Penumbra, Inc.

Innovation and product development · Clinical trial and regulatory approval risks

Our products are continually the subject of clinical trials conducted by us, our competitors, or other third parties, the results of which may be unfavorable, or perceived as unfavorable, which could materially adversely affect our business, financial condition and results of operations.

Customer and revenue · Changing customer preferences and behavior

Our future growth depends, in part, on our ability to further penetrate our current customer base and increase the frequency of use of our products by our customers as well as expand our user base to include additional specialist physicians and other healthcare providers in both our existing and future target end markets.

Strategic execution · Geographic expansion and market entry

Over the long term, we intend to grow our business internationally, and to do so we will need to spend substantial sums to expand or develop direct sales capabilities in existing and new geographic areas, generate additional sales through existing distributors or attract additional distributors.

Market position and competition · Competitive pressure and market share loss

We face significant competition, and if we are unable to compete effectively, we may not be able to achieve or maintain significant market penetration or improve our results of operations. The medical device industry is intensely competitive, subject to rapid change and significantly affected by new product introductions and other market activities of industry participants.

Innovation and product development · Intellectual property protection and infringement

We rely on a variety of intellectual property rights, and if we are unable to maintain or protect our intellectual property, our business and results of operations will be harmed. Our commercial success will depend, in part, on our ability to obtain and maintain intellectual property protection for our products and related technologies both in the United States and elsewhere.

Core operations · Quality control and product defects

Defects or failures or alleged defects or failures associated with our products could lead to recalls, safety alerts, or product-related or securities litigation, as well as significant costs and negative publicity. Manufacturing flaws, component failures, design defects, off-label uses or inadequate disclosure of product-related information could result in an unsafe condition or the injury or death of a patient.

Core operations · Operational disruption and business continuity

We are required to maintain high levels of inventory, which consume a significant amount of our working capital and could lead to permanent write-downs or write-offs of our inventory. Maintaining a significant inventory of raw materials, components and finished goods, including coils, also subjects us to the risk of inventory excess and obsolescence, which may lead to a permanent write-down or write-off of our inventory.

Core operations · Capacity utilization and efficiency

We cannot be certain that we will be able to manufacture our products in high volumes at commercially reasonable costs. We currently produce substantially all of our products at our manufacturing facilities in Alameda and Roseville, California, and we may need to expend significant capital resources and further increase the size of our manufacturing capabilities as we grow our business.

Human capital and workforce · Key personnel dependence and succession

If we were to lose one or more of our key employees, including to competitors, we may experience difficulties in competing effectively, developing our products and implementing our business strategies. Our research and development and sales and marketing programs depend on our ability to attract and retain highly skilled technicians, engineers and salespeople.

Human capital and workforce · Talent acquisition and retention

We depend on key personnel to operate our business and develop our products, and if we are unable to retain, attract and integrate qualified personnel, our ability to develop and successfully grow our business could be harmed. We believe that our future success is highly dependent on the contributions of our executive officers, particularly Adam Elsesser, our chief executive officer.

Natural and catastrophic events · Natural disasters and extreme weather

Natural disasters and other events beyond our control could harm our business. Natural disasters or other catastrophic events, such as earthquakes, flooding, wildfires, power shortages, pandemics, terrorism, political unrest, telecommunications failure, vandalism, cyber-attacks, geopolitical instability, war, drought, sea level rise and other events beyond our control, may cause damage or disruption to our operations.

Legal and litigation · Litigation and legal proceedings

We and our directors and officers may be subject to lawsuits relating to the Merger. Litigation is very common in connection with the sale of public companies, regardless of whether the claims have any merit.

Legal and litigation · Product liability and warranty claims

The medical device industry has historically been subject to extensive litigation over product liability claims. There are high rates of mortality and other complications associated with some of the medical conditions suffered by the patients whom specialist physicians use our devices to treat, and we may be subject to product liability claims if our products cause, or merely appear to have caused, an injury or death.

Legal and litigation · Intellectual property disputes

Our commercial success depends significantly on our ability to operate without infringing upon the intellectual property rights of third parties. The medical device industry is subject to rapid technological change and substantial litigation regarding patent and other intellectual property rights.

Data and privacy · Regulatory investigations and penalties

If our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us now or in the future, we may be subject to penalties, including civil and criminal penalties, damages, fines, disgorgement, exclusion from governmental health-care programs, and the curtailment or restructuring of our operations.

Credit and liquidity · Credit risk and customer defaults

We are exposed to the risk of nonpayment by our customers, which could adversely affect our financial condition or results of operations. Our business is subject to the risk of nonpayment by our customers. We sell our products through various payment arrangements, and may experience losses due to a customer's failure to make payments according to the contractual terms.

Organizational and management · Leadership and management changes

Uncertainty about the effect of the Merger Agreement and the Merger on our customers, employees, suppliers, vendors, and business partners may have an adverse effect on our business and operations. In addition, we have diverted, and will continue to divert, significant management attention and resources towards the completion of the Merger, which could materially adversely affect our business and results of operations.

Reputation and brand · Brand damage and negative publicity

Negative publicity regarding our products or marketing tactics by competitors or other third parties could reduce demand for our products, which would adversely affect sales and our financial performance. We may experience, from time to time, negative exposure in clinical publications or in marketing campaigns of our competitors.

Technology infrastructure · Technology systems and infrastructure failure

We depend on information technology systems to operate our business, and issues with maintaining, upgrading or implementing these systems, could have a material adverse effect on our business. We rely on the efficient and uninterrupted operation of information technology systems to process, transmit and store electronic information in our day-to-day operations.

Digital transformation and innovation · Digital transformation and modernization

In 2023, we completed implementation of a new enterprise resource planning ('ERP') software system implementation which replaced certain existing business, operational, and financial processes and systems. This ERP implementation project will continue to require investment of capital and human resources, the re-engineering of business processes, and the attention of many employees.