Tactile Systems Technology, Inc. (“Tactile Medical” or the
“Company”) (Nasdaq: TCMD), a medical technology company focused on
developing medical devices for the treatment of underserved chronic
diseases at home, today announced it has acquired the assets of the
AffloVest respiratory therapy business from International
Biophysics Corporation, a privately-held company which developed
and manufactures AffloVest.
AffloVest is a portable, wearable vest that treats patients with
chronic respiratory conditions such as COPD-associated breathing
conditions like bronchiectasis, or conditions resulting from
neuromuscular disorders and cystic fibrosis, by managing airway
clearance. AffloVest is the first truly portable, battery-powered,
High Frequency Chest Wall Oscillation (HFCWO) device. Its use has
been shown to reduce antibiotic use, emergency room visits and
hospitalizations.
Management Commentary
“The addition of AffloVest represents an ideal strategic fit for
Tactile Medical as it aligns well with our focus of treating
patients with underserved chronic conditions in the home,” said Dan
Reuvers, President and CEO of Tactile Medical. “We expect to
promote AffloVest’s patented, portable design, demonstrated
clinical outcomes, and established reimbursement within the Durable
Medical Equipment (DME) channel to drive AffloVest to contribute to
our overall company goal of 20%+ revenue growth going forward. Like
lymphedema, the chronic pulmonary disease market represents a
large, and still underpenetrated opportunity. Importantly, multiple
members of our management team have significant experience in this
category, which gives us confidence in our ability to execute our
commercial strategy for AffloVest. We look forward to welcoming the
AffloVest sales team to Tactile Medical and intend to maintain
their strategy of partnering with DME companies to promote the
proven therapy. The sales representatives at these DME companies
are uniquely positioned to provide valuable access to chronic
respiratory providers and patients through their complementary
product and service offerings such as oxygen, nebulizers and
ventilators.”
Reuvers continued, “Longer term, we believe adding a mobile,
wearable therapy to our portfolio invites synergy within our
R&D roadmap as we advance our goals within ease-of-use and
digital engagement. We believe this is a compelling transaction as
it expands Tactile Medical’s annual addressable market opportunity
in the U.S. to more than $10 billion, fits our long-term revenue
and margin growth profile, enhances our long-term profitability,
and is expected to generate an attractive return on
investment.”
Financing Details
- Tactile Medical has financed the
transaction through a combination of cash on hand and $55 million
of borrowings under its existing credit facility, which is being
amended in connection with this transaction. The credit facility is
being exclusively provided by Wells Fargo Bank, NA. Tactile Medical
expects its net leverage ratio as of year-end 2021 to be
approximately 1.4x and anticipates its net leverage ratio as of
year-end 2022 to be less than 1.0x.
Strategic Rationale
- Provides access to a
differentiated and clinically validated, HFCWO technology:
AffloVest was developed to treat patients with serious chronic
respiratory disorders. AffloVest’s patient-friendly design provides
freedom and mobility intended to increase patient adherence. It has
been shown to reduce related healthcare costs including
antibiotics, emergency room visits, and hospitalizations.
- Adds $5 billion annual
addressable market opportunity in the U.S.: Bronchiectasis
is one of the most common respiratory diseases with 500,000 U.S.
adults diagnosed, growing in the high single-digits annually. The
U.S. market remains underpenetrated with more than 16 million
living with COPD, over 4 million of whom may be affected by
bronchiectasis.
- Proven commercial strategy
supports the opportunity for continued market share gains:
AffloVest has demonstrated strong growth and market share gains by
partnering with respiratory DME companies to commercialize the
product. Significant opportunities for further growth exist with a
universe of more than 4,000 respiratory DME sales representatives
in the U.S.
- AffloVest business features
an attractive profitability profile: Expected AffloVest
gross margins above 70% and adjusted EBITDA margins of more than
30%.
- Transaction aligns with
Tactile Medical’s growth and margin goals: Transaction
aligns with the Company’s growth and margin goals, including 20%+
revenue growth, gross margins above 70% and expanding adjusted
EBITDA margins. Calendar year 2021 revenues of AffloVest are
expected to be approximately $17 million and the transaction is
expected to contribute approximately $5.0 million to $5.5 million
of revenue from the closing date of September 8, 2021 to December
31, 2021. Further, the acquisition is expected to be accretive to
the Company’s adjusted EBITDA, excluding purchase accounting,
non-cash amortization and transaction costs, by the end of year one
post-closing. The Company intends to provide additional financial
information related to the AffloVest acquisition during its third
quarter 2021 earnings call in November.
About Tactile Systems Technology, Inc. (DBA Tactile
Medical)
Tactile Medical is a leader in developing and marketing
at-home therapy devices that treat chronic swelling conditions such
as lymphedema and chronic venous insufficiency. Tactile Medical’s
Mission is to help people suffering from chronic diseases live
better and care for themselves at home. The Company’s unique
offering includes advanced, clinically proven pneumatic compression
devices, as well as continuity of care services provided by a
national network of product specialists and trainers, reimbursement
experts, patient advocates and clinicians. This combination of
products and services ensures that tens of thousands of patients
annually receive the at-home treatment necessary to better manage
their chronic conditions. Tactile Medical takes pride in
the fact that its solutions help increase clinical efficacy, reduce
overall healthcare costs and improve the quality of life for
patients with chronic conditions.
About International Biophysics Corporation
International Biophysics Corporation brings to market
innovative, disruptive medical devices and technologies that
improve treatment therapies and patient outcomes. The company has a
strong history of developing and launching innovative and
disruptive technologies. Centered in a precision ISO 13485
certified, FDA registered, state of the art manufacturing facility,
International Biophysics Corporation continues to research and
develop advanced solutions for physicians and patients.
Legal Notice Regarding Forward-Looking
Statements
This release contains forward-looking statements, including,
without limitation, statements related to the Company’s growth and
margin goals and related to the acquisition of AffloVest, such as
expected revenues and revenue growth of AffloVest and the related
impact on the Company’s revenues, the impact on the Company’s
long-term profitability profile, AffloVest’s expected gross margins
and adjusted EBITDA margins, the expected accretive impact of the
acquisition, the results of anticipated leveraging and commercial
strategies, including potential market share gains, the annual
addressable market opportunity for AffloVest and the Company,
and the expected net leverage ratio of the Company in the future,
as well as attractive return on investment. Forward-looking
statements are generally identifiable by the use of words like
“may,” “will,” “should,” “could,” “expect,” “anticipate,”
“estimate,” “believe,” “intend,” “continue,” “confident,”
“outlook,” “guidance,” “project,” “goals,” “look forward,”
“poised,” “designed,” “plan,” “return,” “focused,” “prospects” or
“remain” or the negative of these words or other variations on
these words or comparable terminology. The reader is cautioned not
to put undue reliance on these forward-looking statements, as these
statements are subject to numerous factors and uncertainties
outside of the Company’s control that can make such statements
untrue, including, but not limited to, whether and when the Company
will be able to realize the expected financial results and
accretive effect of the acquisition, and how customers,
competitors, suppliers and employees will react to the acquisition,
the impacts of the COVID-19 pandemic on the Company’s business,
financial condition and results of operations; the course of the
COVID-19 pandemic and its impact on general economic, business and
market conditions; the Company’s inability to execute on its plans
to respond to the COVID-19 pandemic; the adequacy of the Company’s
liquidity to pursue its business objectives; the Company’s ability
to obtain reimbursement from third party payers for its products;
loss or retirement of key executives, including prior to
identifying a successor; adverse economic conditions or intense
competition; loss of a key supplier; entry of new competitors and
products; adverse federal, state and local government regulation;
technological obsolescence of the Company’s products; technical
problems with the Company’s research and products; the Company’s
ability to expand its business through strategic acquisitions; the
Company’s ability to integrate acquisitions and related businesses;
price increases for supplies and components; the effects of current
and future U.S. and foreign trade policy and tariff actions; or the
inability to carry out research, development and commercialization
plans. In addition, other factors that could cause actual results
to differ materially are discussed in the Company’s filings with
the SEC. Investors and security holders are urged to read these
documents free of charge on the SEC’s website at
http://www.sec.gov. The Company undertakes no obligation to
publicly update or revise its forward-looking statements as a
result of new information, future events or otherwise.
Non-GAAP Financial Measures
This press release includes the non-GAAP financial measure of
expected adjusted EBITDA margin of AffloVest, which differs from
financial measures calculated in accordance with U.S. generally
accepted accounting principles (“GAAP”).
Expected adjusted EBITDA margin in this release represents
AffloVest’s expected net income, plus interest expense or less
interest income, less income tax benefit or plus income tax
expense, plus depreciation and amortization, plus stock-based
compensation expense, plus impairment charges and inventory
write-offs, plus litigation defense costs, plus executive
transition costs, plus transaction costs, plus purchase accounting
charges, plus business optimization expenses, and plus other
restructuring and integration costs, on a percentage of revenue
basis. This non-GAAP financial measure is presented because the
Company believes it is a useful indicator of AffloVest’s projected
operating performance. Such non-GAAP financial measure is
supplemental only, and should not be considered superior to, as a
substitute for, or as an alternative to, and should be considered
in conjunction with, net margin. This non-GAAP financial measure
may differ from similar measures used by other companies.
The Company cannot reconcile AffloVest’s expected adjusted
EBITDA margin to expected net income margin without unreasonable
effort because certain items that impact net income and other
reconciling metrics are out of the Company's control and/or cannot
be reasonably predicted at this time. Such unavailable information
could have a significant impact on the GAAP financial results.
Investor Inquiries:
Mike Piccinino, CFA
Managing Director
Westwicke Partners
443-213-0500
investorrelations@tactilemedical.com
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