Establishment Labs Announces Amended Credit Facility with Oaktree
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The amendment of the term loan facility for Establishment Labs Holdings Inc. suggests a strategic move to secure non-dilutive capital, which is vital for the company's expansion, particularly the launch of Motiva Implants® in the U.S. market. The access to additional $50 million in capital, contingent upon FDA approval and sales milestones, provides a financial cushion that could mitigate the risk of cash flow issues during the crucial launch phase.
From a financial perspective, the fixed interest rate of 10.0% on the additional tranches seems relatively high, reflecting the risk associated with the investment. However, this capital access is crucial for the company to maintain its operations without diluting existing shareholders' equity. The company's focus on reaching EBITDA positivity by 2024 and cash flow positivity by 2025 indicates a clear path to profitability, which is a positive signal for investors and stakeholders.
The FDA approval process for medical devices like Motiva Implants® is a significant hurdle for companies in the medical technology sector. Establishment Labs' amendment to its term loan facility is indicative of the company's confidence in obtaining FDA approval. The U.S. market entry for Motiva Implants® represents a substantial opportunity, as the U.S. is a major market for breast aesthetics and reconstruction.
It is important to note that the success of this launch is not guaranteed and hinges on both regulatory approval and market acceptance. The sales milestone of $195 million in trailing twelve-month sales as a condition for Tranche D suggests ambitious revenue targets, which if met, would indicate strong market adoption and could significantly impact the company's market share and growth trajectory.
Regulatory milestones such as FDA approval are critical for medical technology companies. The amendment of Establishment Labs' term loan facility to include such milestones underscores the importance of regulatory compliance in securing funding. The FDA's stringent approval process ensures that only safe and effective medical devices enter the U.S. market, which can be a lengthy and uncertain process.
Understanding the implications of FDA approval on the company's financial health and market potential is crucial for stakeholders. The alignment of financial incentives with regulatory success creates a scenario where the company's financial strategy is tightly coupled with its regulatory achievements, potentially accelerating the availability of innovative medical technologies to patients.
- Amendment of commercial and regulatory milestones for
The terms on the two tranches already drawn under the facility, which total
-
Tranche C of
$25 million U.S. -
Tranche D of
$25 million $195 million -
Interest will accrue on Tranches C and D at a fixed rate of
10.0% per annum.
“This amended facility provides access to additional capital, should we need it, to ensure our successful launch of Motiva Implants in the United States,” said Juan José Chacón-Quirós, CEO and Founder of Establishment Labs. “Even with this access to additional capital, we are focused on getting our current business to EBITDA positive in 2024 and cash flow positive in 2025, and our timeline for US market entry remains unchanged. Oaktree has proven to be a valuable partner in our journey to transform breast aesthetics and reconstruction, and we thank them for their continued confidence.”
“In the two years since we partnered with Establishment Labs, the company has achieved a number of key milestones on their path to global leadership in this industry,” added Aman Kumar, Co-Portfolio Manager of Life Sciences Lending at Oaktree. “The pending launch of Motiva Implants into
A Form 8-K outlining the full terms of the credit facility will be filed with the Securities and Exchange Commission.
About Establishment Labs
Establishment Labs Holdings Inc. is a global medical technology company dedicated to improving women’s health and wellness through the power of science, engineering, and technology. The Company offers a portfolio of Femtech solutions for breast health, breast aesthetics and breast reconstruction. The over three million Motiva® devices Establishment Labs has delivered to plastic and reconstructive surgeons since 2010 have created a new standard for safety and patient satisfaction in the over 85 countries in which they are available. The Motiva Flora® tissue expander is used to improve outcomes in breast reconstruction following breast cancer and it is the only regulatory-approved expander in the world with an integrated port using radio-frequency technology that is MR conditional. Mia Femtech™, Establishment Lab’s unique minimally invasive experience for breast harmony, is the Company’s most recent breakthrough innovation. These solutions are supported by over 200 patent applications in 25 separate patent families worldwide and over 50 scientific studies and publications in peer reviewed journals. Establishment Labs manufactures at two facilities in
Establishment Labs’ Motiva silicone gel-filled implants are currently not approved for commercial distribution in
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). You can find many (but not all) of these statements by looking for words such as “approximates,” “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “intends to,” “would,” “will,” “may” or other similar expressions in this press release. Any statements that refer to expectations regarding the private placement, such as its closing date and use of proceeds, as well as the Company’s projections of our future financial or operating performance are forward-looking statements. We claim the protection of the safe harbor contained in the Private Securities Litigation Reform Act of 1995. We caution investors that any forward-looking statements presented in this report, or that we may make orally or in writing from time to time, are expressions of our beliefs and expectations based on currently available information at the time such statements are made. Such statements are based on assumptions, and the actual outcome will be affected by known and unknown risks, trends, uncertainties, and factors that are beyond our control. Although we believe that our assumptions are reasonable, we cannot guarantee future performance, and some will inevitably prove to be incorrect. As a result, our actual future results and the timing of events may differ from our expectations, and those differences may be material. Factors, among others, that could cause actual results and events to differ materially from those described in any forward-looking statements include risks and uncertainties relating to: our ability to successfully, timely and cost-effectively develop, seek and obtain regulatory clearance for and commercialize our product offerings; the rate of adoption of our products by healthcare providers or other customers; the success of our marketing initiatives; the safe and effective use of our products; our ability to protect our intellectual property; our future expansion plans and capital allocation; our ability to expand upon and/or secure sources of credit or capital; our ability to develop and maintain relationships with qualified suppliers to avoid a significant interruption in our supply chains; our ability to attract and retain key personnel; our ability to scale our operations to meet market demands; the effect on our business of existing and new regulatory requirements; and other economic and competitive factors. These and other factors that could cause or contribute to actual results differing materially from our expectations include, among others, those risks and uncertainties discussed in the company’s annual report on Form 10-K filed on March 1, 2023 and discussed in the Company's quarterly report on Form 10-Q filed on November 8, 2023, which risks and uncertainties may be updated in the future in other filings made by the company with the SEC. The risks included in those documents are not exhaustive, and additional factors could adversely affect our business and financial performance. We operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for us to predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We are not undertaking any obligation to update any forward-looking statements. Accordingly, investors should use caution in relying on past forward-looking statements, which are based on known results and trends at the time they are made, to anticipate future results or trends.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240222313537/en/
Investor/Media Contact:
Raj Denhoy
415-828-1044
rdenhoy@establishmentlabs.com
Source: Establishment Labs Holdings Inc.
FAQ
What is the ticker symbol for Establishment Labs Holdings Inc.?
What is the purpose of the amendment to the term loan facility with Oaktree Capital Management, L.P.?
What are the conditions for the availability of the $25 million tranches under the amended facility?
What is the fixed rate of interest on Tranches C and D under the amended facility?
What are the CEO's goals regarding the company's financial performance?
