Bioventus Dusts Off IPO Plans as its Medical Device Pipeline Grows
Biotech companies continue to jump in line to join the public markets. Bioventus, a medical device maker whose portfolio includes biological products that promote bone healing, is now adding its name to the mix.
The Durham company has filed regulatory paperwork outlining its IPO plans. Bioventus set a preliminary $100 million target for the proposed stock offering. It’s the second time the company has prepared to go public. In 2016, Bioventus filed IPO papers only to withdraw them less than two months later. The company is now making its case to Wall Street boasting a bigger product portfolio and pipeline, as well as more revenue.
Bioventus separates its business into three segments:
- The osteoarthritis joint pain treatment and joint preservation division consists of injectable treatments for osteoarthritis knee pain.
- The bone graft substitutes unit includes human tissue products designed to improve bone fusion rates after spinal fusion and other orthopedic procedures.
- The third division, minimally invasive fracture treatment, consists of medical devices that use ultrasound technology to promote bone growth.
The IPO filing doesn’t break down Bioventus’s revenue by business segment. In 2019, the most recent full year for which financial results are listed, Bioventus reported $340.1 million in net revenue, a more than 6.5 percent increase over the prior year.
Who, what the market includes
Competitors to Bioventus include Ferring Pharmaceutical, Johnson & Johnson, Sanofi, and Zimmer Biomet. Like many companies, Bioventus hasn’t been immune to the economic effects of the pandemic. Through the first three quarters of 2020, sales were down 8.2 percent compared to the same period in 2019, a decline Bioventus attributes to the coronavirus. But unlike 2016 when the company first tried to go public, it can now show investors a profit. Net income in 2020 through the third quarter was $12.5 million.
The Bioventus portfolio could grow as products in its pipeline make progress. For example, the company notes in the IPO filing that it has the FDA’s all-clear to begin a clinical trial for MOTYS, a biologic treatment for osteoarthritis in the knee. The filing also shows that the company has an option and purchase agreement with CartiHeal, an Israel-based company that is developing an implant for treating defects in the knee to cartilage and the bone underneath it.
The shoulder is another part of the body offering growth opportunities for Bioventus. The company has an agreement with Irvine, California-based Harbor Medtech covering the commercialization of PROcuff, a rotator cuff tissue repair product. According to the filing, Bioventus plans to seek FDA clearance for that product in the second or third quarter of 2022.
Beyond the new knee and shoulder products, Bioventus is also laying the groundwork to build on its current product lineup. The company plans to launch a new version of OsteoAmp, a tissue-based product used to support bone formation. The new version is intended for use in minimally invasive spine procedures. In addition, Bioventus is currently conducting clinical trials for Exogen, its ultrasound bone-healing product. Those studies could support the expansion of the product’s use to fresh fractures.
Some of IPO proceeds will be used for acquisitions, such as CartiHeal, Bioventus says in the IPO filing. That purchase would total $350 million. Bioventus would be responsible for another $150 million in payments if the CartiHeal product achieves sales milestones.
Proceeds to include $9.25 million to retired CEO Tony Bihl
The IPO cash will also be applied toward payments due to Anthony Bihl, who retired as CEO last year. Bihl was not entitled to severance or other benefits under his employment agreement, the filing states. But after his retirement, the company entered into an agreement under which Bihl received $9.25 million. That payment represents the amounts due to him under the Bioventus equity compensation plans. Included in the sum is $2 million to reflect the COVID-19-related decrease in value of his compensation award and the redeemed portion of his management incentive plan (MIP) award.
The filing goes on to state that Bihl is entitled to payment for the remainder of his MIP award on or before June 16, 2021. That payment will be equal to or greater than $7.7 million, plus the fair market value of any remaining MIP award. Bioventus will also pay an additional $1.5 million reflecting the COVID-19 related decrease in value of the remaining MIP award.
“We retained the right to accelerate the redemption of such remaining MIP award and the associated June 16, 2021 payments by paying Mr. Bihl the amounts due on an earlier date, and we anticipate accelerating such payments in connection with this offering,” Bioventus states in the filing.
Bioventus is the former biologics and clinical therapies division of Smith & Nephew, a publicly traded medical equipment company based in the United Kingdom. In 2012, Bioventus spun out with financial backing from Essex Woodlands. Essex and Smith & Nephew rank as the top two largest shareholders of Bioventus, according to the filing. The percentage of their stake in the Durham company is not listed. The filing also states that upon completion of the IPO, Bioventus will be a “controlled company,” which means more than half of its shares will be owned by a single entity. Bioventus employs about 680, most of which are based in the U.S., according to the filing.
Bioventus has applied for a listing on the Nasdaq exchange. If it completes the IPO, the company expects its shares will trade under the stock symbol “BVS.”