AtriCure to acquire VC-backed SentreHEART


AtriCure Inc has agreed to acquire Redwood City, California-based SentreHEART Inc, a developer of percutaneous left atrial appendage management solutions, for upwards of $300 million. The deal is expected to close in the next several days. SentreHEART’s backers include Deerfield Management Company, U.S. Venture Partners, Prospect Ventures, Vivo Capital and Decheng Capital.

PRESS RELEASE

MASON, Ohio–(BUSINESS WIRE)–AtriCure, Inc. (Nasdaq: ATRC), a leading innovator in treatments for atrial fibrillation (Afib) and left atrial appendage (LAA) management, today announced that it has entered into a definitive agreement to acquire SentreHEART, Inc., a privately held developer of percutaneous left atrial appendage management solutions. The company also announced updated full year 2019 guidance.

Under the terms of the agreement to acquire SentreHEART, the transaction consideration consists of an upfront payment of approximately $40 million in cash and AtriCure common stock, plus additional contingent consideration based on the achievement of certain clinical and reimbursement milestones over the next several years, all of which are value-creating events. Of the contingent consideration, $140 million is based on milestones related to the aMAZE™ IDE clinical trial, including PMA approval, and $120 million is based on a milestone related to reimbursement for the therapy involving SentreHEART devices. All contingent consideration would be payable in a combination of cash and stock.

“We believe that SentreHEART is a strategic addition to AtriCure, significantly expanding our addressable markets with a product designed for electrophysiologists,” said Michael Carrel, President and Chief Executive Officer of AtriCure. “With our pursuit of labeling based on the aMAZE Trial, we are deepening our commitment to provide the broadest possible offering of ablation and left atrial appendage management solutions to our customers and their patients.”

Mr. Carrel continued, “This transaction combines two companies dedicated to solving the challenges associated with Afib. We are confident that SentreHEART complements our current product portfolio and intellectual property, augments our commitment to clinical science with the aMAZE Trial, and will leverage our growing commercial channel into the electrophysiology market. We believe that upon FDA approval, use of the LARIAT® device will continue to advance AtriCure’s competitive position in the market.”

SentreHEART was founded in 2005 and is based in Redwood City, California. The company’s technology is currently being studied in the aMAZE Trial, an FDA-approved, prospective, multicenter, randomized controlled trial evaluating the LARIAT Suture Delivery Device for LAA closure adjunctive to Pulmonary Vein Isolation (PVI) catheter ablation for the treatment of persistent and longstanding persistent Afib. The objective of the aMAZE Trial is to demonstrate that the LARIAT device for LAA closure, plus a PVI ablation, will lead to a reduced incidence of recurrent Afib compared to PVI alone, with a high safety profile. The aMAZE Trial is expected to enroll up to 600 total patients at 65 sites with one-year follow up. Primary endpoint measures are freedom from episodes of Afib greater than 30 seconds at one-year post treatment. More information about the aMAZE Trial can be found at: https://amazetrial.com/en/. To date, 535 patients have been enrolled in the trial, with full enrollment anticipated in early 2020.

Subject to customary closing conditions, the transaction is expected to close in the next several days. AtriCure shareholder approval is not required.

2019 and Future Outlook
AtriCure projects total revenue for 2019 to be in the range of $224.5 million to $228.5 million, which includes minimal contribution from SentreHEART, and reflects approximately 11% to 13% organic growth. Revenue contribution from the SentreHEART business is expected to be nominal until after completion of the aMAZE Trial and PMA approval.

For 2019, AtriCure now expects adjusted EBITDA, a non-GAAP measure, to be a loss due to integration and operating costs resulting from the transaction. Full-year adjusted EBITDA loss is expected to be in the range of $7 million to $9 million, excluding acquisition costs. This adjusted EBITDA loss translates into an adjusted loss per share between $1.07 and $1.14. For 2020, the company expects to have an adjusted EBITDA loss of less than $10 million, as investments shift from completing the aMAZE Trial to preparing for FDA approval. Adjusted EBITDA and adjusted loss per share are non-GAAP measures. A discussion of non-GAAP financial measures and reconciliations regarding non-GAAP financial measures to their respective GAAP financial measures is provided later in this press release.

“We have a strong balance sheet, which has been reinforced by our credit facility with Silicon Valley Bank. As a result, we believe that we can support both the upfront payment and ongoing investments in the combined business with minimal shareholder dilution,” said Andy Wade, Senior Vice President and Chief Financial Officer. “While this transaction will impact short and medium-term profitability, we do not need to raise additional capital to finish the aMAZE Trial or support post-trial commercialization efforts.”

Conference Call
AtriCure will host a conference call at 8:30 am Eastern Time on Monday, August 12, 2019 to discuss the transaction. A live webcast of the conference call will be available online on the Investors page of AtriCure’s corporate website at www.atricure.com. You may also access this call through an operator by calling (844) 884-9951 for domestic callers and (661) 378-9661 for international callers, using participant passcode 7188965. A replay of the webcast will be available on AtriCure’s website for 90 days.

Advisors
Piper Jaffray & Co. is acting as exclusive financial advisor and Pepper Hamilton LLP is serving as legal counsel to AtriCure for this transaction. Guggenheim Securities LLC is acting as exclusive financial advisor and Goodwin Procter LLP is serving as legal counsel to SentreHEART for this transaction.

About AtriCure, Inc.
AtriCure, Inc. provides innovative technologies for the treatment of Afib and related conditions. Afib affects more than 33 million people worldwide. Electrophysiologists and cardiothoracic surgeons around the globe use AtriCure technologies for the treatment of Afib and reduction of Afib related complications. AtriCure’s Isolator® Synergy™ Ablation System is the first and only medical device to receive FDA approval for the treatment of persistent Afib. AtriCure’s AtriClip Left Atrial Appendage (LAA) Exclusion System products are the most widely sold LAA management devices worldwide. For more information, visit AtriCure.com or follow us on Twitter @AtriCure.

About SentreHEART, Inc.
SentreHEART is a privately-owned medical device company based in Redwood City, California. Founded in 2005, SentreHEART has developed innovative technology for remote delivery of suture for closure of anatomic structures including the LAA. The company is committed to clinical evidence development and is currently sponsoring the FDA-approved prospective, multi-center, randomized controlled trial known as the aMAZE Trial. Information about the aMAZE Trial can be found at: