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Agreements with Endospan | 9 Months Ended
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Sep. 30, 2024
Variable Interest Entity, Primary Beneficiary, Does Not Hold Majority Voting Interest, Disclosures [Abstract] |
Agreements with Endospan | Agreements with Endospan Exclusive Distribution Agreement and Securities Purchase Option Agreement On September 11, 2019 Artivion’s wholly owned subsidiary, JOTEC GmbH (“JOTEC”), entered into an exclusive distribution agreement with Endospan Ltd. (“Endospan”), an Israeli corporation, pursuant to which JOTEC obtained exclusive distribution rights for NEXUS® and related accessories in certain countries in Europe in exchange for a fixed distribution fee of $9.0 million paid in September 2019. We also entered into a securities purchase option agreement (“Endospan Option”) with Endospan for $1.0 million paid in September 2019. The Endospan Option provides Artivion the option to purchase all the outstanding securities of Endospan from Endospan’s securityholders at the time of acquisition, or the option to acquire all of Endospan’s assets, in each case, for a price between $350.0 and $450.0 million before, or within a certain period of time after FDA approval of NEXUS, with such option expiring if not exercised within 90 days after receiving notice that Endospan has received approval from the FDA for NEXUS. On July 1, 2024 Artivion and Endospan entered into an amendment to the Endospan Option (“Endospan Option Amendment”) which amended the terms of the previously existing Endospan Option. Under the terms of the Endospan Option Amendment, the price to acquire all of Endospan’s outstanding securities from Endospan’s securityholders at the time of acquisition, or the option to acquire all of Endospan’s assets under the Endospan Option was reduced from $250.0 million to $175.0 million, resulting in an upfront acquisition purchase price of $135.0 million, inclusive of the loan off-set. There is no longer a minimum earnout payment of $100.0 million and the maximum earnout payment of $200.0 million remains the same. The value of the Endospan Option was fully impaired during the fourth quarter of fiscal year 2021. We estimated the fair value of the Endospan Option after the Endospan Option Amendment utilizing the Monte Carlo simulation. Inputs in our valuation of the Endospan agreements included cash payments and anticipated payments based on the executed agreements with Endospan, projected discounted cash flows in connection with the Endospan transaction, our expected internal rate of return and discount rates, and our assessed probability and timing of receipt of certification of certain approvals and milestones in obtaining FDA approval. Based on this calculation, we recorded $3.1 million for the fair value of the Endospan Option as of the Endospan Option Amendment transaction date and as of September 30, 2024. Loan Agreement Artivion and Endospan also entered into a loan agreement (the “Endospan Loan”), dated September 11, 2019, in which Artivion agreed to provide Endospan a secured loan of up to $15.0 million to be funded in three tranches of $5.0 million each. The first tranche of the Endospan Loan was funded upon execution of the agreement in September 2019. In September 2020 we funded the second tranche payment of $5.0 million upon the certification of the NEXUS IDE from the FDA. In May 2023 we funded the third tranche payment of $5.0 million upon the certification of enrollment of 50% of the required number of patients in the primary arm of the FDA approved clinical trial for NEXUS. We elected the fair value option for recording the Endospan Loan. We assess the fair value of the Endospan Loan based on quantitative and qualitative characteristics and adjust the amount recorded to its current fair market value at each reporting period. We performed an assessment of the fair value of the Endospan Loan, including the funding of the third tranche payment in May 2023. We determined that the loan had no fair value as of June 30, 2023 and recorded a $5.0 million expense included in Other expense, net within the Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2023. After entering into the Endospan Loan Amendment, defined below, we determined that the Endospan Loan had a fair value of $298,000 as of September 30, 2024. On July 1, 2024 Artivion and Endospan entered into an Amended and Restated Loan Agreement (“Endospan Loan Amendment”) which amended the terms of the previously existing Endospan Loan. As a part of the Endospan Loan Amendment, Artivion agreed to fund Endospan additional secured loans of up to $25.0 million. The additional loans are contracted to be funded in three tranches of $7.0 million, $10.0 million, and $8.0 million, subject to Endospan’s achievement of milestones related to its pursuit of regulatory approval for the NEXUS products that are specified in the Endospan Loan Amendment. The first tranche of $7.0 million was funded following execution of the agreement during the three months ended September 30, 2024. We elected the fair value option for recording the Endospan Loan and the additional secured loans as part of the Endospan Loan Amendment (collectively the “Endospan Loans”). We performed an assessment of the first tranche loan of $7.0 million and determined that the first tranche loan had a fair value of $3.8 million as of September 30, 2024 which is recorded in “Other long-term assets” on the Condensed Consolidated Balance Sheets as of September 30, 2024.

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