CartiHeal Acquisition Update

All,

I hope all of the Bioventus Fathers had a terrific Father’s Day and enjoyed your day with family!  (I know this is a US centric holiday but hope you still had a great weekend outside the US;)!)

The attached PR on CartiHeal will go out prior to the market opening on Tuesday June 21st (the market is closed tomorrow due to the Juneteenth observed holiday – another important holiday as highlighted by our DE&I committee that fell on the weekend this year).

I do ask that you please do not share this PR with anyone outside of Bioventus until its release on Tuesday morning.

The PR is pretty clear, over the past month, since our original financing plan was not achievable, we have been able to renegotiate the CartiHeal acquisition and restructure the deal so that it will work favorably for Bioventus and our ability to meet our near term goals and also complete the acquisition.  This was a team effort and want to recognize Tony D’Adamio, Dave Crawford and Mark Singleton for their great work and strong support as we worked through this time consuming process with CartiHeal and their Board as well as the Banks that support us.

The restructured deal allows us to pay over time while keeping our current debt structure and finance the remaining payments with our free cash flow over the coming years.  The new deal is based on meeting key milestones that will drive ultimate value for the CartiHeal technology which we believe has significant growth potential for Bioventus in the medium term.

Here are some key facts to understand regarding our acquisition of CartiHeal.

  • We expect to close the acquisition in the month of July and even though we are paying with milestone payments into potentially 2027 CartiHeal will be owned by Bioventus at the time we close.
  • CartiHeal has about 20 employees based in Israel.  We will transition the manufacturing to our Memphis facility over time and we will keep the manufacturing capabilities of CartiHeal in Israel for manufacturing purposes until 2026 or 2027.
  • We expect the market development process for CartiHeal to take some time and have targeted our restructured deal payments based on key milestones being completed by specific dates.  These milestones include;
    • Publication of the IDE study that shows superiority of CartiHeal over current standard of care for osteochondral defects – by July 1, 2023
    • Completion of the first 100 CartiHeal cases in the US market – by September 1, 2023
    • Publication of the second study on the CartiHeal clinical results – by January 1, 2025
    • Publication of the third study on the CartiHeal clinical results – by January 1, 2026
    • Achievement of the Category One Code needed for full reimbursement – by January 1, 2027

The milestones above are ones that will unlock the full potential of CartiHeal in the years to come.  We expect to commence clinical cases in the US sometime in the month of August or September and it will be a slow process with a handful of surgeons as we build experience and understand the reimbursement pathway.  We will also look to gain further experience with CartiHeal in markets outside the US and will also look to utilize these markets as we develop the needed clinical publications as highlighted in the milestones above.

We will discuss this exciting development further during our All Hands meeting on Wednesday and take any questions you have at that time.

I hope you have a great start to the week!