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May 9, 2022, 5:18 p.m. EDT


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(EDGAR Online via COMTEX) -- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following information should be read in conjunction with the condensed consolidated financial statements and accompanying notes in this Form 10-Q, as well as the audited consolidated financial statements and related notes for the fiscal year ended December 31, 2021 included in our Annual Report on Form 10-K.

When used in this report, the terms "we," "us," and "our" refer to ICU Medical, Inc ("ICU") and its subsidiaries included in our condensed consolidated financial statements unless context requires otherwise.

Business Overview

Recent Developments

On January 6, 2022 we completed the acquisition of Smiths Medical 2020 Limited ("Smiths Medical"), the holding company of Smiths Group plc's global medical device business. See "Acquisitions" in the remainder of this item for additional detail regarding the acquisition transaction. Smiths Medical is engaged in the development, manufacture and sale of syringe and ambulatory infusion devices, vascular access, and vital care products used in hospital, emergency, home and alternative care settings. Our acquisition of Smiths Medical was strategic and increases our focus and scale in infusion therapy globally which we believe will enhance our competitive position as a leader within the industry.

The combination of ICU and Smiths Medical brings together two highly complementary product portfolios to create a comprehensive range of offerings utilized in the infusion therapy care continuum. Our existing product portfolio includes IV solutions, IV smart pumps with pain management and safety software technology, dedicated and non-dedicated IV sets and needlefree connectors designed to help meet clinical, safety and workflow goals. In addition, we manufacture automated pharmacy IV compounding systems with workflow technology, closed systems transfer devices for preparing and administering hazardous IV drugs, and cardiac monitoring systems for critically ill patients. The acquisition of Smiths Medical broadened our product portfolio to include syringe and ambulatory pumps, peripheral IV catheters, fluid warming and respiratory devices, silicone and PVC tracheotomy tubes, among other products.

Following the Smiths Medical acquisition, we are initially presenting the following product lines in addition to our legacy product lines: Infusion Systems-Smiths Medical, Vascular Access-Smiths Medical and Vital Care-Smiths Medical. See "Products" in the remainder of this item for a list of our primary products included in each line.

Our primary customers are acute care hospitals, wholesalers, ambulatory clinics and alternate site facilities, such as clinics, home health care providers and long-term care facilities. With the addition of Smiths Medical we sell our products in more than 90 countries throughout the world.

The following information is additional to and not a substitute for the Business section under Part I, Item 1 of our Annual Report on Form 10-K for the year ended December 31, 2021 and should be read in conjunction with that filing:

Manufacturing Changes

With the acquisition of the Smiths Medical business, we now operate additional manufacturing facilities including five facilities in the United States ("U.S."), two facilities in Mexico and two in the UK, and one facility in the Czech Republic, Italy and China.

Service Centers

With the acquisition of the Smiths Medical business, we now operate additional service and repair facilities in the U.S., Canada, two locations in Europe and four locations in Asia.

Distribution Changes

Following the Smiths Medical acquisition, we operate two additional main distribution centers, one in the U.S. supporting the Americas and International and one in the Netherlands mainly supporting EMEA. We have a further eleven smaller distribution centers globally three of which are in the U.S., two centers in EMEA and China, and one center in Canada, the U.K., Japan and India.

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Competition Changes

The Infusion Systems product line of Smiths Medical competes with many of the same competitors as those referenced in Part I, Item 1. "Business" of our 2021 Annual Report on Form 10-K as well as additional competitors such as Moog Medical and QCOR.

The Vascular Access product line of Smith Medicals competes with many of the same competitors as those referenced in Part I, Item 1. "Business" of our 2021 Annual Report on Form 10-K as well as additional competitors such Angio Dynamics, Greiner Bio-One, and Teleflex Incorporated. Our ability to remain competitive in this market will depend on our ability to focus on demonstrable patient outcomes by differentiating our products by improving device functionality and by providing successful customer training programs on the use and maintenance of our products.

The Vital Care product line of Smith Medical competes with numerous competitors due its wide range of business. Those include multinational competitors such as Medtronic and Philips Healthcare as well as smaller more focused competitors such as Belmont and Intersurgical plc. Our ability to compete in this market will depend on our ability to continue to make technological advances to our products, thereby increasing customer efficiency and by providing product support that improves clinical decision-making that ultimately enhances patient safety.


As of March 31, 2022, our primary product offerings by product line are listed below. We have presented our financial results in accordance with these product lines:

Infusion Consumables

Infusion therapy sets, used in hospitals and ambulatory clinics, consist of a tube running from a bottle or plastic bag containing a solution to a catheter inserted in a patient's vein, that may or may not be used with an IV pump. Our primary Infusion Consumable products are:

Clave(TM) needlefree products, including the MicroClave, MicroClave Clear, and NanoClave(TM) brand of connectors, accessories, extension and administration sets used for the administration of IV fluids and medications and the Neutron catheter patency device, used to help maintain patency of central venous catheters;

SwabCap and SwabTip disinfecting caps, used to protect and disinfect any needlefree connector, including competitive brands of connectors, and male luers;

ClearGuard HD antimicrobial barrier caps for hemodialysis catheters; and

TegoTM hemodialysis connector used to cap and protect hemodialysis central venous catheter hubs.

Closed System Transfer Devices ("CSTD") and hazardous drug compounding systems are used to prepare and deliver hazardous IV medications such as those used in chemotherapy, which, if released, can have harmful effects on the healthcare worker and environment. Our products are:

ChemoLockTM CSTD, which utilizes a proprietary needlefree connection method, is used for the preparation and administration of hazardous drugs. ChemoLock is used to limit the escape of hazardous drug or vapor concentrations, block the transfer of environmental contaminants into the system, and eliminates the risk of needlestick injury;

ChemoClaveTM, an ISO Connection standard and universally compatible CSTD used for the preparation and administration of hazardous drugs. ChemoClave utilizes standard ISO luer locking connections, making it compatible with all brands of needlefree connectors and pump delivery systems. ChemoClave also is used to limit the escape of hazardous drug or vapor concentrations, block the transfer of environmental contaminants into the system, and eliminate the risk of needlestick injury; and

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The preparation of hazardous drugs typically takes place in a pharmacy where drugs are removed from vials and prepared for delivery to a patient. Those prepared drugs are then transferred to a nursing unit where the chemotherapy is administered via an infusion pump set to a patient. Components of the ChemoClave and ChemoLock product lines are used both in pharmacies and on the nursing floors for the preparation and administration of hazardous drugs.

Infusion Systems

We offer a wide range of infusion pumps, dedicated IV sets, software and professional services. Our primary Infusion System products are dedicated IV sets and the following:

Infusion Pump Hardware:

Plum 360(TM): The Plum 360(TM) infusion pump is an ICU Medical MedNet(TM) ready large volume infusion pump with an extensive drug library and wireless capability. Plum 360 was named the 2018, 2019 and 2020 Best in KLAS winner as top-performing IV smart pump and was the first medical device to be awarded UL Cybersecurity Assurance Program Certification. Also, in 2021 and 2022, the Plum 360 won the award as the top-performing Smart Pump EMR-Integrated; and

LifeCare PCA(TM): The LifeCare PCA infusion pump is an ICU Medical MedNet(TM) ready patient-controlled analgesia pump ("PCA"), providing complete IV Electronic Health Record ("IV-EHR") interoperability since 2016.

IV Medication Safety Software:

ICU Medical MedNet(TM): ICU Medical MedNet is an enterprise-class medication management platform for any sized healthcare system that can help reduce medication errors, improve quality of care, streamline workflows and maximize revenue capture. ICU Medical MedNet connects our industry-leading smart pumps to a hospital's EHR, asset tracking systems, and alarm notification platforms with the largest array of integration partners.

Professional Services:

In addition to the products above, our teams of clinical, information technology, and professional services experts work with customers to develop and deliver safe and efficient infusion systems, providing customized and personalized configuration, implementation, and data analytics services to complement our infusion hardware and software.

IV Solutions

We provide a broad portfolio of IV solutions to meet our customers' clinical needs, providing a consistent supply of IV solutions, irrigation, and nutritionals to help provide safe and effective patient care. Our primary IV Solutions products are:

IV Therapy and Diluents:

Including Sodium Chloride, Dextrose, Balanced Electrolyte Solutions, Lactated Ringer's, Ringer's, Mannitol, Sodium Chloride/Dextrose and Sterile Water.


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Critical Care

Our Critical Care products help clinicians get accurate real-time access to patients' hemodynamic and cardiac status with an extensive portfolio of monitoring systems and advanced sensors & catheters. Measurements provided by our systems help clinicians determine how well the heart is pumping blood and how efficiently oxygen from the blood is being used by the tissues. Our primary Critical Care products are:

Cogent(TM) 2-in-1 hemodynamic monitoring system;

Infusion Systems-Smiths Medical

We offer a wide range of infusion pumps, disposables and safety software for use in both hospital and home settings. These products participate in adjacent categories to the legacy ICU Medical Infusion Systems segment. The primary Infusion Systems-Smith Medical products are:

Ambulatory Infusion Hardware:

CADD(R) ambulatory infusion pumps and disposables, including administration sets and medication cassette reservoirs, support a variety of IV pain management therapies across clinical care areas from hospital to outpatient treatment.

Syringe Infusion Hardware:

MedfusionTM syringe infusion pumps are designed for the administration of fluids and medication requiring precisely controlled infusion rates from a variety of syringe sizes in acute care settings.

Infusion Software:

PharmGuard(R) Medication Safety Software for MedfusionTM 4000 syringe and CADD(TM) Solis pumps allows for customized drug libraries to support the standardization of protocols for medication administration throughout the facility.

Vascular Access-Smiths Medical

Our Vascular Access-Smiths Medical products allow clinicians to safely access the patients' bloodstream to deliver fluids and medication or to obtain blood samples. Vascular Access products are often used in conjunction with Consumables and Infusion Systems devices. Our primary Vascular Access products are:

Jelco(R) safety and conventional peripheral IV catheters, sharps safety devices for hypodermic injection, and venipuncture blood collection and peripheral IV catheters designed to help prevent needlestick injury and to reduce the risks associated with blood exposure and contamination while reducing patients' risk of infection;

DELTEC(R) implantable ports and GRIPPER(R) non-coring needles for portal access;

Portex(R) arterial blood sampling syringes, anesthesia trays and kits for pain management;

Powerwand(R) midline catheters; and

MEDEX(R) LogiCal(R) Pressure Monitoring System and components. Table of Contents

Vital Care-Smiths Medical

We offer a range of devices and systems to maintain patients' airways and maintain body temperature before, during and after surgery. Our primary Vital Care products are:

Level 1(R) temperature management systems used in perioperative and critical care settings to help monitor and regulate patient temperature through rapid infusion, routine blood and fluid warming, irrigation warming and convective warming.

Portex(R) acapella(R) bronchial hygiene products used to mobilize pulmonary secretions to facilitate the opening of airways in patients with chronic respiratory diseases such as chronic obstructive pulmonary disease, or COPD, asthma and cystic fibrosis.

Portex(R) Bivona(R) tracheostomy tubes in PVC and silicone construction that provide a secure airway for both surgical and percutaneous procedures. Our silicone tracheostomy tubes are customizable to accommodate unique patient requirements.

In the U.S. a substantial amount of our products are sold to group purchasing organization member hospitals. We believe that as healthcare providers continue to either consolidate or join major buying organizations, the success of our products will depend, in part, on our ability, either independently or through strategic relationships to secure long-term contracts with large healthcare providers and major buying organizations. Although we believe that we are not dependent on any single distributor, large healthcare provider or major buying organization for distribution of our products, the loss of a strategic relationship with any one of these organizations or a decline in the demand for our products could have a material adverse effect on our operating results.

We believe that achievement of our growth objectives worldwide will require increased efforts by us in sales and marketing and product acquisition and development; however, there is no assurance that we will be successful in implementing our growth strategy. Product development or acquisition efforts may not succeed, and even if we do develop or acquire additional products, there is no assurance that we will achieve profitable sales of such products. Increased expenditures for sales and marketing and product acquisition and development may not yield desired results when expected, or at all. While we have taken steps to control these risks, there are certain risks that may be outside of our control, and there is no assurance that steps we have taken will succeed.

Seasonality/Quarterly Results

There are no significant seasonal aspects to our business. We can experience fluctuations in net sales as a result of variations in the ordering patterns of our largest customers, which may be driven more by the novel coronavirus and its variants ("COVID-19") pandemic surges and its impact on hospital admissions and procedure volumes along with production scheduling and customer inventory levels, and less by seasonality. Our expenses often do not fluctuate in the same manner as net sales, which may cause fluctuations in operating income that are disproportionate to fluctuations in our revenue.


On January 6, 2022, we acquired 100% of the equity interests in Smiths Medical from Smiths Group International Holdings Limited ("Smiths") for cash consideration of $1.9 billion and the issuance of 2.5 million shares of our common stock valued at $576.0 million. We funded the cash portion of the consideration paid with a combination of proceeds from a Credit Agreement dated January 6, 2022 (the "Credit Agreement") and our cash and cash equivalents. The fair value of the common shares issued to Smiths was determined based on the closing market price of our common stock on the acquisition date. Smiths may be entitled to a potential contingent earn-out payment of $100.0 million based on our common stock achieving certain price targets on or prior to the third or fourth anniversary of closing. See Note 3, Acquisitions in our accompanying condensed consolidated financial statements for further details on the acquisition. See "Liquidity and Capital Resources" in the remainder of this item and Note 17 in our accompanying condensed consolidated financial statements for additional information regarding the Credit Agreement.


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While we continually monitor the ongoing and evolving impact of the effect of the COVID-19 pandemic on our operations the overall impact will not be fully reflected in our results of operations until future periods. The duration and extent of the impact from the COVID-19 pandemic depends on future developments that cannot be fully predicted at this time, as such, the impact of the pandemic on our overall financial performance remain uncertain and cannot as yet be quantified. For discussion of the risks and uncertainties we face associated with the COVID-19 pandemic, see Part I, Item 1A. "Risk Factors" of our 2021 Annual Report on Form 10-K.

May 09, 2022


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