Artivion Amends Agreements with Endospan

Rhea-AI Summary

Artivion has revised its agreements with Endospan, providing up to $25 million in debt financing to assist in obtaining FDA approval for the NEXUS Stent Graft System. The upfront payment for a potential purchase of Endospan has been reduced to $135 million, inclusive of loan offsets, and the $100 million minimum earnout has been eliminated. NEXUS offers a minimally invasive treatment for aortic arch disease, targeting a $600 million annual global market. Artivion retains the option to acquire Endospan within 90 days of NEXUS FDA approval, with terms allowing for up to $12.5 million in equity as part of the payment.

Positive

• Artivion is providing up to $25 million in additional debt financing to Endospan.
• The upfront payment for acquiring Endospan was reduced from $250 million to $135 million.
• The $100 million minimum earnout has been eliminated.
• NEXUS addresses a $600 million annual global market opportunity for minimally invasive aortic arch repair.

Negative

• Artivion is committing additional funds to aid Endospan's FDA approval process, potentially increasing financial risk.

Insights

Financial Analyst

Artivion's decision to extend an additional $25 million in debt funding to Endospan reflects a strategic move to advance the FDA approval process for the NEXUS device and potentially secure a unique asset in the aortic repair market. The reduction in upfront acquisition payment from $250 million to $175 million, combined with the elimination of the $100 million minimum earnout payment, significantly lowers the financial burden and risks associated with this acquisition. This makes the deal more attractive to Artivion's investors while continuing to align with their long-term goals. The use of free cash flow for funding suggests that Artivion is confident in its liquidity and cash generation capabilities, which might be a reassuring sign for shareholders. However, investors should closely monitor the progress towards FDA approval as it remains a critical milestone for the success of this investment strategy.

Medical Research Analyst

NEXUS, which is currently the only branched endovascular system approved for treating aortic arch disease, represents a significant advancement in medical technology. Minimally invasive procedures, such as those enabled by NEXUS, generally result in shorter hospital stays, fewer complications and quicker recoveries compared to traditional open-chest surgeries. From a clinical perspective, the adoption of NEXUS could transform the standard of care for aortic arch aneurysms and dissections. This potentially positions Artivion as a leader in this niche yet critical sector. The global addressable market opportunity of $600 million highlights substantial growth potential, but achieving FDA approval is essential. Investors should consider the competitive landscape and regulatory hurdles that might impact the timeline and success of this product's integration into the market.

Market Research Analyst

The amended agreements indicate a calculated risk by Artivion to capture a larger share of the aortic repair market. The financial incentives provided to Endospan ensure progress towards commercialization while aligning both companies' interests. The elimination of the minimum earnout reduces financial strain and the possibility of using company equity for part of the payment showcases financial flexibility. This partnership could strengthen Artivion's market positioning if successful, considering the innovative nature of NEXUS. The market opportunity is sizable, but competition and market acceptance remain variables. Investors should weigh the potential market disruption against the inherent risks of relying on regulatory approval and market adoption for long-term gains.

Provides Endospan with $25 million of Additional Debt Funding to Obtain FDA Approval for NEXUS

Upfront Payment Associated with Purchase Option Reduced to $135 million, inclusive of loan off-set, and $100 million earnout minimum eliminated 

ATLANTA, July 1, 2024 /PRNewswire/ -- Artivion, Inc. (NYSE: AORT), a leading cardiac and vascular surgery company focused on aortic disease, today announced it has amended its credit facility and option purchase agreements with Endospan Ltd. ("Endospan"), an Israeli-based, privately-held developer of the NEXUS^® Stent Graft System ("NEXUS"). In 2019, the Company provided a credit facility to Endospan and entered into an option agreement to purchase Endospan upon U.S. Food and Drug Administration ("FDA") approval of NEXUS. The amendments announced today result in three major changes to the original credit facility and option purchase agreements:

• Artivion will provide additional loans to Endospan of up to $25 million in three tranches and anticipates funding the loans with free cash flow;
• The upfront payment associated with the purchase option is reduced from $250 million to $175 million, resulting in an upfront acquisition purchase price of $135 million, inclusive of loan off-set; and
• The $100 million minimum payout for the earnout is eliminated.

Endospan has developed NEXUS, the first and only approved branched endovascular system to treat aortic arch disease, including both aortic aneurysms and dissections. While minimally invasive endovascular repair has been the standard of care for Abdominal Aortic Aneurysm (AAA) and Thoracic Aortic Aneurysms (TAA), aortic arch disease patients with aneurysms or dissections who receive treatment have previously had little choice but to undergo open-chest surgery with its associated invasiveness and risks, lengthy hospitalizations, and prolonged recuperation. NEXUS transforms a complex surgical aortic arch repair into a minimally invasive endovascular procedure and stands to address an annual global addressable market opportunity of $600 million according to latest estimates.

"Based on our experience with NEXUS in Europe since 2019, we continue to see a significant global opportunity for the NEXUS technology and expect that it will further solidify our position as a global leader in aortic repair," said Pat Mackin, Chairman, President, and Chief Executive Officer of Artivion. "We view our revised credit facility and option purchase agreements with Endospan as an investment in the next frontier of aortic arch surgery. Should we exercise our option to acquire Endospan, we believe we will be able to meaningfully expand our total addressable market at that time on terms more favorable than existed prior to these amendments."

Terms of the Amendments 
Under the terms of the amended Endospan credit facility, Artivion will provide up to an additional $25 million in debt financing to Endospan over three tranches, with the first $7 million drawn at close and subsequent tranches subject to progress toward and achievement of the NEXUS PMA. The terms of the loan are nearly identical to the terms of the original $15 million loan, except that under the amended terms both original and new loans will benefit from a first priority lien in Endospan assets, pari passu with other first lien Endospan liabilities.

If Artivion elects to exercise its option to purchase Endospan as contemplated in the Securities Purchase Option Agreement, then the outstanding principal amount and all accrued interest on the original and new loans would be deducted from the acquisition proceeds paid at closing. Under the amended purchase option, Artivion has the right to acquire Endospan at any time up to 90 days after receiving notice of U.S. FDA approval of NEXUS, for an upfront payment of $175 million, less previously extended loans and accrued interest, and an additional payment in the form of an earnout at two years post exercise of two and one half times (2.5x) incremental year two revenue. There is no longer any minimum earnout payment, and the maximum payment is still $200 million. Additionally, Artivion at its sole discretion may use up to $12.5 million of Artivion equity as part of the upfront payment. 

The amendments to the credit facility and Securities Purchase Option Agreement have been approved by both companies' boards of directors and Endospan's Security Holders. There were no changes to the parties existing Exclusive Distribution Agreement. The purchase obligations of the Securities Purchase Option Agreement will become effective if, and only when, Artivion exercises its purchase option. Any purchase of Endospan by Artivion would be subject to customary closing conditions.

Financial Commentary
The Company does not anticipate the amended agreement with Endospan to have a material impact on its full-year 2024 financial guidance.

About Artivion, Inc.
Headquartered in suburban Atlanta, Georgia, Artivion is a medical device company focused on developing simple, elegant solutions that address cardiac and vascular surgeons' most difficult challenges in treating patients with aortic diseases. Artivion's four major groups of products include: aortic stent grafts, surgical sealants, On-X mechanical heart valves, and implantable cardiac and vascular human tissues. Artivion markets and sells products in more than 100 countries worldwide. For additional information about Artivion, visit our website, www.artivion.com.

About Endospan Ltd.
Privately held Endospan, headquartered in Herzlia (Tel Aviv), Israel, is a pioneer in the endovascular repair of Aortic Arch Disease including aneurysms and dissections. Endospan has received CE-Mark to commercialize in Europe the NEXUS Stent Graft System, the first endovascular off-the-shelf system to treat Aortic Arch Disease which affects a greatly underserved group of patients diagnosed with a dilative lesion in, or near, the aortic arch. While minimally invasive endovascular repair has been the standard of care for Abdominal Aortic Aneurysm (AAA), Aortic Arch Disease patients with aneurysms or dissections have not been as fortunate and have had little choice but to undergo open-chest surgery with its invasiveness and risks, lengthy hospitalization periods, and prolonged recuperation. For additional information about Endospan, visit their website, www.endospan.com. 

Forward Looking Statements 
Statements made in this press release and the accompanying presentation that look forward in time or that express management's beliefs, expectations, or hope are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements reflect the views of management at the time such statements are made. These statements include those regarding our estimates for the total addressable annual global market for the NEXUS technology; and our beliefs that we continue to see a significant global opportunity for the NEXUS technology and expect that it will further solidify our position as a global leader in aortic repair; we view our revised credit facility and option purchase agreements with Endospan as an investment in the next frontier of aortic arch surgery; and we believe that should we exercise our option to acquire Endospan, we will be able to meaningfully expand our total addressable market at that time on terms more favorable than existed prior to these amendments. These forward-looking statements are subject to a number of risks, uncertainties, estimates, and assumptions that may cause actual results to differ materially from current expectations. These risks and uncertainties include but are not limited to the risks that the TRIOMPHE clinical trial may not be completed or may fail, may not reach its endpoints, or may be completed on timeframes different than anticipated; that PMA approval for NEXUS may be not achieved at all or on the time frames anticipated or that there be developments in technology by competitors that reduce the total addressable market for the NEXUS technology. These risks and uncertainties include the risk factors detailed in our Securities and Exchange Commission filings, including our Form 10-K for the year ended December 31, 2023, and our subsequent filings with the SEC. Artivion does not undertake to update its forward-looking statements.

Contacts:
Artivion, Inc.	Gilmartin Group LLC
Lance A. Berry	Brian Johnston / Laine Morgan
Executive Vice President & Chief Financial Officer	Phone: 332-895-3222
Phone: 770-419-3355	investors@artivion.com

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SOURCE Artivion, Inc.

FAQ

What is the additional debt funding provided by Artivion to Endospan?

Artivion is providing up to $25 million in additional debt financing to Endospan in three tranches.

How has the upfront payment for the Endospan purchase option changed?

The upfront payment for Artivion's purchase option has been reduced from $250 million to $135 million, inclusive of loan offsets.

What is the significance of eliminating the $100 million minimum earnout for Endospan?

Eliminating the $100 million minimum earnout reduces the financial obligations for Artivion in the acquisition deal.

What is the market opportunity for the NEXUS Stent Graft System?

NEXUS targets an annual global market opportunity of $600 million for minimally invasive aortic arch repair.

When can Artivion exercise its option to acquire Endospan?

Artivion can exercise its option to acquire Endospan up to 90 days after receiving FDA approval for NEXUS.