ATLANTA - Artivion, Inc. (NYSE:AORT), a company specializing in aortic disease treatment, has revised its financial agreements with Endospan Ltd., the Israeli developer of the NEXUS Stent Graft System. The amendments, announced today, adjust the terms of the credit facility and purchase option for Endospan, which Artivion has been financing since 2019 pending U.S. Food and Drug Administration (FDA) approval for NEXUS.
Under the new terms, Artivion will extend up to $25 million in additional loans to Endospan, funded through its free cash flow. The upfront payment for the purchase option has been reduced from $250 million to $175 million, with a final upfront acquisition cost of $135 million after loan offsets. Additionally, the previous $100 million minimum earnout has been removed, altering the potential future financial structure of the deal.
NEXUS is noted as the first and only approved branched endovascular system designed for minimally invasive treatment of aortic arch disease, which has traditionally required open-chest surgery. The technology is anticipated to significantly impact the global market for aortic arch surgery, estimated at $600 million annually.
Artivion's Chairman, President, and CEO, Pat Mackin, expressed confidence that the amended agreements with Endospan represent an investment in the future of aortic arch surgery and could expand Artivion's market upon acquiring Endospan.
The amendments include the provision of additional loans over three tranches, with the first $7 million available immediately and subsequent tranches contingent on progress toward FDA approval for NEXUS. The loans will have a first priority lien in Endospan assets, on par with other first lien liabilities.
Should Artivion exercise its purchase option, the outstanding loan principal and accrued interest will be deducted from the closing payment. The earnout payment, due two years after the exercise of the purchase option, is now set at 2.5 times the incremental year two revenue, with no minimum and a maximum of $200 million. Artivion also retains the right to use up to $12.5 million of its equity for the upfront payment.
Both companies' boards of directors and Endospan's Security Holders have approved these amendments, which do not affect their existing Exclusive Distribution Agreement. Any potential acquisition of Endospan by Artivion is subject to customary closing conditions.
Artivion does not expect these changes to materially impact its 2024 financial guidance. The company, headquartered in Georgia, markets its products globally, including aortic stent grafts and mechanical heart valves.
This report is based on a press release statement.
In other recent news, Artivion Inc. has demonstrated robust financial performance in the first quarter of 2024, with a 16% year-over-year growth in constant currency revenue, reaching $97.4 million. The firm's adjusted EBITDA also saw a significant increase of 60% year-over-year. This growth was primarily driven by strong performances across key product segments, including a 26% rise in tissue products and a 19% increase in stent grafts.
Artivion's first-quarter results prompted Needham to raise its price target for the company to $30.00, maintaining a Buy rating. The firm's optimistic outlook is based on Artivion's sustained double-digit revenue growth and even faster EBITDA growth.
Geographically, Artivion's sales in Latin America saw a robust increase of 22% in constant currency. However, the Asia Pacific region faced a 3% decline due to the timing of distributor orders. Despite this, Artivion has raised its revenue guidance for 2024, anticipating a constant currency growth rate of 9-12%.
Artivion's recent developments include positive clinical data for products like the On-X aortic heart valve and robust sales growth across several regions and product lines. The company expects continued growth by expanding its product portfolio and increasing presence in APAC and Latin America. While free cash flow was negative $9.1 million in Q1 due to cash-intensive activities, Artivion anticipates positive free cash flow for the full year.
InvestingPro Insights
Artivion, Inc. (NYSE:AORT) has shown a strong performance in the market with significant returns over the past few months. According to the latest metrics, the company has seen a 21.05% price total return over the last three months and an even more impressive 43.46% year-to-date price total return. This upward trend is further highlighted by the fact that Artivion's stock is trading near its 52-week high, at 98.91% of the peak value.
Investors considering Artivion as part of their portfolio should note that while the company is currently not profitable, with a negative P/E Ratio of -108.29, analysts are predicting a change in fortune. The net income is expected to grow this year, which aligns with the optimistic outlook of Artivion's management on the potential market expansion upon acquiring Endospan.
Moreover, the company's liquid assets currently exceed its short-term obligations, indicating a strong liquidity position that could support its strategic investments and financial commitments.
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