Sientra(SIEN) - 2020 Q4 - Annual Report

Market Overview - The U.S. consumers spent approximately $17 billion on around 18 million cosmetic procedures in 2019, indicating a significant market for aesthetic procedures [33]. - The global breast market is estimated to be approximately $1.5 billion, with the addressable market for currently available breast products in the U.S. at around $600 million [36]. - The addressable consumables market for miraDry in the U.S. is estimated to be approximately $6 billion, with about 15 million people interested in the miraDry solution [40]. - The addressable equipment market for miraDry is estimated at approximately $1.4 billion globally, with the U.S. market estimated at around $700 million [42]. Product Performance and Innovation - The miraDry System is the only FDA-cleared device for reducing underarm sweat, odor, and hair, with clinical studies showing an average of 82% sweat reduction at 12 months [53]. - The company’s proprietary Allox2 tissue expander has shown a 100% surgeon satisfaction rate based on recent case studies [49]. - The miraDry procedure has received an 88% "worth it" rating from patients on RealSelf.com, indicating high patient satisfaction [54]. - The breast implant portfolio includes approximately 350 variations, utilizing High-Strength Cohesive silicone gel, which differentiates the products from competitors [65][74]. - The Allox2 tissue expander features a patented dual port and integral drain technology, improving clinical outcomes and reducing financial risks associated with breast reconstruction [80][88]. - The miraDry technology platform utilizes microwave energy for precise heating, effectively targeting sweat glands while protecting surrounding tissues [83][85]. - Clinical trials for breast implants demonstrated safety and effectiveness, with a 10-year follow-up showing comparable or better rupture and capsular contracture rates than competitors [86][87]. - The company emphasizes the importance of product innovation and enhanced customer service offerings, including a 20-year limited warranty for patients [67]. Strategic Plans and Market Expansion - The company plans to selectively pursue acquisitions and expand into new markets to leverage relationships with plastic surgeons and enhance market share [58]. - The company aims to increase its international presence, having received regulatory approval to market its breast implants in Japan and seeking further approvals in additional markets [63]. - The company plans to broaden its product portfolio by developing new breast implants and tissue expanders, aiming to address unmet needs in the market [59]. - The sales force has been optimized by integrating the miraDry sales team into the Breast Products ENHANCE Practice Development team, enhancing customer adoption and awareness [60]. - The company intends to invest in clinical studies and peer-reviewed articles to support the clinical benefits of its products, leveraging relationships with Plastic Surgeons [61]. Regulatory Compliance and Challenges - The company must comply with extensive post-market regulatory requirements, including conducting post-market surveillance studies and maintaining a tracking system for breast implants [139]. - The FDA classifies medical devices into three classes, with silicone gel breast implants requiring a full PMA application, which is generally more costly and time-consuming than the 510(k) process [134]. - The company’s miraDry System is regulated as a Class II device that requires 510(k) clearance, which typically takes three to 12 months but can be longer [133]. - Regulatory compliance failures can result in significant enforcement actions by the FDA, including product recalls and legal proceedings [141]. - The company faces significant competition from U.S. competitors with greater market share and resources, including Allergan and Cynosure, which may hinder the market acceptance of the miraDry System [121][124]. - The company faces more competition in international markets due to less stringent regulatory requirements compared to the U.S. [125]. Financial Overview - As of December 31, 2020, the company had $55.0 million in cash and cash equivalents [474]. - Research and development expenses totaled approximately $10.3 million in 2020, with additional costs attributed to the miraDry System [108]. - Third-party payors are increasingly limiting coverage and reducing reimbursements for medical products and services, impacting sales [167]. - The company expects net sales to fluctuate quarterly due to seasonality in breast augmentation and miraDry procedures [180]. Legal and Compliance Risks - The company is at risk of significant legal expenses and reputational damage due to potential investigations related to healthcare law compliance [148]. - The Federal Civil False Claims Act allows for penalties of three times the actual damages sustained by the government, plus mandatory civil penalties for each false claim [150]. - The company must report detailed payment data to comply with the Physician Payments Sunshine Act, with penalties of up to $150,000 per year for non-compliance [159]. - The company faces potential penalties for non-compliance with healthcare laws, including civil, criminal, and administrative penalties, which could adversely affect its operations and financial results [145]. - Violations of the Federal Anti-Kickback Statute can result in imprisonment for up to ten years and fines of up to $100,000 per violation [147]. Intellectual Property and Competitive Advantage - The company relies on a combination of intellectual property rights to maintain a competitive advantage in the marketplace [174]. - The company has 34 registered trademarks and 25 pending trademark applications for its Breast Products [175]. - The Breast Products patent portfolio includes 1 granted U.S. Patent and 7 pending U.S. patent applications [176]. - The miraDry patent portfolio consists of 21 granted or allowed U.S. patents and 101 granted or allowed foreign counterpart patents [176]. Workforce and Organizational Changes - The company has implemented an organizational efficiency initiative, reducing its workforce by approximately 60 employees as of December 31, 2020 [32]. - The company faces competition in attracting and retaining qualified employees, with 255 full-time employees as of December 31, 2020 [179].