Angiotech Announces Sale of Interventional Products Business to Argon Medical Devices Inc.

 

April 8, 2013

April 8, 2013 — Angiotech Pharmaceuticals Inc. announced that it entered into a definitive agreement to sell certain of its subsidiaries, comprising Angiotech's interventional products business, to Argon Medical Devices Inc., a portfolio company of RoundTable Healthcare Partners, for $362.5 million in cash consideration. Angiotech expects the transaction will close prior to the end of April 2013.

"This important transaction will enable Angiotech to retire all of its remaining debt obligations, and in addition will provide excess cash proceeds, which we plan to use to provide an immediate return to our shareholders and to invest in our remaining businesses," said Thomas Bailey, president and CEO of Angiotech. "This event represents a culmination of turnaround efforts we initiated upon concluding our 2011 restructuring, and is a direct result of the exceptional and improved business results our teams were able to achieve in 2012. We would like to offer our admiration and sincere thanks to the dedicated management and employees of our interventional products business for their resilience through many changes, teamwork and achievements."

"We are excited to turn our efforts to investing in and executing opportunities in our surgical products business, where we still see much untapped opportunity for our proprietary Quill product line, our Look and Sharpoint general wound closure products, and our ophthalmic products," said Tammy Neske, chief business officer of Angiotech. "In addition, we have retained our recently FDA approved BioSentry (Bio-Seal) product line as part of this transaction, and we will continue to explore commercial and development opportunities for BioSentry while initiating U.S. commercial activities and making it available for customers."

Highlights and selected terms of the transaction include:

  • The businesses being acquired by Argon include all manufacturing, commercial and administrative operations relating to Angiotech's interventional products business. Key product lines in this business include Angiotech's BioPince full core biopsy devices, Tru-Core II (fully automatic) and SuperCore (semi-automatic) disposable biopsy instruments, T-Lok bone marrow biopsy devices and Skater drainage catheters, among other products. Angiotech's interventional products business also manufactures components for other third party medical device manufacturers, operates manufacturing facilities in Wheeling, Ill., Gainesville, Fla., and Stenlose, Denmark and employs a direct sales and marketing organization in the United States and Europe. Angiotech's interventional products businesses recorded $101.6 million in revenue in the 12 month period ended Dec. 31, 2012.
  • Consideration for the transaction will total $362.5 million in cash, subject to a potential working capital adjustment, with $347.5 million to be received upon the close of the transaction, and $15 million to be retained in escrow for a period of 12 months to secure indemnification obligations relating to the transaction.
  • Angiotech expects to use the proceeds received from the transaction to repay all of its remaining outstanding debt obligations, including remaining amounts due under its Senior Floating Rate Notes due December 2013 and the Senior Notes due December 2016. Angiotech also expects to terminate its revolving credit facility with Wells Fargo Capital Finance upon the close of the transaction.
  • The transaction is subject to approval of Angiotech shareholders. Shareholders representing approximately 70 percent of Angiotech's outstanding shares have signed voting agreements in connection with the transaction, and have agreed to vote their shares in favor of the proposed transaction.
  • The transaction is conditioned on, among other things, expiration of applicable waiting periods under the U.S. Hart Scott Rodino Act.
  • Angiotech expects to make a cash distribution, in the form of a return of capital, to shareholders in an amount to be determined shortly after the close of the transaction, and subsequent to the repayment of Angiotech's debt obligations, final payment of all transaction related fees and expenses and final determination by management and the board of directors as to the operating cash needs of Angiotech's remaining businesses.

Upon the conclusion of the transaction, Angiotech will retain its surgical products business and its royalty business. Revenue recorded by Angiotech in the 12 months ended Dec. 31, 2012 from these businesses was $123.1 million and$15.1 million respectively. Key product lines in Angiotech's surgical products business include wound closure products such as the Quill knotless tissue closure device, Look brand sutures for general and dental surgery and Sharpoint UltraGlide and Microsurgical sutures and ophthalmic products such as the Sharpoint brand ophthalmic surgical blades. Angiotech's Surgical Products Business also manufactures components for other third party medical device manufacturers, and operates manufacturing facilities in Reading, Pa., Aguadilla, Puerto Rico and Taunton, England. Angiotech's surgical products business also employs a specialized direct sales and marketing team, with dedicated groups focused on its wound closure, ophthalmology and medical components product lines respectively.

Angiotech's royalty business comprises a portfolio of intellectual property relating to a variety of biomaterial, drug and medical device related technologies and technology applications. The most significant intellectual property in this portfolio is related to the use of the drug paclitaxel in treating certain conditions, including certain side effects that may occur coincident with the implantation of medical devices. Angiotech has licensed this aspect of its intellectual property portfolio to its partners Boston Scientific Corp. (BSC) and Cook Medical Inc. for application in drug-eluting stents used to treat coronary and peripheral artery disease. Virtually all of Angiotech's royalty business revenue in 2012 was derived from royalties received from BSC and Cook.

Angiotech will also retain all intellectual property, rights, assets and inventory related to its BioSentry (formerly Bio-Seal) product line, which was recently approved for sale in the United States by the U.S. Food and Drug Administration (FDA). Coincident with the transaction, Angiotech concluded a three year Manufacturing and Supply Agreement with Argon with respect to BioSentry. Argon will not, as part of this agreement, have commercialization rights to BioSentry. U.S. commercial launch activities for this product line will continue, and customers may inquire or place orders for BioSentry through Angiotech's existing customer service line.

Lastly, Angiotech will retain real property assets located in Stenlose, Denmark as part of the transaction, and will retain net proceeds generated upon any sale of such real property assets subsequent to Angiotech and Argon concluding Angiotech's previously announced transfer of production activities from Stenlose to facilities located in the United States. Such transfer is currently expected to conclude during the first half of 2013.

Upon the close of the transaction, Angiotech will cease to be a voluntary reporting public issuer, and will therefore no longer file financial or other information with the U.S. Securities and Exchange Commission. Angiotech expects to continue to provide certain financial information, including audited annual financial information and selected interim quarterly financial information, via a private portal accessible to shareholders of record. Further information will be forthcoming upon the close of the transaction. Angiotech plans to file its 2012 annual report on form 10-K in ordinary course at or around March 31, 2013. Angiotech will also postpone its upcoming investor call, currently scheduled for April 2, 2013, to a later date subsequent to the close of the transaction, at which point Angiotech plans to conduct a conference call, accessible to shareholders of record, to discuss its future plans for its remaining businesses.

Angiotech's financial advisors respecting the transaction were Moelis & Co. and Houlihan Lokey. Angiotech was represented by its legal counsel, Irell & Manella LLP in the transaction, and was represented by Stikeman Elliott LLP on Canadian legal matters.

For more information: about Angiotech, please visit our website at www.angiotech.com.