6640 Eli Whitney Drive
Columbia, Maryland 21046
(800) 826-2926
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)

Patrick A. McBrayer
President and Chief Executive Officer
ACell, Inc.
6640 Eli Whitney Drive
Columbia, Maryland 21046
(800) 826-2926
(Name, address, including zip code, and telephone number, including
area code, of agent for service)

Approximate date of commencement of proposed sale to the public:
As soon as practicable after this registration statement is declared effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. o

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant will file a further amendment which specifically states that this Registration Statement will thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement will become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. We and the selling stockholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

This is the initial public offering of shares of common stock of ACell, Inc. We are offering 5,000,000 shares of common stock.

Prior to this offering, there has been no public market for our common stock. It is currently estimated that the initial public offering price for our common stock will be between $14.00 and $16.00 per share. We have applied to list our common stock on the Nasdaq Global Market under the symbol "ACLL."

We are an "emerging growth company" as defined under the federal securities laws and, as such, we have elected to comply with certain reduced reporting requirements for this prospectus and may elect to do so in future filings.

Investing in our common stock involves a high degree of risk. Before buying any shares of our common stock, you should carefully read the discussion of material risks of investing in our common stock in "Risk factors" beginning on page 15 of this prospectus.

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

The selling stockholders identified in this prospectus have granted the underwriters an option for a period of 30 days from the date of this prospectus to purchase up to 750,000 shares of common stock from them at the initial public offering price, less the underwriting discounts and commissions. We will not receive any of the proceeds from the sale of any common stock by the selling stockholders upon any such exercise.

The underwriters expect to deliver the shares of common stock to purchasers on or about , 2020.

None of us, the selling stockholders or any of the underwriters have authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses we have prepared. None of us, the selling stockholders or any of the underwriters take responsibility for, or can provide any assurance as to the reliability of, any other information that others may give you. We, the selling stockholders and the underwriters are offering to sell, and seeking offers to buy, shares of our common stock only under circumstances and in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock.

For investors outside the United States: None of us, the selling stockholders or any of the underwriters have done anything that would permit this offering or the possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside of the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, this offering and the possession and distribution of this prospectus outside of the United States.

Any discrepancies included in this prospectus between totals and the sums of the percentages and dollar amounts presented are due to rounding.

Prospectus summary

This summary highlights selected information included elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our common stock. You should read this entire prospectus carefully, including the sections titled "Risk factors," "Management's discussion and analysis of financial condition and results of operations," "Business," and our financial statements and the related notes included elsewhere in this prospectus, before making an investment decision. Unless the context otherwise requires, all references in this prospectus to "ACell," the "company," "we," "our," "us" or similar terms refer to ACell, Inc. We refer to our Series A convertible preferred stock, Series B convertible preferred stock, Series C convertible preferred stock and Series D convertible preferred stock as our "convertible preferred stock" in this prospectus.

BUSINESS OVERVIEW

Our company

We are a leading regenerative medicine company focused on the development, manufacture and sale of products primarily used in acute care settings as part of the treatment and management of moderate to severe wounds and reinforcement of soft tissue surgical defects. Our products utilize our proprietary porcine urinary bladder matrix platform technology, which is designed to enhance the body's ability to restore natural tissue and minimize scarring in the management of traumatic, surgical and chronic wounds, burns, hernias and other conditions requiring the reinforcement of soft tissue. We believe we are at the forefront of advancing the global standard of care for wounds and soft tissue surgical defects by providing solutions that are designed to significantly improve patient outcomes while lowering the overall cost of care. Since our commercial launch in 2009, we have sold over 500,000 units of our urinary bladder matrix, or UBM, products.

We manufacture the only commercially available extracellular matrix, or ECM, products that utilize porcine UBM. When applied to a wound or soft tissue surgical defect, our products are typically resorbed over time and replaced with newly formed tissue that replicates uninjured tissue where scarring would normally occur. This capability enables our products to promote durable wound closure and soft tissue defect repair, restore natural tissue function and enhance aesthetic outcomes. Our products are available in sheet and particulate form for wound management, and in multiple layering configurations of various sizes for surgical soft tissue repair, including hernia repair. We market MicroMatrix, a particulate formulation, and Cytal Wound Matrix products, in sheet formulations, for the management of acute, surgical, chronic and tunneling wounds and partial thickness burns. We also market Gentrix Surgical Matrix products, in sheet formulations, for the reinforcement of soft tissue in certain surgical applications, such as for hernia repair. We manufacture our products using our proprietary know-how, trade secrets and patented technology.

Our products address large, underserved and growing markets with significant commercial potential. In addition to the ongoing need to manage traumatic injuries, we believe that long-term demand for our products is increasing due to aging demographics and the growing prevalence of conditions such as diabetes, obesity and vascular disease. We estimate that our total addressable market in the United States for our currently marketed products is over $2 billion, based on estimated 2019 revenues for hernia matrices and biologic skin and dermal substitutes for wound care. We intend to grow our business and market opportunity by further penetrating our current acute care customer accounts, increasing our acute care customer base, selectively expanding the sale of our products into non-acute care settings, expanding our international sales opportunity and enhancing and expanding our product portfolio.

European Union. We currently sell and market our products in the United States through a dedicated, surgically-focused direct sales force of approximately 160 employees as of April 30, 2020 that sell into hospital operating rooms and intensive care units. To complement our direct sales efforts, we also have established a national accounts team that supports our commercial efforts with group purchasing organizations, or GPOs, integrated delivery networks, or IDNs, and government facilities, including Department of Veterans Affairs and Department of Defense medical facilities. During the year ended December 31, 2019, we sold our products to over 1,900 customers and had contracts with eight GPOs and seven distributors in 11 countries. We also provide medical education programs that offer hands-on and virtual education for all of our products and host symposiums throughout the United States, including at our state-of-the-art surgical learning center in Columbia, Maryland.

We have achieved significant revenue growth since the launch of our first commercial product in 2009. Our revenue increased to $100.8 million for the year ended December 31, 2019 from $89.2 million for the year ended December 31, 2018, an increase of 13.0%. For the years ended December 31, 2019 and 2018, we recorded a gross margin of 81.0% and 81.7%, respectively, and net income of $1.4 million and net loss of $3.1 million, respectively. In the three months ended March 31, 2020 and 2019, we recorded revenue of $23.7 million and $24.2 million, respectively, a gross margin of 80.4% and 81.6%, respectively, and net loss of $2.7 million and net income of $0.1 million, respectively.

Industry background

Worldwide, the epidemiological burden of acute and chronic wounds is significant, driving the need for improved healing and wound management solutions. Acute wounds include traumatic wounds, surgical wounds and moderate to severe burns. Traumatic wounds were estimated to have a global incidence of at least 5.6 million in 2019. In the United States and European Union alone, major surgical wounds were estimated to have an incidence of approximately 12.8 million in 2019. In 2019, medically treated burns were expected to have a global incidence of over 6.3 million, while burns requiring hospitalization were estimated to have a global incidence of approximately 597,000. Chronic wounds include stage 3 and stage 4 pressure ulcers, diabetic ulcers and venous and arterial ulcers, which were estimated to have global incidences in 2019 of approximately 22.6 million, 14.5 million and 13.3 million, respectively. We believe the annual incidence of acute wounds, aging demographics and increased prevalence of systemic comorbidities, including growth of vascular complications and diabetes, are contributing to the growth in wound management procedures and demand for alternative therapies.

Incidence of hernias, a type of soft tissue defect, and the resulting market for hernia repair are increasing. Surgery is the only treatment that can permanently repair a hernia, and synthetic or biologically-derived mesh is used in about 90% of those surgeries to reinforce torn or damaged tissue around hernias. In the United States alone, approximately 1.2 million hernia repairs were estimated to have occurred in 2019. We believe the growth in hernia repair procedures, increased incidence of obesity, aging demographics and incidence and awareness of infection and rejection of synthetic or other biologically-derived meshes, is driving the need for new therapies.

Our UBM platform technology

Our UBM platform technology is built on over 40 years of tissue regeneration and ECM constructs research. Our platform technology is based on an ECM comprised of the two innermost layers of porcine urinary bladder depicted in the image below. The epithelial basement membrane on one side of the ECM is a thin, delicate membrane of proteins that serves as a natural barrier to separate tissue layers. The lamina propria layer on the opposite side is rough and absorptive, serving as a porous scaffold that allows for the body's cells to infiltrate the UBM. Through our proprietary manufacturing process, we retain both of these layers while removing cellular content without the use of harsh and damaging detergents or chemicals. Our ability to retain these two layers differentiates our products from other ECM-based products. Specifically, our products contain a protein composition that

provides a surface for cellular ingrowth and maturation, with the intent to help restore natural tissue function at the wound or surgical site. In addition, we use a proprietary processing method to remove the cellular content specific to a pig. This decellularization process isolates the ECM of the tissue, resulting in products that are acellular scaffolds appropriate for use in humans. When used to treat a wound or soft tissue surgical defect, these scaffolds provide a platform for the body's cells to populate and differentiate, resulting in biomechanically-functional tissue.

In a normal healing process, the body works to close disrupted tissues to prevent infection and further tissue damage, often resulting in the development of fibrous scar tissue and potentially diminishing biomechanical functionality. This process is largely regulated by macrophages in the immune system. There are two main types of macrophages involved in the healing process: M1, or pro-inflammatory macrophages, and M2, or anti-inflammatory macrophages. While pro-inflammatory M1 macrophages play an important role in the early stages of normal wound healing, the ability of the body to transition to a predominately M2 macrophage environment is crucial to promote repair and regeneration of damaged tissues.

The unique structure and composition of UBM is designed to provide an environment in which macrophages are more likely to exhibit an M2-type healing response. While an M1 process often results in increased inflammation and scarring, in an M2 process, the macrophages and other cells break down the UBM as the body naturally generates new proteins, remodeling the scaffold into a tissue that is similar to the native tissue structure and biomechanical function while potentially reducing scarring and resulting in better aesthetic outcomes.

treatment, including those made from biologic tissue such as human, porcine, bovine and ovine sources and those made from synthetic materials such as polyethylene, polypropylene or polyester. Biologically-derived products include chemically strengthened, or crosslinked, products and cellular, acellular and amniotic products. We believe characteristics of competing products including (i) the type of tissue or synthetic material utilized, (ii) the processing techniques required and (iii) physical attributes including thickness, porosity, pliability and form, can limit the functional healing response of the body.

Specifically, we believe these limitations include:

➤: Risk of foreign body response and inflammation. Use of synthetic and many biologically-derived products can lead to a foreign body response, characterized by chronic inflammation and scarring.
➤: Limited remodeling, formation of scar tissue and infection. Rather than remodel functional tissue, many synthetic and biologically-derived products heal through the formation of scar tissue, thereby limiting the body's healing response and potentially leading to decreased function, prolonged healing times, infection, dehiscence and other surgical complications.
➤: Limited or lack of resorption. The body has difficulty resorbing crosslinked and synthetic products, limiting the body's natural healing process and resulting in complications such as adhesions, fistula formation and product erosion into surrounding tissues and organs.
➤: Limited application versatility. The strength levels and handling characteristics of synthetic and biologically-derived products vary, which can limit their range of applications depending on the needs for strength and conformability for a given type of wound being treated. Furthermore, most synthetic and biologically-derived products come in sheet form and lack alternative configurations, such as a particulate formulation, making the management of wounds or defects with irregular topographies more difficult.
➤: Limited storage flexibility and logistical challenges. Many currently available products have manufacturing and storage limitations that restrict their use and potential range of applications.
➤: Cost-effectiveness concerns. We believe the cost-effectiveness of such products, taking into account both clinical performance and price, is an important consideration for use. While synthetic products can be effective and are typically lower priced, they can lead to costly complications and a higher overall cost of care. Biologically-derived products can be effective when synthetic products fail or are not appropriate, but typically command a higher price.

Key advantages of our products

Our products support the body's natural remodeling process and address many of the limitations of competitive biologically-derived and synthetic products. The advantages of our products include:

➤: Clinically favorable healing with reduced foreign body response and inflammation. Unlike synthetic and many other biologically-derived products, our products are acellular scaffolds that the body recognizes as natural tissue, which facilitates new healthy tissue growth while avoiding foreign body response. Both the non-synthetic and fully resorbable nature of our products allow for rapid cell infiltration in the wound tissue where scarring would typically occur, leading to the restoration of functional tissue with more desirable aesthetic outcomes. Moreover, our products can be placed in challenging defects while avoiding many of the clinical complications associated with chronic inflammation.
➤: Natural, functional tissue remodeling in place of scar tissue. Our products facilitate the body's ability to form tissue that has characteristics similar to natural, uninjured tissue. This feature minimizes encapsulation, related infections and complications associated with the formation of scar tissue and tissue adhesions.

➤: Non-crosslinked and resorbable. Our products do not require harsh chemicals to decellularize the porcine bladder material. Furthermore, the composition of our products does not require crosslinking to achieve adequate strength. These characteristics allow our products to be highly resorbable by the body, which facilitates the body's natural healing process.
➤: Broad application versatility. The physical properties of our technology combined with our ability to offer our products in a variety of forms enable us to address a wide range of clinical applications. Our products are available as flexible sheets that vary in the number of UBM layers and sizing as well as in a particulate formulation that is especially useful for wounds or defects with irregular topographies. In applications like hernia repair, in which strength is a significant consideration, we manufacture various configurations to enable clinicians to provide the appropriate products to their patients. In addition, our sheet and particulate products are cleared by the FDA for concomitant use in wound management, which we believe enables clinicians to more thoroughly and uniformly address the wound site and differentiates us from our competitors.
➤: Convenience and ease of use. Our products have a two-year shelf life, can be stored at room temperature and do not require special handling. These attributes may provide greater convenience for our customers compared to other biologically-derived products. Moreover, because our products are not human-derived, they are not subject to The American Association of Tissue Banks requirements, which enables ease of access to our products.
➤: Cost-effective alternative. We offer products with high clinical utility as part of the treatment of a broad range of moderate to severe traumatic wounds and the reinforcement of soft tissue surgical defects. We believe that because our products provide durable wound repair and restoration of natural tissue, while avoiding many clinical complications often associated with other biologic and synthetic alternatives, we provide cost-effective solutions.

Our growth strategies

We strive to enhance our position as a leading regenerative medicine company focused on the development, manufacture and commercialization of acute care solutions as part of the treatment and management of moderate to severe wounds and reinforcement of soft tissue surgical defects. In order to achieve this goal, we seek to establish our products as standards of care across multiple delivery channels by employing the following strategies:

➤

Increase awareness of our products in the markets in which we compete. We intend to broaden our market presence by further increasing awareness of our differentiated technology, products and brand among hospitals, wound care centers, long-term acute care hospitals, or LTACHs, government facilities, ambulatory surgical centers, physician offices and patient advocates, as well as other key clinical and economic decision-makers.

➤

Continue the development of data supporting the clinical benefits of UBM. We intend to grow the body of clinical evidence supporting the benefits and efficacy of UBM in order to further drive adoption of our products. We are conducting post-market studies which we believe can expand the commercialization potential for our existing portfolio, primarily by broadening clinical differentiation and reimbursement coverage for additional care settings.

➤

Expand and enhance the effectiveness of our U.S. commercial organization to achieve greater market adoption. Through disciplined expansion and development of our sales and marketing teams, we intend to focus our sales and marketing efforts to grow our business by:

-: Further penetrating existing acute care customer accounts. We intend to leverage our established contracts with hospitals, hospital networks, GPOs, IDNs and government facilities to drive further penetration in acute care settings.

-: Growing our acute care customer base. In addition to our existing acute care accounts, we plan to add new acute care customers, both within the traditional hospital setting, as well as through the targeting of LTACHs and facilities operated by the Department of Veterans Affairs.
-: Selectively expanding the sale of our products into non-acute care facilities. We believe our direct sales force will be able to strategically drive adoption and utilization of our products in some non-acute care facilities, such as outpatient wound management centers and physician's offices, representing a potential opportunity for longer-term growth.

➤

Expand our international sales opportunities. We will continue to work with distributors to attain regulatory approval for our products in additional jurisdictions outside of the United States. We expect to continue to expand our international sales opportunities in the following regions:

-: APAC: China and South Korea represent our most significant opportunities within APAC due to high unmet demand for quality healthcare, increasing initiatives by governments to improve healthcare infrastructure, growing awareness about the clinical benefits of regenerative medicine among end-users and the increasing prevalence of chronic and acute diseases.
-: EMEA: Western Europe represents our most significant opportunity in EMEA due to the increasing incidence of acute and chronic diseases, high awareness of technologically advanced regenerative therapies and the rapidly aging population.
-: Rest of world: The need for treatment and management of moderate to severe wounds and reinforcement of soft tissue surgical defects is a global issue. We plan on selectively entering additional international markets based on varying country-specific factors, including the regulatory environment, awareness and advocacy of regenerative medicine technologies, healthcare infrastructure and economic development.

➤

Expand and enhance our product portfolio, including expanding treatment applications, to grow our addressable markets. We intend to submit additional 510(k) premarket notifications to the FDA in the coming years, as well as actively consider other product opportunities that may require a premarket approval application or biologics license application. We also intend to pursue a number of initiatives, which include adding features and designs to our existing products, as well as expanding treatment applications for these products. If successful, we believe these additional applications may provide opportunities to increase future sales by allowing us to address large, underserved markets.

Effects of the COVID-19 pandemic on our business

With the global spread of the ongoing COVID-19 pandemic, we have implemented business continuity plans designed to address and mitigate the impact of the COVID-19 pandemic on our employees, customers and business. For example, we have implemented new safety measures designed to minimize risk for our employees and, ultimately, our customers, such as enacting new employee screening procedures for possible COVID-19 exposure, having certain employees work in two-week rotating shifts and allowing certain employees to work from home. Given the global economic slowdown, the overall disruption of global healthcare systems and the other risks and uncertainties associated with the pandemic, our business, financial condition, results of operations and growth prospects have been, and we believe are likely in the near-term to continue to be, adversely affected. See the section titled "Risk factors" in this prospectus for more details on the risks we face as a result of the COVID-19 pandemic. We continue to closely monitor the COVID-19 situation as we evolve our business continuity plans and response strategy.

Recent Developments

We began to observe a decline in procedure volumes in the second half of March 2020, driven by impacts of the COVID-19 pandemic. Factors that specifically impacted our business included limitations on access to hospitals, reduced incidents of trauma driven by restricted mobility and deferrals of elective procedures. However, in April 2020, as hospital access began to resume and restrictions on mobility began to lift in certain areas in the United States, we began to observe a gradual recovery in weekly procedure volumes.

Based on available information to date, for the three months ended June 30, 2020, we estimate that we achieved revenue of $19.4 million to $19.7 million, representing a decrease of approximately 21.2% to 22.4% on a year-over-year basis from $25.0 million for the three months ended June 30, 2019. Our business and revenues gradually began to recover throughout the second quarter of 2020 and while estimated sales during the months of April and May were lower than in the corresponding months in the prior year period, estimated sales in June were higher as compared to June 2019.

These estimates are preliminary and unaudited. In addition, such preliminary revenue data is based on our current expectations and may be adjusted as a result of, among other things, the completion of our quarter-end financial and accounting closing procedures for the quarter ended June 30, 2020 and other developments that may arise between now and the time the financial results for this period are finalized, and should not be viewed as a substitute for full quarterly financial statements prepared in accordance with accounting principles generally accepted in the United States.

RISK FACTORS SUMMARY

Investing in our common stock involves substantial risks. The risks described in the section titled "Risk factors" immediately following this prospectus summary may cause us to not realize the full benefits of our strengths or to be unable to successfully execute all or part of our strategy. Some of the more significant risks include the following:

➤: We may not be profitable in the near term or maintain profitability in the future.
➤: We may be unable to successfully execute on our growth strategy.
➤: Our future success will largely depend on our ability to maintain and further grow clinical acceptance and adoption of our products, and we may be unable to adequately educate healthcare practitioners on the use and benefits of our products.
➤: We could be subject to increased monetary penalties and other sanctions, including exclusion from federal healthcare programs, if we fail to comply with the terms of our Federal Settlement Agreement, State Settlement Agreements or Corporate Integrity Agreement.
➤: The global COVID-19 pandemic and related impacts are having a material adverse effect on our operations, financial performance and cash flows. We are unable to predict the extent to which the pandemic and related impacts will continue to adversely impact our business operations, financial performance, results of operations, financial position and the achievement of our strategic objectives.
➤: Our results of operations could suffer if we are unable to manage our planned international expansion effectively.
➤: We may be unable to maintain current, and obtain future, contracts with major GPOs and IDNs for our products, and even if we are able to do so, such contracts may not generate sufficient sales of our products.
➤: We may be unable to compete successfully against our existing or future competitors.
➤: We rely on third-party suppliers and providers, some of which are currently the only source for the respective materials or services they provide to us.

➤: Substantially all of our revenue has been, and we expect that it will continue to be, generated from sales of our UBM products, and we therefore are highly dependent on their success.
➤: We rely heavily on our sales professionals to market and sell our products worldwide. If we are unable to hire, effectively train, manage, improve the productivity of, and retain our sales professionals, our business will be harmed, which would impair our future revenue and profitability.
➤: Product liability lawsuits against us could cause us to incur substantial liabilities and could limit commercialization of any products we may develop.
➤: If our products are found to be defective or otherwise pose certain safety risks, we may decide, or the FDA could require us, to initiate a recall, and we will be subject to medical device reporting requirements, and we could be subject to agency enforcement actions.
➤: A reclassification of our products by the FDA could significantly increase our regulatory costs, including the time and expense associated with required clinical trials, or may require us to suspend or discontinue sales of our products.
➤: Changes in existing third-party coverage and reimbursement may impact our ability to sell our products.
➤: We may need additional funding beyond the proceeds of this offering and may be unable to raise capital when needed, which would force us to delay, reduce, eliminate or abandon our commercialization efforts or product development programs.
➤: Our core patents with claims directed to our currently marketed products will soon expire and our remaining patents and other intellectual property rights may not adequately protect our products.

OUR CORPORATE INFORMATION

We were incorporated under the laws of the State of Delaware in June 1999. Our principal executive offices are located at 6640 Eli Whitney Drive, Columbia, Maryland 21046, and our telephone number is (800) 826-2926. Our website address is www.acell.com. Information contained on, or that can be accessed through, our website is not incorporated by reference into this prospectus, and you should not consider information on our website to be part of this prospectus or in deciding to purchase our common stock.

We have proprietary rights to a number of trademarks used in this prospectus which are important to our business. "ACell," "MicroMatrix," "Cytal," "Gentrix" and our other registered and common law trade names, trademarks and service marks are the property of ACell, Inc. Other trade names, trademarks and service marks used in this prospectus are the property of their respective owners. Solely for convenience, the trademarks and trade names in this prospectus may be referred to without the ® and ™ symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto.

IMPLICATIONS OF BEING AN EMERGING GROWTH COMPANY

We are an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. We may take advantage of certain exemptions from various public company reporting requirements, including not being required to have our internal control over financial reporting audited by our independent registered public accounting firm under Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and any golden parachute payments. We may take advantage of these exemptions until the last day of our fiscal year following the fifth anniversary of the completion of this offering. However, if certain events occur prior to the end of such five-year period, including if we become a "large accelerated filer," our annual gross

The offering


Common stock offered by us		5,000,000 shares
Option to purchase additional shares of common stock offered by the selling stockholders		750,000 shares
Common stock to be outstanding after this offering		22,675,510 shares
Use of proceeds		We estimate that our net proceeds from the sale of our common stock that we are offering will be approximately $67.4 million, assuming an initial public offering price of $15.00 per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We will not receive any proceeds from the sale of shares of our common stock by the selling stockholders.
		The principal purposes of this offering are to increase our capitalization and financial flexibility, to create a public market for our common stock and to facilitate our future access to the capital markets. As of the date of this prospectus, we cannot specify with certainty all of the particular uses for the net proceeds we receive from this offering. However, we currently intend to use the net proceeds we receive from this offering to increase awareness of our technology and products, fund clinical trials and post-market studies, grow our sales force, upgrade our Lafayette, Indiana facility, expand our international sales, expand and enhance our product portfolio and for working capital and general corporate purposes.
		See "Use of proceeds" for additional information.
Selling stockholders		Certain selling stockholders have granted the underwriters an option to purchase 750,000 shares of common stock. See "Principal and selling stockholders" for additional information.
Risk factors		You should carefully read the section titled "Risk factors" beginning on page 14 and the other information included in this prospectus for a discussion of facts that you should consider before deciding to invest in shares of our common stock.
Proposed Nasdaq Global Market symbol		"ACLL"

The number of shares of common stock that will be outstanding after this offering is based on 17,675,510 shares, which consists of (i) 4,806,044 shares of common stock outstanding as of March 31, 2020 and (ii) 12,869,466 shares of common stock issuable upon the automatic conversion

of all outstanding shares of convertible preferred stock, which will occur immediately prior to the completion of this offering. This number excludes:

➤: 2,609,229 shares of common stock issuable on the exercise of outstanding stock options as of March 31, 2020 under our 2002 Stock Option and Incentive Plan, or 2002 Plan, our 2011 Stock Option and Grant Plan, or 2011 Plan, and granted outside of our equity incentive plans, with a weighted average exercise price of $5.13 per share;
➤: 2,206 shares of common stock issuable on the exercise of a common stock warrant at an exercise price of $1.13 per share, which will expire upon the earlier of August 24, 2020 or the completion of this offering;
➤: 4,925,786 shares of common stock reserved for future issuance under our 2020 equity incentive plan, or our 2020 Plan, which will become effective immediately prior to the execution of the underwriting agreement related to this offering, as well as any future increases, including annual automatic evergreen increases, in the number of shares of common stock reserved for issuance thereunder, and any shares underlying outstanding stock awards granted under our 2002 Plan and 2011 Plan that expire or are repurchased, forfeited, cancelled or withheld, as more fully described in the section titled "Executive compensation—Equity Incentive Plans"; and
➤: 282,396 shares of common stock reserved for issuance under our employee stock purchase plan, or our ESPP, which will become effective immediately prior to the execution of the underwriting agreement related to this offering, as well as any future increases, including annual automatic evergreen increases, in the number of shares of common stock reserved for future issuance thereunder.

In addition, unless we specifically state otherwise, the information in this prospectus assumes:

➤: a 1-for-2.8329 reverse stock split of our common stock effected on July 10, 2020;
➤: the filing of our amended and restated certificate of incorporation and the effectiveness of our amended and restated bylaws, each of which will occur immediately prior to the completion of this offering;
➤: no exercise of the underwriters' option to purchase additional shares of common stock from the selling stockholders in this offering; and
➤: no exercise of the outstanding stock options and warrant described above.

Summary financial data

The summary statements of operations data for the fiscal years ended December 31, 2019 and 2018 have been derived from our audited financial statements included elsewhere in this prospectus. The summary statements of operations data for the three months ended March 31, 2020 and 2019 and the summary balance sheet data as of March 31, 2020 have been derived from our unaudited interim financial statements included elsewhere in this prospectus. You should read the financial data set forth below in conjunction with our financial statements and the accompanying notes and the information in the section titled "Management's discussion and analysis of financial condition and results of operations" included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results to be expected for any period in the future.

	Year ended December 31,						Three months ended March 31,

Statements of operations data:	2019			2018			2020			2019

	(in thousands, except share and per share data)
Revenue	$	100,794		$	89,221		$	23,684		$	24,151
Cost of goods sold		19,111			16,289			4,646			4,434

Gross profit		81,684			72,932			19,038			19,716

Operating expenses:
Selling, general and administrative		72,364			66,977			20,040			17,438
Research and development		7,944			9,020			1,739			2,288

Total operating expenses		80,307			75,997			21,779			19,725

Income (loss) from operations		1,376			(3,065	)		(2,741	)		(9	)

Other income (expense):
Interest expense		(373	)		(303	)		(98	)		(127	)
Interest income		166			180			24			42
Other income		121			9			59			—

Total other expense		(87	)		(115	)		(15	)		(85	)

Income (loss) before income taxes		1,289			(3,180	)		(2,756	)		(94	)
Income taxes benefit		160			49			86			160

Net income (loss)	$	1,449		$	(3,131	)	$	(2,671	)	$	66



Net income (loss) per common share, basic(1)	$	0.08		$	(0.78	)	$	(0.56	)	$	0.00



Net income (loss) per common share, diluted(1)	$	0.08		$	(0.78	)	$	(0.56	)	$	0.00



Weighted average number of common shares outstanding, basic(1)		4,715,669			4,006,027			4,802,342			4,659,219



Weighted average number of common shares outstanding, diluted(1)		5,885,061			4,006,027			4,802,342			5,918,452



Pro forma net income (loss) per common share, basic(1)	$	0.08					$	(0.15	)
Pro forma net income (loss) per common share, diluted(1)	$	0.08					$	(0.15	)
Pro forma weighted average number of common shares outstanding, basic(1)		17,585,135						17,671,808
Pro forma weighted average number of common shares outstanding, diluted(1)		18,754,527						17,671,808

(1): See Note 2 to our financial statements appearing at the end of this prospectus for further details on the calculations of basic and diluted net income (loss) per common share. The pro forma numbers above also give effect to the issuance of 12,869,466 shares of common stock issuable upon the automatic conversion of all outstanding shares of convertible preferred stock, which will occur immediately prior to the completion of this offering.

	As of March 31, 2020

Balance sheet data:	Actual			Pro forma(1)			Pro forma as adjusted(2)(3)

	(in thousands)
Cash and cash equivalents	$	4,559		$	19,099		$	86,978
Working capital(4)		16,705			31,245			98,551
Total assets		38,976			53,516			120,293
Legal settlement liability, including current portion(5)		12,325			12,325			12,325
Debt		500			15,040			15,040
Total liabilities		22,312			36,852			36,279
Convertible preferred stock		33			—			—
Additional paid-in capital		42,715			42,748			110,080
Accumulated deficit		(26,089	)		(26,089	)		(26,089	)
Total stockholders' equity		16,664			16,664			84,014

(1): The pro forma balance sheet data gives effect to the automatic conversion of all outstanding shares of convertible preferred stock into an aggregate of 12,869,466 shares of common stock, which will occur immediately prior to the completion of this offering, as well as the receipt in April 2020 of (i) $9.0 million as part of the federal Paycheck Protection Program which we refer to as the PPP loan, and (ii) $5.5 million from the SVB line of credit.
(2): The pro forma as adjusted balance sheet data gives effect to (a) the items described in footnote (1) above and (b) our receipt of estimated net proceeds from the sale of 5,000,000 shares of common stock that we are offering at an assumed initial public offering price of $15.00 per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
(3): A $1.00 increase (decrease) in the assumed initial public offering price of $15.00 per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, would increase (decrease) each of cash and cash equivalents, working capital, total assets, and total stockholders' equity by $4.7 million, assuming that the number of shares of common stock offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. Each increase (decrease) of 1,000,000 shares in the number of shares of common stock offered by us would increase (decrease) each of cash and cash equivalents, working capital, total assets, and total stockholders' equity by $14.0 million, assuming the assumed initial public offering price of $15.00 per share of common stock remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
(4): Working capital is defined as current assets less current liabilities.
(5): Represents payment obligations pursuant to settlement agreements with the U.S. federal government and certain states. See "Business—Legal proceedings" for more details regarding these settlement agreements.

An investment in our common stock involves a high degree of risk. You should consider carefully the following risks and other information contained in this prospectus before you decide whether to buy our common stock. If any of the events contemplated by the following discussion of risks should occur, our business, results of operations, financial condition and growth prospects could suffer significantly. As a result, the market price of our common stock could decline, and you may lose all or part of the money you paid to buy our common stock. The risks below are not the only ones we face. Additional risks that we currently do not know about or that we currently believe to be immaterial may also impair our business. Certain statements below are forward-looking statements. See "Special note regarding forward-looking statements" in this prospectus.

We may not be profitable in the near term or maintain profitability in the future.

We reported a net loss of $2.7 million for the three months ended March 31, 2020 and there can be no assurance that we will achieve or maintain profitability in the future. As of March 31, 2020, we had an accumulated deficit of $26.1 million. Our future profitability depends on, among other things, our ability to generate revenue in excess of our costs. We expect to incur significant operating costs in the near term as we conduct or fund research, including clinical trials and post-market studies, seek to expand our product portfolio and the applications for which our products may be used, grow our commercial organization and incur additional expenses related to operating as a public company. In addition, we have significant and continuing fixed costs relating to the maintenance of our assets and business. We may incur significant losses in the future for a number of reasons, including the other risks described in this prospectus and specifically those related to the COVID-19 pandemic, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown events.

We intend to grow our business and market opportunity by further penetrating our current acute care customer accounts, growing our acute care customer base, selectively expanding the sale of our products into non-acute care settings, expanding our international sales opportunity and enhancing and expanding our product portfolio. Each of these growth strategies will require considerable time and resources, and we may not be successful in executing on any or all of these strategies. Furthermore, the continued impact of the COVID-19 pandemic may delay our ability to execute on our strategy.

A primary component of our growth strategy is to increase awareness of our products in the markets in which we compete. We may be unable to increase awareness cost-efficiently, on a timely basis or at all among hospitals, wound care centers, long-term acute care hospitals, or LTACHs, government facilities, ambulatory surgical centers, physician offices and patient advocates, as well as other key clinical and economic decision-makers. A significant part of our strategy to increase awareness is to continue the development of data supporting the clinical benefits of porcine urinary bladder matrix, or UBM. In order to do so, we will be required to invest significant time, resources and money in conducting or sponsoring research, including clinical trials and post-market studies, which could divert our resources from other parts of our business and growth strategy. Even if we are able to develop additional data on UBM and our products, there is no guarantee that the data will support the efficacy, cost-effectiveness and other benefits of our products at all or to the extent we expect. If the outcomes of such studies and trials are not positive or do not show statistically significant benefits of UBM, our technology platform or our products, we may suffer setbacks in increasing awareness and adoption of our products despite making these significant investments.

Another component of our growth strategy is to expand and enhance our product portfolio, including expanding treatment applications for our current products. We intend to submit additional 510(k) premarket notifications in the coming years to pursue a number of initiatives, which include adding features and designs to our existing products as well as expanding treatment applications for these products. We may not be successful in obtaining the regulatory clearances that we seek, which could limit our market opportunities for our products. In addition, we are actively considering other product opportunities for which the U.S. Food and Drug Administration, or the FDA, may require a premarket approval application, or PMA, or biologics license application, or BLA, to commercialize. We have no experience applying for or receiving approval of a PMA or BLA and may not be successful in these efforts.

Our growth strategy also involves expanding our international operations. In addition to risks associated with international operations in general, we will also need to navigate complex foreign regulatory requirements with which we may not be familiar or have experience. To obtain regulatory approval in other countries, we must comply with numerous and varying regulatory requirements of such countries regarding safety, efficacy, manufacturing, clinical trials, commercial sales, pricing and distribution of our products. Although we have received regulatory clearance for our products in the United States and some other countries, we cannot ensure that we will obtain regulatory clearance or approval in other countries. If we fail to obtain regulatory clearance approval in any jurisdiction, the geographic market for our products could be limited.

There are several aspects of our growth strategy and opportunities to grow our sales and product portfolio. However, we have limited financial and managerial resources, and we may forego or delay pursuit of growth opportunities that later prove to have greater value to our business. Our resource allocation decisions may cause us to fail to capitalize on viable opportunities, and we could spend resources on strategies that are not ultimately successful.

Our future success will largely depend on our ability to maintain and further grow clinical acceptance and adoption of our products, and we may be unable to adequately educate healthcare practitioners on the use and benefits of our products.

Healthcare practitioners play a significant role in determining the course of a patient's treatment and, ultimately, the type of product that will be used to treat the patient. As a result, our commercial success is heavily dependent on our ability to educate these practitioners on the use of our products in surgical soft tissue repair procedures and complex wound management. Acceptance and adoption of our products in our markets depends on educating healthcare practitioners as to the distinctive characteristics, benefits, safety, clinical efficacy and cost-effectiveness of our products, including potential comparisons to our competitors' products, and on training healthcare practitioners in the proper application of our products. If we are not successful in convincing healthcare practitioners of the merits and advantages of our products compared to our competitors' products, they may not use our products and we will be unable to increase our sales and sustain growth or profitability.

Convincing healthcare practitioners to dedicate the time and energy necessary to properly train to use new products and techniques is challenging, and we may not be successful in these efforts. In particular, as healthcare resources are strained due to the ongoing COVID-19 pandemic, it may be more difficult to convince healthcare practitioners to commit their time and resources to learning to use a new product. If healthcare practitioners are not properly trained, they may use our products ineffectively, resulting in unsatisfactory patient outcomes, patient injury, negative publicity or lawsuits against us. Accordingly, even if our products show superior benefits, safety or efficacy, based on head-to-head clinical trials, in comparison to alternative treatments, our success will depend on our ability to gain and maintain market acceptance for our products. If we fail to do so, our sales will not

grow and our business, financial condition and results of operations will be adversely affected. We may not have adequate resources to effectively educate the medical community and our efforts may not be successful due to physician resistance or negative perceptions regarding our products.

Healthcare practitioners may be hesitant to change their medical treatment practices for the following reasons, among others:

In addition, we believe recommendations and support of our products by key opinion leaders are essential for market acceptance and adoption. If we do not receive support from such key opinion leaders or if long-term clinical data does not show the benefits of using our products, we may not achieve adequate commercial acceptance of our products.

We could be subject to increased monetary penalties and other sanctions, including exclusion from federal healthcare programs, if we fail to comply with the terms of our Federal Settlement Agreement, State Settlement Agreements or Corporate Integrity Agreement.

On May 14, 2019, we entered into a civil False Claims Act settlement with the United States, acting through the United States Department of Justice and on behalf of the Office of Inspector General of the Department of Health and Human Services, or OIG-HHS, the Defense Health Agency, acting on behalf of the TRICARE Program and the United States Department of Veteran Affairs, which is referred to herein as the Federal Settlement Agreement. As contemplated by the Federal Settlement Agreement, the United States Attorney's Office for the District of Maryland, or USAO, filed an Information against us on June 6, 2019, in a case captioned United States of America v. ACell, Inc., Action No. ELH-19-0282 in the United States District Court for the District of Maryland, and, on June 11, 2019, we entered into a plea agreement with the USAO on behalf of the Department of Justice and pled guilty to one misdemeanor count of failure to report a medical device removal. In connection with the plea agreement, we also agreed to pay a criminal fine of $3.0 million and establish and maintain a compliance and ethics program. On May 14, 2019, we also entered into civil False Claims Act settlement agreements with the states of Maryland, Wisconsin, and Florida, which are referred to collectively herein as the State Settlement Agreements, on the basis of the same conduct that was the subject of the Federal Settlement Agreement.

Under the terms of the Federal Settlement Agreement and the State Settlement Agreements, we have agreed to pay to the Department of Justice and the states of Maryland, Wisconsin, and Florida a total

of $12.8 million, plus interest at a rate of 2.875%, referred to herein as the Settlement Amount, over the course of five years, and a total amount of $222,500 in attorneys' fees and costs for plaintiffs' counsel in the two qui tam complaints. Subject to our payment of the Settlement Amount, the United States has released us from any civil or administrative monetary claim the United States has under the False Claims Act and certain other statutes and common law theories of liability arising from the conduct that was the subject of the Federal Settlement Agreement, and the states of Maryland, Wisconsin and Florida have released us from any civil or administrative monetary cause of action that the state had for any claims submitted or caused to be submitted to the state's Medicaid Programs as a result of the conduct covered by the State Settlement Agreements. Likewise, in consideration of the obligations in the Federal Settlement Agreement and the Corporate Integrity Agreement, as described below, OIG-HHS agreed to release and refrain from instituting, directing or maintaining any administrative action seeking to exclude us from Medicare, Medicaid and other Federal health care programs.

If we violate the terms of the Federal Settlement Agreement or State Settlement Agreements, consequences could include accelerated settlement payments, rescission of the agreements and/or exclusion or disbarment from participation in all federal health care programs. A breach of the terms of our plea agreement could result in the rescission of the plea agreement and monetary penalties.

On May 13, 2019, we entered into a Corporate Integrity Agreement with the OIG-HHS. The Corporate Integrity Agreement has a term of five years and contains various compliance obligations designed to help ensure our ongoing compliance with federal health care program requirements. The terms of the Corporate Integrity Agreement include internal monitoring requirements, compliance training, certification obligations by our Board of Directors and certain employees, reporting requirements to OIG-HHS, and the engagement of an independent review organization to review and prepare written reports regarding reviews of certain of our systems and transactions.

If we fail to comply with the terms of the Corporate Integrity Agreement, we may be required to pay certain monetary penalties. Furthermore, material, uncorrected violations of the Corporate Integrity Agreement could lead to our exclusion or disbarment from participation in Medicare, Medicaid and other federal and state healthcare programs and subject us to repayment obligations. Any such exclusion or disbarment would result in the revocation or termination of certain government contracts and potentially have a material adverse effect on our results of operations. In addition, the Corporate Integrity Agreement increases the amount of information we must provide to the federal government regarding our compliance with federal regulations. The reports we provide in connection with the Corporate Integrity Agreement could result in greater scrutiny by other regulatory agencies.

In addition, we could be subject to future investigations. Many healthcare companies have announced government investigations of their sales and marketing practices and other activities. Even with compliance training and a company culture of compliance, our current or future practices may nonetheless become the subject of an investigation. A number of laws, often referred to as "whistleblower" statutes, provide for financial rewards to employees and others for bringing to the attention of the government practices that the government views as illegal or fraudulent. The costs of investigating any claims, responding to subpoenas of investigators and any resulting fines can be significant and could divert the attention of our management from operating our business.

The global COVID-19 pandemic and related impacts are having an adverse effect on our operations, financial performance and cash flows. We are unable to predict the extent to which the pandemic and related impacts will continue to adversely impact our business operations, financial performance, results of operations, financial position and the achievement of our strategic objectives.

Our operations, financial performance and cash flows have been negatively impacted by the COVID-19 pandemic that has caused, and is expected to continue to cause, the global slowdown of economic activity, including the decrease in demand for a broad variety of goods and services, disruptions in global supply chains and significant volatility and disruption of financial markets. Because the severity, magnitude and duration of the COVID-19 pandemic and its economic consequences are uncertain, rapidly changing, and difficult to predict, the pandemic's impact on our operations and financial performance, as well as its impact on our ability to successfully execute our business strategies and initiatives, remains uncertain and difficult to predict. In addition, the ultimate impact of the COVID-19 pandemic on our operations and financial performance depends on many factors that are not within our control.

The COVID-19 pandemic has subjected, and is expected to continue to subject, our operations, financial performance and financial condition to a number of risks including, but not limited to, the following:

As the COVID-19 pandemic continues to adversely affect our operating and financial results, it may also have the effect of heightening many of the other risks described in this prospectus. Further, the COVID-19 pandemic may also affect our operating and financial results in a manner that is not presently known to us or that we currently do not expect to present significant risks to our operations or financial results, particularly if the COVID-19 pandemic and its associated impacts reoccur in successive waves in the coming months.

Our results of operations could suffer if we are unable to manage our planned international expansion effectively.

Further expansion into international markets is an element of our business strategy and involves risk. The sale and shipment of our products across international borders, as well as the purchase of materials and products from international sources, subject us to extensive U.S. and foreign governmental trade, import, and export and customs regulations and laws. Compliance with these regulations and laws is costly and exposes us to penalties for non-compliance. Other laws and regulations that can significantly affect us include various anti-bribery laws, including the U.S. Foreign Corrupt Practices Act, or FCPA, anti-boycott laws, anti-money laundering laws and regulations relating to economic sanctions imposed by the United States, including the Office of Foreign Assets Control or the U.S. Treasury. Any failure to comply with applicable legal and regulatory obligations in the United States or abroad could adversely affect us in a variety of ways that include, but are not limited to significant criminal, civil and administrative penalties, including imprisonment of individuals, fines and penalties, denial of export privileges, seizure of shipments and restrictions on certain business activities. The occurrence of any of these events could have a negative effect on our financial returns and impact our planned foreign expansion.

We may be unable to maintain current, and obtain future, contracts with major GPOs and integrated delivery networks, or IDNs, for our products, and even if we are able to do so, such contracts may not generate sufficient sales of our products.

Many existing and potential customers for our products within the United States are members of GPOs and IDNs, including accountable care organizations or public-based purchasing organizations, and our business strategy includes entering into major contracts with these organizations. Our products can be contracted under national tenders or with larger hospital GPOs. These organizations typically award contracts on a category-by-category basis through a competitive bidding process. We are currently responding to bids and negotiating a number of GPO and IDN agreements. Due to the highly competitive nature of the bidding process and the GPO and IDN contracting processes in the United States, we may not be able to obtain contracts with major GPOs and IDNs for our products. In addition, while having a contract with a major purchaser for a given product category can facilitate sales, sales volumes of those products may not be maintained. For example, GPOs and IDNs are increasingly awarding contracts to multiple suppliers for the same product category. Even if we are the sole contracted supplier for our product category, members of the GPO or IDN generally are free to purchase from other suppliers. Furthermore, such contracts typically are terminable without cause upon 60 to 90 days' notice.

We may be unable to compete successfully against our existing or future competitors.

We operate in a highly competitive market characterized by rapid technological change. We compete with both alternative biologically-derived products and synthetic products based on efficacy, price, ease of use, reimbursement, customer support services and healthcare provider education. We face competition from various industry participants, including medical device companies, pharmaceutical companies, biotechnology companies, academic institutions and government agencies, as well as private and public research institutions.

Our success depends, in part, on our ability to maintain a competitive position in the development of technologies and products for use by our customers. Many of the companies developing or marketing competing or alternative products have competitive advantages when compared to us, including:

In the market for wound management, which includes burn care, we primarily compete against products marketed by Avita Medical Ltd., Integra LifeSciences Holdings Corporation, MiMedx

Group, Inc., Organogenesis Holdings Inc., Osiris Therapeutics, Inc., a subsidiary of Smith & Nephew plc, and Vericel Corporation.

In the market for hernia repair, we primarily compete against products marketed by C.R. Bard, Inc., a subsidiary of Becton, Dickinson and Company, Cook Biotech Inc., Ethicon LLC, a subsidiary of Johnson & Johnson, Integra LifeSciences Holdings Corporation, LifeCell Corporation, a subsidiary of AbbVie Inc., Medtronic plc, TELA Bio, Inc. and W. L. Gore & Associates, Inc.

In addition to already marketed products, we also face competition from products that are or could be under development and that target the same applications as our products or applications that we may address in the future. Such product candidates may be developed by the above-mentioned entities and others, including pharmaceutical companies, biotechnology companies, academic institutions, government agencies and private and public research institutions. Our competitors may develop and patent processes or products earlier than we can, obtain regulatory clearance or approvals for competing products more rapidly than we can and develop more effective or less expensive products or technologies that render our technology or products obsolete or non-competitive. Despite the steps we have taken to maintain and protect our intellectual property, competitors may nevertheless attempt to or succeed in developing similar porcine or other UBM technology. We also compete with other organizations in recruiting and retaining qualified scientific, sales and management personnel. If our competitors are more successful than us in these matters, we may be unable to compete successfully against our existing or future competitors.

We rely on third-party suppliers and providers, some of which are currently the only source for the respective materials or services they provide to us.

Any delay, interruption or cessation of production by our third-party suppliers of important materials, or any delay in qualifying new materials, if necessary, could prevent or delay our ability to manufacture our products. Although the porcine urinary bladders used in the manufacture of our products are available from multiple suppliers, we currently rely on two abattoirs to harvest the porcine urinary bladders that we use in our manufacturing process. In addition, we currently rely on one company to sterilize our porcine urinary bladders. While we have developed business continuity plans for various scenarios affecting the supply and sterilization of our raw materials and will continue to update these plans as necessary, including to mitigate supply risks that could occur as the result of the COVID-19 pandemic, we cannot give assurance that these plans will be effective in eliminating the negative effects of any such supply failures on our ability to manufacture and market our products.

In addition, an uncorrected impurity, a supplier's variation in a raw material, either unknown to us or incompatible with our manufacturing process, or any other problem with our materials, would prevent or delay our ability to manufacture products. These delays may limit our ability to meet demand for our products, which would have a material adverse impact on our business, results of operations and financial condition. In addition, any undetected defect or impurity could lead us to sell products that are defective and could cause harm to patients or lead to product liability lawsuits or other actions against us.

The production of our products involves a highly complex manufacturing process that is subject to a number of risks.

We manufacture our products in our own facilities through a complex, multi-step process involving procurement and preparation of porcine urinary bladders for initial processing, tissue delamination, disinfection, final processing to size and shape our products and sterilization. Manufacturing any

animal-derived medical device is highly complex and is subject to a number of risks, and failure can occur at any stage in the production process. If we fail to achieve and maintain high quality controls, processing and manufacturing standards, including avoidance of manufacturing errors, defects or product failures, we could experience recalls or withdrawals of our products, delays in delivery, cost overruns or other problems that would adversely affect our business. If we are unable to manufacture our products on a timely basis, at acceptable quality and costs, and in sufficient quantities, or if we experience unanticipated technological problems or delays in production, our business would be adversely affected.

If we are unable to manage product inventory in an effective and efficient manner, our profitability could be impaired.

Many factors affect the efficient use and planning of product inventory, such as effectiveness of predicting demand, effectiveness of preparing manufacturing to meet demand, efficiently meeting product mix and product demand requirements and product expiration. Our products have an expected shelf life of two years. If we are unable to manage our product inventory efficiently or within expected budget goals, or keep sufficient finished and in-process product on hand to meet demand, our operating margins and long term growth prospects could be impaired.

We place orders with our suppliers based on forecasts of demand and, in some instances, may acquire additional inventory to accommodate anticipated demand. Our forecasts are based on management's judgment and assumptions, each of which may introduce error into our estimates. If we overestimate customer demand, our excess or obsolete inventory may increase significantly, which would reduce our gross margin and adversely affect our financial results. Conversely, if we underestimate customer demand or if insufficient manufacturing capacity is available, we would miss revenue opportunities and potentially lose market share and damage our customer relationships.

An outbreak of infectious disease carried by pigs could negatively affect the supply of our porcine urinary bladders and the sales of our products.

Sales of our UBM products could be materially adversely affected by the outbreak of disease carried by pigs, which could lead to the widespread death or precautionary destruction of animals that we rely upon for the manufacturing of our products. For example, recent outbreaks of African Swine Fever have seriously impacted swine herds primarily in China and certain Southeast Asian countries. The further spread of African Swine Fever within China, and its continued expansion to other countries, could further impact the size of swine herds globally and therefore the demand for our UBM products, and if widespread, could have a material impact on our financial results. Also, the outbreak of any highly contagious disease at or near our abattoirs could require us to immediately halt supply of the porcine bladders for our products at such sites and force us to incur substantial expenses in procuring raw materials or products elsewhere.

Substantially all of our revenue has been, and we expect that it will continue to be, generated from sales of our UBM products, and we therefore are highly dependent on their success.

Sales of our UBM products accounted for substantially all of our revenue for the years ended December 31, 2018 and 2019 and the three months ended March 31, 2019 and 2020, and we expect that sales of our UBM products will continue to account for substantially all of our revenue for the foreseeable future. Our failure to successfully increase sales of these products or any other event

impeding our ability to sell these products would result in a material adverse effect on our business, financial condition and results of operations.

We rely heavily on our sales professionals to market and sell our products. If we are unable to hire, effectively train, manage, improve the productivity of, and retain our sales professionals, our business will be harmed, which would impair our future revenue and profitability.

Our success largely depends on our ability to hire, train, manage and improve the productivity levels of our sales professionals. We train our existing and recently recruited sales professionals to better understand our existing and new product technologies and how they can be positioned against our competitors' products and increase the revenue of our customers. It may take time for the sales professionals to become productive and there can be no assurance that recently recruited sales professionals will be adequately trained in a timely manner, or that our direct sales productivity will improve, or that we will not experience significant levels of attrition in the future. Furthermore, there is a risk that our sales professionals may make inaccurate claims regarding the efficacy and benefits of our products, including in indications for which the products are not cleared by the FDA, which could subject us to claims and liabilities.

Even if we receive the necessary regulatory clearances or approvals for new products or the use of our existing products for the additional indications currently in our development pipeline, we may not be able to successfully launch and market our new products, or our existing products for each intended treatment indication.

We may not market new products or our existing products for the various new treatments contemplated by our development efforts until we have received the requisite regulatory approvals or clearances for each product or treatment indication. Our product development program may be curtailed, redirected, eliminated or delayed at any time for many reasons, and we cannot predict whether we will successfully develop and commercialize our new products or additional indications for our existing products. The commercial success of our new products, and existing products for the treatment of each future proposed indication, whether 510(k)-cleared or with an approved PMA or BLA, will depend on a number of factors, including the following:

We anticipate submitting additional 510(k) premarket notifications in 2020 for our products for new surgical soft tissue repair indications. However, even if we obtain a 510(k) clearance, the FDA may issue a clearance for more narrow indications than we seek, or restrict the claims we may make regarding our products. Even if we receive clearance or approval to market our products to treat each new indication we seek, any problems associated with the successful marketing and commercialization of our products for such indications could harm sales of our products for current treatment indications. If we are not successful in launching and marketing our products for the treatment of new indications, or if we are significantly delayed in doing so, our future prospects may be diminished.

In the future our products may become obsolete, which would negatively affect operations and financial condition.

The field of regenerative medicine is characterized by rapid and significant advancement and change. There can be no assurance that other companies will not succeed in developing or marketing devices and products that are more clinically or cost effective than our UBM products or that would render our products obsolete or noncompetitive. Additionally, new surgical procedures, medications and other therapies could be developed that replace or reduce the importance of our products.

Accordingly, our success will depend in part on our ability to respond quickly to medical and other changes through the development and introduction of new products. Product development involves a high degree of risk, and there can be no assurance that our new product development efforts will result in any commercially successful products.

Product liability lawsuits against us could cause us to incur substantial liabilities and could limit commercialization of any products we may develop.

We face an inherent risk of product liability exposure relating to the use of our products, which may result from previously unknown problems with a product, manufacturer or facility. This risk exists even if a product is 510(k)-cleared, PMA-approved or BLA-approved for commercial sale by the FDA and manufactured in facilities that are required to be in compliance with the FDA's quality system regulation, or QSR, or has received marketing authorization from an applicable foreign regulatory authority. Any side effects, manufacturing defects, misuse or abuse associated with our products could result in injury to a patient. In addition, a liability claim may be brought against us even if our products merely appear to have caused an injury or were used in a procedure in which an injury occurred. Product liability claims may be brought against us by consumers, healthcare providers, medical device companies or others selling or otherwise coming into contact with our products, among others. If we cannot successfully defend ourselves against product liability claims, we will incur substantial liabilities. While we carry product liability insurance coverage for our products that we believe is consistent with industry norms, our insurance coverage may not be sufficient to cover all of our product liability related expenses or losses and may not cover us for any expenses or losses we may suffer.

Moreover, insurance coverage is becoming increasingly expensive, and, in the future, we may not be able to maintain insurance coverage at a reasonable cost, in sufficient amounts or upon adequate terms to protect us against losses due to product liability. Even if we determine that it is prudent to increase our product liability coverage, we may be unable to obtain this increased product liability insurance on commercially reasonable terms or at all. Large judgments have been awarded in class action or individual lawsuits based on device or drug products that had unanticipated side effects. A successful product liability claim or series of claims brought against us could cause our stock price to decline and, if judgments exceed our insurance coverage, could decrease our cash and have a material adverse effect on our business, results of operations, financial condition and growth prospects.

If our products are found to be defective or otherwise pose certain safety risks, we may decide, or the FDA could require us, to initiate a recall, and we will be subject to medical device reporting requirements and could be subject to agency enforcement actions.

The FDA has the authority to require the recall of commercialized products if there is a reasonable probability that the product would cause serious, adverse health consequences or death, for example in

the case of material deficiencies or defects in the design or manufacture of the product. Manufacturers may, under their own initiative, recall a product if any material deficiency in a device is found. A government-mandated or voluntary recall could occur as a result of an unacceptable risk to health, component failures, manufacturing errors, design or labeling defects or other deficiencies and issues.

In addition, under the FDA regulations, we are required to report to the FDA any incident in which our product may have caused or contributed to a death or serious injury or in which our product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury. If we fail to report these events or a product recall to the FDA within the required timeframes, or at all, the FDA and/or the United States Department of Justice could take regulatory or enforcement action against us. In response to a recall initiated by us or the FDA, and depending on the circumstances, the FDA could pursue additional remedies including an injunction, product seizure, imposition of monetary penalties or criminal charges. For example, we recently entered into a plea agreement with the United States Attorney's Office for the District of Maryland and the United States Department of Justice Consumer Protection Branch, in which we pled guilty to one count of failure and refusal to report a medical device removal, agreed to pay a criminal fine and agreed to establish and maintain a compliance and ethics program. We are obligated under the plea agreement to report to the Department of Justice, among other things, (i) the initiation of a recall of a medical device; (ii) the failure to report to the FDA a medical device correction or removal under 21 USC § 360i(g); or (iii) the failure to submit a medical device report to the FDA as required by 21 USC § 360i(a). Failure to do so could result in the rescission of the plea agreement and monetary penalties. We are also obligated under the Corporate Integrity Agreement to report to OIG-HHS the initiation of a recall by us or the FDA. Failure to do so could result in monetary penalties and exclusion from participation in all federal health care programs. We would expect scrutiny by the FDA, Department of Justice and OIG-HHS if we initiate or are ordered to initiate a recall. Repeated product malfunctions may also result in a voluntary or mandatory product recall. Depending on the corrective action we take to redress a product's deficiencies or defects, the FDA may require, or we may decide, that we will need to obtain new clearances or approvals for the device before we may market or distribute the corrected device. Seeking such approvals or clearances 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 may also be required to bear other costs or take other actions that may have a negative impact on our sales as well as face significant adverse publicity or regulatory consequences, which could harm our business, including our ability to market our products in the future. Additional recalls of any of our products would divert managerial and financial resources and have an adverse effect on our business, results of operations and financial condition. A recall could harm our reputation with customers and negatively affect our sales. We may initiate withdrawals of our products in the future that we determine do not require notification of the FDA. If the FDA were to disagree with our determinations, it could request that we report those actions as recalls, and again take regulatory or enforcement action against us or our products.

Our manufacturing operations require us to comply with the FDA's and other governmental authorities' laws and regulations regarding the manufacture and production of medical devices, which is costly and could subject us to enforcement action.

We are required to comply with the FDA's QSR, which covers the methods used in, and the facilities and controls used for, the design, testing, manufacture, quality assurance, labeling, packaging, sterilization, storage and shipping of our products. The FDA enforces the QSR through periodic announced and unannounced inspections of manufacturing facilities. The failure by us or one of our

suppliers to comply with applicable statutes and regulations administered by the FDA and other regulatory authorities, or the failure to timely and adequately respond to any adverse inspectional observations, could result in, among other things, any of the following enforcement actions:

Any of these actions could impair our ability to produce our products in a cost-effective and timely manner to meet our customers' demands. Furthermore, our key suppliers may not currently be or may not continue to be in compliance with all applicable regulatory requirements, which could result in our failure to produce our products on a timely basis and in the required quantities, if at all.

In addition to the FDA requirements in the United States, we are required to comply with requirements for the commercialization and distribution of medical devices in foreign countries to sell our products. While those requirements vary by country, they generally require compliance with ISO 13485 (Quality Management Systems). Some countries where we may commercialize our products also have special requirements related to medical devices that contain ingredients of an animal origin and require Transmissible Spongiform Encephalopathy or Bovine Spongiform Encephalopathy certification. If we are unable to comply with these international requirements related to the commercialization of our products, our ability to expand internationally may be limited, or if we fail to maintain compliance we may be subject to sanctions, including a total shutdown of our commercialization of the products internationally.

A reclassification of our products by the FDA could significantly increase our regulatory costs, including the time and expense associated with required clinical trials, or may require us to suspend or discontinue sales of our products.

Under the Federal Food, Drug, and Cosmetic Act, medical devices are classified into one of three classes—Class I, Class II or Class III—depending on the degree of risk associated with each medical device and the extent of control needed to provide reasonable assurance of safety and effectiveness.

Class I devices are those for which safety and effectiveness can be reasonably assured by adherence to FDA's "general controls" for medical devices, which include compliance with the applicable portions of the QSR facility registration and product listing, reporting of adverse medical events, and appropriate, truthful and non-misleading labeling, advertising, and promotional materials. Some Class I devices also require premarket clearance by the FDA through the 510(k) premarket notification process described below.

Class II devices are subject to FDA's general controls, and any other "special controls" deemed necessary by FDA to ensure the safety and effectiveness of the device. Premarket review and clearance by the FDA for Class II devices is accomplished through the 510(k) premarket notification procedure, though certain Class II devices are exempt from this premarket review process. When a 510(k) is

required, the manufacturer must submit to the FDA a premarket notification submission demonstrating that the device is "substantially equivalent" to a legally marketed device, which in some cases may require submission of clinical data. A legally marketed device is defined by statute to mean a device that was legally marketed prior to May 28, 1976, the date upon which the Medical Device Amendments of 1976 were enacted, or another commercially available, similar device that was cleared through the 510(k) process. Unless a specific exemption applies, 510(k) premarket notification submissions are subject to user fees. If the FDA determines that the device, or its intended use, is not substantially equivalent to a legally marketed device, the FDA will place the device, or the particular use of the device, into Class III, and the device sponsor must then fulfill much more rigorous premarketing requirements in the form of a PMA.

A Class III device includes devices deemed by the FDA to pose the greatest risk such as life-supporting or life-sustaining devices, or implantable devices, in addition to a device that has a new intended use or utilizes advanced technology that is not substantially equivalent to that of a legally marketed device. The safety and effectiveness of Class III devices cannot be reasonably assured solely by general and special controls. These devices almost always require formal clinical studies to demonstrate safety and effectiveness. Submission and FDA approval of a PMA or BLA is required before marketing of a Class III device can proceed.

Our products are currently Class II medical devices; however, from time to time, the FDA may disagree with the classification and require us to apply for approval as a Class III medical device. In the event that the FDA determines that our products should be classified as Class III, we could be precluded from marketing the products for clinical use within the United States for months, years or longer, depending on the specific change in the classification. Reclassification of our technology as Class III could significantly increase our regulatory costs, including the timing and expense associated with required clinical trials and other costs. In addition, the FDA could determine that our products, or claims related to them, are biologics. For example, certain tissue-engineered products do not meet the criteria to be classified as medical devices and may be regulated as biologic products under Section 351 of the Public Health Service Act and also, in some respects, as drugs under the FDCA. Before a biological product can be marketed in interstate commerce, it must receive approval of a BLA by the FDA. Although we do not currently market any biological products, we may consider pursuing potential product opportunities that may require BLA approval. Should we choose to manufacture any potential product opportunities that require BLA approval in the future, the process must comply with the FDA's current good manufacturing, or cGMP, regulations, which are designed to ensure that finished products are not adulterated or misbranded or otherwise in violation of the requirements of the FDCA. Furthermore, we may determine to suspend or discontinue sales of products that are reclassified if we are unable to meet the new FDA requirements, if ever.

We are subject to substantial post-market government regulation that could have a material adverse effect on our business.

The manufacture, labeling, advertising, promotion, record-keeping, post-market surveillance, and marketing of our products are subject to extensive regulation and review by the FDA and numerous other governmental authorities in the United States as well as foreign countries where we may sell our products. Even after we have obtained 510(k) clearance or PMA approval to market a product, we have ongoing responsibilities under FDA and other regulations. The FDA and other national governmental authorities have broad enforcement powers. The regulations to which we are subject are complex and have become more stringent over time. Regulatory changes could result in restrictions on our ability to continue or expand our operations, higher than anticipated costs or lower than

anticipated sales. Our failure to comply with applicable regulatory requirements could result in enforcement actions such as:

The incurrence or commencement of any such action would harm our reputation and cause sales of our products to suffer and may prevent us from generating revenue.

If we modify or change one or more of our products without 510(k) clearance, the FDA could retroactively determine that the modifications were improper and require us to stop marketing and recall our modified products.

Even after 510(k) clearance is obtained from the FDA for one or more of our products, any change or modification to such product that could significantly affect its safety or effectiveness, such as a significant change or modification in design, material, chemical composition, energy source or manufacturing process, or a major change or modification in the device's intended use, would require a new 510(k) clearance or possibly even a PMA approval. The FDA requires every manufacturer to make this determination in the first instance, but the FDA may review any manufacturer's decision. The FDA may not agree with our decisions regarding whether new clearances or approvals are necessary. We have modified some of our 510(k) cleared products, and have determined, based on our review of the applicable FDA guidance, that in certain instances new 510(k) clearances are not required. If the FDA disagrees with our determination and requires us to submit new premarket 510(k) notifications or PMAs for modifications to our previously cleared products for which we have concluded that new clearances or approvals are unnecessary, we may be required to cease marketing or to recall the modified product until we obtain clearance or approval, and we may be subject to significant regulatory fines or penalties.

If the FDA disagrees with our decision not to seek a new 510(k) for modifications to existing products, we may be required to submit extensive preclinical and clinical data, depending on the nature of the changes, in support of an application for marketing clearance or approval. We may not be able to obtain additional 510(k) clearances or premarket approvals for modifications to, or additional indications for, our existing products in a timely fashion, or at all. Delays in obtaining future clearances or approvals would adversely affect our ability to introduce our products for additional indications in a timely manner, which in turn would harm our revenue and operating results.

Furthermore, the FDA's ongoing review of the 510(k) program may make it more difficult for us to make modifications to our previously cleared products, either by imposing more stringent requirements on when a manufacturer must submit a new 510(k) for a modification to a previously cleared product, or by applying more onerous review criteria to such submissions. Even though recent FDA guidance related to the Abbreviated 510(k) Program issued September 13, 2019 updates earlier guidance from 1998, the practical impact of any changes to the FDA's 510(k) program remains unclear.

The misuse or off-label use of our products may harm our reputation or the image of our products in the marketplace, or result in injuries that lead to product liability suits, which could be costly to our business. Moreover, we could be subject to FDA sanctions if we are deemed to have engaged in off-label promotion.

We have received 510(k) clearances from the FDA for the management of wounds, including for products indicated for pressure ulcers, venous ulcers, diabetic ulcers, second-degree burns, surgical wounds and trauma wounds, and the reinforcement of soft tissue where weakness exists in urological, gynecological and gastroenterological anatomy. Our promotional materials and training methods must comply with FDA and other applicable laws and regulations, including the prohibition on the promotion of a medical device for an indication that has not been approved or cleared by the FDA, referred to as an off-label use. We have been accused of, and recently entered into a settlement agreement regarding, the promotion of products in a manner that has not been approved by the FDA. While we have entered into a settlement agreement with the United States, acting through the United States Department of Justice on behalf of the Office of the Inspector General of the Department of Health and Human Services, the Defense Health Agency, acting on behalf of the TRICARE Program, and the United States Department of Veteran Affairs, regarding such claims, such accusation along with the terms of the Settlement Agreement may cause or impose increased scrutiny of our operations. The FDA does not restrict or regulate a physician's use of a medical device within the practice of medicine, and we cannot prevent a physician from using our products for an off-label use. If the FDA determines that our current or future promotional or training materials constitute the unlawful promotion of an off-label use, it could subject us to regulatory or enforcement actions, including additional civil money penalties, criminal fines and penalties, and exclusion from participation in federal health programs, among others. Other federal, state or foreign governmental authorities might also take action if they consider our promotion or training materials to constitute promotion of an off-label use, which could result in significant fines or penalties under other statutory authorities. In that event, our reputation could be damaged and the use of our products in the marketplace could be impaired.

In addition, there may be increased risk of injury if physicians or others attempt to use our products for off-label indications. Furthermore, the use of our products for indications other than those that have been cleared by the FDA may not effectively treat such conditions, which could harm our reputation in the marketplace among physicians and patients. Physicians may also misuse our products or use improper techniques if they are not adequately trained in the particular use, potentially leading to injury and an increased risk of product liability. Product liability claims are expensive to defend and could divert our management's attention from our primary business and result in substantial damage awards against us. Any of these events could harm our business, results of operations and financial condition.

Our business and sale of our products are subject to extensive regulatory requirements, including compliance with labelling, manufacturing and reporting controls. If we fail or are unable to timely obtain the necessary 510(k) clearances or PMA approvals for new products or for the use of our products for additional indications, our ability to generate revenue could be materially harmed.

Our products are classified as medical devices and are subject to extensive regulation in the United States by the FDA and other federal, state and local authorities and by similar regulatory authorities in overseas jurisdictions. Government regulation of medical devices is meant to assure their safety and effectiveness, and includes regulation of, among other things:

In the United States, before we can market a new medical device, or a new use of, or claim for, an existing product, we must first receive either 510(k) clearance or PMA approval from the FDA, unless an exemption applies.

In the 510(k) clearance process, the FDA must determine that a proposed device is "substantially equivalent" to a device legally on the market, known as a "predicate" device. Substantial equivalence means that with respect to the proposed device being compared to the predicate device, the proposed device has the same intended use as the predicate device and the proposed device has the same technological characteristics as the predicate device, or has different technological characteristics but that the proposed device is as safe and effective as the predicate device and does not raise different questions of safety and effectiveness. Clinical data are sometimes required to support substantial equivalence. The PMA pathway requires an applicant to demonstrate the safety and effectiveness of the device based, in part, on extensive data, including, but not limited to, technical, preclinical, clinical trial, manufacturing and labeling data. The PMA process is typically required for devices that are deemed to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices and also novel devices that remain in Class III. Products that are approved from a PMA application generally need FDA approval of a PMA supplement before they can be modified. Similarly, some modifications made to products cleared through a 510(k) may require a new 510(k). Both of these processes can be expensive and lengthy, and with respect to a PMA, can entail significant user fees, unless exempt. The FDA's 510(k) clearance process usually takes from three to six months, but may take significantly

longer. The process of obtaining a PMA is much more costly and uncertain than the 510(k) clearance process and generally takes from one to three years, or longer, from the time the application is submitted to the FDA until an approval is obtained. The process of obtaining 510(k) clearances or PMA approvals to market a medical device can be costly and time consuming, and we may not be able to obtain these clearances or approvals on a timely basis, if at all.

In the United States, our currently commercialized products have received multiple 510(k) clearances. If the FDA requires us to go through a lengthier, more rigorous process for future products or modifications to existing products than expected, our product introductions or modifications could be delayed or cancelled, which could cause our sales to decline. In addition, the FDA may determine that future products will require the more costly, lengthy and uncertain PMA process. Although we do not currently market any devices under a PMA, the FDA may demand that we obtain a PMA prior to marketing certain of our future products. Further, even with respect to those future products where a PMA is not required, we cannot assure you that we will be able to obtain the 510(k) clearances with respect to those products. The FDA can delay, limit or deny 510(k) clearance or PMA approval of a device for many reasons, including:

While we have previously received FDA clearance for the indication of our products, the FDA may not approve or clear additional indications that are necessary or desirable for future successful commercialization of our products. Indeed, the FDA may refuse our requests for 510(k) clearance or premarket approval of new products, new intended uses or modifications to existing products.

From time to time, legislation is drafted and introduced in the United States that could significantly change the statutory provisions governing any regulatory approval or clearance that we receive in the United States. In addition, the FDA may change its clearance and approval policies, adopt additional regulations or revise existing regulations, or take other actions which may prevent or delay approval or clearance of our products under development or impact our ability to modify our currently approved or cleared products on a timely basis.

In addition, it is possible that changes in the FDA's review processes or policies regarding tissue-engineered or animal-derived products may result in an FDA decision to review future potential indications of our products under FDA's authority to regulate biological products. Such a determination would require us to submit a BLA rather than a 510(k) or PMA to obtain marketing authorization, comply with applicable good manufacturing practice requirements for biological products, and may subject us to additional data requirements and conditions of approval prior to marketing our products for such indications.

Healthcare policy changes may have a material adverse effect on our business.

The United States and many foreign jurisdictions have enacted or proposed legislative and regulatory changes affecting the healthcare system that could affect our ability to profitably sell our products. Changes in regulations, statutes or the interpretation of existing statutes or regulations could impact our business in the future by requiring, for example: (i) changes to our manufacturing arrangements; (ii) additions or modifications to product labeling; (iii) the recall or discontinuation of our products; or

(iv) additional record-keeping requirements. If any such changes were to be imposed, they could adversely affect the operation of our business.

In the United States, there have been and continue to be laws enacted and policies implemented by the federal government, state governments, regulators and third party payors to control healthcare costs, and generally, to reform the healthcare system in the United States. For example, the Patient Protection and Affordable Care Act, amended by the Health Care and Education Reconciliation Act or, collectively, ACA, substantially changed the way healthcare is delivered and financed by both governmental and private insurers. Among other things, the ACA:

These changes included the creation of demonstration programs and other value-based purchasing initiatives that provide financial incentives for physicians and hospitals to reduce costs, including incentives for furnishing low cost therapies for chronic wounds even if those therapies are less effective than our products.

Under the Trump Administration, there are ongoing efforts to modify or repeal all or part of the ACA or to take executive action that affects its implementation. The Tax Cuts and Jobs Act of 2017, or the Tax Act, includes a provision that repealed effective January 1, 2019 the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the "individual mandate." On December 14, 2018, a U.S. District Court Judge in the Northern District of Texas, or the Texas District Court Judge, ruled that the individual mandate is unconstitutional and a critical and inseverable feature of the ACA, and therefore, the remaining provisions of the ACA are invalid as well. On December 18, 2019, the Fifth Circuit U.S. Court of Appeals held the individual mandate is unconstitutional, but remanded the case to the lower court to reconsider its earlier invalidation of the full ACA. On March 2, 2020, the United States Supreme Court granted the petitions for writs of certiorari to review this case, and has allotted one hour for oral arguments, which are expected to occur in the fall. Pending review, the ACA remains in effect, but it is unclear at this time what effect such litigation will have on the status of the ACA.

General legislative action may also affect our business. For example, the Budget Control Act of 2011 included provisions to reduce the federal deficit and resulted in the imposition of reductions of up to 2% in Medicare payments to providers, which began in April 2013. The CARES Act suspended the 2% Medicare sequester from May 1, 2020, through December 31, 2020, and extended the sequester through 2030. The American Taxpayer Relief Act of 2012 further reduced Medicare payments to several types of providers, including hospitals and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. These or other similar reductions in government healthcare spending could result in reduced demand for our products or additional pricing pressure.

On January 20, 2017, President Trump signed an Executive Order directing federal agencies with authorities and responsibilities under the ACA to waive, defer, grant exemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal burden on states or a cost, fee, tax, penalty or regulatory burden on individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. On October 13, 2017, President Trump signed

an Executive Order terminating the cost-sharing subsidies that reimburse insurers under the ACA. The Trump administration has concluded that cost-sharing reduction, or CSR, payments to insurance companies required under the ACA have not received necessary appropriations from Congress and discontinued these payments. The loss of the CSR payments was expected to increase premiums on certain policies issued by qualified health plan issuers under the ACA. Several state Attorneys General filed suit to stop the administration from terminating the subsidies, but their request for a restraining order was denied by a federal judge in California on October 25, 2017. The Bipartisan Health Care Stabilization Act of 2017, as well as the follow-on Bipartisan Health Care Stabilization Act of 2018 were introduced to appropriate funds to stabilize CSR payments; however, the future of this effort is unclear. The effects of the loss of CSR payments on third-party payors, the viability of the ACA marketplace, providers, and potentially our business, are not yet fully known.

Moreover, on January 22, 2018, President Trump signed a continuing resolution on appropriations for fiscal year 2018 that delayed the implementation of certain ACA-mandated fees, including the so called "Cadillac" tax on certain high cost employer-sponsored insurance plans, the annual fee imposed on certain health insurance providers based on market share, and the medical device excise tax on non-exempt medical devices (these three provisions have been repealed, as discussed below). The Bipartisan Budget Act of 2018, also amended the ACA, effective January 1, 2019, by increasing the point-of-sale discount that is owed by pharmaceutical manufacturers who participate in Medicare Part D and closing the coverage gap in most Medicare drug plans, commonly referred to as the "donut hole." In addition, CMS published a final rule that would give states greater flexibility, starting in 2020, in setting benchmarks for insurers in the individual and small group marketplaces, which may have the effect of relaxing the essential health benefits required under the ACA for certain plans sold through such marketplaces.

We expect that the ACA, as well as other healthcare reform measures that may be adopted in the future, may result in additional reductions in Medicare and other healthcare funding, more rigorous coverage criteria, lower reimbursement, and new payment methodologies. This could lower the price that we receive for our products. Any denial in coverage or reduction in reimbursement from Medicare or other government-funded programs may result in a similar denial or reduction in payments from private payors, which may prevent us from being able to generate sufficient revenue, attain profitability or commercialize our products. Litigation and legislative efforts to change or repeal the ACA are likely to continue, with unpredictable and uncertain results. We cannot predict the results of subsequent cases or appeals, any action by the Trump Administration, or whether additional legislative reform proposals will be adopted, when they will be adopted, or what impact they may have on us, but any such proposals could have a negative impact on our business and provide incentives for hospitals and physicians to not use our products.

We may be subject to or otherwise affected by federal and state healthcare laws, including anti-kickback, fraud and abuse and health information privacy and security laws, and could face substantial penalties if we are unable to fully comply with such laws.

Although we do not provide healthcare services, submit claims for third-party reimbursement, or receive payments directly from Medicare, Medicaid or other third-party payors for our products, we are subject to broadly applicable healthcare fraud and abuse regulation and enforcement by federal and state governments, which could significantly impact our business. Manufacturing, sales, promotion and other activities following product approval are also subject to regulation by numerous regulatory authorities in the United States in addition to the FDA, including the Centers for Medicare and Medicaid Services, or CMS, the Office of Inspector General and Office for Civil Rights, other divisions

of the Department of Health and Human Services, or HHS, the Department of Justice, the Drug Enforcement Administration, the Consumer Product Safety Commission, the Federal Trade Commission, the Occupational Safety & Health Administration, the Environmental Protection Agency and state and local governments.

Additionally, healthcare providers and third-party payors play a primary role in the recommendation of medical devices and other medical items and services. Arrangements with providers, consultants, third-party payors and customers are subject to broadly applicable fraud and abuse, anti-kickback, false claims laws, reporting of payments to physicians and teaching hospitals and patient privacy laws and regulations and other healthcare laws and regulations that may constrain our business and/or financial arrangements. Healthcare fraud and abuse and health information privacy and security laws potentially applicable to our operations include:

In addition, certain states mandate implementation of corporate compliance programs to ensure compliance with these laws, impose additional restrictions on our financial relationships with physicians and other healthcare providers, and/or require the tracking and reporting of compensation and other remuneration to physicians.

Another development affecting fraud and abuse risks is the continued use of the whistleblower or qui tam provisions of the FCA. The FCA imposes liability on any person or entity who, among other things, knowingly presents, or causes to be presented, a false or fraudulent claim for payment by a federal healthcare program. The qui tam provisions of the FCA allow a private individual to bring civil actions on behalf of the federal government alleging that the defendant has submitted a false claim to

the federal government, and to share in any monetary recovery. Over the past several years, the number of suits brought by private individuals has increased dramatically. In addition, various states have enacted false claim laws analogous to the FCA. A number of these state laws apply where a claim is submitted to any third-party payor and not merely a federal healthcare program.

Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available under the federal Anti-Kickback Statute, it is possible that some of our business activities, including our relationships with physicians, hospitals, IDNs, and group purchasing organizations, or GPOs, could be subject to challenge under one or more of such laws. We could be adversely affected if regulatory agencies interpret our financial relationships with our physician consultants who order our products to be in violation of applicable laws. This could subject us to civil and criminal penalties for non-compliance, the cost of which could be substantial.

If our past or present operations are found to be in violation of any of such laws or any other governmental regulations that may apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, exclusion from government healthcare programs and the curtailment or restructuring of our operations. Similarly, if the healthcare providers or entities with whom we do business are found to be non-compliant with applicable laws, they may be subject to sanctions, which could also have an adverse impact on us. Any penalties, damages, fines, curtailment or restructuring of our operations could adversely affect our ability to operate our business and our financial results. Any action against us for violation of these laws, even if we successfully defend against them, could cause us to incur significant legal expenses and divert our management's attention from the operation of our business. Moreover, we expect there will continue to be federal and state laws and regulations, proposed and implemented, that could impact our operations and business. The extent to which future legislation or regulations, if any, relating to healthcare fraud abuse laws or enforcement, may be enacted or what effect such legislation or regulation would have on our business remains uncertain. In addition, the commercialization of any of our products outside the United States will also likely subject us to foreign equivalents of the healthcare laws mentioned above, among other foreign laws.

Failure to obtain and maintain regulatory authorization in foreign jurisdictions will prevent us from marketing our products internationally.

We have been audited and are ISO 13485 certified by our Notified Body, BSI Group, which we expect will enable us, in combination with the appropriate marking authorizations, to initiate commercialization of our products in Latin America, Asia and the Middle East. Outside the United States, we can market a product only if we receive marketing authorization and, in some cases, pricing approval, from the appropriate regulatory authorities. The approval procedure varies among countries and can involve compliance with manufacturing and design controls and additional testing. The time required to obtain approval may differ from that required to obtain FDA approval or clearance and may include all of the risks associated with obtaining FDA clearance or approval in addition to other risks. We may not obtain foreign regulatory approvals or certifications on a timely basis, if at all. Approval or clearance by the FDA does not ensure approval or certification by regulatory authorities in other countries, and approval or certification by one foreign regulatory authority does not ensure approval by regulatory authorities in other foreign countries or by the FDA. However, the failure to obtain marketing authorization in one jurisdiction may adversely impact our ability to obtain marketing authorization in another jurisdiction. We may be required to perform additional preclinical or clinical studies even if we have obtained FDA clearance or approval. If we fail to receive necessary approvals to commercialize our products in foreign jurisdictions on a timely basis, or at all, or are deemed to be in violation of marketing restrictions in such countries, we may be subject to fines or other penalties and our business, results of operations and financial condition could be adversely affected.

Changes in existing third-party coverage and reimbursement may impact our ability to sell our products.

In the United States and markets in other countries, patients who are prescribed medical products for their conditions and providers performing the prescribed services generally rely on third-party payors to reimburse all or part of the associated healthcare costs. Maintaining and growing sales of our products depends in large part on the availability of adequate coverage and reimbursement from third-party payors, including government programs such as Medicare and Medicaid, private insurance plans and managed care programs. Hospitals and other healthcare provider customers that purchase our products typically bill various third-party payors to cover all or a portion of the costs and fees associated with the procedures in which our products are used, including the cost of the purchase of our products. Medicare reimbursement for procedures using our products during an inpatient stay is generally made under a prospective payment system that is determined by a classification system known as the Medicare severity diagnosis-related groups, or MS-DRGs. The Centers for Medicare & Medicaid Services, or CMS, the agency responsible for administering the Medicare program, also includes payment for our products in Medicare payments for outpatient surgical procedures in ambulatory surgery centers or hospital outpatient departments. Our customers' access to adequate coverage and reimbursement for the procedures performed with our products by government and private insurance plans is central to the acceptance of our current and future products. Changes in the amount third-party payors are willing to reimburse our customers for procedures using our products or our products themselves could create pricing pressures for us. We may be unable to sell our products on a profitable basis if third-party payors deny coverage or reduce their current levels of payment, or if our costs of production increase faster than increases in reimbursement levels.

Coverage decisions and payment amounts are established at the discretion of individual third-party payors. Many private payors, however, use coverage decisions and payment amounts determined by CMS as guidelines in setting their coverage and reimbursement policies. As the portion of the U.S. population over the age of 65 and eligible for Medicare continues to grow, we may be more vulnerable to coverage and reimbursement limitations imposed by CMS. While certain procedures using our products are currently covered by Medicare and other third-party payors, future action by CMS or other government agencies may diminish payments to physicians, outpatient centers and/or hospitals for covered services. For instance, our products generally are classified as "skin substitutes" for Medicare reimbursement purposes, and therefore are typically reimbursed in the outpatient setting by CMS through bundled payments. Under these Medicare bundled payments, reimbursement for skin substitute products, including ours, are made as a single payment to the health care provider that includes both the application of the product and the product itself. These bundled payments are subject to a two-tier system—one bundled payment for procedures that involve products whose cost exceeds a threshold amount (i.e., high cost products) and another bundled payment for procedures that involve low cost products below that designated threshold (i.e., low cost payments). Bundled payment rates are modified annually based on modifications to the threshold amounts and geographic adjustments. Currently, our skin substitute products are classified as low cost; however it is not possible to predict whether their designation will change, or whether the bundled payment reimbursement rates will change.

In any case, these bundled payments are limited by dollar amount and may not cover the cost of our products used in a given surgical procedure. Moreover, coverage decisions are at the discretion of the Medicare contractors. As a result, we cannot be certain that the procedures performed with our products will be reimbursed at a cost-effective level or reimbursed at all.

Some third-party payors in the United States, including certain Medicare contractors and private health insurance companies, have developed policies that deny coverage for our products when used as

wound care treatment for certain clinical indications such as lower extremity ulcers in a hospital outpatient facility, ambulatory surgery center or physician office. To support changes in these policies and expanded coverage, we may need to conduct prospective, randomized controlled clinical trials and present data from such trials to payors to demonstrate the medical necessity or cost effectiveness of our products for these indications. While we are devoting considerable resources to such post-market clinical trials to support such additional coverage and reimbursement, there can be no assurance that coverage for our products will be expanded. In addition, those private payors that do not follow the Medicare guidelines may adopt different coverage and reimbursement policies for procedures performed with our products, though we cannot predict whether coverage will be sufficient or if there will be coverage at all. Failure to obtain favorable payor policies could have a material adverse effect on our business and operations.

Furthermore, the healthcare industry in the United States has experienced a trend toward cost containment as government and private insurers seek to control healthcare costs by imposing lower payment rates and negotiating reduced contract rates with service providers. Therefore, we cannot be certain that the procedures performed with our products will be reimbursed at cost-effective levels. Nor can we be certain that third-party payors using a methodology that sets amounts based on the type of procedure performed, such as those utilized by Medicare and in many privately managed care systems, will view the cost of our products to be justified so as to incorporate such costs into the overall cost of the procedure. Moreover, we are unable to predict what changes will be made to the reimbursement methodologies used by third-party payors in the future.

To the extent we sell our products internationally, market acceptance may depend, in part, upon the availability of coverage and reimbursement within prevailing healthcare payment systems. Reimbursement and healthcare payment systems in international markets vary significantly by country, and include both government-sponsored healthcare and private insurance. We may not obtain international coverage and reimbursement approvals in a timely manner, if at all. Our failure to receive such approvals would negatively impact market acceptance of our products in the international markets in which those approvals are sought.

Consolidation in the healthcare industry could lead to demands for price concessions or to the exclusion of some suppliers from certain of our markets, which could have an adverse effect on our business, results of operations and financial condition.

Because healthcare costs have risen significantly over the past decade, numerous initiatives and reforms initiated by legislators, regulators and third-party payors to curb these costs have resulted in a consolidation trend in the healthcare industry to create new companies with greater market power. As the healthcare industry consolidates, competition to provide products and services to industry participants has become and will continue to become more intense. This in turn has resulted and will likely continue to result in greater pricing pressures and the exclusion of certain suppliers from important market segments as GPOs, independent delivery networks and large single accounts continue to use their market power to consolidate purchasing decisions for some of our customers. We expect that market demand, government regulation, third-party coverage and reimbursement policies and societal pressures will continue to change the worldwide healthcare industry, resulting in further business consolidations and alliances among our customers, which may reduce competition, exert further downward pressure on the prices of our products and could adversely impact our business, results of operations and financial condition.

We may need additional funding beyond the proceeds of this offering and may be unable to raise capital when needed, which would force us to delay, reduce, eliminate or abandon our commercialization efforts or product development programs.

We cannot be certain that our anticipated cash flow from operations will be sufficient to meet all of our cash requirements of our growth plan. We intend to continue to make investments to support our business growth and may require additional funds to:

We believe that the net proceeds from this offering, together with our existing cash balances and cash receipts generated from sales of our products, will be sufficient to meet our anticipated cash requirements for at least the next 12 months. However, we may need additional funding sooner than expected and our business and future funding requirements can change unpredictably due to a variety of factors, which could affect our funding needs or cash flows from operations. We may be unable to raise additional funds in a timely manner or on terms that are acceptable to us. If we do not have, or are not able to obtain, sufficient funds, we may have to delay the further development or commercialization of our products for one or more indications. We also may have to reduce marketing, customer support or other resources devoted to our products.

Our results of operations and liquidity needs could be materially and adversely affected by market fluctuations and economic downturn.

Our results of operations and liquidity could be materially and adversely affected by economic conditions generally, both in the United States and elsewhere around the world. Domestic and international equity and debt markets have experienced and may continue to experience heightened volatility and turmoil based on domestic and international economic policies, conditions and concerns. In the event the markets continue to remain volatile, including as a result of the current COVID-19 pandemic, our results of operations and liquidity could be adversely affected by those factors in many ways, including making it more difficult for us to raise funds if necessary, and our stock price may decline. In addition, we maintain significant amounts of cash and cash equivalents at one or more financial institutions, some of which may not be federally insured. If economic instability were to occur, we cannot be certain that we will not experience losses on these cash and cash equivalents.

Our quarterly operating results may fluctuate significantly, which may cause the price of our stock to fluctuate.

Due in part to the unpredictability of the occurrence of traumatic wounds, which in turn causes some unpredictability in our acute wound management business, our operating results have varied from

quarter to quarter and may vary significantly from quarter to quarter in the future. Quarterly fluctuations may also result from factors such as:

As a result of these factors, we may not be able to accurately forecast our revenues or operating results, and our quarterly operating results may vary significantly in the future. This quarterly variation means that period-to-period comparisons of results of operations may not necessarily be meaningful and, as a result, such comparisons should not be relied upon as indications of future performance. Furthermore, any quarterly fluctuations in our operating results may, in turn, cause the price of our stock to fluctuate substantially.

Changes in tax law could adversely affect our business and could differ materially from the financial statements provided herein.

The rules dealing with U.S. federal, state and local income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Service and the U.S. Treasury

Department. Changes to tax laws (which changes may have retroactive application) could adversely affect us or holders of our common stock. In recent years, many such changes have been made and changes are likely to continue to occur in the future. Future changes in tax laws could have a material adverse effect on our business, cash flow, financial condition or results of operations. We urge investors to consult with their legal and tax advisers regarding the implication of potential changes in tax laws on an investment in our common stock.

Our ability to use net operating loss carryforwards and certain other tax attributes to reduce future tax payments may be subject to limitations.

Our U.S. federal net operating loss carryforwards generated in taxable years beginning before January 1, 2018 may be carried forward to offset future taxable income, if any, until such net operating loss carryforwards expire. Under the Tax Act, as modified by the CARES Act, U.S. federal net operating losses incurred in taxable years beginning after December 31, 2017 may be carried forward indefinitely, but the deductibility of such U.S. federal net operating losses in taxable years beginning after December 31, 2020, is limited to 80% of taxable income. It is uncertain if and to what extent various states will conform to the Tax Act or the CARES Act.

In addition, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an "ownership change" (generally defined as a greater than 50 percentage point change (by value) in its equity ownership over a three-year period), the corporation's ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes (such as research tax credits) to offset its post-change income may be limited. It is possible that we have experienced one or more ownership changes in the past, and we may experience ownership changes in the future as a result of subsequent shifts in our stock ownership. We may therefore be limited in the portion of net operating loss carryforwards and other applicable tax attributes that we can use in the future to offset taxable income for U.S. federal income tax purposes. In addition, at the state level, there may be periods during which the use of net operating losses is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.

Significant disruptions of information technology systems or breaches of information security could adversely affect our business, results of operations and financial condition.

We rely to a large extent upon sophisticated information technology systems to operate our business. In the ordinary course of business, we collect, store and transmit large amounts of confidential information (including but not limited to, personal information and intellectual property). We also have outsourced significant elements of our operations to third parties, including significant elements of our information technology infrastructure and, as a result, we are managing many independent vendor relationships with third parties who may or could have access to our confidential information. The size and complexity of our information security systems, and those of our third-party vendors with whom we contract (and the large amounts of confidential information that is present on them), make such systems potentially vulnerable to service interruptions or to security breaches from inadvertent or intentional actions by our employees or vendors, or from malicious attacks by third parties. Such attacks are of ever-increasing levels of sophistication and are made by groups and individuals with a wide range of motives (including, but not limited to, industrial espionage and market manipulation) and expertise. While we have invested significantly in the protection of data and information technology, there can be no assurance that our efforts will prevent service interruptions or security breaches. Although we have cyber-insurance coverage that may cover certain events described

above, this insurance is subject to deductibles and coverage limitations and we may not be able to maintain this insurance. Also, it is possible that claims could exceed the limits of our coverage. Any interruption or breach in our systems could adversely affect our business operations and/or result in the loss of critical or sensitive confidential information or intellectual property, and could result in financial, legal, business and reputational harm to us or allow third parties to gain material, inside information that they use to trade in our securities.

Our future success depends on our ability to retain key employees and our ability to attract, retain and motivate qualified personnel.

Our success depends, in part, upon key managerial, manufacturing, scientific, sales and technical personnel, as well as our ability to continue to attract and retain additional highly qualified personnel. We compete for such personnel with other companies, academic institutions, governmental entities and other organizations, some of which have greater financial resources than we do to recruit and retain personnel. We cannot be certain that we will be successful in retaining our current personnel or in hiring or retaining qualified personnel in the future. Recruiting and retaining qualified employees, including sales and scientific personnel, will be critical to our success. Our failure to retain key employees or to attract, retain or motivate qualified personnel may impede the progress of our commercialization, research and development objectives. Further, any inability on our part to enforce non-compete arrangements related to key personnel who have left our company or may leave our company in the future could have a material adverse effect on our business.

Our business could be adversely affected if there are disputes among members of our board and stockholders.

In 2015, one of our stockholders—and now a current director—acted to remove the then board of directors by means of a written stockholder consent. The action led to a lawsuit that ultimately confirmed the effectiveness of the consent, resulting in the replacement of the incumbent directors with the director slate elected by the stockholders. All legal proceedings related to this matter were resolved in 2016 and, in 2019, two of the removed directors were reappointed to our board. Although we believe the current relationships among our directors are good, we cannot guarantee that there will not be future disputes among stockholders or members of our board. If such a dispute were to occur, it could adversely affect the functioning of our board of directors, lead to management distraction and interfere with our operations, any of which could materially harm our business.

Our officers, employees, independent contractors, principal investigators, consultants and commercial partners may engage in misconduct or activities that are improper under other laws and regulations, which would create liability for us.

We are exposed to the risk that our officers, employees, independent contractors (including contract research organizations, or CROs), consultants, suppliers and third party distributors may engage in fraudulent conduct or other illegal activity. Misconduct by these parties could include intentional, reckless and/or negligent conduct or disclosure of unauthorized activities to us that violate FDA regulations, including those laws requiring the reporting of true, complete and accurate information to the FDA, manufacturing standards, federal and state healthcare laws and regulations, and laws that require the true, complete and accurate reporting of financial information or data. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Misconduct by these parties could also involve the improper use of individually identifiable information, which could result in regulatory sanctions and serious harm to our reputation. While we have programs in place to

address this conduct, it is not always possible to identify and deter misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant civil, criminal, and administrative penalties, including without limitation, damages, fines, imprisonment, exclusion from participation in government healthcare programs, and the curtailment or restructuring of our operations.

Our efforts to acquire and integrate other companies or technologies could adversely affect our operations and financial results.

As part of our growth strategy, we may, among other things, selectively in-license or acquire complementary products and technologies. A successful acquisition depends on our ability to identify, negotiate, complete and integrate such acquisition and to obtain any necessary financing. The process of proposing, negotiating and implementing a license or acquisition of a product candidate or approved product is lengthy and complex. Other companies, including some with substantially greater financial, marketing, sales and other resources, may compete with us for the license or acquisition of product candidates and approved products. With respect to any such future acquisitions, we may experience:

In addition, any future acquisitions could materially impair our operating results by causing us to make significant expenditures or incur debt in an effort to fund such acquisitions.

The estimates of market opportunity and forecasts of market growth included in this prospectus may prove to be inaccurate, and even if the markets in which we compete are as large as we estimate or achieve their forecasted growth, our business could fail to grow at similar rates, if at all.

Market opportunity estimates and growth forecasts included in this prospectus, including those we have generated ourselves, are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate. The variables that go into the calculation of our market opportunity are subject to change over time, and there is no guarantee that any particular number or percentage of customers covered by our market opportunity estimates will purchase our products at all or generate any particular level of revenue for us. Any expansion in our market depends on a number

of factors, including the cost and perceived value associated with our products and those of our competitors. Even if the markets in which we compete meet the size estimates and growth forecast in this prospectus, our business could fail to grow at similar rates, if at all. Our growth is subject to many factors, including our success in implementing our business strategy, which is subject to many risks and uncertainties. Accordingly, the forecasts of market size and growth included in this prospectus should not be taken as indicative of our future growth.

We rely on third parties to conduct our research studies and they may not perform as contractually required or expected.

We rely on third parties, such as medical institutions, clinical investigators and contract laboratories to conduct our clinical research and studies. We and our third party collaborators are required to comply with all applicable regulations governing clinical research, including good clinical practice, or GCP, regulations. The FDA and similar foreign authorities enforce these regulations through periodic inspections of trial sponsors, principal investigators, and trial sites. If we or our third party collaborators fail to comply with GCP regulations, our studies may be delayed or the data generated in our studies may be deemed unreliable and the FDA may require us to perform additional studies before granting us authorization to market, if at all. We cannot be certain that, upon inspection, the FDA and similar foreign regulatory authorities will determine that any of our studies comply or complied with applicable regulations, including GCPs. In addition, our studies must be conducted with product manufactured in accordance with the QSR, and the FDA may also require a large number of test subjects. Our failure or the failure of our third party contractors, to comply with the applicable regulations may require us to repeat studies, which could delay or prevent us from obtaining clearance. Furthermore, our third-party collaborators may be delayed in conducting our studies for reasons outside of their control. For example, as a result of the current COVID-19 pandemic, many studies and clinical trials, including those involving our products, have been temporarily suspended.

If these third parties do not successfully carry out their contractual duties or regulatory obligations or meet expected deadlines, if these third parties need to be replaced, or if the quality or accuracy of the data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for other reasons, our non-clinical development activities or clinical studies may be extended, delayed, suspended or terminated, and we may not be able to obtain regulatory clearance for, or successfully commercialize, our products for additional indications on a timely basis, if at all, and our business, results of operations, financial condition and growth prospects may be adversely affected.

Our core patents with claims directed to our currently marketed products will soon expire and our remaining patents and other intellectual property rights may not adequately protect our products.

Our ability to compete effectively will depend, in part, on our ability to maintain the proprietary nature of our technology and manufacturing processes. We attempt to protect our intellectual property rights in our technology platform and products through a combination of patent, trademark, copyright and trade secret laws. These legal means, however, afford only limited protection and may not adequately protect our rights. In addition, the laws of some of the countries in which our products are or may be sold may not protect our intellectual property to the same extent as U.S. laws or at all. In particular, the laws of certain countries in which we intend to expand, may provide means to permit the disclosure of our technology to companies of government agencies of such countries. We also may be unable to protect our rights in trade secrets and unpatented proprietary technology in these

countries. Our failure to obtain or maintain adequate protection of our intellectual property rights for any reason could have a material adverse effect on our business, results of operations and financial condition. We rely on trade secrets, including proprietary know-how and other unpatented technology, which are difficult to protect. Although we seek such protection in part by entering into confidentiality agreements with our vendors, employees, consultants and others who may have access to proprietary information, we cannot be certain that these agreements will not be breached, that adequate remedies for any breach would be available, or that our trade secrets will not otherwise become known to or be independently developed by our competitors.

In addition to trade secret protection, we also rely on patents to protect our products. However, the core U.S. and foreign patents with claims directed to our currently marketed products will expire between October 2020 and January 2021. After these patents expire, we will be unable to prevent competitors from designing, marketing or commercializing products similar to ours, which could have an adverse effect on our revenues, sales, pricing and profitability. The patents we own may not be of sufficient scope or strength to provide us with any meaningful protection or commercial advantage, and competitors may be able to design around our patents to develop products that provide outcomes that are similar to ours. In addition, a third party may bring a proceeding before the U.S. Patent and Trademark Office, or USPTO, or equivalent foreign agency attempting to significantly narrow the claims in our issued patents, or even to invalidate any of our patents in their entirety. These proceedings could result in adverse decisions as to the ownership or priority of our inventions and the narrowing or invalidation of any or all of the claims in our issued patents.

Further, while we generally apply for patents in those countries where we expect to have material sales of our patented products, we may not accurately predict all of the countries where patent protection will ultimately be desirable. If we fail to timely file a patent application in any such country, we may be precluded from doing so at a later date. Furthermore, we cannot assure you that any of our patent applications will be approved.

We rely on our trademarks, trade names, and brand names to distinguish our products from the products of our competitors, and have registered or applied to register many of these trademarks. We cannot assure you that our trademark applications will be approved. Third parties may also oppose our trademark applications, or otherwise challenge our use of the trademarks. In the event that our trademarks are successfully challenged, we could be forced to rebrand our products, which could result in loss of brand recognition, and could require us to devote resources to the advertising and marketing of new brands.

If we are unsuccessful in protecting our intellectual property rights, sales of our products may suffer and our ability to generate revenue could be severely impacted.

Legal proceedings to assert our intellectual property rights could be costly and could impair our operations.

In the event that a third party infringes upon or challenges our patents or other intellectual property rights, enforcing these rights may be costly, difficult and time-consuming. If we are unsuccessful in enforcing and protecting our intellectual property rights and protecting our products, it could harm our business, results of operations and financial condition. Even if successful, litigation to enforce our intellectual property rights or to defend our intellectual property rights against challenge could be expensive and time-consuming and could divert our management's attention from our primary business. We may not have sufficient resources to enforce our intellectual property rights or to defend our patents or other intellectual property rights against a challenge. The patents covering our UBM technology platform have in the past been the subject of reexamination and interference proceedings

before the USPTO, as well as patent infringement litigation. While we are pleased with the outcome of these prior proceedings, we cannot assure you that we will be successful enforcing and protecting our intellectual property rights in the future.

We may be sued by third parties for alleged infringement of their proprietary rights, which could be costly, time-consuming and limit our ability to use certain technologies in the future.

We may be subject to claims that our technologies infringe upon the intellectual property or other proprietary rights of third parties. Any claims, even those without merit, could be time-consuming and expensive, and could divert our management's attention away from the execution of our business plan. Moreover, any settlement or adverse judgment resulting from the claim could require us to pay substantial amounts or obtain a license to continue to use the technology that is the subject of the claim, or otherwise restrict or prohibit our use of the technology. There can be no assurance that we would be able to obtain a license from the third party asserting the claim on commercially reasonable terms, if at all, that we would be able to develop alternative technology on a timely basis, if at all, or that we would be able to obtain a license to use a suitable alternative technology to permit us to continue offering, and our customers to continue using, our affected product.

We generally indemnify our retail and distribution partners with respect to third party intellectual property infringement claims relating to our products. These claims may require us to initiate or defend protracted and costly litigation on behalf of our retail and distribution partners regardless of the merits. An adverse determination could force us to pay damages on behalf of our retail and distribution partners or obtain licenses on their behalf. If we cannot obtain such licenses on commercially reasonable terms, our retail and distribution partners may be forced to stop selling and distributing our products. Thus, infringement claims asserted against us or our vendors may have a material adverse effect on our business, results of operations or financial condition.

Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.

Success in the healthcare industry is often dependent on intellectual property, for example, patents. Obtaining and enforcing patents in the healthcare industry involve both technological and legal complexity, and therefore obtaining and enforcing healthcare patents is costly, time-consuming and inherently uncertain.

Moreover, U.S. Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. In addition to increasing uncertainty regarding our ability to obtain patents in the future, this combination of events has created uncertainty regarding the value of any patents we do obtain. Depending on decisions by the U.S. Congress, the federal courts, and the U.S. Patent and Trademark Office, the laws and regulations governing patents could change in unpredictable ways that could weaken our ability to obtain new patents or to enforce any current or future patents that we may own or license.

There has been no public market for our common stock prior to this offering, and an active market in the shares may not develop or be liquid enough for investors to resell our common stock quickly or at the market price.

Prior to this offering, there has been no public market for our common stock. We cannot predict the extent to which an active market for our common stock will develop or be sustained after this

offering, or how the development of such a market might affect the market price for our common stock. The initial public offering price of our common stock in this offering will be agreed upon between us and the underwriters based on a number of factors, including market conditions in effect at the time of the offering, which may not be indicative of the price at which our shares will trade following completion of the offering. If an active market for our common stock does not develop or is not sustained, it may be difficult for you to sell shares you purchased in this offering at an attractive price or at all.

The price of our common stock is likely to be volatile and may fluctuate due to factors beyond our control.

The market price of our common stock may be highly volatile and may fluctuate or decline substantially as a result of a variety of factors, some of which are beyond our control, including:

Broad market and industry fluctuations, as well as general economic, political, regulatory, and market conditions, may also negatively impact the market price of our common stock.

If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about our business, the price of our common stock and our trading volume could decline.

The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. We do not currently have and may never obtain research coverage by equity research analysts. If no or too few securities or industry analysts commence coverage of us, the trading price for our common stock would likely be negatively affected. In the event securities or industry analysts initiate coverage, if one or more of the analysts

who cover us downgrade our common stock or publish inaccurate or unfavorable research about our business, the price of our common stock would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our common stock could decrease, which might cause the price of our common stock and trading volume to decline.

We will incur increased costs as a result of operating as a public company, and our management and board of directors will be required to devote substantial time to new compliance initiatives and corporate governance practices.

As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the stock exchange on which our common stock is listed, and other applicable securities rules and regulations impose various requirements on public companies, including the establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management, board of directors and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, we expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance, which in turn could make it more difficult for us to attract and retain qualified members of our management and board of directors. However, these rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.

Future sales of our common stock in the public market could cause our share price to fall.

Sales of a substantial number of shares of our common stock in the public market after this offering, or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. Upon the closing of this offering, we will have 22,675,510 shares of common stock outstanding.

All of the shares of common stock sold in this offering will be freely tradable without restrictions or further registration under the Securities Act except for any shares held by our affiliates as defined in Rule 144 under the Securities Act. Approximately 17.0 million shares of common stock outstanding immediately after this offering, or approximately 75%, will be restricted as a result of securities laws, lock-up agreements or other contractual restrictions that restrict transfers for 180 days after the date of this prospectus.

UBS Securities LLC may, in its sole discretion, release all or some portion of the shares subject to lock-up agreements with the underwriters prior to expiration of the lock-up period. See "Shares eligible for future sale."

The holders of approximately 22.7 million shares of common stock outstanding after this offering, or approximately 63.3% of outstanding shares immediately after giving effect to this offering, will be entitled to rights with respect to registration of such shares under the Securities Act pursuant to an investor rights agreement between such holders and us. See "Description of capital stock—Registration rights." If such holders, by exercising their registration rights, sell a large number of shares, the market price for our common stock could be harmed. If we file a registration statement for the purpose of

selling additional shares to raise capital and are required to include shares held by these holders pursuant to the exercise of their registration rights, our ability to raise capital may be impaired. We intend to file a registration statement on Form S-8 under the Securities Act to register shares for issuance under our equity incentive plans, including our 2002 Plan, 2011 Plan, 2020 Plan and ESPP, and shares issuable upon exercise of options granted outside of our equity incentive plans. Each of the 2020 Plan and ESPP provides for automatic increases in the shares reserved for issuance under the plan which could result in additional dilution to our stockholders. Once we register these shares, they can be freely sold in the public market upon issuance and vesting, subject to any lock-up restrictions of the holder.

Because we do not expect to pay dividends on our common stock in the foreseeable future, capital appreciation, if any, would be your sole source of gain.

We have never declared or paid any dividends on our common stock. We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. The decision to pay future dividends to stockholders will be at the discretion of our board of directors after taking into account various factors including our business prospects, cash requirements, financial performance and new product development. Accordingly, investors cannot rely on dividend income from our common stock and any returns on an investment in our common stock will likely depend entirely upon any future appreciation in the price of our common stock.

If you purchase common stock in this offering, you will suffer immediate dilution of your investment.

The assumed initial public offering price of our common stock is substantially higher than the pro forma as adjusted net tangible book value per share. Therefore, if you purchase common stock in this offering, you will pay a price per share that substantially exceeds the book value of our tangible assets, after subtracting our liabilities, after this offering. Based on the assumed initial public offering price of $15.00 per share, which is the midpoint of the range set forth on the cover page of this prospectus, you will experience immediate dilution of $11.29 per share, representing the difference between our pro forma as adjusted net tangible book value per share after giving effect to this offering and the assumed initial public offering price. In addition, purchasers of common stock in this offering will have contributed approximately 69% of the aggregate price paid by all purchasers of our common stock but will own only approximately 22% of our common stock outstanding after this offering. To the extent options are exercised, you will incur further dilution. See "Dilution."

We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.

Our management will have broad discretion in the application of the net proceeds from this offering and could spend the proceeds in ways that do not improve our results of operations or increase the value of our common stock. We intend to use the net proceeds from this offering to increase awareness of our technology and products, fund research, including clinical trials and post-market studies, grow our sales force, upgrade our Lafayette, Indiana facility, expand our international sales opportunity, expand and enhance our product portfolio and for working capital and general corporate purposes. The failure by our management to apply these funds effectively could result in financial losses that could have an adverse effect on our business, cause the price of our common stock to decline and delay the development of our product candidates. Pending their use, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value.

We are an "emerging growth company," and we cannot be certain if the reduced reporting requirements applicable to "emerging growth companies" will make our common stock less attractive to investors.

We are an "emerging growth company," as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies," including the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, or Section 404, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. Pursuant to Section 107 of the JOBS Act, as an emerging growth company, we have elected to use the extended transition period for complying with new or revised accounting standards until those standards would otherwise apply to private companies. As a result, our financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies, which may make our common stock less attractive to investors. In addition, if we cease to be an emerging growth company, we will no longer be able to use the extended transition period for complying with new or revised accounting standards.

We will remain an emerging growth company until the earliest of: (1) the last day of the fiscal year following the fifth anniversary of this offering; (2) the last day of the first fiscal year in which our annual gross revenue is $1.07 billion or more; (3) the date on which we have, during the previous rolling three-year period, issued more than $1 billion in non-convertible debt securities; and (4) the last day of the fiscal year in which the market value of our common stock held by non-affiliates exceeded $700 million as of June 30 of such fiscal year.

We cannot predict if investors will find our common stock less attractive if we choose to rely on these exemptions. For example, if we do not adopt a new or revised accounting standard, our future results of operations may not be as comparable to the results of operations of certain other companies in our industry that adopted such standards. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock, and our stock price may be more volatile.

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, stockholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our common stock.

Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404, or any subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal control over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock.

We will be required to disclose changes made in our internal controls and procedures on a quarterly basis and our management will be required to assess the effectiveness of these controls annually.

However, for as long as we are an "emerging growth company" under the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404. We could be an "emerging growth company" for up to five years. An independent assessment of the effectiveness of our internal controls could detect problems that our management's assessment might not. Undetected material weaknesses in our internal controls could lead to financial statement restatements and require us to incur the expense of remediation.

Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our common stock.

Provisions in our amended and restated certificate of incorporation and amended and restated bylaws, as they will be in effect upon the completion of this offering, and provisions of Delaware law, may have the effect of delaying or preventing a change of control or changes in our management. Our amended and restated certificate of incorporation and amended and restated bylaws will include provisions that:

These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally, subject to certain exceptions, prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any "interested" stockholder for a period of three years following the date on which the stockholder became an "interested" stockholder.

Our amended and restated certificate of incorporation will designate the Court of Chancery of the State of Delaware and, to the extent enforceable, the federal district courts of the United States of America as the exclusive forums for substantially all disputes between us and our stockholders, which will restrict our stockholders' ability to choose the judicial forum for disputes with us or our directors, officers, or employees.

Our amended and restated certificate of incorporation, as will be in effect upon the completion of this offering, will provide that the Court of Chancery of the State of Delaware (or, if and only if the Court of Chancery of the State of Delaware lacks subject matter jurisdiction, any state court located within the State of Delaware or, if and only if all such state courts lack subject matter jurisdiction, the federal district court for the District of Delaware) is the exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: any derivative action or proceeding brought on our behalf; any action asserting a breach of a fiduciary duty; any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our amended and restated certificate of incorporation, or our amended and restated bylaws; or any action asserting a claim against us that is governed by the internal affairs doctrine. The provisions would not apply to suits brought to enforce a duty or liability created by the Securities Act or the Exchange Act. In addition, our amended and restated certificate of incorporation will provide that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, subject to and contingent upon a final adjudication in the State of Delaware of the enforceability of such exclusive forum provision.

These choice of forum provisions may limit a stockholder's ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees. If a court were to find either choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions. While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions. In such instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of our amended and restated certificate of incorporation. This may require significant additional costs associated with resolving such action in other jurisdictions and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions.

This prospectus contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this prospectus, including statements regarding our future results of operations or financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as "anticipate," "believe," "contemplate," "continue," "could," "estimate," "expect," "intend," "may," "plan," "potential," "predict," "project," "should," "will" or "would" or the negative of these words or other similar terms or expressions. These forward-looking statements include, but are not limited to, statements concerning the following:

You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this prospectus primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition

and operating results. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled "Risk factors" and elsewhere in this prospectus. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this prospectus. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

In addition, statements that "we believe" and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this prospectus. And while we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

The forward-looking statements made in this prospectus relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this prospectus to reflect events or circumstances after the date of this prospectus or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments.

This prospectus contains estimates, projections and other information concerning our industry, our business and the markets for our products. Some market data and statistical information contained in this prospectus are also based on management's estimates and calculations, which are derived from our review and interpretation of independent sources, our internal research and our knowledge of our markets. This information involves a number of assumptions and limitations, and you are cautioned not to give undue weight to these estimates. In addition, projections, assumptions and estimates of the future performance of the industry in which we operate and our future performance are necessarily subject to uncertainty and risk due to a variety of factors, including those described in the sections titled "Risk factors" and "Special note regarding forward-looking statements." These and other factors could cause results to differ materially from those expressed in the projections and estimates made by independent third parties and us.

Unless otherwise expressly stated, we obtained industry, business, market and other data from our own internal estimates and research as well as from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources. Some of the estimates, projections and other industry information in this prospectus was obtained from BioMedGPS, provider of SmartTRAK Business Intelligence Solutions.

In some cases, we do not expressly refer to the sources from which this data is derived. In that regard, when we refer to one or more sources of this type of data in any paragraph, you should assume that other data of this type appearing in the same paragraph is derived from the same sources, unless otherwise expressly stated or the context otherwise requires.

We estimate that we will receive net proceeds from this offering of approximately $67.4 million based on an assumed initial public offering price of $15.00 per share of common stock, the midpoint of the estimated price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We will not receive any of the proceeds from the sale of common stock in this offering by the selling stockholders in the event that the underwriters exercise their option to purchase additional shares.

A $1.00 increase (decrease) in the assumed initial public offering price of $15.00 per share of common stock, the midpoint of the estimated price range set forth on the cover page of this prospectus, would increase (decrease) the net proceeds to us from this offering by approximately $4.7 million, assuming the number of shares of common stock offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. An increase (decrease) of 1,000,000 shares in the number of shares of common stock offered by us would increase (decrease) the net proceeds to us from this offering by approximately $14.0 million, assuming the assumed initial public offering price of $15.00 per share of common stock remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

The principal purposes of this offering are to increase our capitalization and financial flexibility, to create a public market for our common stock and to facilitate our future access to the capital markets. As of the date of this prospectus, we cannot specify with certainty all of the particular uses for the net proceeds we receive from this offering. However, we currently intend to use the net proceeds we receive from this offering as follows:

We may also use a portion of the net proceeds we receive from this offering to acquire complementary businesses, products, services or technologies. However, we do not have agreements or commitments to enter into any acquisitions at this time.

We will have broad discretion over how to use the net proceeds we receive from this offering. We intend to invest the net proceeds we receive from this offering that are not used as described above in investment-grade, interest-bearing instruments.

We have never declared or paid any dividends on our common stock. We currently intend to retain all available funds and future earnings, if any, to fund the development and expansion of our business, and we do not anticipate declaring or paying any cash dividends in the foreseeable future. In addition, our loan and security agreement with Silicon Valley Bank contains restrictive covenants that prohibit us, subject to certain exceptions, from paying dividends on our common stock, and future debt securities or other financing arrangements could contain similar or more restrictive negative covenants. Any future determination regarding the declaration and payment of dividends, if any, will be at the discretion of our board of directors and will depend on then-existing conditions, including our financial condition, operating results, contractual restrictions (including in our then-existing debt arrangements), capital requirements, business prospects and other factors our board of directors may deem relevant.

The following table sets forth our cash and cash equivalents and capitalization as of March 31, 2020:

The information below is illustrative only and our capitalization following this offering will be based on the actual initial public offering price and other terms of this offering determined at pricing. Cash and cash equivalents are not components of our total capitalization. You should read this table together with the section titled "Management's discussion and analysis of financial condition and results of operations" and our financial statements and related notes included elsewhere in this prospectus.

	As of March 31, 2020



	Actual			Pro forma			Pro forma as adjusted

	(in thousands except share and per share amounts)
Cash and cash equivalents	$	4,559		$	19,099		$	86,978



Debt		500			15,040			15,040
Stockholders' equity:
Series A convertible preferred stock, $0.001 par value, 2,000,000 shares authorized, 891,000 shares issued and outstanding with a liquidation preference of $1,337, actual; no shares authorized, issued and outstanding, pro forma and pro forma as adjusted		1			—			—
Series B convertible preferred stock, $0.001 par value, 2,000,000 shares authorized, 1,915,149 shares issued and outstanding with a liquidation preference of $6,263, actual; no shares authorized, issued and outstanding, pro forma and pro forma as adjusted		2			—			—
Series C convertible preferred stock, $0.001 par value, 30,000,000 shares authorized, 23,393,691 shares issued and outstanding with a liquidation preference of $9,357, actual; no shares authorized, issued and outstanding, pro forma and pro forma as adjusted		23			—			—
Series D convertible preferred stock, $0.001 par value, 10,000,000 shares authorized, 6,428,545 shares issued and outstanding with a liquidation preference of $9,000, actual; no shares authorized, issued and outstanding, pro forma and pro forma as adjusted		6			—			—
Common stock, $0.001 par value, 65,000,000 authorized, 4,806,044 shares issued and outstanding, actual; 100,000,000 shares authorized, 17,675,510 shares issued and outstanding, pro forma; 100,000,000 shares authorized, 22,675,510 shares issued and outstanding, pro forma as adjusted		5			18			23
Preferred stock, $0.001 par value, no shares authorized, issued and outstanding, actual; 5,000,000 shares authorized, no shares issued and outstanding, pro forma and pro forma as adjusted		—			—			—
Additional paid-in capital		42,716			42,735			110,080
Accumulated deficit		(26,089	)		(26,089	)		(26,089	)

Total stockholders' equity		16,664			16,664			84,014

Total capitalization	$	17,164		$	31,704		$	99,054

A $1.00 increase (decrease) in the assumed initial public offering price of $15.00 per share of common stock, the midpoint of the estimated price range set forth on the cover page of this prospectus, would increase (decrease) each of our pro forma as adjusted cash and cash equivalents, additional paid-in capital, total stockholders' equity and total capitalization by approximately $4.7 million, assuming the

number of shares of common stock offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase (decrease) of 1,000,000 shares in the number of shares of common stock offered by us would increase (decrease) each of our pro forma as adjusted cash and cash equivalents, additional paid-in capital, total stockholders' equity and total capitalization by approximately $14.0 million, assuming the assumed initial public offering price of $15.00 per share of common stock remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expense payable by us.

If you invest in our common stock in this offering, your interest will be diluted to the extent of the difference between the initial public offering price per share of common stock and the pro forma as adjusted net tangible book value per share immediately after this offering.

Our pro forma net tangible book value as of March 31, 2020 was $16.7 million, or $0.94 per share of common stock. Our pro forma net tangible book value per share represents the amount of our total tangible assets less our total liabilities, divided by the number of our shares of common stock outstanding as of March 31, 2020, after giving effect to the automatic conversion of all outstanding shares of convertible preferred stock into an aggregate of 12,869,466 shares of common stock, which will occur immediately prior to the completion of this offering.

After giving effect to the sale by us of 5,000,000 shares of common stock in this offering at an assumed initial public offering price of $15.00 per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of March 31, 2020 would have been $84.0 million, or $3.71 per share. This amount represents an immediate increase in pro forma as adjusted net tangible book value of $2.76 per share to our existing stockholders and an immediate dilution of $11.29 per share to new investors purchasing common stock in this offering. We determine dilution by subtracting the pro forma as adjusted net tangible book value per share after this offering from the initial public offering price per share paid by investors purchasing common stock in this offering. The following table illustrates this dilution on a per share basis:

The dilution information discussed above is illustrative only and may change based on the actual initial public offering price and other terms of this offering. A $1.00 increase (decrease) in the assumed initial public offering price of $15.00 per share of common stock, the midpoint of the estimated price range set forth on the cover page of this prospectus, would increase (decrease) our pro forma as adjusted net tangible book value per share after this offering by $0.21 per share and increase (decrease) the dilution to new investors by $0.79 per share, in each case assuming the number of shares of common stock offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. An increase of 1,000,000 shares in the number of shares of common stock offered by us would increase our pro forma as adjusted net tangible book value by approximately $0.43 per share and decrease the dilution to new investors by approximately $0.43 per share and a decrease of 1,000,000 shares in the number of shares of common stock offered by us would decrease our pro forma as adjusted net tangible book value by approximately $0.47 per share and increase the dilution to new investors by approximately $0.47 per share, in each case assuming the assumed initial public offering price of

$15.00 per share of common stock remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

The following table summarizes, as of March 31, 2020, on a pro forma as adjusted basis as described above, the number of shares of our common stock, the total consideration and the average price per share (1) paid to us by existing stockholders and (2) to be paid by new investors acquiring our common stock in this offering at an assumed initial public offering price of $15.00 per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

Each $1.00 increase (decrease) in the assumed initial public offering price of $15.00 per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, would increase (decrease) the total consideration paid by new investors and total consideration paid by all stockholders by $5.0 million, assuming that the number of shares of common stock offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

The table above assumes no exercise of the underwriters' option to purchase additional shares in this offering. If the underwriters' option to purchase additional shares is exercised in full, the number of shares of our common stock held by existing stockholders would be reduced to 75% of the total number of shares of our common stock outstanding after this offering, and the number of shares of common stock held by new investors purchasing common stock in this offering would be increased to 25% of the total number of shares of our common stock outstanding after this offering.

To the extent that stock options or warrants are exercised, new stock options are issued under our equity incentive plans, or we issue additional shares of common stock in the future, there will be further dilution to investors participating in this offering. In addition, we may choose to raise additional capital because of market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans. If we raise additional capital through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our stockholders.

The selected statements of operations data for the fiscal years ended December 31, 2019 and 2018 and the selected balance sheet data as of December 31, 2018 and 2019 have been derived from our audited financial statements included elsewhere in this prospectus. The selected statements of operations data for the three months ended March 31, 2019 and 2020 and the selected balance sheet data as of March 31, 2019 and 2020 have been derived from our unaudited financial statements included elsewhere in this prospectus. You should read the financial data set forth below in conjunction with our financial statements and the accompanying notes and the information in the section titled "Management's discussion and analysis of financial condition and results of operations" included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results to be expected for any period in the future.

	Year ended December 31,						Three months ended March 31,

Statements of operations data:	2019			2018			2020			2019

	(in thousands, except share and per share data)
Revenue	$	100,794		$	89,221		$	23,684		$	24,151
Cost of goods sold		19,111			16,289			4,646			4,434

Gross profit		81,684			72,932			19,038			19,716

Operating expenses:
Selling, general and administrative		72,364			66,977			20,040			17,438
Research and development		7,944			9,020			1,739			2,288

Total operating expenses		80,307			75,997			21,779			19,725

Income (loss) from operations		1,376			(3,065	)		(2,741	)		(9	)

Other income (expense):
Interest expense		(373	)		(303	)		(98	)		(127	)
Interest income		166			180			24			42
Other income		121			9			59			—

Total other expense		(87	)		(115	)		(15	)		(85	)

Income (loss) before income taxes		1,289			(3,180	)		(2,756	)		(94	)
Income taxes benefit		160			49			86			160

Net income (loss)	$	1,449		$	(3,131	)	$	(2,671	)	$	66



Net income (loss) per common share, basic(1)	$	0.08		$	(0.78	)	$	(0.56	)	$	0.00



Net income (loss) per common share, diluted(1)	$	0.08		$	(0.78	)	$	(0.56	)	$	0.00



Weighted average number of common shares outstanding, basic(1)		4,715,669			4,006,027			4,802,342			4,659,219



Weighted average number of common shares outstanding, diluted(1)		5,885,061			4,006,027			4,802,342			5,918,452



Pro forma net income (loss) per common share, basic(1)	$	0.08					$	(0.15	)
Pro forma net income (loss) per common share, diluted(1)	$	0.08					$	(0.15	)
Pro forma weighted average number of common shares outstanding, basic(1)		17,585,135						17,671,808
Pro forma weighted average number of common shares outstanding, diluted(1)		18,754,527						17,671,808

	As of December 31,						As of March 31, 2020

Balance sheet data:	2019			2018			As of March 31, 2020

	(in thousands)
Cash and cash equivalents	$	6,961		$	7,712		$	4,559
Working capital(1)		19,515			18,315			16,705
Total assets		43,397			42,897			38,976
Legal settlement liability, including current portion(2)		12,825			15,000			12,325
Line of credit		—			—			500
Total liabilities		24,426			26,685			22,311
Convertible preferred stock		33			33			33
Additional paid-in capital		42,351			41,042			42,715
Accumulated deficit		(23,418	)		(24,866	)		(26,089	)
Total stockholders' equity		18,971			16,212			16,664

Management's discussion and analysis of financial condition and results of operations

The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including, without limitation, those set forth in "Risk factors," "Special note regarding forward-looking statements" and other matters included elsewhere in this prospectus. The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the notes thereto included elsewhere in this prospectus, as well as the information presented under "Selected financial data."

We are a leading regenerative medicine company focused on the development, manufacture and sale of products primarily used in acute care settings as part of the treatment and management of moderate to severe wounds and reinforcement of soft tissue surgical defects. Our products utilize our proprietary porcine urinary bladder matrix platform technology, which is designed to enhance the body's ability to restore natural tissue and minimize scarring in the management of traumatic, surgical and chronic wounds, hernias and other conditions requiring the reinforcement of soft tissue. We believe we are at the forefront of advancing the global standard of care for wounds and soft tissue surgical defects by providing solutions that are designed to significantly improve patient outcomes while lowering the overall cost of care.

We market MicroMatrix, a particulate formulation, and Cytal Wound Matrix products, in sheet formulations, for the management of acute, surgical, chronic and tunneling wounds and partial thickness burns. We also market Gentrix Surgical Matrix products, in sheet formulations, for reinforcement of soft tissue in certain surgical applications, such as for hernia repair. We manufacture our products using our proprietary know-how, trade secrets and patented technology. Since our commercial launch in 2009, we have sold over 500,000 of our urinary bladder matrix, or UBM, products. We recorded $100.8 million and $89.2 million in revenue for the years ended December 31, 2019 and 2018, respectively, and net income of $1.4 million for the year ended December 31, 2019 and net loss of $3.1 million for the year ended December 31, 2018. We generated revenue of $23.7 million and net loss of $2.7 million for the three months ended March 31, 2020, compared to revenue of $24.2 million and net income of $0.1 million for the three months ended March 31, 2019.

Our revenue in the United States is generated through a dedicated, surgically-focused direct sales force of over 160 employees that sell into hospital operating rooms and intensive care units. To complement our direct sales efforts, we also have established a national accounts team that supports our commercial efforts with group purchasing organizations, or GPOs, integrated delivery networks, or IDNs, and government facilities, including Department of Veterans Affairs and Department of Defense medical facilities. Over half of our revenue is derived by direct delivery of our UBM products by our sales representatives at the time of the patient procedure.

We intend to grow our business and market opportunity by further penetrating our current acute care customer accounts, increasing our acute care customer base, selectively expanding the sale of our products into non-acute care settings, expanding our international sales opportunities and enhancing and expanding our product portfolio.

We view our operations and manage our business in one operating segment. All of our operations are located in the United States.

Management's discussion and analysis of financial condition and results of operations

Our revenue is derived primarily from our sales of our UBM products to acute care customers for complex wound management applications and surgical soft tissue repair applications. Our revenue is driven by (i) direct sales to customers through delivery at the time of procedure by one of our sales representatives, which we refer to as field stock sales; (ii) direct orders shipped from our warehouse to customers, which we refer to as drop ship sales; and (iii) consignment agreements with customers, which we refer to as consignment sales.

Cost of goods sold consists of direct labor expenses, including employee benefits and stock-based compensation expense, product material costs, depreciation of manufacturing equipment, freight costs, facility costs and certain allocated overhead expenses. As we grow our revenue, we expect these expenses to increase. Our gross profit represents total revenue less the cost of goods sold, and gross margin is gross profit expressed as a percentage of total revenue.

Professional services consist principally of external legal, accounting, recruiting and other consulting services. Our provision for doubtful accounts, insurance premiums and banking fees, as well as insurance verification services provided by an outside service provider to supplement our internal reimbursement team, are also included in selling, general and administrative expense. We expense all selling, general and administrative expenses as incurred.

We expect that our selling, general and administrative expenses will increase in absolute dollars as we grow our commercial organization and incur additional expenses related to operating as a public company, including director and officer insurance coverage, legal costs, accounting costs, costs related to listing our shares on the Nasdaq Global Market, costs related to compliance with the rules and regulations of the U.S. Securities and Exchange Commission, or SEC, and investor relations costs.

Research and development expenses consist of costs incurred for the development of our products for various applications, and include:

Management's discussion and analysis of financial condition and results of operations

Research and development costs are expensed as incurred. Historically, our external research and development expenses consisted principally of fees paid in connection with preclinical and clinical activities related to our products and UBM platform technology. We expect to continue to incur research and development costs as we conduct or fund research, including clinical trials and post-market studies, and seek to enhance and expand our product portfolio.

Other (expense) income is comprised of interest expense, interest income and other non-operating expense activities. Interest expense consists primarily of interest expense associated with our loan balances and, for the 2019 period, interest on amounts due under our settlement agreement. Interest income consists of interest earned on our cash and cash equivalents.

We continue to closely monitor developments related to the COVID-19 pandemic and our decisions will continue to be driven by the health and well-being of our employees, hospital and physician customers, and their patients while maintaining operations to support our customers and their patients in the near-term. These developments include:

Management's discussion and analysis of financial condition and results of operations

In response to the impact of COVID-19, we have implemented a variety of measures intended to help us manage through its impact and position us to resume normal operations quickly and efficiently once restrictions are lifted. These measures exist across several areas and include:

There is considerable uncertainty and lack of visibility regarding our near-term revenue growth prospects and product development plans due to the rapidly evolving environment and continued uncertainties resulting from the COVID-19 pandemic. At this time, the full extent of the impact of the COVID-19 pandemic on our business, financial condition and results of operations is uncertain and cannot be predicted with reasonable accuracy and will depend on future developments that are also uncertain and cannot be predicted with reasonable accuracy. We believe there are a number of patients who have gone untreated during the COVID-19 pandemic who may benefit from procedures using our products once hospitals recover from the impacts of COVID-19 and resume procedures. However, there can be no assurance that such a recovery will occur or that the recent increase in COVID-19 cases experienced in the U.S. will not lead to renewed hospital access restrictions or renewed limitations on mobility, which could lead to further declines in traumatic injuries and hospital procedures, which could negatively impact our business.

Management's discussion and analysis of financial condition and results of operations

Our results of operations for the three months ended March 31, 2020 and 2019 are summarized in the table below (in thousands).

	Three months ended March 31,

	Three months ended March 31,						Period over period change (%)
	2020			2019			Period over period change (%)
Revenue	$	23,684		$	24,151			(2	)%
Cost of goods sold		4,646			4,434			5	%

Gross profit		19,038			19,716			(3	)%

Operating expenses:
Selling, general and administrative		20,040			17,438			15	%
Research and development		1,739			2,288			(24	)%

Total operating expenses		21,779			19,725			10	%

Operating loss		(2,741	)		(9	)		*

Other (expense) income:
Interest expense		(98	)		(127	)		(22	)%
Interest income		24			42			(42	)%
Other income, net		59			—			*

Total other (expense) income		(15	)		(85	)		(82	)%

Loss before income tax benefit		(2,756	)		(94	)		*
Income tax benefit		(86	)		(160	)		(46	)%

Net (loss) income	$	(2,671	)	$	66			*

For the three months ended March 31, 2020 and 2019, our revenues were $23.7 million and $24.2 million, respectively. The decrease in revenue of $0.5 million was primarily a result of a decline in volume of sales within our existing customer accounts due to disruption from COVID-19. Revenues were impacted by lower than expected procedure volumes in the second half of March 2020 due to hospitals and patients deferring elective procedures and other factors related to the COVID-19 pandemic. The following table shows the breakdown of revenue by product for the three months ended March 31, 2019 and 2020 (in thousands):

Management's discussion and analysis of financial condition and results of operations

For the three months ended March 31, 2020 and 2019, our cost of goods sold were $4.6 million and $4.4 million, respectively. The increase in cost of goods sold of $0.2 million, or 4.8%, was primarily a result of increased production labor costs of $0.2 million.

For the three months ended March 31, 2020 and 2019, our gross profit was $19.0 million and $19.7 million, respectively. The decrease in gross profit was primarily attributable to decreased revenue from sales of our Gentrix products and greater cost of goods sold for the three months ended March 31, 2020 as compared to the three months ended March 31, 2019. Of our products, Gentrix in particular experienced reduced demand due to the COVID-19 pandemic because many of the hernia repair surgeries in which Gentrix is typically used are non-emergency or elective and therefore may be deferred. Our gross margins were 80.4% and 81.6% respectively, for the three months ended March 31, 2020 and 2019.

For the three months ended March 31, 2020 and 2019, our selling, general and administrative expenses were $20.0 million and $17.4 million, respectively. The increase in selling, general and administrative expense of $2.6 million, or 14.9%, was driven primarily by an increase in personnel-related expenses of $0.7 million and outside service expenses of $1.3 million primarily to support regulatory and compliance initiatives.

For the three months ended March 31, 2020 and 2019, our research and development expense was $1.7 million and $2.3 million, respectively. The decrease in research and development expense of $0.6 million, or 24.0%, in the quarter was driven by delays in ongoing clinical studies due to COVID-19 and a reduction in personnel-related expenses of $0.3 million as compared to the three months ended March 31, 2019.

For each of the three months ended March 31, 2020 and 2019, our interest expense was $0.1 million, primarily consisting of interest incurred pursuant to our Department of Justice settlement as well as interest on term loans and a line of credit.

Management's discussion and analysis of financial condition and results of operations

For the three months ended March 31, 2020 and 2019, our interest income was $24,213 and $41,985, respectively, consisting of interest earned on our cash balances residing in banks.

For the three months ended March 31, 2020 and 2019, our other income was $0.1 million and $0, respectively, primarily consisting of fees received for use of our facility by third parties in the 2020 period.

For the three months ended March 31, 2020 and 2019, we recorded income tax benefits of $0.1 million and $0.2 million, respectively, primarily representing our alternative minimum tax credit carryforward.

Our results of operations for the years ended December 31, 2019 and 2018 are summarized in the table below (in thousands).

	Year ended December 31,

	Year ended December 31,						Period over period change (%)
	2019			2018			Period over period change (%)
Revenue	$	100,794		$	89,221			13	%
Cost of goods sold		19,111			16,289			17	%

Gross profit		81,684			72,932			12	%

Operating expenses:
Selling, general and administrative		72,364			66,977			8	%
Research and development		7,944			9,020			(12)	%

Total operating expenses		80,308			75,997			6	%

Net operating income (loss)		1,376			(3,065	)		*

Other income (expense):
Interest expense		(373	)		(303	)		23	%
Interest income		166			180			(8)	%
Other income		121			9			*

Other expense, net		(87	)		(115	)		(24)	%

Income (loss) before income taxes		1,289			(3,180	)		*
Income tax benefit		160			49			7	%

Net income (loss)	$	1,449		$	(3,131	)		*

For the years ended December 31, 2019 and 2018, our revenues were $100.8 million and $89.2 million, respectively. The increase in revenue of $11.6 million primarily consisted of an overall increase in volume of sales, growth of sales to new customer accounts and increased penetration within our

Management's discussion and analysis of financial condition and results of operations

existing customer accounts. The following table shows the breakdown of revenue by product for the years ended December 31, 2018 and 2019 (in thousands):

For the years ended December 31, 2019 and 2018, our cost of goods sold were $19.1 million and $16.3 million, respectively. The increase in cost of goods sold of $2.8 million, or 17.3%, was attributable to an increase in manufacturing and production expenses resulting from volume growth and increased sales of our products and increased account penetration within our existing customer base.

For the years ended December 31, 2019 and 2018, our gross profit was $81.7 million and $72.9 million, respectively. The increase in gross profit was primarily attributable to increased revenue from sales of our MicroMatrix, Cytal and Gentrix products for the year ended December 31, 2019 as compared to the prior year. Our gross margins were 81.0% and 81.7% respectively, for the years ended December 31, 2019 and 2018.

For the years ended December 31, 2019 and 2018, our selling, general and administrative expenses were $72.4 million and $67.0 million, respectively. The increase in selling, general and administrative expense of $5.4 million, or 8.0%, was driven primarily by an increase in selling, general and administrative personnel-related expense of $4.1 million as we increased our headcount in these areas.

For the years ended December 31, 2019 and 2018, our research and development expense was $7.9 million and $9.0 million, respectively. The decrease in research and development expense of $1.1 million, or 12.2%, was driven primarily by a reduction in outsourced preclinical research projects in order to focus resources on clinical trials and product development.

Management's discussion and analysis of financial condition and results of operations

For the years ended December 31, 2019 and 2018, our interest expense was $0.4 million and $0.3 million, respectively, primarily consisting of interest incurred pursuant to our Department of Justice settlement as well as interest on term loans and a line of credit.

For the year ended December 31, 2019 and 2018, our interest income was $0.2 million and $0.2 million, respectively, consisting of interest earned on our cash balance residing in banks.

For the years ended December 31, 2019 and 2018, our other income was $121,000 and $9,000, respectively, primarily consisting of fees received for use of our facility by third parties.

For the years ended December 31, 2019 and 2018, we recorded income tax benefits of $159,595 and $48,757, respectively, primarily representing our alternative minimum tax credit carryforward.

Through 2011, we funded our operations primarily through the sale of our common stock and convertible preferred stock. Since 2012, we have funded our operations primarily through cash provided by operating activities, as well as through debt. As of March 31, 2020, we had cash and cash equivalents of $4.6 million and approximately $3.5 million available under our revolving line of credit with Silicon Valley Bank, or SVB. In April 2020, we amended our loan agreement with SVB to increase our available line of credit to $6.0 million, and we drew down the remaining $5.5 million to support ongoing operations. Additionally, we were granted a loan of $9.0 million from the federal government through the Paycheck Protection Program in April 2020, which we refer to as the PPP loan.

Although it is difficult to predict future liquidity requirements, based on our current operations, we believe that our existing cash and cash equivalents and our borrowings under the line of credit and PPP loan will be sufficient to fund our operations for at least the next 12 months. If our existing cash balances, net proceeds from this offering and anticipated cash flow from operations are insufficient to satisfy our liquidity requirements, including because of lower demand for our products as a result of the risks described in this prospectus, we may seek to sell additional common or preferred equity or convertible debt securities, enter into an additional credit facility or another form of third-party funding or seek other debt financing. We cannot be assured that additional equity, equity-linked or debt financing will be available on terms favorable to us or our stockholders, or at all, including as a result of market volatility in light of the COVID-19 pandemic. If we are unable to obtain adequate financing, we may be required to delay the development, commercialization and marketing of our products.

We are party to a loan and security agreement, or the credit agreement, with SVB that, as of December 31, 2019, provided for a $4.0 million revolving credit line secured by our accounts receivable. As of December 31, 2019, we had $0.5 million of borrowings outstanding under the line of credit, which matures in 2020. The annual interest rate on borrowings under the line of credit is the greater of 6.25% or the prime rate plus 1.5%. As of December 31, 2019, we were in compliance with the covenants under the credit agreement.

In April 2020, we modified our SVB line of credit to extend the maturity date to March 2022 and modify the interest rate to the to the greater of prime plus 750 basis points or 5%. We also amended

Management's discussion and analysis of financial condition and results of operations

our loan agreement with SVB to increase our available line of credit to $6.0 million, and we drew down the remaining $5.5 million to support ongoing operations.

In April 2020, we were granted a loan of $9.0 million from the federal government under the Paycheck Protection Program, or PPP. The PPP was established under the recently congressionally-approved Coronavirus Air, Relief, and Economic Security Act, or the CARES Act, and is administered by the U.S. Small Business Administration, or SBA. Our PPP loan is being made through SVB. The PPP loan matures in April 2022 and has an annual interest rate of 1.0%. Payments of principal and interest are deferred until November 2020. Pursuant to Section 1106 of the CARES Act, we may apply for and be granted forgiveness for all or a portion of the PPP loan. Such forgiveness will be determined, subject to limitations, based on the use of the loan proceeds for qualifying expenses, which include payroll costs, rent and utility costs over the 24-week measurement period following receipt of the loan proceeds. Additionally, the SBA and the U.S. Treasury Department continue to develop and issue new and updated guidance regarding the PPP loan application process, including guidance regarding required borrower certifications and requirements for forgiveness of loans made under the PPP. We continue to track the guidance as it is released and assess and re-assess various aspects of its application as necessary based on the guidance. Although we intend to use, and have been using, the PPP loan proceeds for qualifying expenses, in the absence of final guidance or regulations, we cannot give any assurance that the PPP loan will be forgivable in whole or in part.

Our primary sources of cash are cash receipts on accounts receivable from sales of our products. In addition to changes in the amounts billed to our customers for product sales, net cash collections of accounts receivable are impacted by the efficiency of our cash collections process, which can vary from period to period.

The following tables summarize our cash flows for each of the periods indicated (in thousands):

Net cash used in operating activities for the three months ended March 31, 2020 was primarily impacted by a net loss of $2.7 million and non-cash expenses of $1.1 million, which included $0.3 million of stock-based compensation, $0.5 million of depreciation and $0.3 million of provision for losses on accounts receivable. These amounts were partially offset by net working capital outflows of $0.7 million, which included a $1.8 million decrease in accrued expenses, a $0.5 million decrease in

Management's discussion and analysis of financial condition and results of operations

legal settlement liability, a $0.5 million increase in other assets and a $0.3 million increase in inventory, partially offset by a $1.5 million decrease in accounts receivable, a $0.7 million decrease in prepaid expenses and other current assets and a $0.2 million increase in accounts payable.

Net cash used in operating activities for the three months ended March 31, 2019 was primarily impacted by net income of $0.1 million and non-cash expenses of $0.8 million, which included $0.2 million of stock-based compensation and $0.6 million of depreciation. These amounts were offset by net working capital outflows of $2.7 million, which included a $0.7 million increase in accounts receivable, a $0.6 million decrease in accounts payable, a $0.3 million decrease in accrued expenses, a $0.2 million decrease in other long term liabilities and a $0.1 million increase in inventory, partially offset by a $0.2 million decrease in prepaid expenses and other current assets.

Net cash provided by operating activities for the twelve months ended December 31, 2019 was primarily impacted by a net income of $1.4 million and non-cash expenses of $3.2 million, which included $1.0 million of stock-based compensation and $2.3 million of depreciation. These amounts were partially offset by working capital outflows of $0.9 million, which included a $1.7 million increase in accounts receivable and a $2.2 million decrease in legal settlement liability.

Net cash used in operating activities for the twelve months ended December 31, 2018, was primarily impacted by net loss of $3.1 million and non-cash expenses of $3.8 million, which included $0.7 million of stock-based compensation, $0.6 million of deferred rent and $2.2 million of depreciation. These amounts were partially offset by working capital outflows of $2.3 million, which included a $1.2 million increase in accrued expenses and a $1.9 million increase in inventory.

Net cash used in investing activities for the three months ended March 31, 2020 and 2019 primarily consisted of purchases of production equipment.

Net cash used in investing activities in the twelve months ended December 31, 2019 and 2018 primarily consisted of purchases of production equipment during 2019 and purchases of equipment related to the additional office space leased to build our surgical learning center in Columbia, Maryland during 2018.

Net cash provided by financing activities in the three months ended March 31, 2020 primarily reflected our receipt of $54,600 from warrant and option exercises.

Net cash used in financing activities in the three months ended March 31, 2019 primarily reflected the repayment of $350,000 of debt, partially offset by our receipt of $15,853 from warrant and option exercises.

Net cash used in financing activities in the twelve months ended December 31, 2019 primarily reflected the repayment of $1.0 million of debt and $0.4 million of deferred costs related to this offering, partially offset by our receipt of $0.3 million from warrant and option exercises.

Net cash used in financing activities in the twelve months ended December 31, 2018 primarily reflected the repayment of $1.4 million of debt, partially offset by our receipt of $0.3 million from warrant and option exercises.

Management's discussion and analysis of financial condition and results of operations

We expect to continue to incur significant expenses for the foreseeable future. We anticipate that our expenses will increase substantially as we:

For more information as to the risks associated with our future funding needs, see "Risk factors."

The following table summarizes our future contractual obligations as of December 31, 2019 (in thousands):

Our management's discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP. The preparation of our financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the

Management's discussion and analysis of financial condition and results of operations

reported amounts of assets, liabilities, revenue, expense and related disclosures. We base our estimates and assumptions on historical experience and on various other factors that we believe to be reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. The results of our analyses form the basis for making assumptions about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results may differ, potentially materially, from these estimates under different assumptions or conditions.

We believe the following critical accounting policies, which are more fully described in Note 2 of the notes to the financial statements included elsewhere in this prospectus involve significant judgments and estimates that we use in the preparation of our financial statements.

On January 1, 2019, we adopted the new accounting standard ASC 606, "Revenue from Contracts with Customers" (Topic 606), or ASC 606, and the related amendments to all contracts with customers that were not completed as of the date of adoption using the modified retrospective method. ASC 606 supersedes prior revenue guidance under ASC 605, "Revenue Recognition" and requires entities to recognize revenue to depict the transfer of promised goods or services to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We completed our assessment of the new guidance and evaluated the new requirements as applied to our existing revenue contracts not completed as of the date of initial application. As a result of the assessment, we determined that adoption of the new standard did not have a significant impact on our revenue recognition methodology. In accordance with ASC 606, we recognize revenue when the customer obtains control of a promised good or service, in an amount that reflects the consideration to which we expect to be entitled in exchange for the good or service.

ASC 606 outlines a five-step process for recognizing revenue from contracts with customers: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the separate performance obligations in the contract, and (v) recognize revenue associated with the performance obligations as they are satisfied.

We only apply the five-step model to contracts when it is probable that we will collect the consideration to which we are entitled in exchange for the goods or services we transfer to the customer. Once a contract is determined to be within the scope of ASC 606, we determine the performance obligations that are distinct. We recognize as revenues the amount of the transaction price that is allocated to each respective performance obligation when the performance obligation is satisfied or as it is satisfied. Generally, our performance obligations are transferred to customers at a point in time, typically upon receipt of the product by the customer.

Our revenue is primarily derived from sales of our MicroMatrix, Cytal or Gentrix products. All revenues are categorized as drop ship sales, consignment sales or field stock sales. Drop ship sales involve orders that are placed for products that will be directly delivered from our warehouse to the customer. Consignment sales involve the use of a product from consignment inventory on location at a customer facility that has been received and stored by the customer under the terms of a consignment agreement; each consignment customer is required to notify us after it has used a product from its consignment inventory. Field stock sales involve the use of a product from inventory maintained and carried by one of our sales representatives that the sales representative brings into the customer facility in connection with a procedure being performed there. We recognized revenue for all sales categories upon the satisfaction of our performance obligations, generally upon transfer of control of the goods and risk of loss transfer to customers, in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods.

Management's discussion and analysis of financial condition and results of operations

We have agreements with brokers that represent a consortium of individual hospitals. We pay administrative fees to the broker. We are a principal to these transactions because we control the goods prior to transferring control to the customer. The administrative fees are recorded as selling, general and administrative expenses.

We also elected to utilize the practical expedient that allows us to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that we otherwise would have recognized is one year or less. We did not record a deferral of contract cost as a result of the adoption of ASC 606.

In 2018 and periods prior to the adoption of ASC 606, we recognized revenue for all sales categories when title to the goods and risk of loss transferred to customers, provided there were no material remaining performance obligations required of us or any matters requiring customer acceptance, and when persuasive evidence of an arrangement exists, the amount due from the customer is fixed or determinable and collection is reasonably assured. With respect to our agreements with brokers, we determined that we are a principal to these transactions because we are the primary obligor and have the ultimate and contractual responsibility for fulfillment and acceptability of the products purchased. We deliver the product directly to the customer. The customer enters into the agreement to confirm pricing and delivery terms. Under these agreements, consistent with our normal agreements, the customer does not have a right of return. We also bear full risk of delivery and loss for products, whether the products are sold as drop ship sales, consignment sales or field stock sales.

Expenses related to the development of products are expensed as incurred. For payments made in advance for research and development contractual arrangements, we recognize research and development expense as the services are rendered. Research and development costs primarily consist of salaries and related expenses for personnel, laboratory supplies and raw materials, depreciation of laboratory facilities and leasehold improvements, and utilities costs related to research space. Other research and development expenses include fees paid to consultants, materials, and outside service providers.

We regularly review the creditworthiness of our customers and consider factors such as historical collection experience, the age of accounts receivable balances and general economic conditions that may affect a customer's ability to pay. If we determine that collectability of an account receivable becomes doubtful, we will establish an allowance for doubtful accounts which is charged against income.

We maintain an allowance for doubtful accounts for estimated credit losses. We continuously monitor collections and payments from our customers and maintain an allowance for doubtful accounts based upon our historical payment experience and any specific identifiable customer accounts considered at risk or uncollectible. We provide credit, in the normal course of business, to our customers. As of March 31, 2020 and 2019, our allowance for doubtful accounts totaled $716,707 and $446,076, respectively. Our allowance for doubtful accounts totaled $438,268 and $467,545 at December 31, 2019 and 2018, respectively.

Inventories, which are recorded at the lower of cost or market, include materials, labor and other direct and indirect costs and are valued using the first-in, first-out method. We capitalize

Management's discussion and analysis of financial condition and results of operations

manufacturing costs for each product SKU beginning once our product is first sold after commercial launch. We capitalize inventories produced in preparation for commercial launches when it becomes probable that the applicable product will receive regulatory clearance and that the related costs will be recoverable through the commercialization of the product. We currently do not have any pre-launch inventory for any period presented. At each balance sheet date, we evaluate ending inventories for excess quantities, obsolescence or shelf-life expiration. Our evaluation includes an analysis of historical sales levels by product, projections of future demand by product, the risk of technological or competitive obsolescence for our products, general market conditions, a review of the shelf-life expiration dates for our products and the feasibility of reworking or using excess or obsolete products or components in the production or assembly of other products that are not obsolete or for which we do not have excess quantities in inventory. To the extent that we determine there are excess or obsolete quantities or quantities with a shelf life that is too near its expiration for us to reasonably expect that we can sell those products prior to their expiration, we adjust their carrying value to estimated net realizable value. If future demand or market conditions are lower than our projections, or if we are unable to rework excess or obsolete quantities into other products, we may record further adjustments to the carrying value of inventory through a charge to cost of product revenues in the period the revision is made.

As part of the process of preparing our financial statements, we may be required to estimate accrued expenses. This process involves reviewing open contracts and purchase orders, communicating with applicable personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual cost. The majority of our service providers invoice us monthly in arrears for services performed. We make estimates of our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us. We confirm the accuracy of our estimates with the service providers and make adjustments if necessary. Examples of estimated accrued expenses include:

If we do not identify costs that we have begun to incur or if we underestimate or overestimate the level of services performed or the costs of these services and liabilities, our actual expenses could differ from our estimates. We do not anticipate the future settlement of existing accruals to differ materially from our estimates.

We account for all equity awards to employees and members of our board of directors using the provisions of Accounting Standards Committee Topic 718, "Compensation—Stock Compensation", and recognize the fair value of each award as an expense on a straight-line basis over the employee's or director's expected vesting period. In June 2018, the Financial Accounting Standards Board issued guidance with respect to the accounting for non-employee share-based payment awards. The guidance generally aligns the accounting for non-employee awards to that for employees. We adopted this

Management's discussion and analysis of financial condition and results of operations

guidance effective January 1, 2019 and the adoption did not have a material impact on our financial statements.

For the three months ended March 31, 2020 and 2019, we incurred stock-based compensation expense of $309,397 and $220,739, respectively. For the years ended December 31, 2019 and 2018, we incurred stock-based compensation expense of $972,456 and $745,526, respectively.

For purposes of calculating stock-based compensation, we estimate the fair value of stock options using a Black-Scholes valuation model, which requires the use of certain subjective assumptions, including expected term, volatility, expected dividend yield, risk-free interest rate, and the fair value of our common stock. These assumptions generally require significant judgment. A summary of our assumptions used in determining the fair value of stock options is as follows:

We estimate the expected term of employee options using the simplified method, which is based on the midpoint between the vesting date and the expiration date. Our expected dividend rate is zero, as we have never paid any dividends on our common stock and do not anticipate paying any dividends in the foreseeable future. We derive our expected volatility from the historical volatilities of several peer public companies within our industry because we have little information on the volatility of the price of our common stock due to our lack of a trading history. When selecting our industry peer companies to be used in the volatility calculation, we considered the industry, stage of development, size and financial leverage. We base the risk-free interest rate on the implied yield currently available on zero coupon U.S. Treasury notes with maturities approximately equal to the expected term of the option.

We estimate our forfeiture rate based on an analysis of our actual forfeitures and will continue to evaluate the appropriateness of the forfeiture rate based on actual forfeiture experience, analysis of employee turnover behavior and other factors. If factors change and we employ different assumptions, stock-based compensation expense may differ significantly from what we have recorded in the past. If there is a difference between the assumptions used in determining stock-based compensation expense and the actual factors that become known over time, we may change the input factors used in determining stock-based compensation costs for future grants. These changes, if any, may materially impact our results of operations in the period such changes are made. We expect to continue to grant stock options in the future, and to the extent that we do, our actual stock-based compensation expense recognized in future periods will likely increase.

The fair value of the common stock that underlies our stock options has historically been determined by our board of directors based upon information available to it at the time of grant. Because there has been no public market for our common stock, the determination of the fair value of our common stock was based on the board of directors' consideration of various subjective and objective factors, including contemporaneous valuations. The contemporaneous valuations were performed in accordance with applicable methodologies, approaches and assumptions of the technical practice-aid issued by the American Institute of Certified Public Accountants Practice Aid entitled Valuation of Privately-Held Company Equity Securities Issued as Compensation, or the AICPA Practice Aid, and considered many

Management's discussion and analysis of financial condition and results of operations

objective and subjective factors to determine the common stock fair market value each valuation date. The following factors, among others, were considered:

The assumptions underlying these valuations represented management's best estimate, which involved inherent uncertainties and the application of management's judgment. As a result, if we had used different assumptions or estimates, the fair value of our common stock and our stock-based compensation expense could have been materially different.

Following the closing of this offering, the fair value of our common stock will be determined based on the quoted market price of our common stock on the date of grant.

We are subject to income taxes in the United States, and we use estimates in determining our provision for income taxes. We account for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted rates in effect for the year in which those temporary differences are expected to be recovered or settled. A deferred tax asset is established for the expected future benefit of net operating loss and credit carryforwards.

Recognition of deferred tax assets is appropriate when realization of such assets is more likely than not. We recognize a valuation allowance against our net deferred tax assets if it is more likely than not that some portion of the deferred tax assets will not be fully realizable. This assessment requires judgment as to the likelihood and amounts of future taxable income by tax jurisdiction. At December 31, 2019, we had a full valuation allowance against all of our net deferred tax assets because realization of our deferred tax assets did not meet the more likely than not standard.

We assess all material positions taken in any income tax return, including all significant uncertain positions, in all tax years that are still subject to assessment or challenge by relevant taxing authorities. We prescribe a comprehensive model for recognizing, measuring, presenting and disclosing in financial statements uncertain tax positions taken or expected to be taken on a tax return, including a decision whether to file a tax return in a particular jurisdiction. Assessing an uncertain tax position begins with the initial determination of the position's sustainability and is measured at the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. As of each balance sheet date, unresolved uncertain tax positions must be reassessed, and we will determine whether the factors underlying the sustainability assertion have changed and the amount of the recognized tax

Management's discussion and analysis of financial condition and results of operations

benefit is still appropriate. The recognition and measurement of tax benefits require significant judgment. Judgments concerning the recognition and measurement of a tax benefit might change as new information becomes available.

We do not currently have, nor have we had during any of the periods presented, any off-balance sheet arrangements, as defined in the rules and regulations of the Securities and Exchange Commission.

A discussion of recent accounting pronouncements is included in Note 2 to our audited financial statements included elsewhere in this prospectus.

We qualify as an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act.

An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. This includes an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002. We may take advantage of this exemption for up to five years or such earlier time that we are no longer an emerging growth company. We will cease to be an emerging growth company if we have more than $1.07 billion in total annual gross revenue, have more than $700 million in market value of our common stock held by non-affiliates as of June 30 of a fiscal year or issue more than $1.0 billion of non-convertible debt over a three-year period. We may choose to take advantage of some but not all of these provisions that allow for reduced reporting and other burdens.

We have elected to use the extended transition period under the JOBS Act for the implementation of new or revised accounting standards. Accordingly, our financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards.

Our cash and cash equivalents as of December 31, 2019 and March 31, 2020 primarily consisted of cash accounts. The primary objectives of our investment activities are to preserve principal, provide liquidity and maximize income without significantly increasing risk. Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of U.S. interest rates. However, because of the short-term nature of the instruments in our portfolio, a sudden change in market interest rates would not be expected to have a material impact on our financial condition and/or results of operation. We do not have any foreign currency or other derivative financial instruments.

Our products address large, underserved and growing markets with significant commercial potential. In addition to the ongoing need to manage traumatic injuries, we believe that demand for our products is increasing due to aging demographics and the growing prevalence of conditions such as diabetes, obesity and vascular disease. We estimate our total addressable market in the United States for our currently marketed products is over $2 billion, based on estimated 2019 revenues for hernia matrices and biologic skin and dermal substitutes for wound care. We intend to grow our business and market opportunity by further penetrating our current acute care customer accounts, increasing our acute care customer base, selectively expanding the sale of our products into non-acute care settings, expanding our international sales opportunity and enhancing and expanding our product portfolio.

We have 17 clearances from the U.S. Food and Drug Administration, or FDA, and many of our products are also approved for sale in Canada and Saudi Arabia. We are also seeking regulatory approvals for our products in several international markets including China, South Korea and the European Union. We currently sell and market our products in the United States through a dedicated, surgically-focused direct sales force of over 160 employees that sell into hospital operating rooms and intensive care units. To complement our direct sales efforts, we also have established a national accounts team that supports our commercial efforts with group purchasing organizations, or GPOs, integrated delivery networks, or IDNs, and government facilities, including Department of Veterans Affairs and Department of Defense medical facilities. During the year ended December 31, 2019, we sold our products to over 1,900 customers and had contracts with eight GPOs and seven distributors in 11 countries. We also provide medical education programs that offer hands-on and virtual education for all of our products and host symposiums throughout the United States, including at our state-of-the-art surgical learning center in Columbia, Maryland.

We have achieved significant revenue growth since our commercial launch in 2009. Our revenue increased to $100.8 million for the year ended December 31, 2019 from $89.2 million for the year ended December 31, 2018, an increase of 13.0%. For the years ended December 31, 2019 and 2018, we recorded a gross margin of 81.0% and 81.7%, respectively, and net income of $1.4 million and net loss of $3.1 million, respectively. In the three months ended March 31, 2020, we recorded revenue of $23.7 million, a gross margin of 80.4% and net loss of $2.7 million.

Worldwide, the epidemiological burden of wounds is significant, driving the need for improved healing and wound management solutions. There are two broad wound categories: acute wounds and chronic wounds. Acute wounds include traumatic wounds, surgical wounds and moderate to severe burns. Traumatic wounds were estimated to have a global incidence of at least 5.6 million in 2019. In the United States and European Union alone, major surgical wounds were estimated to have an incidence of approximately 12.8 million in 2019. Burns are classified as either minor burns, medically treated or hospitalized cases. In 2019, medically treated burns, which typically tend to be moderate to severe, were estimated to have a global incidence of over 6.3 million, while burns requiring hospitalization were estimated to have a global incidence of approximately 597,000. Chronic wounds include stage 3 and stage 4 pressure ulcers, diabetic ulcers and venous and arterial ulcers, which were expected to have global incidences in 2019 of approximately 22.6 million, 14.5 million and 13.3 million, respectively. The market for U.S. wound biologics is estimated to increase to approximately $1.4 billion by 2024. We believe the annual incidence of acute wounds, aging demographics and increased prevalence of systemic comorbidities, including growth of vascular complications and diabetes, are contributing to the growth in wound management procedures and demand for alternative therapies.

Incidence of hernias, a type of soft tissue defect, and the resulting market for hernia repair are increasing. Hernias develop as a result of an abdominal wall defect caused by the weakening of the inner layers of the inside wall of the abdominal muscle. Common types of hernias include inguinal, ventral, femoral, umbilical and hiatal. Surgery is the only treatment that can permanently repair a hernia, and mesh is used in about 90% of those surgeries to reinforce torn or damaged tissue around hernias. Mesh may be made of synthetic or tissue-based materials, often referred to as regenerative or biologically-derived products, and comes in a variety of shapes and sizes for different hernias. In the United States alone, approximately 1.2 million hernia repairs were estimated to have occurred in 2019. The market for U.S. hernia matrices is estimated to increase to approximately $1.1 billion by 2024. We believe the growth in hernia repair procedures, increased incidence of obesity, aging demographics and incidence and awareness of infection and rejection of synthetic or other biologically-derived meshes, is driving the need for new therapies.

Regenerative medicine combines the fields of biology, engineering and medicine to repair or replace diseased or injured tissues and organs. The market for regenerative medicine products is primarily driven by the clinical need for durable and effective healing with desired aesthetic outcomes. While regenerative medicine has advanced over the last decade, we believe there are significant limitations to other currently available biologically-derived products as well as relevant synthetic products.

porous scaffold that allows for the body's cells to infiltrate the UBM. Through our proprietary manufacturing process, we retain both of these layers while removing cellular content without the use of harsh and damaging detergents or chemicals. Our ability to retain these two layers differentiates our products from other ECM-based products. Specifically, our products contain a protein composition that provides a surface for cellular ingrowth and maturation, with the intent to help restore natural tissue function at the wound or surgical site.

In addition, we use a proprietary processing method to remove the cellular content specific to a pig. This decellularization process isolates the ECM of the tissue, resulting in products that are acellular scaffolds appropriate for use in humans. When used to treat a wound or soft tissue surgical defect, these scaffolds provide a platform for the body's cells to populate and differentiate, resulting in biomechanically-functional tissue.

The unique structure and composition of our UBM products are designed to provide an environment in which macrophages are more likely to exhibit an M2-type healing response. While an M1 process often results in increased inflammation and scarring, in an M2 process, the macrophages and other cells break down the UBM as the body naturally generates new proteins, remodeling the scaffold into a tissue that is similar to the native tissue structure and biomechanical function while reducing scarring. We believe the ability of UBM to facilitate a greater M2-type healing response also may result in reduced scarring, more biomechanically functional tissue and better aesthetic outcomes.

The following table summarizes the key indications and attributes of our currently marketed products:

In addition to selling our own products, we currently are the exclusive U.S. distributor of Southmedic, Inc.'s ABRA solutions, a dynamic system used to facilitate closure in open wounds and surgical repairs. During the year ended December 31, 2018, revenue from our distribution of these and other products accounted for less than 2% of our total revenue.

While we currently sell our products under the MicroMatrix, Cytal and Gentrix brand names, we have received 17 510(k) clearances over the years. The following table summarizes our history of FDA regulatory clearances:

The clinical goal in the treatment of moderate to severe wounds and soft tissue surgical defects is to promote healing through the restoration of natural, functional tissue while avoiding adverse reactions such as infection, chronic inflammation, excessive scarring and undesirable aesthetic outcomes. There are a number of currently available alternative products that are typically used for complex wound treatment, including those made from biologic tissue such as human, porcine, bovine and ovine sources and those made from synthetic materials such as polyethylene, polypropylene or polyester. Biologically-derived products include chemically strengthened, or crosslinked, products and cellular, acellular and amniotic products. We believe characteristics of competing products including (i) the type of tissue or synthetic material utilized, (ii) the processing techniques required and (iii) physical attributes including thickness, porosity, pliability and form, can limit the functional healing response of the body.

Our products support the body's natural remodeling process and address many of the limitations of competitive biologically-derived and synthetic products. The advantages of our products include:


Copies to:
Darren DeStefano Christian E. Plaza Katie Kazem Cooley LLP 11951 Freedom Drive Reston, Virginia 20190 (703) 456-8034	Christopher F. Branch Chief Operating Officer and General Counsel ACell, Inc. 6640 Eli Whitney Drive Columbia, Maryland 21046 (800) 826-2926	Benjamin K. Marsh William A. Magioncalda Goodwin Procter LLP The New York Times Building 620 Eighth Avenue New York, New York 10018 (212) 813-8800


Large accelerated filer o		Accelerated filer o		Non-accelerated filer ý		Smaller reporting company o Emerging growth company ý

Title of each class of securities to be registered	Amount to be registered(1)	Proposed maximum offering price per share	Proposed maximum aggregate offering price(1)(2)	Amount of registration fee(2)(3)




Common stock, par value $0.001 per share	5,750,000	$16.00	$92,000,000	$11,941.60

	Per share	Total


Initial public offering price	$	$

Underwriting discounts and commissions(1)	$	$

Proceeds, before expenses, to ACell, Inc.	$	$


UBS Investment Bank	Barclays	RBC Capital Markets
SunTrust Robinson Humphrey


Delaware (State or other jurisdiction of incorporation or organization)		3841 (Primary Standard Industrial Classification Code Number)		04-3496380 (I.R.S. Employer Identification Number)

		Page

Prospectus summary			1
Risk factors			15
Special note regarding forward-looking statements			54
Market, industry and other data			56
Use of proceeds			57
Dividend policy			58
Capitalization			59
Dilution			62
Selected financial data			65
Management's discussion and analysis of financial condition and results of operations			67
Business			85
Management			119
Executive compensation			126
Certain relationships and related party transactions			140
Principal and selling stockholders			142
Description of capital stock			147
Shares eligible for future sale			151
Material U.S. federal income tax consequences to non-U.S. holders			153
Underwriting			158
Legal matters			166
Experts			166
Where you can find additional information			166
Index to financial statements			F-1


Assumed initial public offering price per share				$	15.00
Historical net tangible book value per share as of March 31, 2020	$	3.47
Decrease per share attributable to the pro forma adjustments described above		(2.53	)

Pro forma net tangible book value per share as of March 31, 2020		0.94
Increase in pro forma as adjusted net tangible book value per share attributable to new investors purchasing shares in this offering		2.77

Pro forma as adjusted net tangible book value per share after giving effect to this offering					3.71

Dilution per share to new investors in this offering				$	11.29

						Total consideration

	Shares purchased
	Shares purchased										Average price per share
	Number		Percent			Amount		Percent			Average price per share

Existing stockholders		17,675,510		78	%	$	34,077,983		31	%	$	2.09
New investors		5,000,000		22			75,000,000		69		$	15.00

Total		22,675,510		100.0	%	$	109,077,983		100.0	%

	Payments due by period

	Less than one year		1 - 3 years		3 - 5 years		More than five years		Total

	(in thousands)

Debt obligations(1)	$	500	$	—	$	—	$	—	$	500
Settlement obligation(2)		2,479		5,915		4,431		—		12,825
Debt and settlement interest(3)		346		446		112		—		904
Operating lease obligations(4)		1,932		4,112		1,828		4,739		12,611

Total	$	5,257	$	10,473	$	6,371	$	4,739	$	26,840

	Three months ended March 31,

	2020	2019
Expected dividend yield	—%	—%
Expected volatility	41.8 - 42.4%	54.2 - 70.6%
Risk-free interest rate	1.46 - 1.48%	2.55 - 3.00%
Expected average life (in years)	5.83 - 6.26	5.50 - 6.06