HeartWare International Inc. is lining up a large pile of cash — including a $20 million assist from one-time merger partner Thoratec Corp. — to help fund development and sales of the company’s miniaturized implantable heart pumps.
According to regulatory filings and company announcements, the Framingham, Mass.-based ventricular implants maker expects to soon pocket more than $24 million in net proceeds from the sale of its common stock to a group of institutional investors. The private placement, expected to close Friday, is priced at $22 a share, marking a 4.3 percent discount on the stock’s closing price Monday before the deal was announced.
Heartware also secured commitments to sell an additional 1.4 million shares, with the potential to generate nearly $30 million more in net proceeds, but must first gain its shareholders’ approval before issuing those shares. That process likely will take about two months, according to a company spokesman.
Coinciding with the stock sales in United States, Heartware also plans to sell up to $5 million worth of shares in Australia — the company’s corporate home prior to its move to Framingham. If all the proposed transactions are completed, Heartware’s total take would be $58.8 million.
The company did not identify individual members of the investor groups, although the spokesman, Matt Clawson of Allen & Caron Inc. in suburban Los Angeles, said they include existing investors as well as several first-time buyers who became aware of Heartware through its proposed merger with Pleasanton, Calif.-based Thoratec earlier this year.
The Federal Trade Commission last month moved to block the $282 million merger, contending Thoratec already dominates the U.S. market for heart implants designed to boost the left ventricle’s ability to push blood throughout the body. The companies then said they were voluntarily spiking the merger rather than pursuing a costly legal challenge.
“Once the deal with Thoratec fell through, it was clear [to the investors] that Heartware would need additional funds to complete the U.S. trials of their device and ramp up sales in Europe,” Clawson said. “So they stepped up and bought stock in the private placement.”
Thoratec has not entirely left the scene, however.
As part of the proposed merger, the company agreed in February to lend Heartware up to $28 million to fund operations during the expected transition period. Thoratec is leaving $20 million of that money on the table for Heartware, giving Thoratec the option of converting the borrowed money into Heartware stock priced at $29.43 a share.
Heartware has not yet tapped the loan facility, which runs through 2011 and carries an annual interest rate of 10 percent. If fully converted into stock, Thoratec would own just less than 680,000 shares, or a roughly 7.6 percent stake, according to regulatory documents filed Monday with the U.S. Securities and Exchange Commission.
Heartware finished the quarter ended March 31 with $12.5 million in cash and equivalents on hand, just about enough to carry it through two more quarters of operations at its current burn rate. Sales thus far have been minimal — totaling $1.4 million during the first quarter — although the company anticipates a hefty boost in revenues after receiving CE Mark certification to sell its Ventricular Assist System in the European Union earlier this year.
The company also is continuing trials of the implant at nine U.S. hospitals with a goal of gaining regulatory approvals here within two to three years, Clawson said.
