Fuse Medical Stock

Fuse Medical, Inc. operates as a manufacturer and distributor of medical devices in the United States.

The company provides a broad portfolio of orthopedic implants, including:

Foot and Ankle: Internal and external fixation products;

Orthopedics: Upper and lower extremity plating and total joint reconstruction implants;

Sports Medicine: Soft tissue fixation and augmentation for sports medicine procedures; and

Spine: Full spinal implants for trauma, degenerative disc disease, and deformity indications (collectively, the company refers to these bulleted products as Orthopedic Implants).

The company also provides a wide array of osteo-biologics and regenerative products, which include human allografts, tendons, synthetic skin and bone substitute materials, and regenerative tissues, which it refers to as (Biologics).

All of the company's medical devices are approved by the U.S. Food and Drug Administration (FDA) for sale in the United States, and all of its Biologics suppliers are licensed tissue banks accredited by the American Association of Tissue Banks. Additionally, the company is licensed by the FDA for storage and distribution of human cells, tissues, and cellular and bone-based products (HCT/Ps), and an FDA-registered medical device specification developer and repackager/relabeler, and manufacturer of record, (a Manufacturer). The company is seeking to grow its manufacturing operations, both by internal product development and by acquiring existing FDA approved devices and related intellectual property.

Products

The company's broad portfolio of Orthopedic Implants and Biologics provide high-quality products to assist surgeons with positive patient outcomes and are cost-effective solutions for its customers.

Marketed Products - Orthopedic Implants

Foot and Ankle - The company offers comprehensive product offerings of internal and external fixation for forefoot, midfoot and hindfoot reconstruction. The company's solutions include CPM Cannulated Headed and Headless Screws, CPM Snap Off Screws, Fuse Orbitum Compression Staple System, FuseFix HammerToe and its Fuse TyWedge System.

Orthopedics - The company offers joint reconstruction systems for upper and lower extremities, which include the Sterizo Total Knee, Tibial Revision, and Total Hip Replacement Systems, as well as the Arrow total and reverse total shoulder system.

Sports Medicine - The company offers its line of Fuse Suture Anchors and Interference Screws, as well as multiple products for soft tissue fixation augmentation, including ACL and Rotator Cuff Repair (RCR).

Spine - The company offers a full line of spinal products for cervical and thoracolumbar fusion, including its Fuse PSS Pedicle Screw system for open and MIS procedures, its Fuse ACP Anterior Cervical Plating System, its Maxim X-Treme PEEK Cervical Interbodies and CPM PEEK Titanium Coated Cervical and Lumbar Interbodies.

Marketed Products - Biologics

Osteobiologics - The company offers an extensive product portfolio of allograft products for all categories for fracture management and fusion indications, which include FusePure Demineralized Bone Matrix (DBM) and FuseTrilogy Viable Bone Matrix bone void fillers.

Regenerative - The company offers placental membranes for use in conjunction with surgical procedures, which includes FuseChoice, FuseChoice Plus, and FuseChoice Max, with amniotic and umbilical membranes, and FuseChoice Derm, FuseChoice DermX, and FuseChoice DermXT with dermal matrix membranes.

Autologous - The company offers concentration systems for Platelet Rich Plasma (PRP) and Bone Marrow Aspirate Concentrate (BMAC).

Customers and Product Distribution Channels

Retail: Under its retail distribution model, (Retail Model), the company sells directly to its end customers, which consist of hospitals and medical facilities, utilizing its full-time sales representatives whom it employs or engages as independent contractors and independent sales representatives who work on a non-exclusive basis. In both instances, the company pays the sales representative a commission with respect to sales made by the representative. The company refers to sales through its Retail Model as Retail Cases (Retail Cases). For the year ended December 31, 2022, the company's Retail Cases generated, in aggregate, approximately 93% of its revenues.

Wholesale: Under its wholesale distribution model, (Wholesale Model), the company sells its products directly to independent distributors rather than to hospitals and medical facilities who are the ultimate end customer. The company refers to its sales through its Wholesale Model as Wholesale Cases, (which are herein referred to as Wholesale Cases). For the year ended December 31, 2022, the company's Wholesale Cases generated, in aggregate, approximately 7% of its revenues.

For the year ended December 31, 2022, the company's largest customer represented approximately 13.1% of its consolidated net revenues. The company continues to develop and expand its customer portfolio through building relationships with key medical professionals in the expanding geographic areas it serves. The company provides on-going product training and support to its full-time sales representatives, independent sales representatives and contractors, and independent distributors, along with product manufacturer marketing materials to ensure customer satisfaction with the products it offers. The company focuses on these key areas is essential to growing its customer base and increasing revenues, particularly with respect to Retail Cases.

Suppliers

The company's primary supplier of Biologics is Vivex Biomedical, Inc., a biomedical company focused on cellular therapies that treat orthopedic, spine, wound, and soft tissue indications. With respect to Orthopedic Implants, the company's significant suppliers FH Orthopedics, Inc. for shoulder replacement systems, and CoreLink Surgical, Inc. for medical devices used in spine surgeries.

The company contracts with Tyber Medical, LLC, Maruho Medical, LLC, Solco Biomedical Co., Ltd, and Modal Manufacturing, LLC, for the manufacture of Orthopedic Implants, to develop and expand its private label initiatives, including its foot and ankle, and spine and sports medicine products. During 2022, the company expanded its private label products through key relationships and suppliers. The company's Orthopedic Implants private label portfolio consists of:

Its internal fixation product line for foot and ankle procedures, which includes CPM Headed and Headless Cannulated Screws, CPM Snap Off Screws, the FuseFix Hammertoe implant, and Fuse TyWedge System for Evans & Cotton procedures;

Its Cervical ACIF, and Lumbar PLIF/TLIF interbody spacer product line that features titanium-coated surfaces to promote osseointegration during spinal fusion surgeries;

Its Fuse Suture Anchor product line for sports medicine procedures, which includes Galen, Kopis and Vida suture anchors delivery system for soft tissue fixation (Fuse Suture Anchors);

Its Fuse ACP Anterior Cervical Plating System and

Its Sterizo Total Knee Replacement System (Sterizo Total Knee System).

Private Label Tissue Processors: The company contracts with Vivex Biomedical to process its regenerative tissues and viable bone matrices, and Pinnacle Transplant Technologies for osteobiologics, and demineralized bone matrices.

Contract Manufacturers

The company then sells the products under one of its own proprietary brands utilizing its Retail Model or Wholesale Model. The company's FDA cleared products for which it is the Manufacturer of record are Maxim X-Treme PEEK Cervical Interbody System; Fuse PSS open and MIS Pedicle Screw System; and Orbitum Compression Staple System.

Competition

Generally, the company views Stryker Corporation, Smith & Nephew plc, and Orthofix Medical Inc., as examples of its large vertically integrated competitors.

Seasonality

The company is subject to seasonal fluctuations in sales, which cause fluctuations in quarterly results of operations.

Historically, the company has experienced greater revenue and greater sales volume, as a percentage of revenue, during the last two calendar quarters of its fiscal year compared to the first two calendar quarters (year ended December 31, 2022) of the year. The company uses this seasonality trend to assist it in enterprise-wide resource planning, such as purchasing, product inventory logistics, and human capital demands.

Intellectual Property

The company maintains stocking distribution agreements providing for exclusive distribution rights in certain geographic areas and use of associated trademarks, service marks, and tradenames for the sale and promotion of the products it offers. The company's distribution agreement with Induce Biologics includes exclusive distribution rights in the state of Texas for the Urist Natural Matrix Protein (NMP) bioimplant. The company's distribution agreement with BRM Extremities includes exclusive distribution rights in the United States of the SilkToe metatarsophalangeal joint arthroplasty system. In 2020, the company applied and was granted trademark approval for its Galen and Kopis suture anchors, part of its Fuse Suture Anchor product line. As of 2022, Galen became a registered trademark of Fuse.

Government Regulation

The company's products are subject to regulation by the FDA and other the U.S. federal and state regulatory bodies. Its products are subject to regulation under the Federal Food, Drug, and Cosmetic Act, and in the case of its tissue products, also under the Public Health Service Act. The products the company markets in the U.S. are Class I and Class II devices marketed under FDA 510(k) clearance. The company's facilities, records, and manufacturing processes are subject to periodic announced and unannounced inspections by the FDA to evaluate compliance with applicable regulatory requirements. To ensure that its products are safe and effective for their intended use, the FDA regulates, among other things, the activities that the company or its manufacturing and distribution partners perform and will continue to perform.

To obtain 510(k) Clearance, the company must submit a 510(k) premarket notification demonstrating that the proposed device is substantially equivalent to a device legally marketed in the United States. Certain of the company's products are regulated as human cells, tissues, and cellular and tissue-based products (HCT/Ps). Section 361 of the PHSA authorizes the FDA to issue regulations to prevent the introduction, transmission or spread of communicable disease.