CryoLife Signs Definitive Agreement to Acquire Cardiogenesis
Acquisition represents significant addition to CryoLife's cardiovascular surgery portfolio
All-cash transaction values Cardiogenesis at approximately $22 million and is expected to be break-even to slightly accretive to CryoLife diluted net earnings per share in 2011, excluding acquisition-related charges and integration costs
CryoLife will host a conference call at 10:00 AM Eastern Time
ATLANTA, and IRVINE, Calif., March 29, 2011 - CryoLife, Inc. (NYSE: CRY), an implantable biological medical device and cardiovascular tissue processing company, and Cardiogenesis Corporation (OTCQB: CGCP), a leading developer of surgical products used in the treatment of patients with refractory angina resulting from diffuse coronary artery disease, today announced that the boards of directors of both companies have approved a definitive agreement under which CryoLife will acquire all of the outstanding shares of Cardiogenesis for $0.457 per share. The all-cash transaction values Cardiogenesis at approximately $22 million, net of cash acquired and liabilities assumed. The offer represents a 43 percent premium to Cardiogenesis' closing price on March 28, 2011. The transaction is expected to be conducted as a tender offer followed by a merger and to close in mid to late May 2011.
Cardiogenesis had sales of $11.3 million for the year ended December 31, 2010. Cardiogenesis' market leading YAG laser system and single use, fiber-optic delivery systems are FDA approved for performing a surgical procedure known as Transmyocardial Revascularization (TMR), which treats patients with angina that is not responsive to standard medications. Patients undergoing TMR treatment with Cardiogenesis products have been shown to have angina improvement, longer event-free survival, reduction in cardiac related hospitalizations, and increased exercise tolerance. The current market potential for TMR surgical procedures in the U.S. is estimated to be greater than $175 million. CryoLife believes that the delivery of biologic materials, such as stem cells, in conjunction with TMR could increase the estimated U.S. market potential to greater than $700 million.
Cardiogenesis has also developed the PHOENIX(TM) Combination Delivery System, which is designed to combine the intramyocardial delivery of biologic materials with TMR. The synergy of injecting biologics, such as stem cells or growth factors, with TMR may provide greater angina reduction, improve cardiac function and enhance quality of life in patients with diffuse disease who are not candidates for surgical bypass or intervention. The PHOENIX System has received a CE Mark and CryoLife intends to begin commercialization efforts in select European markets in the second half of 2011, with a more extensive launch expected in 2012.
Cardiogenesis and CryoLife products are both targeted toward cardiovascular surgeons and this acquisition represents a significant addition to CryoLife's cardiac surgery portfolio. Leveraging its significant global sales force, CryoLife expects to grow TMR revenues in the low double-digits within 12 months of completing the acquisition, excluding the benefits of any possible future product approvals or successful clinical trial outcomes.
"We believe this transaction will benefit the customers, employees and shareholders of both companies," said Steven G. Anderson, chairman, president and chief executive officer of CryoLife. "Cardiogenesis brings developed technologies with proven clinical outcomes in the treatment of cardiovascular disease and a pipeline of potential new products that build on the TMR platform. Cardiogenesis' products greatly expand our customer offerings and we believe they will create opportunities for us to cross sell and rollout Cardiogenesis' products on a global platform. We look forward to welcoming Cardiogenesis employees to the CryoLife team as we work together to create opportunity for our customers and investors."
"CryoLife is a partner that shares our commitment to develop innovative products that improve the lives of patients around the world," said Paul McCormick, executive chairman of Cardiogenesis. "We are pleased to be joining CryoLife and we feel that the company's direct cardiac surgery sales force, geographic scale, expertise and resources will help us expand the global reach of our products."
Following the completion of the transaction, Cardiogenesis will become a wholly-owned subsidiary of CryoLife.
Terms of the Agreement
Under the terms of the definitive agreement, Cardiogenesis shareholders will receive $0.457 in cash for each share of Cardiogenesis stock they own, less applicable withholding taxes. Upon consummation of the tender offer, CryoLife intends to complete a merger in order to acquire all of the shares of Cardiogenesis common stock that remain outstanding after the completion of the tender offer, at the same per share price.
CryoLife expects the tender offer for the outstanding shares of Cardiogenesis to commence on or around April 4, 2011 and to remain open for at least 20 business days. The officers and directors of Cardiogenesis, who currently hold 2.7 percent of the voting shares of Cardiogenesis, have agreed to tender all of their shares into the offer upon CryoLife's request.
If over 83.5 percent of the outstanding shares of Cardiogenesis are tendered in the tender offer, CryoLife expects to exercise a "top up" option and close on the short-form merger approximately 10 days thereafter. If at least a majority but less than 83.5 percent, of the outstanding shares of Cardiogenesis are tendered in the tender offer, CryoLife will purchase up to 49.9 percent of Cardiogenesis' shares in the tender offer, and Cardiogenesis will hold a special meeting of Cardiogenesis shareholders as soon as practical after the completion of the tender offer to vote on the proposed merger. If more than 50 percent of the outstanding shares of Cardiogenesis, including those shares acquired by CryoLife in the tender offer, vote in favor of the merger, CryoLife and Cardiogenesis will move to complete the merger as soon as possible after the special meeting of Cardiogenesis shareholders. No approval of the shareholders of CryoLife is required in connection with the offer or the merger.
CryoLife will use cash on hand to fund the transaction. CryoLife expects the transaction to be break-even to slightly accretive to 2011 diluted net earnings per share, excluding acquisition-related charges and integration costs, including customary amounts related to acquired inventory expected to be recorded in 2011.
The transaction is subject to customary closing conditions and regulatory approvals, including the valid tender of at least a majority of the outstanding shares of Cardiogenesis common stock, on a fully-diluted basis. The transaction is not subject to a financing condition.
Strategic and Financial Benefits
The acquisition of Cardiogenesis is highly complementary to CryoLife's business and enables CryoLife to extend its product offerings and reach.
o Clear TMR leader: Cardiogenesis is the market share leader in TMR to
treat refractory angina; and when combined, the two companies will have
programs across valve replacement surgery, reconstructive cardiac
surgery, TMR to treat refractory angina, and surgical sealants and
hemostatic agents to prevent and control bleeding.
o Complementary programs: Cardiogenesis' experience with TMR products and
relationships with leading cardiac surgery programs are a strong
complement to CryoLife's valve replacement and reconstructive cardiac
surgery franchise.
o Increased direct selling organization: The assimilation of
Cardiogenesis' direct sales representatives will nearly double
CryoLife's cardiac surgery specialist sales force in the U.S. Once
fully cross-trained, CryoLife and Cardiogenesis representatives will be
able to promote the full range of both companies' cardiac surgery
products and services.
o International growth: CryoLife's global presence can further strengthen
and enhance Cardiogenesis' international growth. Cardiogenesis
currently does not have a presence in international markets. CryoLife's
international sales and marketing network, which reaches into
approximately 70 countries, can accelerate Cardiogenesis' growth more
rapidly in key international markets.
o Large market potential: The successful delivery of biologic materials,
such as stem cells, in conjunction with Cardiogenesis' TMR devices will
make CryoLife a leading participant in the treatment of chronic
myocardial ischemia. Cardiogenesis has been in discussions with the
Food and Drug Administration (FDA) regarding initiating a randomized,
prospective clinical trial to evaluate TMR in conjunction with bone
marrow derived stem cell therapy to treat patients with severe
refractory angina. A feasibility trial is underway outside the U.S.
using the PHOENIX System.
o Accretive transaction: Prior to 2010, Cardiogenesis experienced
revenue growth with historically strong gross margins. If the
transaction closes in May, CryoLife expects revenue from the
Cardiogenesis product line to be between $4.0 million and $5.0 million
in 2011, which primarily reflects disposable hand piece and service
revenues. Additionally, the transaction is expected to be accretive to
CryoLife's revenue growth rate and gross margin and to be either
break-even or slightly accretive to diluted net earnings per share in
2011, excluding acquisition related charges and integration costs,
including the increase to cost of goods sold related to the step up in
inventory values required under purchase accounting, expected to be
incurred during 2011. CryoLife recorded transaction-related charges in
the fourth quarter of 2010 and expects to record additional charges
during 2011.
CryoLife will hold a teleconference call and live webcast with a slide presentation today at 10:00 a.m. Eastern Time to discuss the transaction, hosted by Steven G. Anderson, president and chief executive officer of CryoLife, Inc.
To listen to the live teleconference, please dial 201-689-8261 a few minutes prior to 10:00 a.m. A replay of the teleconference will be available March 29 through April 5 and can be accessed by calling (toll free) 877-660-6853 or 201-612-7415. The account number for the replay is 244 and the conference number is 369782.
To view the live slide presentation use GoToWebinar to reserve your seat by using the following link: www3.gotomeeting.com/register/983632446. You can also access a pdf file of the slide presentation by going to the Investor Relations section of the CryoLife web site at www.cryolife.com and selecting the heading Webcasts & Presentations.
The teleconference replay, as well as a pdf of the slide presentation, can be accessed by going to the Investor Relations section of the CryoLife web site at www.cryolife.com and selecting the heading Webcasts & Presentations.
Piper Jaffray & Co. is acting as financial advisor to CryoLife and Arnall Golden Gregory, LLP is CryoLife's legal counsel. B. Riley & Co. is acting as financial advisor to Cardiogenesis and K&L Gates LLP is Cardiogenesis' legal counsel.
About CryoLife
Founded in 1984, CryoLife, Inc. is a leader in the processing and distribution of implantable living human tissues for use in cardiac and vascular surgeries throughout the U.S. and Canada. CryoLife's CryoValve(®) SG pulmonary heart valve, processed using CryoLife's proprietary SynerGraft(®) technology, has FDA 510(k) clearance for the replacement of diseased, damaged, malformed, or malfunctioning native or prosthetic pulmonary valves. CryoLife's CryoPatch(®) SG pulmonary cardiac patch has FDA 510(k) clearance for the repair or reconstruction of the right ventricular outflow tract (RVOT), which is a surgery commonly performed in children with congenital heart defects, such as Tetralogy of Fallot, Truncus Arteriosus, and Pulmonary Atresia. CryoPatch SG is distributed in three anatomic configurations: pulmonary hemi-artery, pulmonary trunk, and pulmonary branch. CryoLife's BioGlue(®) Surgical Adhesive is FDA approved as an adjunct to sutures and staples for use in adult patients in open surgical repair of large vessels. BioGlue is also CE marked in the European Community and approved in Canada and Australia for use in soft tissue repair and was recently approved in Japan for use in the repair of aortic dissections. CryoLife's BioFoam(((TM)) Surgical Matrix is CE marked in the European Community for use as an adjunct in the sealing of abdominal parenchymal tissues (liver and spleen) when cessation of bleeding by ligature or other conventional methods is ineffective or impractical. CryoLife distributes PerClot(®), an absorbable powder hemostat, in the European Community.
For additional information about CryoLife, visit CryoLife's Web Site: www.cryolife.com.
About Cardiogenesis Corporation
Cardiogenesis specializes in the treatment of cardiovascular disease and is a leader in devices that treat severe angina. Its market leading YAG laser system and single use fiber-optic delivery systems are used to perform an FDA-cleared surgical procedure known as Transmyocardial Revascularization (TMR).
For more information on Cardiogenesis and its products, please visit its website at www.cardiogenesis.com.
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CryoLife Media Contacts:D. Ashley Lee Executive Vice President, Chief Financial Officer and Chief Operating Officer Phone: 770-419-3355
Chris Mittendorf Edelman Phone: 212-704-8134
Dana HartlineEdelmanPhone: 404-262-3000
Cardiogenesis Media Contact:Paul J. McCormickExecutive ChairmanPhone: 949-420-1827
SOURCE CryoLife, Inc.
Web Site: www.cryolife.com
