UPDATED August 9, 2016, with 2nd-quarter results.
The Aquadex device is designed to filter salt and water in patients with renal failure experiencing fluid overload. The deal calls for Eden Prairie, Minn.-based Sunshine Heart to pay $4 million in cash and another 1 million in SSH shares, worth about $950,000 at their August 5 closing price of 95¢ apiece.
Baxter paid $3.9 billion to acquire Swedish dialysis giant Gambro and the Aquadex device in September 2013.
Sunshine Heart’s flagship product is the C-Pulse system, designed to use intra-aortic balloon counter-pulsation to reduce the load on the left ventricle using a cuff around the exterior of the aorta. The cuff is designed to inflate and deflate in sync with the heart’s pulsation to augment cardiac function.
“Aquadex is an important strategic investment, which allows Sunshine Heart to strengthen our presence in the heart failure market,” chairman & CEO John Erb said in prepared remarks. “We believe Aquadex is a valuable and highly complementary technology to our expanding heart failure product portfolio. There is a real need for fluid management in patients both before and following any kind of heart failure procedure. Aquadex is used to treat fluid overload in congestive heart failure patients and can help reduce the length of stay while in the hospital and the number of hospital visits in total.”
The acquisition is expected to be accretive this year “with a relatively quick payback period,” Erb added.
Last month, Sunshine Heart said it planned to look at therapeutic strategies focused on neuromodulation rather than counterpulsation for the C-Pulse device, touting the shift as a more cost-effective strategy with a faster path to commercialization. Later in July the company drummed up $3.5 million in a direct offering of convertible preferred stock to a lone investor.
Sunshine Heart also said it paid off its debt facility with Silicon Valley Bank as part of the deal, taking out a new $5 million facility with the investment bank – contingent on it meeting financial covenants it doesn’t currently meet.
“This strategic acquisition will allow Sunshine Heart to further drive important advancements to heart failure treatment,” said Ben Johnson, Managing Director of Silicon Valley Bank. “We’re excited to provide the financing to support the company as it matures to the next phase of development.”
Sunshine Heart also reported its 2nd-quarter results August 9, paring its losses by -34.1% to -$4.2 million, or -23¢ per share. Adjusted to exclude 1-time items, losses per share were -21¢, exactly in line with the consensus expectation on Wall Street.
“After completing my first full quarter as CEO, I continue to be excited and optimistic about the significant opportunities ahead of us at Sunshine Heart,” Erb said. “As you can see, we are not sitting still. There are a lot of good things happening at the company and the entire team is focused on executing our strategy. We are excited about the direction we are heading and we are confident that we’ve identified a better path to deliver a meaningful therapy for heart failure patients.”
SSH shares were up 5.6% to $1 even in pre-market trading August 8, but investors pushed the stock back down to a 94¢ close and had cut its value by another -9.6% to 85¢ in early trading August 9, after the company released its earnings report.