Ra Medical lines up reverse merger with Catheter Precision after layoffs, stock crash

Just a few months after beginning a review of “strategic alternatives” to its existing business plan—and proceeding to lay off around two-thirds of its full-time employees—Ra Medical has plotted a new route to potential financial success.

The San Diego-area medtech is planning to combine with New Jersey-based Catheter Precision in what the pair has dubbed a reverse merger, according to a Monday announcement. Though the privately held Catheter Precision will become a wholly owned subsidiary of the publicly traded Ra Medical, Catheter Precision’s shareholders will end up with a much larger ownership stake in the resulting combined company.

The merger will be an entirely stock-for-stock transaction, with all of Catheter Precision’s promissory notes and equity interests exchanged for options and Ra Medical stock shares. If the deal is finalized, 80% of the combined public company will be owned by Catheter Precision’s stakeholders, with the remaining 20% going to Ra Medical’s pre-merger equity holders.

Both companies’ boards have already approved the merger; it’s expected to be completed before the end of this year.

If all goes according to plan, the resulting entity will combine both companies’ work to develop catheter-based systems used in vascular procedures, like Ra Medical’s FDA-cleared Dabra ablation catheter, which is used alongside an excimer laser to clear out blockages linked to peripheral artery disease.

But the combined company will focus primarily on continuing to develop Catheter Precision’s trio of technologies, the duo said. The first two are already cleared in the U.S. and Europe and include the VIVO 3D imaging system to pinpoint the origin of ventricular arrhythmias and the Amigo robotic arm for remote catheter control.

Next up, Catheter Precision is preparing to launch a vessel closure device that can be used by surgeons to help close up the sites where catheters and other devices were inserted into a patient’s body. That device is slated to be released sometime in the first half of next year.

“This business combination, if completed, will result in Ra Medical investors having an equity stake in a company that is focused on developing and commercializing novel technologies and solutions to improve the lives of patients with cardiac arrhythmias under the leadership of a world-class team with decades of medical device industry experience,” said Will McGuire, Ra Medical’s CEO.

The post-merger company will be led by Catheter Precision CEO David Jenkins, who has a track record of founding medtech startups that end up acquired by larger devicemakers, including the now-Medtronic-owned Transneuronix and EP MedSystems, which now resides under the St. Jude Medical umbrella.

With the news of the proposed merger, Ra Medical’s stock took a small leap upward: After closing Friday at $0.15, it opened Monday morning at $0.22 before sliding back down to about $0.18 in the first few hours of trading.

The company share price fell below $1 at the start of the year—and stayed there—and has been hovering around the $0.15 mark since the end of July. The first plummet came in February, when Ra Medical proposed an underwritten public offering of $12 million in stock, prompting the company to begin its strategic review. The July drop-off, meanwhile, occurred after the devicemaker announced mass layoffs and made its first mention of a potential merger with Catheter Precision.