Admedus (ASX: AHZ) shares have returned to trading after the structural heart company confirmed it would conduct a recapitalisation plan by selling its patch business to a US medical devices firm.
In a statement to the market, Admedus announced that it had sold its CardioCel and VascuCel patch business to NASDAQ-listed LeMaitre Vascular for up to $36.2 million including $22.8 million to be paid upfront.
Under the terms of the agreement, the medical devices company will receive $22.8 million immediately followed by deferred payments of $1 million in 12 months and 36 months’ time.
Additionally, there is also a provision for Admedus to receive up to $11.4 million in earn-out payments including $3 million if the company obtains regulatory approval under the European Medical Devices Directorate Regulation.
A $700,000 tranche payment is also expected if Admedus completes all testing and documentation to “extend the shelf life” of the CardioCel and VascuCel products from 36 months to at least 60 months in the US.
Additional tranche payments
To ensure its products continue to deliver commercial returns, the agreed deal also contains a provision for several payments based on ongoing sales revenue generated by LeMaitre.
Admedus stands to receive up to $3.73 million if gross revenue from CardioCel and VascuCel product sales exceed $29.8 million or $1.8 million if gross revenue exceeds $22.4 million in the first 12 months.
Furthermore, the same provision will reapply and Admedus could receive another $3.73 million if gross product sales exceed $44.7 million or $1.8 million if product sales exceed $33.5 million in the second 12 months.
Handing over to LeMaitre
LeMaitre is a provider of devices and implants to treat peripheral vascular disease, a condition that affects more than 200 million people worldwide.
The US company also develops, manufactures and markets disposable and implantable vascular devices typically used by vascular surgeons.
Today’s announced deal will provide LeMaitre with additional products it can sell as part of its broader suite and will help the company’s operations almost immediately.
The CardioCel bio-scaffold is used to repair congenital heart deformities and to reconstruct dysfunctional heart valves and valve leaflets. The product is approved for sale in Europe, the US, Canada, Hong Kong, Malaysia, Singapore, New Zealand, India the Middle East and North Africa as well as being available under the special access scheme in Australia.
VascuCel is a vascular scaffold only available in the US, used in cardiac repairs and reconstructions.
Admedus hailed the sale of its patch business as a “transformational milestone” that will position the ASX-listed company for its “next growth phase anchored by its ground-breaking TAVR programme”.
“This is what management set-out to achieve for shareholders two years ago,” said Admedus chief executive officer Wayne Paterson.
“The partnership strategy was possible only after we built a credible product profile over the past two years,” he said.
Admedus also explained that the significant capital infusion of up to $36 million will streamline its operations and will help to induce cost reductions given the reduced headcount and operating expenses.
With the patch business sold, Admedus is now expected to focus on its TAVR programme and other market opportunities based on its scientifically and commercially validated ADAPT platform.
The company’s initial target will be its first-in-human studies for its single-piece 3D aortic valve in 2020.
“Based on Admedus’ current laboratory and animal study findings – combined with the highly differentiated anti-calcification properties of all products generated using the ADAPT technology – there is potential for single-piece 3D aortic valve and TAVR devices to be breakthrough for patients,” said Mr Paterson.
The news boosted Admedus shares by almost 12% to $0.067 in morning trade.