Smith+Nephew Acquiring CartiHeal for Up to $330 Million

Smith+Nephew is purchasing knee regenerative technology developer CartiHeal for $180 million cash at closing and an additional $150 million, contingent on financial performance.
 
CartiHeal’s Agili-C is an off-the-shelf one-step treatment for osteochondral (bone and cartilage) lesions with a broader indication than existing treatments. It treats 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 United States.   
 
“The acquisition of this disruptive technology supports our strategy to invest behind our successful Sports Medicine business,” Smith+Nephew CEO Deepak Nath said. “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.
 
“Smith+Nephew is the ideal new home for Agili-C,” CartiHeal CEO Nir Altschuler stated. “We are excited at the prospect of our technology helping many more patients overcome knee pain.”

The transaction is expected to close in the first quarter of 2024. Breakeven to trading profit is targeted by 2027 with ROIC to exceed WACC by the fifth year. Smith+Nephew is financing the acquisition with existing cash and debt facilities.

Founded in 2009 as a university spin-out, CartiHeal retains a small facility close to Tel Aviv and a sales office in New Jersey. It has large quantities of raw material in the United States and, by close of the transaction, will also have ample U.S. stock to support full commercial launch. All CartiHeal employees are expected to transfer to Smith+Nephew.
 
“We have shown with REGENETEN◊ that we have the market development and commercialization expertise to take 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.”
 
Smith+Nephew is a medical technology firm that develops new technologies across three global business units—Orthopaedics, Advanced Wound Management, and Sports Medicine & ENT. Founded in Hull, U.K., in 1856, the company operates in more than 100 countries, and generated annual sales of $5.2 billion in 2022. Smith+Nephew is a constituent of the FTSE100.

Reference
¹ Medtech 360, Sports Medicine Devices, Market Analysis, U.S., 2018, Millennium Research Group Inc.