures and sells sensor components for microelectromechanical systems. These components consist of piezoresistive pressure sensors in various forms, including bare silicon die, die mounted on ceramic substrates, and fully calibrated components for numerous applications both inside and outside the healthcare industry.

Endoscopy

The products in the company’s endoscopy operating segment, Merit Medical Endotek, are organized in two product portfolios: gastroenterology and pulmonary.

The company’s gastroenterology products include a complete range of innovative, gastrointestinal solutions. The company’s primary product offerings in ouitsr gastroenterology portfolio include its:

Alimaxx-ES and EndoMAXX Fully Covered Esophageal Stents, for maintaining esophageal luminal patency in certain esophageal strictures;

BIG60 Inflation Device, a 60-mL syringe and gauge designed to inflate and deflate non-vascular balloon dilators while monitoring and displaying inflation pressures up to 12 atmospheres; and

Elation Fixed Wire, Wire Guided and new 5-stage Balloon Dilators, intended for use in the alimentary tract.

The company’s pulmonary products consist of laser-cut tracheobronchial stents, advanced over-the-wire and direct visualization delivery systems and dilation balloons to endoscopically dilate strictures. The company’s primary product offerings in its pulmonary portfolio include its:

AERO, AEROmini and AERO DV Fully Covered Tracheobronchial Stents, for the treatment of tracheobronchial strictures produced by malignant neoplasms; and

Elation Pulmonary Balloon Dilator, for the dilation of strictures of the trachea and bronchi.

The company also offers a variety of kits and accessories for endoscopy and bronchoscopy procedures.

Marketing and Sales

Target Market/Industry: The company’s principal target markets are peripheral intervention, cardiac intervention, interventional oncology, critical care and endoscopy. Within these markets its products are used in the following clinical areas: diagnostic and interventional cardiology; interventional radiology; neurointerventional radiology; vascular, general and thoracic surgery; electrophysiology; cardiac rhythm management; interventional pulmonology; interventional nephrology; orthopedic spine surgery; interventional oncology; pain management; breast cancer surgery; outpatient access centers; intensive care; computed tomography; ultrasound; and interventional gastroenterology.

According to statistics published by the National Center for Health Statistics, cardiovascular disease continues to be a leading cause of death and a significant health problem in the U.S. Treatment options range from dietary changes to surgery, depending on the nature of the specific disease or disorder. Endovascular techniques, including angioplasty, stenting and endoluminal stent grafts, continue to represent important therapeutic options for the treatment of vascular disease. Breast cancer is the most commonly diagnosed cancer in women and is the second leading cause of cancer death among women. The company derives a large percentage of its revenues from sales of products used during percutaneous diagnostic and interventional procedures, such as angiography, angioplasty and stent placement, and it intends to pursue additional sales growth by building on its existing market position in both core technology and accessory products.

Strategy

The company plans to continue to develop and launch innovative products to support clinical trends and to address the increasing demands of markets. The company’s product development focuses on identifying and introducing a regular flow of profitable products that meet customer needs.

U.S. and International Sales

In the U.S., the company has dedicated, direct sales organizations primarily focused on selling to end-user physicians, hospitals and alternate site facilities (e.g., office-based labs), major buying groups and integrated healthcare networks.

Internationally, the company employs sales representatives and contract with independent dealer organizations and custom procedure tray manufacturers to distribute its products worldwide, including territories in Europe, the Middle East, Africa, Asia, Oceania, Central and South America, Mexico and Canada. The company maintains a distribution center and administrative office in Beijing. The company sells its products through more than 500 distributors in mainland China, who are responsible for reselling its products, primarily to hospitals. The company uses the modified direct sales approach in China, employing sales personnel throughout China who work with its distributors to promote the clinical advantages of its products to clinicians and other decision makers at hospitals.

In Europe, the Middle East and Africa (EMEA), the company has both direct and modified direct sales operations. Such sales operations are active throughout the region, including the largest markets in Western, Southern, Central and Eastern Europe and the emerging markets within EMEA.

The company is conducting education programs specific to radial access, spinal intervention, surgical grafts, wire-free tumor localization, electrophysiology, endoscopy, dialysis and embolism. The company requires its international dealers to store products and sell directly to customers within defined sales territories. Each of the company’s products must be approved for sale under the laws of the country in which it is sold. International dealers are responsible for compliance with applicable anti-corruption laws, such as the U.S. Foreign Corrupt Practices Act, as well as all applicable laws and regulations in their respective countries.

OEM Sales: The company’s global OEM Division sells components and finished devices, including molded components, sub-assembled goods, custom kits and bulk non-sterile goods, to medical device manufacturers. These products may be combined with other components and products from other companies and sold under a Merit or customer label. Products sold by the company’s OEM Division can be customized and enhanced to customer specifications, including packaging, labeling and a variety of physical modifications. The company’s OEM Ddvision serves customers with a staff of regional sales representatives based in the U.S., Europe and Asia, and a dedicated OEM Engineering and Customer Service Group.

Research and Development

The company’s research and development expenses included $75.5 million for the year ended December 31, 2022.

Customers

The company provides products to hospitals and alternate site-based physicians, technicians and nurses. Hospitals and acute care facilities in the U.S. purchase its products through its direct sales force, distributors, OEM partners, or custom procedure tray manufacturers who assemble and combine its products in custom kits and packs. Outside the U.S., hospitals and acute care facilities generally purchase the company’s products through utsdirect sales force, or, in the absence of a sales force, through independent distributors or OEM partners.

Merit Sensor Systems, Inc. develops and markets silicon pressure sensors to a range of enterprises and supplies the sensors it uses indigital inflation devices and blood pressure sensors.

Competition

The company’s primary competitors in its peripheral intervention market are Teleflex Incorporated (Teleflex), Cook Medical Incorporated (Cook Medical), Medtronic plc (Medtronic), Boston Scientific Corporation (Boston Scientific), and Becton, Dickinson and Company (BD). The company’s primary competitors in its cardiac intervention market are BD, Teleflex, Medtronic, Abbott Laboratories, Terumo Corporation, Edwards Lifesciences Corporation, Cook Medical, and Boston Scientific. The company’s primary competitors in its spine market are Medtronic, Stryker Corporation, and Johnson & Johnson. The company’s primary competitors in its oncology market are BD, Hologic, Inc., Argon Medical Devices, Inc. and Cook Medical. The company’s primary competitors in its endoscopy market are Getinge AB, Boston Scientific, Cook Medical, and Olympus Corporation.

Proprietary Rights and Litigation

As of December 31, 2022, the company owned approximately 1,600 U.S. and international patents and patent applications.

Additionally, the company holds exclusive and non-exclusive licenses to a variety of third-party technologies covered by patents and patent applications.

The Merit name and logo are trademarks in the U.S. and other countries. In addition to the Merit name and logo, the company has used, registered or applied for registration of other specific trademarks and service marks to help distinguish its products, technologies and services from those of its competitors in the U.S. and foreign countries.

Seasonality

The company’s worldwide sales have not historically reflected a significant degree of seasonality; however, customer purchases have historically been lower during the third quarter of the year, as compared to other quarters (year ended December 31, 2022). This reflects, among other factors, lower demand during summer months in countries in the northern hemisphere.

Regulation

In October 2020, the company entered into a Corporate Integrity Agreement (CIA) with the Office of Inspector General (OIG), a five-year agreement that was a condition of its settlement with the United States Department of Justice (DOJ). The CIA subjects the company to certain compliance, monitoring, reporting, certification, oversight and training obligations.

The company’s products and operations are global and are subject to regulations by the FDA and various other federal and state agencies, as well as by foreign governmental agencies.

In May 2020, the company received the CE mark for the Merit Wrapsody Cell-ImpermeableEndoprosthesis, and is pursuing regulatory approval in the U.S. and elsewhere. The company is conducting a large, multinational pivotal human clinical trial of the Wrapsody Endoprosthesis, which is required for it to obtain approval from the FDA and some international regulatory agencies.

The Federal Food, Drug and Cosmetic Act (FDCA) and its counterpart non-U.S. laws require the company to comply with quality system regulations (QSR) pertaining to all aspects of its product design and manufacturing processes, including requirements for packaging, labeling, record keeping, personnel training, supplier controls, design controls, complaint handling, corrective and preventive actions and internal quality system auditing.

The company’s labeling and promotional activities are also subject to scrutiny by the FDA and foreign regulators. The company’s product promotion is also subject to regulation by the Federal Trade Commission (the FTC), which has primary oversight of the advertising of unrestricted devices, including FDA-cleared devices. The Federal Trade Commission Act prohibits unfair methods of competition and unfair or deceptive acts or practices in or affecting commerce, as well as unfair or deceptive practices such as the dissemination of any false or misleading advertisement pertaining to medical devices. FTC enforcement can result in orders requiring, among other things, limits on advertising, corrective advertising, consumer redress, rescission of contracts and such other relief as the FTC may deem necessary.

Additionally, the export of the company’s products is subject to restrictions due to trade and economic sanctions imposed by the U.S., the EU and other governments and organizations. The U.S. Departments of Justice, Commerce, State and Treasury and other federal agencies and authorities have a broad range of civil and criminal penalties they may seek to impose against corporations and individuals for violations of economic sanctions laws, export control laws, and other federal statutes and regulations, including those established by the Office of Foreign Assets Control (OFAC).

As a medical device manufacturer, the company is subject to other post-market requirements in multiple jurisdictions, including product listing, establishment registration, Unique Device Identification (UDI), and reports of corrections and removals. The company is also subject to regulations that require manufacturers to report to the FDA, or an equivalent foreign regulatory body, any incident in which their device may have caused or contributed to a death or serious injury, or has malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction of the device or a similar device were to recur.

The company’s international operations are subject to the Foreign Corrupt Practices Act (the FCPA), the U.K. Bribery Act and other foreign anti-corruption laws.

The company’s compliance program includes policies addressing not only the FCPA, but also the provisions of a variety of anti-corruption laws in multiple foreign jurisdictions; provisions relating to books and records that apply to it as a public company, and effective training for its personnel and relevant third parties.

The company’s to corporate social responsibility (CSR) laws and regulations which require it to monitor the labor standards in its supply chain, including the California Transparency in Supply Chains Act, the U.K. Modern Slavery Act, and U.S. Federal Acquisition Regulations regarding Combating Trafficking in Persons.

History

Merit Medical Systems, Inc. was founded in 1987 as a Utah corporation. The company was incorporated in 1987.