After an attempt to expand its business fell apart earlier this year, Bioventus is downsizing instead.
Less than two weeks after outlining plans to sell off its wound care segment, Bioventus announced Tuesday that it has completed the carve-out. LifeNet Health, which makes bio-implants and offers tissue donation and donor organ procurement services, has picked up the business, which includes Bioventus’ TheraGenesis and TheraSkin skin substitutes—the latter of which LifeNet has been producing for more than a decade, but which have been distributed by Bioventus throughout that time.
“Non-healing wounds are a modern healthcare crisis,” LifeNet CEO Rony Thomas said in the company’s initial announcement about the acquisition. “Our goal is to continue reimagining wound care through increased access to best-in-class wound care products that are both clinically effective and affordable, helping patients recover and avoid amputation and poor health outcomes.”
LifeNet also inherited about 90 Bioventus employees along with the wound care division.
The deal was worth a total of $85 million, starting with $35 million in cash that LifeNet agreed to pay out at the close of the purchase, according to Bioventus’ sale announcement earlier this month. LifeNet is also set to dole out a deferred cash payment of $5 million more in 18 months, plus up to another $45 million in potential earn-out payments.
After fees and expenses, Bioventus said it’s expecting to rake in about $30 million in net proceeds from the closing payment, which it plans to use to help pay down its debts. In its first-quarter earnings report released last week, Bioventus calculated more than $445 million in debt obligations—up nearly $30 million from just three months prior.
“The sale of our wound business will enhance our liquidity and enable a greater focus on execution,” said Tony Bihl, who took over as Bioventus’ interim CEO earlier this year after the board of directors decided the time was right for former leader Ken Reali to transition out of the role. Bihl previously held the chief executive title at the company between 2013 and 2020.
As for the longer-term effects of the sale, Bioventus estimated that slicing off the wound division will cut about $40 million from its annual revenues and $5 million from its adjusted earnings.
For all of 2022, Bioventus reported net sales of about $512 million, up nearly 19% year over year, and adjusted EBITDA of just over $66 million, a drop of almost 18% compared to 2021’s earnings.
The company ultimately tallied a net loss of more than $213 million for the year—well below the net income of $9.6 million it had registered at the end of 2021. Bioventus attributed much of the decline to a noncash impairment charge of just over $189 million that it had to take “due to the decline in our market capitalization.”
It was in the wake of that plummet into the red that Bioventus backed out of its acquisition of surgical implant maker CartiHeal. Though the $450 million deal was finalized last July—complete with a $100 million upfront payment from Bioventus—the buyer announced in February of this year that it had inked an agreement with CartiHeal’s former shareholders to return ownership of the company back to them, freeing Bioventus from its remaining $350 million in post-buyout milestone payments.
Even relieved of that burden, Bioventus is still racking up losses in 2023. As of last week’s first-quarter report, its net loss had already reached $100 million, thanks in large part to another noncash impairment charge of $78.6 million that was tied this time to the write-down of the wound business.
During a call with investors alongside the release of the earnings sheet, Bihl said the remainder of 2023 will be devoted to revamping Bioventus’ hyaluronic-acid-based therapies, considering the divestment of other “noncore assets” after the wound segment sale and looking for additional ways to improve profitability and efficiency.
“While we will not reverse all the headwinds of the past year in a single quarter, we believe we will over the course of the next several quarters rebuild our balance sheet and look to regain credibility with our investors,” he said.