Sight Sciences (SGHT) Risk Analysis

We have sold our TearCare products since 2019. We do not have experience selling TearCare with a large sales force and concerted sales initiatives. Thus, the number of eligible ECPs trained on TearCare remains relatively modest. If we are unable to expand and enhance our training efforts to target and effectively train existing and new ECP customers on our TearCare products, adoption of TearCare will be adversely impacted. Further, we have limited experience with marketing TearCare. Our marketing and sales campaigns have been limited in scope and have continued to evolve as we better understand the needs and preferences and knowledge gaps of our existing and prospective TearCare customers, and as we expand our library of clinical evidence supporting the TearCare procedure's safety and efficacy, but these efforts may not be successful in driving TearCare adoption. Further, we have limited experience marketing and selling TearCare for use in procedures that are reimbursed by Medicare and other governmental payers. If we are unable to effectively train our personnel on, and to otherwise comply with, laws, regulations and guidelines applicable to federally reimbursed products, including regulations pertaining to kickbacks, false claims, interactions with ECPs and direct-to-consumer advertising, our business may suffer.

Competitors may infringe our patents or trademarks, or we may be required to enforce our patents or trademarks to protect our technology, customer goodwill and product branding. We may also be required to file suit to protect our trade secrets or may be involved in litigation defending against claims of infringement of the rights of others. In addition, our patents and trademarks also may become involved in inventorship, priority or validity disputes. To counter or defend against such claims can be expensive and time-consuming and could divert our attention from other functions and responsibilities. In an infringement proceeding, a court may decide that a patent or trademark owned by us is invalid or unenforceable. Furthermore, even if our patents and trademarks are found to be valid and infringed, a court may refuse to grant injunctive relief against the infringer and instead grant us monetary damages and/or ongoing royalties. Such monetary compensation may be insufficient to adequately offset the damage to our business caused by the infringer's competition in the market. Adverse determinations against us in defending against infringement could subject us to significant liabilities to third parties, require us to seek licenses from third parties, prevent us from using the infringing trademark in our business, or prevent us from manufacturing, selling or using the infringing product, any of which could severely harm our business. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during litigation. Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses and could distract our management and other personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments, and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on our common stock price. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities. We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources and more mature and developed intellectual property portfolios. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace. Any of the foregoing could have a material adverse effect on our business, financial condition or results of operations. On September 16, 2021, we filed suit in the U.S. District Court for the District of Delaware (C.A. No. 1:21-cv-01317) (the "Court") alleging that Ivantis, Inc. ("Ivantis") directly and indirectly infringes our U.S. Patent Nos. 8,287,482, 9,370,443,9,486,361, and 10,314,742 by making, using, selling, and offering for sale the Hydrus Microstent. Our complaint sought money damages and injunctive relief. On January 24, 2022, Ivantis asserted counterclaims requesting declaratory judgments that our asserted patents-in-suit are not infringed and/or invalid. On August 1, 2022, we filed an amended complaint alleging that Alcon Inc., Alcon Vision, LLC and Alcon Research, LLC (collectively, "Alcon") infringe the four originally asserted patents by making, using, selling, and offering for sale the Hydrus Microstent, and that all defendants also infringe U.S. Patent No. 11,389,328. The defendants asserted counterclaims requesting declaratory judgments that our asserted patents-in-suit are not infringed and/or are invalid. In September 2022, Ivantis and Alcon filed petitions with the U.S. Patent Office seeking inter partes review of U.S. Patent Nos. 8,287,482, 9,370,443, 9,486,361, and 10,314,742 (IPR2022-01529, IPR2022-01530, IPR2022-01533, IPR2022-01540), each of which the U.S. Patent Office denied for raising prior art references and invalidity arguments that were cumulative of those previously considered by the U.S. Patent Office. On April 26, 2024, at the conclusion of a five-day jury trial, we were awarded a positive jury trial verdict of $34 million, comprised of $5.5 million in lost profits damages and $28.5 million in royalty damages for commercial sales of the Hydrus Microstent for the period between its commercial launch through trial. The patents at issue were U.S. Patent Nos. 8,287,482, 9,370,443, and 11,389,328. In December 2024, the Court held an in-person hearing to brief the parties' oral arguments on their post-trial briefings at the conclusion of which, the Court ordered the parties to engage in non-binding mediation. In early March 2025, we and Alcon informed the Court that we had not resolved our dispute through mediation and asked the Court to decide the parties' post-trial motions and enter a judgment, which judgment will be subject to appeal. It is possible that the jury verdict that was rendered in our favor may be reduced, limited or vacated by the Court or by the appellate court if appealed. We are presently unable to predict the outcome of this lawsuit or to reasonably estimate the potential financial impact of the lawsuit on us, if any. In June 2025, Alcon filed petitions with the U.S. Patent Office for ex parte reexaminations of the three patents that we asserted at trial, challenging the validity of each of these patents based on prior art patents and publications. In September 2025, the Central Reexamination Unit (CRU) of the U.S. Patent Office decided to proceed with the reexaminations and this reexamination process, which may include multiple levels of appeals, is currently underway, It is possible that the April 2024 jury verdict in the Company's favor, including its ability to collect past damages and ongoing royalties, may be materially and adversely impacted if the reexamination proceedings result in final, non-appealable determinations that the asserted claims of the patents-in-suit are either invalid or must be amended, in either case before a final, non-appealable judgment is entered by the Court in the separate patent infringement litigation.

The methods used in, and the facilities used for, the manufacture of our products must comply with the FDA's QMSR and, subject to transitional provisions, the EU Medical Device Regulation ("EU MDR"), both of which are complex regulatory schemes that cover the procedures and documentation of the design, testing, production, process controls, quality assurance, labeling, packaging, handling, storage, distribution, installation, servicing and shipping of medical devices. Furthermore, we are required to maintain, and to verify that our suppliers maintain, facilities, procedures and operations that comply with our quality standards and applicable regulatory requirements. Our products are also subject to similar state regulations, various laws and regulations of foreign countries governing manufacturing and a requirement for adherence to industry standards of the International Standards Organization ("ISO") in connection with our medical device operations outside of the United States. Failure by us or one of our third-party suppliers to comply with applicable FDA or foreign requirements or later discovery of previously unknown problems with our products or manufacturing processes could result in, among other things civil penalties, suspension or withdrawal of clearances, seizures or recalls of our products, total or partial suspension of production or distribution, refusal to grant pending or future clearances, approvals, or certifications for our products, clinical holds, refusal to permit the import or export of our products, and criminal prosecution. Furthermore, regulatory authorities have broad discretion to require the recall or suspension of a product or to require that manufacturers alert customers of safety risks. A government-mandated or voluntary recall or suspension by us, one of our distributors or any of our third-party suppliers could occur as a result of an unacceptable risk to health, component failures, manufacturing errors, design or labeling defects or other deficiencies and issues. Recalls, suspensions or other notices relating to any products that we distribute would divert managerial and financial resources, and have an adverse effect on our reputation, financial condition and operating results. Further, under the FDA's medical device reporting regulations and similar foreign regulations, we are required to maintain appropriate quality systems and report incidents in which our product may have caused or contributed to serious injury or death in which our product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to serious injury or death. Repeated product malfunctions may result in a voluntary or involuntary product recall or suspension of product sales, which could divert managerial and financial resources, impair our ability to manufacture our products in a cost-effective and timely manner and have an adverse effect on our reputation, financial condition and operating results. If we initiate a correction or removal for our products to reduce a risk to health posed by them or to remedy a violation of law that may present a risk to health, we would be required to submit a report to the FDA and may be required to submit similar notifications to other regulatory authorities. This report could lead to increased scrutiny by the FDA, other foreign regulatory agencies and our customers regarding the quality and safety of our products. Furthermore, the submission of these reports, to the extent made publicly available in accordance with FDA regulations, could be used by competitors against us or otherwise publicized and cause physicians to delay or cancel product orders, which will harm our reputation. Depending on the corrective action we take to redress a product's deficiencies or defects, the FDA or FDA's foreign counterparts may require, or we may decide, that we will need to obtain new clearances, certifications or approvals for the device before we may market or distribute the corrected device. Seeking such clearances, certifications or approvals may delay our ability to replace the recalled devices in a timely manner. Moreover, if we do not adequately address problems associated with our devices, we may face additional regulatory enforcement action, including FDA warning letters, product seizure, injunctions, administrative penalties or civil or criminal fines. We have received ISO 13485:2016 certification for our quality management system. ISO certification generally includes recertification audits every third year, scheduled annual surveillance audits and periodic unannounced audits. We can provide no assurance that we will be found to remain in compliance with the QMSR or ISO standards upon a regulator's review. If the FDA, other regulator, or notified body, inspect or audit any of our manufacturers' facilities and discovers compliance problems, we may have to cease manufacturing and product distribution until we can take the appropriate remedial steps to correct the audit findings. Any of the actions noted above could significantly and negatively affect supply of our products. Taking corrective action may be expensive, time-consuming and a distraction for management. If any of these events occurs, our reputation could be harmed, we could be exposed to product liability claims and we could lose customers and experience reduced sales and increased costs.

In the United States, we currently rely on our direct sales force and any failure to maintain and grow our sales force could harm our business. In Europe, we currently rely on a combination of direct sales personnel and independent distributors to sell our OMNI product, and we intend to grow our international sales through a combination of direct and distributor sales. In order to generate future growth, we plan to expand and leverage our commercial infrastructure to increase our customer base and increase adoption by existing customers to drive our growth. Identifying and recruiting qualified sales and marketing professionals and training them on our products, on applicable federal and state laws and regulations and on our internal policies and procedures requires significant time, expense and attention. Our direct sales force may subject us to higher fixed costs than those of companies with competing products or treatments that rely more heavily on independent third parties, placing us at a competitive disadvantage. Our business may be harmed if our efforts to expand and train our sales force and distribution chain do not generate a corresponding increase in product sales and revenue, and our higher fixed costs may slow our ability to reduce costs in the face of a sudden decline in demand for our products. Any failure to hire, develop and retain effective sales personnel, to identify and train distributors and independent sales representatives in targeted international territories, to achieve desired productivity levels in a reasonable period of time or timely reduce fixed costs, could have a material adverse effect on our business, financial condition and results of operations. Our ability to increase our customer base and achieve broader market acceptance of our products will depend, to a significant extent, on our ability to maintain and expand effective sales and marketing and educational efforts. We plan to dedicate significant resources to our sales and marketing initiatives, and educational programs through leading medical publications and at large industry and scientific meetings, both directly and through key opinion leaders. Our business may be harmed if these efforts and expenditures do not generate a corresponding increase in revenue. Further, our sales results are dependent in large part on the efforts and effectiveness of our sales and marketing personnel, and underperformance in these functions, whether though sub-optimal marketing campaigns, problematic sales representative performance or otherwise, may adversely impact our product sales and reputation. In addition, we believe that developing and maintaining broad awareness of our brand in a cost-effective manner is critical to achieving broad acceptance of our products and reaching new ECPs and patients. Brand promotion activities may not impact ECP or patient awareness or increase revenue, and even if they do, any increase in revenue may not offset the costs and expenses we incur in building our brand. If we fail to successfully promote, maintain and protect our brand, we may fail to attract or retain the market acceptance necessary to realize a sufficient return on our brand building efforts, or to achieve the level of brand awareness that is an important factor for the broad adoption of our products.

We derive revenue from sales of OMNI and SION to physicians, ASCs, and HOPDs, which typically bill all or a portion of the costs and fees associated with our products to various third-party payors, including Medicare, Medicaid, foreign governmental payors, private commercial insurance companies, health maintenance organizations and other healthcare-related organizations, and then bill patients for any applicable deductibles or co-payments. Historically, we have sold our TearCare system components to customers on a limited basis to drive customer awareness and acceptance in advance of reimbursement. We are pursuing broad reimbursement coverage for TearCare so that ECPs can bill all or a portion of the costs and fees associated with this product to a larger swath of third-party payors, including Medicare, Medicaid, private commercial insurance companies, health maintenance organizations, and other healthcare-related organizations, and then bill patients for any applicable deductibles or co-payments. Only recently have payors started establishing more appropriate payment values for CPT code 0563T, the code associated with TearCare procedures. ECPs have begun to receive individual claim-by-claim reimbursements for TearCare services. As a result, access to adequate coverage and reimbursement for procedures in which our Interventional Glaucoma and Interventional Dry Eye products are used by third-party payors is essential to their broad acceptance and adoption by patients and ECPs. Internationally, medical reimbursement systems vary significantly from country to country, with some countries limiting medical centers' spending through fixed budgets, regardless of levels of patient treatment, and other countries requiring application for, and approval of, government or third-party reimbursement. For example, in the third quarter of 2024, certain reimbursement advice published by the United Kingdom's National Health Service (NHS) had rendered untenable the code that had previously been relied upon as applicable to procedures performed with our OMNI technology. This shift has resulted in reduced reimbursement for OMNI procedures as compared to historic reimbursement levels, which in turn has affected our business, results of operations and prospects in the United Kingdom. Though we are working to establish appropriate reimbursement by NHS for the OMNI procedure, there is no guarantee that we will be successful in addressing this or other reimbursement challenges that we may encounter in the United Kingdom or other international markets in which we market and sell our products. These third-party payors continually review new and existing technologies for possible coverage and can deny or reverse coverage for new or existing products and procedures, and there can be no assurance that third-party payor policies provide coverage, or will continue to provide coverage, for procedures in which OMNI or our other products are used. For example, in the U.S., the Centers for Medicare & Medicaid Services ("CMS"), MACs or commercial payors could require or issue coverage policies that could restrict or eliminate coverage for the patient populations eligible for treatment with our products, or that are otherwise unfavorable to our business. In June 2023, for instance, five MACs published the Prior LCDs, which identified certain non-implantable MIGS procedures as investigational and not reasonable and necessary in the jurisdictions where these MACS administer Medicare Part B benefits, including but not limited to adult canaloplasty in combination with trabeculotomy ab interno, a procedure performed with OMNI and for which it is indicated. The Prior LCDs may also have categorized our SION technology as investigational and thus non-covered with respect to goniotomy procedures. Although the Prior LCDs were withdrawn in late December 2023 and replaced with the now-effective Final LCDs which allow for continued coverage of standalone canaloplasty and goniotomy procedures performed with our OMNI and SION technologies in these five MAC jurisdictions, in the future, governmental or private payors may issue coverage policies or guidance that may establish non-coverage, materially restrict coverage, or reduce reimbursement levels for one or more procedures involving our products. Any such policies, determinations or guidance could in turn influence coverage determinations by other third-party payors. In addition, the Final LCDs' non-coverage policies when an aqueous shunt or stent procedure is performed with another surgical MIGS procedure at the same time in the same patient eye has also adversely affected the market for MIGS devices, including our products. . If the remaining two MACs also publish LCDs with the same coverage restriction, we expect an even further decline in MIGS claims volumes. Adverse coding, coverage or payment determination such as these are not within our control. If we are not successful in reversing any proposed non-coverage policies, or if third-party payors that currently cover or reimburse procedures in which our products are used reverse or limit their coverage in the future, or if other third-party payors issue similar policies negatively impacting reimbursement for our products, it could have a material adverse effect on our business, financial condition, and results of operations. Moreover, any uncertainty with respect to coverage or coding may impact management's ability to accurately forecast results. We also derive revenue from sales of TearCare to ECPs and eye care clinics, which bill all or a portion of the costs and fees associated with treatments and products to third-party payors. We believe that access to adequate coverage and reimbursement for procedures in which TearCare is used by third-party payors is important to the broad acceptance and adoption of TearCare. Currently, two MACs, FCSO and Novitas, have established fee schedules for code 0563T that more closely reflect the cost and value of the TearCare procedure. There is no guarantee that other MACs will establish similar fee schedule amounts, or that FCSO and Novitas will maintain their fee schedules for CPT code 0563T at their current levels. Further, MACs from time to time may include, and we are currently aware of two MACs that have included low payment rates for TearCare procedures in their fee schedules. If these low payment rates are not removed or increased to what we believe is an appropriate reimbursement level, they could adversely impact our efforts to achieve reimbursement for TearCare that is sufficient to support its broad commercial growth and adoption. While we will continue to engage with those MACs that currently maintain low fee schedules for the TearCare procedure, there is no guarantee that these MACs will remove these low payment values and replace them with payment values that are sufficient to support widespread customer adoption. It may not be commercially feasible for us to market and sell TearCare in those jurisdictions where reimbursement is not sufficient for TearCare adoption, which in turn would adversely affect our business and results of operations. Further, commercial payors may from time to time may deny coverage for our TearCare product, which could hamper our efforts to drive broad commercial adoption of TearCare. These determinations could be made with reference to a variety of factors, including our legacy TearCare commercial practices, perceived clinical efficacy compared to other treatment alternatives, and similar considerations. We are pursuing a comprehensive, long-term market development and patient access plan for TearCare and focusing our efforts on partnering with key strategic accounts to pursue prior authorization approvals and reimbursement claims for procedures in which TearCare is used, but there is no guarantee that we will be successful. This strategy is dependent, among other things, on ECPs' willingness to submit, and their success in submitting, accurate TearCare procedure claims that support appropriate reimbursement, as well as their success in appealing denied or underpaid claims with payors, as needed. If patients are not willing to pay for procedures in which TearCare is used, or if third-party payors other than FCSO and Novitas continue to decline to provide coverage and reimbursement, or provide insufficient levels of reimbursement, it would have a negative impact on ECPs' adoption of TearCare and sales of TearCare, which could adversely affect our business and results of operations. Further, though CPT code 0563T specifically describes the procedure enabled by the TearCare technology, it is possible that competitors could seek to use, promote for use, or encourage providers to bill under this code with competitive technology. In addition, the code could subsequently be modified or interpreted in a manner to allow competitive products to be billed thereunder, which could adversely affect our business and results of operations. Third-party payors, whether foreign or domestic, or governmental or commercial, are developing increasingly sophisticated methods of controlling healthcare costs. In addition, no uniform policy of coverage and reimbursement for procedures using our products exists among third-party payors. Therefore, coverage and reimbursement for procedures using our products can differ significantly from payor to payor. Obtaining and maintaining coverage and reimbursement can be a time-consuming process that could require us to provide supporting scientific, clinical and cost-effectiveness data for the use of our products. We may not be able to provide data sufficient to satisfy governmental and third-party payors that procedures using our products should be covered and reimbursed. The majority of potential TearCare patients are insured by commercial payors, If the Company is unsuccessful in establishing formal coverage policies with adequate reimbursement for the TearCare procedure, reimbursed market access for TearCare will be materially limited. With regard to our international sales efforts, even if and as we succeed in bringing our products to market in foreign countries, uncertainties regarding future healthcare policy, legislation and regulation, as well as private market practices, could affect our ability to sell our products in commercially acceptable quantities at acceptable prices. In the United States, the American Medical Association ("AMA") generally assigns specific billing codes for procedures under a coding system known as Current Procedural Terminology ("CPT"), which surgeons use to bill third-party payors and receive reimbursement. Once a permanent CPT code ("Category I CPT code") is established for a service, CMS establishes national payment levels under Medicare, while other payors may establish rates and coverage rules independently. Canaloplasty followed by trabeculotomy procedures using OMNI are typically billed using the Category I CPT code 66174, which describes canaloplasty. ECPs may also bill for procedures in which our OMNI product is used under Category I CPT Code 65820, which describes goniotomy procedures. Coding for ophthalmic surgical procedures is complex, and changes to the codes used to report services performed with our products may result in significant changes in reimbursement, which could negatively impact our revenue. For example, the RVS Update Committee ("RUC") of the AMA has regularly reevaluated the physician work associated with CPT code 66174. As a result of these RUC reviews and further conversion factor reductions, CMS has reduced the Medicare Physician Fee Schedule amount associated with this service multiple times from approximately $950 in 2021 to $545 in 2026. These reductions in physician reimbursement have made the use of CPT code 66174 less attractive to ECPS, which in turn has adversely affected our business and results of operation. Many of the factors considered by the RUC, and many of the factors evaluated by payors and other payor advisory bodies, in assessing the costs of, and payments with respect to, procedures associated with our products are not within our control. For instance, with respect to determination of hospital, ASC and physician payment associated with CPT code 66174, evaluation of procedure costs may include the costs of competitive products that are priced well below our products and may also reflect reduced physician work with respect to procedures that are less comprehensive than the procedures performed with OMNI. This, in turn, may adversely affect our ability to obtain and maintain adequate and appropriate levels of reimbursement for the comprehensive procedure enabled by our OMNI technology, which could adversely affect our financial condition and results of operations. Further, if and to the extent that CPT code 65820 or another code describing a goniotomy procedure is established, modified, or revalued by the RUC so as to reduce the payment amount associated with goniotomy procedures, our business and results of operation may be adversely affected. The AMA maintains a subset of temporary CPT codes ("Category III CPT codes") used for new and emerging technologies. For example, TearCare was assigned a Category III CPT code effective beginning January 1, 2020. Coverage for Category III CPT codes is often limited. Medicare does not generally establish national payment rates for Category III CPT codes on the Medicare Physician Fee Schedule ("MPFS"). As a result, individual Medicare contractors and private payors may establish their own payment rates for services described by Category III CPT codes, as has been the case with TearCare. These payment rates are subject to change, may be variable across Medicare contractors, or may be materially below the reimbursement rates that we are currently targeting for code 0563T. Payors may also determine not to reimburse any services described by Category III CPT codes in the absence of a formal, positive coverage policy for a specific service. Further, we believe that future coverage and reimbursement may be subject to increased restrictions, such as additional prior authorization requirements, both in the United States and in international markets. Third-party coverage and reimbursement for procedures using our products or any of our products in development for which we may receive regulatory clearance, certification or approval may not be available or adequate in either the United States or international markets. Further, other devices or treatments that compete with our products may be more widely covered, paid at more favorable rates, or subject to different co-pay policies and requirements, which could impact demand for our products. If hospital, surgical center, ECP and/or patient demand for our products is adversely affected by third-party reimbursement policies and decisions, it could have a material adverse effect on our business, financial condition and results of operations.

Our products are regulated as medical devices by the FDA and foreign regulatory authorities. We and our products are subject to extensive regulation in the United States and elsewhere, including by state agencies, the FDA and the FDA's foreign counterparts. The FDA and foreign regulatory agencies regulate, among other things, with respect to medical devices: design, development, manufacturing and release; laboratory, preclinical and clinical testing; labeling, packaging, content and language of instructions for use and storage; product safety and efficacy; establishment registration and device listing; marketing, sales and distribution; pre-market clearance, approval, and certification; service operations; record keeping procedures; advertising and promotion; recalls and field safety corrective actions; post-market surveillance, including reporting of deaths or serious injuries and malfunctions that, if they were to recur, could lead to death or serious injury; post-market studies; and product import and export. The law and regulations to which we are subject are complex, burdensome to understand and apply and have tended to become more stringent over time. Legal and regulatory changes could result in restrictions on our ability to carry on or expand our operations, higher than anticipated costs or lower than anticipated sales. The FDA and foreign regulatory authorities enforce these regulatory requirements through, among other means, periodic (unannounced) inspections and periodic reviews of public marketing and promotion materials. We do not know whether we will be found compliant in connection with any future FDA or foreign inspections or reviews. Failure to comply with applicable regulations could jeopardize our ability to sell our products and result in enforcement actions such as: warning letters; untitled letters; fines; injunctions; civil penalties; termination of distribution; recalls or seizures of products; delays in the introduction of products into the market; total or partial suspension of production; refusal to grant future clearances, approvals, or certifications; withdrawals or suspensions of current approvals or certifications, resulting in prohibitions on sales of our products; and in the most serious cases, criminal penalties.

In the conduct of our business, we may at times collect, store, and process personal information, including health-related personal information. The U.S. federal government and various states and regulatory agencies, including the U.S. Department Health and Human Services, have adopted or proposed laws, regulations, guidelines and rules for the collection, distribution, use and storage of personal information, including personal health information, of individuals. These laws include HIPAA and related regulations, as well as the CCPA and similar state privacy and data security laws. In connection with any reimbursement support we provide to customers, we receive, use, and/or disclose health-related personal information. When proving such support, we as a Business Associate under HIPAA and are directly subject to HIPAA's privacy, security, and breach-notification requirements, as well as the terms of our Business Associate Agreements. In addition, certain state and non-U.S. laws, such as GDPR, govern the privacy and security of personal (including health) data in certain circumstances, some of which are more stringent than U.S. federal law and many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts. Failure to comply with these laws, where applicable, can result in the imposition of significant civil and/or criminal penalties and private litigation. Any actual or perceived failure by us or the third parties with whom we work to comply with privacy or security laws, policies, legal obligations or industry standards, or any security incident that results in the unauthorized access, release or transfer of personally identifiable information, may result in governmental enforcement actions and investigations including by European Data Protection Authorities and U.S. federal and state regulatory authorities, fines and penalties, litigation and/or adverse publicity, including by consumer advocacy groups, and could cause our customers, their patients and other healthcare professionals to lose trust in us, which could harm our reputation and have a material adverse effect on our business, financial condition and results of operations.

While we seek to maintain sufficient levels of inventory to protect ourselves from supply interruptions, we keep limited components, sub-assemblies, materials and finished products on hand. To ensure adequate inventory supply and manage our operations with our third-party suppliers, we forecast anticipated materials requirements and demand for our products in order to predict inventory needs and then place orders with our suppliers based on these predictions. Our ability to accurately forecast demand for our products could be negatively affected by many factors, including our limited historical commercial experience, rapid growth, material changes in product reimbursement, failure to accurately manage our expansion strategy, product introductions by competitors, unanticipated increases or decreases in customer demand for our products, our failure to accurately forecast customer acceptance and adoption of new products, unanticipated changes in general market conditions or regulatory matters and weakening of economic conditions or consumer confidence in future economic conditions. Inventory levels in excess of customer demand may result in a portion of our inventory becoming obsolete or expiring, as well as inventory write-downs or write-offs, which would negatively impact our gross margins and impair the strength of our brand. Conversely, if we underestimate customer demand for our products or our own requirements for components, sub-assemblies and materials, our third-party suppliers may not be able to deliver components, sub-assemblies and materials to meet our requirements, which could result in inadequate inventory levels or interruptions, delays or cancellations of deliveries to our customers, any of which would damage our reputation, customer relationships and business. In addition, several components, sub-assemblies and materials incorporated into our products require lengthy order lead times, and additional supplies or materials or additional manufacturing capacity may not be available when required on terms that are acceptable to us, or at all, and our third-party suppliers may not be able to allocate sufficient capacity in order to meet our increased requirements, any of which could have an adverse effect on our ability to meet customer demand for our products and our business, financial condition and results of operations.