REG - ConvaTec Group PLC - Acquisition: entry into attractive wound biologics

ConvaTecAnnouncement

28/01/2022 07:00

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RNS Number : 9627Z  ConvaTec Group PLC  28 January 2022

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

 

 
       28 January 2022

 

Entry into the attractive wound biologics segment through

the acquisition of Triad Life Sciences Inc

 

·  Strengthens ConvaTec's Advanced Wound Care business in the US - highly
complementary product portfolios and commercial expertise

·   Secures access to innovative and differentiated technology and an
exciting pipeline

·   Future growth supported by CTEC's expertise and global reach

·  Initial consideration of $125m with potential $50m for short-term
milestones.  Additional earnout potential dependent on financial performance
in first two years.  Return on invested capital is expected to be greater
than WACC in year 3

 

ConvaTec Group Plc (CTEC.LN), a global medical solutions company focused on
the management of chronic conditions, is pleased to announce that it has
entered into a definitive agreement to acquire Triad Life Sciences Inc((1))
('Triad'), a US-focused medical device company that develops
biologically-derived innovative products to address unmet clinical needs in
surgical wounds, chronic wounds and burns. The transaction, which is subject
to regulatory approvals and other customary conditions, is expected to close
during Q1 2022.

 

For ConvaTec this represents an entry into the large and rapidly growing wound
biologics segment((2)). This segment is currently estimated to be worth c.$1.8
billion per annum globally with a projected growth of high single digit
percentage per annum. Regenerative medicine and biologically-derived therapies
are frequently used to treat hard-to-heal wounds which, in the US alone,
affect 3.7 million patients each year.

 

This proposed acquisition is consistent with ConvaTec's FISBE strategy
(Focus-Innovate-Simplify-Build-Execute).  It strengthens Convatec's Advanced
Wound Care position in the US (Focus) and secures access to a complementary
and innovative technology platform (Innovation) that enhances advanced wound
management and patient outcomes.

This technology, know-how and a pipeline of innovative products based on
porcine placental tissue offer attractive characteristics in the treatment of
hard-to-heal wounds. Triad's latest offerings, InnovaMatrixAC and InnovaBurn,
are the first 510k cleared porcine placenta‐derived extracellular matrix
products in the US((3)). Sales of these products commenced in 2021. In
addition, Triad has an attractive pipeline of new products for advanced wound
care and also a technology platform with the potential to enter the
regenerative medicine segment.

Founded in 2017, Triad Life Sciences is based in Memphis, Tennessee and
currently has over 50 employees.  The company develops, manufactures and
commercializes their product portfolio.  These products are highly
complementary to ConvaTec's existing portfolio and will enable the Group to
meet a wider range of needs of both patients and health care practitioners.
This transaction will also be commercially complementary. Triad will bring
expertise in this novel and rapidly growing segment, whilst benefitting from
ConvaTec's global commercial, quality & operations, and R&D
capabilities.

 

The initial consideration is $125 million with two potential additional
payments of $25 million each relating to short-term milestones.  There are
also two earnout payments conditional on performance during year 1 and year 2
post completion, with the maximum earnout of $275 million based on stretching
financial performance over the period.

 

This is an exciting opportunity for ConvaTec, with powerful strategic logic, a
strong contribution to future growth and an attractive financial profile.
The transaction is expected to be immediately accretive to sales growth and
the return on invested capital is expected to exceed the Group's cost of
capital in year three. The consideration will be satisfied from existing cash
balances and debt facilities.

 

Karim Bitar, CEO, ConvaTec Group said: "Today's announcement marks another
successful step in our strategic intent of pivoting to sustainable and
profitable growth. This transaction will strengthen our Wound Care business
and enable ConvaTec to enter the rapidly growing wound biologics segment.
Triad Life Sciences has innovative and differentiated products and an exciting
pipeline which is consistent with our vision - Pioneering trusted medical
solutions to improve the lives we touch.  We are delighted that Russ and the
team have decided to join ConvaTec."

 

Russell Olsen((4)), President and CEO, Triad Life Sciences Inc said: "ConvaTec
has an impressive reputation and unique capabilities in Advanced Wound Care,
based on decades of innovation.  We are excited to be joining ConvaTec and
look forward to accelerating the growth of our innovative technology
platform."

 

***

 

Analysts and Investors

Kate Postans, VP, Investor Relations & Corporate
Communications        +44 (0) 7826 447807

 

Media

Buchanan: Charles Ryland / Chris Lane / Vicky Hayns
                          +44 (0)207 466 5000

 

Notes

 

(1)   The vendor is Triad Life Sciences, Inc.

 

(2)  SmartTRAK estimate for 'WorldWide Wound Biologics' revenues (e.g. skin
substitutes, active collagen dressings and topical drug delivery) in 2021 with
5-year CAGR.

 

(3)  The business, which is focused solely in the US, generated annual
revenues of $8.4 million in 2020 and a loss before tax of $2.8 million.
Revenues for 2021 are estimated to be approximately $19 million.  The gross
assets of Triad Life Sciences were $23 million at 30 June 2021.

 

(4)  Russell Olsen, the Founder and CEO of Triad Life Sciences, will be the
General Manager of the business, reporting directly into David Shepherd,
President and Chief Operating Officer of Global Advanced Wound Care. Russ has
over 35 years of experience in the MedTech industry. He has held roles at
Bristol-Myers Squibb and Smith & Nephew and served as Global President for
Derma Sciences and Chief Executive Officer of BioD, LLC.

 

This acquisition constitutes a class 2 transaction for the purposes of the UK
Financial Conduct Authority's Listing Rules.  The person responsible for this
announcement on behalf of ConvaTec Group Plc is Susan Marsden, Deputy Company
Secretary.

 

ConvaTec Group Plc

ConvaTec is a FTSE 250 global medical products and technologies company
focused on solutions for the management of chronic conditions, with leading
positions in advanced wound care, ostomy care, continence and critical care,
and infusion care. We have more than 10,000 colleagues and operations in over
100 countries. Our vision is pioneering trusted medical solutions to improve
the lives we touch. Our products provide a range of clinical and economic
benefits including infection prevention, protection of at-risk skin, improved
patient outcomes and reduced total cost of care. Group revenues in 2020 were
over $1.894 billion. To learn more about ConvaTec, please visit
http://www.convatecgroup.com (http://www.convatecgroup.com)

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