Bioventus Inc. — Q1 2022 Form 10-Q
Reporting period: 13 weeks ended April 2, 2022; comparative period ended April 3, 2021. Bioventus develops and commercializes minimally invasive medical treatments. Its portfolio is organized into Pain Treatments, Restorative Therapies and Surgical Solutions, and it reports U.S. and International segments. The 2022 results include Misonix, acquired in October 2021; comparisons therefore reflect a different acquisition mix.
Financial performance
Amounts below are in millions of dollars unless stated otherwise.
| Metric | Q1 2022 | Q1 2021 | Change / context |
|---|---|---|---|
| Net sales | $117.3 | $81.8 | Up 43.4%; acquisitions contributed $28.5 million across U.S. and International sales. |
| Gross profit / margin | $75.7 / 64.5% | $59.6 / 72.8% | Profit up 27.1%; margin down 8.3 percentage points. |
| Operating income (loss) | $(21.5) | $22.0 | Shifted to an operating loss. |
| Net income (loss) | $(14.8) | $24.5 | Net loss attributable to Bioventus Inc. was $11.3 million; diluted loss per Class A share was $0.19. |
| Adjusted EBITDA | $7.1 | $11.1 | Non-GAAP measure; down from prior year. |
| Cash from operating activities | $(21.0) | $(18.0) | Cash used increased $3.0 million. |
Revenue rose in all three product verticals. Gross margin fell partly because of acquired-product mix and higher amortization of acquisition-related assets. SG&A increased $51.4 million to $86.1 million, including a large year-over-year equity-compensation comparison effect, acquisition-related compensation and higher consulting and travel costs. The 2021 period included a substantial reduction in the fair value of pre-IPO liability-classified compensation awards, making expense comparisons less directly comparable. Segment adjusted EBITDA was $4.7 million in the U.S. (down 52.7%) and $2.4 million International (up 122.3%).
Financial position and liquidity
- Cash and cash equivalents were $27.4 million at April 2, versus $43.9 million at December 31, 2021. Including restricted cash, total cash was $82.7 million, of which $50.0 million was escrowed for the potential CartiHeal acquisition.
- Current assets were $245.4 million and current liabilities $171.5 million. Accounts receivable was $119.3 million; inventory was $64.7 million.
- Debt principal comprised a $356.2 million term loan and $15.0 million drawn on a $50.0 million revolver. Reported debt carrying value was $368.3 million, including current and long-term portions, net of unamortized costs and discount. The term loan and revolver were due in December 2026; the stated rate was 2.46%. The company reported compliance with credit-facility covenants.
- Investing cash outflow was $4.7 million and financing cash inflow was $9.2 million; the latter included a $15.0 million revolver draw. Cash, cash equivalents and restricted cash declined $16.6 million during the quarter.
Material developments, outlook and risks
- CartiHeal acquisition and funding: In April 2022, after FDA premarket approval of CartiHeal’s Agili-C implant, Bioventus exercised its option to acquire the remaining shares for approximately $314.9 million. A further approximately $135.0 million may be payable if trailing 12-month sales reach $100.0 million. The company’s planned $415.0 million senior-notes offering was withdrawn on April 26, 2022 because of unfavorable market conditions; it was exploring alternative financing. Management said existing liquidity and expected operating cash flow should cover operating needs for at least 12 months, but additional capital is required for CartiHeal. Failure to complete the transaction could put the $50.0 million escrow advance at risk and lead to other legal action.
- Product regulation: FDA review of the EXOGEN metatarsal-fracture indication remained subject to requested data analyses and other information; approval and timing were uncertain. Bioventus planned to submit a scaphoid-fracture supplement in Q4 2022.
- Business risks: Management cited potential continuing COVID-19 effects on patient visits, elective procedures, collections and supply chains. The filing also identifies inflation and supply costs, product and reimbursement competition, regulatory and clinical-development uncertainty, acquisition integration, and reliance on a limited number of products and manufacturers as risks.
- Legal matters: The former Misonix China distributor’s remaining trade-secret claim continued, with no trial date set. Bioness-related proceedings included a fee dispute and a separate shareholder action; the company said it intended to defend itself and believed certain claims were covered by indemnification. Management could not estimate possible losses for these matters.
- Other: The company recorded $0.6 million of restructuring costs; the 2022 restructuring plan was expected to generate $1.1 million of total pretax charges. No quantified full-year revenue or earnings guidance was provided in the supplied filing text.
Key facts for investors to verify
- Whether Bioventus secured financing and completed the CartiHeal acquisition, and the resulting debt, interest expense, dilution or other financing terms.
- Whether Agili-C achieves commercialization and the sales milestone tied to the potential $135.0 million contingent payment.
- Whether organic sales growth, excluding acquisitions, supports the reported 43.4% increase and whether gross margins recover from the acquisition-related mix and amortization effects.
- Whether operating cash use improves and the company maintains adequate liquidity while funding acquisitions and integration.
- Updates on EXOGEN FDA submissions, the remaining legal matters, and any changes in reimbursement, supply-chain or regulatory risks.