CryoLife, Inc. CRY announced the signing of a distribution and credit facility agreement with Israel-based endovascular stent graft system developer, Endospan. The alliance will add NEXUS (the only endovascular stent graft system accepted for the repair of aneurysms and dissections in the aortic arch) to CryoLife's branched aortic stent graft portfolio.
The deal also provides an option of purchasing Endospan in the future.
Financial Terms of the Deal
The deal, regarding the distribution rights and future purchase, has been finalized at an upfront payment of $10 million. CryoLife will additionally provide $15 million as debt financing to Endospan, depending upon the progress made by Endospan on the clinical trial to receive FDA approval for NEXUS.
Endospan will receive $250 million after the FDA approval of NEXUS if CryoLife decides to exercise its purchase option within 90 days of receiving the nod. It will also receive guaranteed $100 million and up to an additional $100 million, depending on the commercial success of NEXUS in the first year of post-option exercise.
Few Words About Nexus
The aortic arch disease includes aortic aneurysms and aortic dissections, which occur suddenly and usually without warning. Currently, around 120,000 patients suffer thoracic aortic arch disease in the United States and Europe annually. This shows that the disease is currently spreading at an alarming rate. On the contrary, the treatment market has huge untapped potential as barely 30,000 patients are receiving treatment.
Till now, minimally invasive endovascular repair has been the typical care for Abdominal Aortic Aneurysm (AAA) and Thoracic Aortic Aneurysms (TAA). Patients, with aneurysms or dissections, receiving aortic arch disease treatment, had to undergo open-chest surgery and endure invasiveness and risks, long hospital stays, and extended recovery period due to the unavailability of a workable alternative.
On this front, Endospan developed NEXUS to treat aortic arch disease, thus altering a complex surgical aortic arch repair into an ordinary endovascular procedure. It has been designed to augment intra-procedural and long-term stability due to its proprietary geometrical design, thus reducing arch manipulation and risk of a stroke.
Per the experienced medical fraternity, NEXUS is more suitable for aged patients, who are not suited for open-chest surgery, and those with a prior Type A dissection, which was repaired in an open surgical approach.
The addition of Nexus to CryoLife’s existing portfolio of aortic stent graft branch will, thus, strengthen its position in the global arena.
How Strategic is the Deal?
The agreement between CryoLife and Endospan provides the former the exclusive distribution rights of NEXUS and immediate access to the highly lucrative endovascular aortic arch repair market in the European region. It will also open up avenues for cross-selling of CryoLife's existing stent graft portfolio, JOTEC.
The deal also includes the option of CryoLife purchasing Endospan at a predetermined price, which will be valid for 90 days following FDA’s approval for NEXUS. The deal will also open up the global market access for endovascular aortic arch repair, estimated to be around $800 million, pending regulatory approvals.
The deal positions CryoLife for accelerated revenue and adjusted earnings growth over the next five years, without even exercising the purchase option of Endospan.
Given the growing market potential, the deal has been struck at the appropriate time.
Per a report by Research And Markets, the global aortic stent graft market is expected to surpass $3.7 billion by 2024, growing at an impressive CAGR of around 6% between 2018 and 2024. The major factor driving the current market expansion is the commercialization of state-of-the-art grafts such as fenestrated aortic stent grafts, further broadening treatment options for aortic aneurysm.
Share Price Performance
The company has gained 10.7% in the past month compared with the industry’s growth of 4.4% and the S&P 500 index’s rally of 5.9%.
Zacks Rank & Stocks to Consider
Currently, CryoLife carries a Zacks Rank #3 (Hold). A few better-ranked stocks from the broader medical space are Baxter International Inc. BAX, GW Pharmaceuticals PLC GWPH and Neurotrope, Inc. NTRP.
Baxterwith a Zacks Rank #2 (Buy), has a projected long-term earnings growth rate of 12.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
GW Pharmaceuticals estimates third-quarter earnings growth rate to be 72.8%. It currently sports a Zacks Rank #1.
Neurotrope, with a Zacks Rank #2, has a projected third-quarter earnings growth rate of 27.7%.
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