Smith+Nephew plc (LON:SN, NYSE:SNN), the global medical technology company, has announced that it has entered into a definitive agreement to acquire CartiHeal, developer of Agili-C, a novel sports medicine technology for cartilage regeneration in the knee. Under the terms of the agreement, Smith+Nephew will pay an initial cash consideration of $180 million at closing, and up to a further $150 million contingent on financial performance.
Agili-C is an off-the-shelf one-step treatment for osteochondral (bone and cartilage) lesions with a broader indication than existing treatments. It is indicated to treat a wide patient population, including those with lesions in knees with mild to moderate osteoarthritis, a previously unaddressed condition, as well as the approximately 700,000 patients1 that receive cartilage repair annually in the US.
“The acquisition of this disruptive technology supports our strategy to invest behind our successful Sports Medicine business”, said Deepak Nath, Chief Executive Officer of Smith+Nephew. “Agili-C’s superior clinical performance makes it highly complementary to our existing knee repair portfolio and with our proven commercial expertise in high-growth biologics, we are confident that we will drive further success with this compelling treatment option.”
Agili-C is a porous, biocompatible, and resorbable scaffold which promotes natural regeneration of the articular cartilage and restoration of its underlying subchondral bone. The U.S. Food and Drug Administration (FDA) granted Agili-C Breakthrough Device designation status in 2020 and Premarket Approval (PMA) in March 2022. PMA approval was granted based on the results of a two-year randomised controlled trial (N=251) that confirmed superiority of Agili-C over current standard of care – microfracture and debridement for the treatment of knee joint surface lesions, chondral and osteochondral defects. Study inclusion criteria included patients with mild and moderate osteoarthritis. At four-year follow-up the trial continues to show significant improvement of patient reported outcome scores, low surgical reintervention, and that the difference in improvement using Agili-C compared to the standard of care is statistically significant – offering potential for a new standard of care in cartilage repair.
“As a leader in sports medicine and with a deep knowledge of biologics, Smith+Nephew is the ideal new home for Agili-C,” said Nir Altschuler, Chief Executive Officer and Founder of CartiHeal. “We are excited at the prospect of our technology helping many more patients overcome knee pain.”
“We have shown with REGENETEN◊ that we have the market development and commercialisation expertise to take novel technologies and successfully establish a new standard of care,” said Scott Schaffner, President Sports Medicine, Smith+Nephew. “Agili-C is the perfect addition to our portfolio and we look forward to leveraging our expertise to transform cartilage repair outcomes for patients.”
CartiHeal was founded in 2009 as a university spin-out. It retains a small facility close to Tel Aviv and a sales office in New Jersey, US. CartiHeal has large quantities of raw material in the US and, by close of the transaction, will also have ample US stock to support full commercial launch. All CartiHeal employees are expected to transfer to Smith+Nephew.
The transaction is expected to close in the first quarter of 2024. Breakeven to trading profit is targeted by 2027 with ROIC to exceed our WACC by the fifth year. The acquisition will be financed from existing cash and debt facilities.
Smith+Nephew’s Meet the Management investor event on 29 November 2023 will include discussion of this acquisition.
