Date: Feb 25, 2014 Source: Mass Device (
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by Brad Perriello
Teleflex says it's having trouble developing the medical device coating technology it acquired along with Semprus BioSciences for up to $80 million.
Teleflex: We're having trouble with the Semprus technology
Teleflex (NYSE:TFX) is having trouble developing the anti-microbial coating technology it acquired along with Semprus BioSciences for up to $80 million in 2012, according to a regulatory filing.
Teleflex paid out $30 million up front and put another $50 million in milestones on the table for Semprus in June 2012, a few months before winning 510(k) clearance from the FDA for its Nylus peripherally inserted central catheter. The Nylus device also won CE Mark approval in the European Union that year.
Unlike other medical device coatings, with the Semprus technology the atoms comprising the coating's polymers are covalently bonded to the material comprising the medical device, meaning it is "grown' instead of applied.
But now Teleflex says it might have to write down its investment in Semprus, according to the filing.
"As of Dec. 31, 2013, we continue to experience difficulties with respect to the development of the Semprus technology, which we are attempting to resolve through further research and testing," Teleflex said. "Failure to resolve these issues may result in a reduction of the expected future cash flows related to the Semprus technology and could result in recognition of impairment charges with respect to the related assets, which could be material."
Teleflex said it paid out $2.4 million less in earn-outs from the Semprus deal last year "after determining that certain conditions for the payment of certain contingent consideration would not be satisfied," according to the filing. But the Semprus R&D costs were higher by $1.2 million, according to the filing. The Semprus business was worth about $42 million as of Dec. 31, the Limerick, Pa.-based company said.
The news marks a significant shift for Teleflex, which was bullish on the Semprus technology as recently as February 2013, when chairman, president & CEO Benson Smith said he believed the Semprus coating technique "will pay benefits for many years to come." Smith heralded the acquisition soon after it was announced in the summer of 2012.
"This transaction brings to Teleflex an innovative and patented platform technology Semprus sustained that will serve as the basis for many of our next-generation medical devices. This technology is designed to provide the benefits of reducing complications such as thrombosis and microbial adhesion over long durations. And while the initial focus for this technology will be in vascular device applications, we see this technology being applied across a range of our existing products including dialysis, Foley catheters, and into tracheal tubes," Smith said in July 2012.
Teleflex was still behind the coating by that fall, with Smith saying the company was "quite enthusiastic" about the tech, "which we believe will be valuable on a number of Teleflex medical devices and provide additional OEM capabilities."
Teleflex did not respond to a request for comment.
TFX shares hit a 52-week high of $103.51 apiece last week after the medical device company released its 4th-quarter and 2013 numbers. Teleflex reported profits of $34.8 million, or 77ยข per share, on sales of $450.5 million for the 3 months ended Dec. 31, 2013, for bottom-line growth of 18.8% on sales growth of 7.5% compared with Q4 2012.
Adjusted to exclude 1-time items, profits were $58.5 million, or $1.36 per share, nearly a dime ahead of consensus expectations on Wall Street.
Full-year profits were $150.9 million, or $3.67 per share, on sales of $1.70 billion, representing a swing from red to black ink on sales growth of 9.4% compared with 2012.
TFX shares closed down 0.06% at $100.57 apiece yesterday and were up 0.7% to $101.3 each today as of about 11:45 a.m.
