U.S. banking regulators’ latest moves may provide some reassurance for medtech and other companies exposed to Silicon Valley Bank‘s closure.
The California Department of Financial Protection and Innovation shuttered SVB on March 10 to stave off what was turning into an old-fashioned bank run.
Silicon Valley Bank has been a huge name in the tech and startup world since its founding in the 1990s. According to SVB’s website, half of all U.S. VC-backed tech and life science companies used the Santa Clara, California–based bank. Especially vulnerable were startups that parked their funds at the bank — and found themselves asking how much they’d get back above the $250,000 FDIC deposit insurance limit.
The FDIC — appointed as receiver in the closing — created the Deposit Insurance National Bank of Santa Clara (DINB). This protects insured depositors, the FDIC said in a news release. At the time of closing, the FDIC immediately transferred to the DINB all insured deposits of Silicon Valley Bank.
Yesterday, U.S. banking regulators announced plans to ensure Silicon Valley Bank depositors had access to their funds today. The Federal Reserve plans to provide loans for up to one year to shore up other banks — which are sitting on long-term, low-interest investments that they might have to sell at a loss in the present high-interest-rate environment.
By the afternoon today, Pristine Surgical CEO Bryan Lord reported in a LinkedIn post that the endoscopy tech company had successfully moved 100% of its funds out of Silicon Valley Bank.
“Much will (and already is) being said, but for now — putting policy and politics aside — I want to commend the leaders and staff at the FDIC, Federal Reserve and Treasury Department who did their job. Payrolls will be met. Jobs will be saved. Lifesaving and life-changing innovations will continue to be developed. Leading companies of the future will continue to push ahead,” Lord said.
Stock markets seemed relatively stable in morning trading today after the moves over the weekend — along with predictions that the Fed may halt interest rate hikes for now. MassDevice‘s MedTech 100 index, which includes stocks of the world’s largest medical device companies, was up slightly. (In other news, Insulet (Nasdaq:PODD) will replace Silicon Valley Bank in the S&P 500 index.)
Silicon Valley Bank’s reach extends to medtech
BTIG analysts issued a list of their covered companies that could be exposed to Silicon Valley Bank. This includes exposure through loan agreements, revolving credit facilities, and more. (Note: This is only a fraction of the medtech companies involved. We’ll update this story as we find out more.)
The analysts stressed that the list is only based on these companies’ most recent filings. It lacks full additional detail that could help provide context. By relying on filings, the list also doesn’t reflect companies that might hold cash or investments with Silicon Valley Bank. BTIG analysts say they reached out to the companies they listed to better understand the exposure.
Below are some of the potentially affected companies and some details on their dealings with Silicon Valley Bank.
iRhythm has a five-year loan agreement expiring March 2027. It includes a term loan of up to $75 million and revolving credit of up to $25 million. As of Dec. 31, 2022, iRhythm had $35 million in outstanding debt under the term loan. It had nothing outstanding under the revolving credit facility.
AtriCure has a five-year loan agreement expiring November 2026. It includes a term loan of $60 million with an option to make available an additional $30 million in term loan borrowings, plus a $30 million revolving line of credit. As of Dec. 31, 2022, AtriCure had $60 million in outstanding debt under the term loan. It also had unused borrowing capacity of around $29 million under the revolving credit line.
“In our case, the majority of our cash and investments are held in custody outside of SVB and are not at risk,” Justin Noznesky, a spokesperson for AtriCure, told MassDevice.
A BTIG update said AtriCure estimates that its exposure totals $2.5M. That represents about 3% of cash and investments.
ViewRay has a five-year loan facility agreement with MidCap and Silicon Valley Bank expiring in November 2027. It includes a term loan of up to $100 million and a revolving credit facility of up to $25 million. As of Dec. 31, 2022, ViewRay had $80 million in outstanding debt. That includes $75 million from its term loan and $5 million from the revolving credit line.
Treace Medical Concepts
Treace borrowed $50 million under a term loan with MidCap and $4 million under a revolving loan facility with MidCap in April 2022. Term loan proceeds repaid a term loan obligation with CRG and an early termination fee to Silicon Valley Bank amounting to $34 million. That included principal of $30 million, interest of $400,000 and fees totaling $3.7 million. However, Treace has no outstanding debt with Silicon Valley Bank following the repayment. It has an additional $900,000 in cash pledged to Silicon Valley Bank as collateral for its corporate credit card.
Vericel entered into an agreement for SVB Leerink to act as a placement agent to sell $200 million in common stock in an ATM offering in August 2021. SVB Leerink is not required to sell a specified number of shares. As of Dec. 31, 2022, Vericel has sold no shares in relation to the agreement.
Organogenesis has a term loan facility with Silicon Valley Bank and other lenders totaling up to $75 million. It also has a revolving credit facility of up to $125 million, having finalized an agreement in August 2021. The company currently has $71.25 million in outstanding term loans owed. It’s required to pay the loan in four installments: $4.7 million in 2023, $5.6 million in 2024, $6.6 million in 2025 and $54.6 million in 2026.
Humacyte entered into a $50 million term loan agreement with Silicon Valley Bank in March 2021. Its maturity date falls on March 1, 2025. As of Feb. 28, 2022, Humacyte borrowed $30 million of principal from the loan agreement. It issued Silicon Valley Bank warrants to purchase 123,302 in common stock as collateral for the loan agreement. Its payment schedule related to the $30 million in debt includes $8.6 million in 2023, $17.1 million in 2024 and $4.3 million in 2025.
In a statement shared to MassDevice by a spokesperson for the company, Humacyte said: “The company is aware of media reports relating to liquidity concerns at Silicon Valley Bank. Humacyte considers its exposure to liquidity concerns at SVB, if any, to be immaterial.”
SVB Leerink acted as sales agent for Lensar’s $35 million common stock issuance in an ATM offering on April 8, 2021.
Truist adds more medtech companies to the list
In addition to BTIG’s list, Truist published a collection of medtech companies with exposure to Silicon Valley Bank. Details remain slim and may be updated later.
Inspire Medical Systems
Truist says Inspire Medical Systems has two small cash accounts with Silicon Valley Bank. They represent very little (low-single-digit percentage) of cash and investments.
The company has one small account for payroll and vendor liabilities. Truist says it consists of less than $5 million.
Based on Si-Bone’s 10-K report, Truist believes the vast majority of its money sits in separately managed accounts not with Silicon Valley Bank. However, the company has a $51 million credit facility with the bank. That includes a $36 million term loan and $15 million revolving credit line. Truist also says Si-Bone has an uncommitted $15 million term loan accordion available at Silicon Valley Bank’s discretion.
Insulet will replace Silicon Valley Bank on the S&P 500 index as a result of the closure. It has no exposure to the bank. PODD shares closed Friday at $280.36 apiece. They’ve since grown 8.1% to $303.02 apiece before the markets opened today.
The CGM maker today issued a statement in response to speculation following the bank closure:
“Dexcom does not have material exposure to the developments at Silicon Valley Bank, including with respect to the company’s cash deposits. Although the company has worked successfully with SVB for many years, Dexcom does not have any exclusive banking relationship with SVB. As noted in Dexcom’s recent filing on form 10-K, the company currently retains approximately $2.5 billion in cash, cash equivalents, and short-term marketable securities. Approximately $2.7 million of this amount is held at SVB.”
Further info from the FDIC
All insured depositors have full access to insured deposits no later than the morning of Monday, March 13. The FDIC intends to pay uninsured depositors an advance dividend within the next week. As the FDIC sells Silicon Valley Bank’s assets, it may make future dividend payments to uninsured depositors.
Silicon Valley Bank had approximately $209 billion in total assets and about $175.4 billion in total deposits as of Dec. 31, 2022. The bank had 17 branches in California and Massachusetts. Its main office and all branches will reopen on Monday, March 13. DINB will maintain Silicon Valley Bank’s normal business hours.
This story originally ran on March 10, 2023. Update March 13 with more updates on companies affected, FDIC moves. Executive editor Chris Newmarker contributed to this report.