The road to profitability appears to be less steep for embattled tissue-processing company CryoLife Inc. with the raising of an additional $20 million.
The company said that it sold about 3.4 million shares of common stock at $6.25 per share in a private placement, with Piper Jaffray & Co. serving as the exclusive placement agent.
The $20 million in estimated net proceeds will be assigned to general corporate purposes, primarily research and development, marketing and sales, and general administrative expenses, said Joe Schepers, vice president of corporate communications at CryoLife.
And the company's prospects for 2004, 2005 and beyond look "very promising," Schepers said.
That's a prediction the company's shareholders will be watching closely following the debacle of 2002, when the FDA pulled from the market many of the company's products, followed by a spate of liability suits. The company's problems stemmed from an apparent failure of quality control and the reported contamination of tissues. One case resulted in the death of a Minnesota man, following knee surgery using cadaver tissue processed by CryoLife.
"The fact that some highly regarded institutions have invested in the company is clear evidence that they believe the company's future is promising," Schepers said. He listed a variety of initiatives launched "over the past several weeks" that indicate the company is making steady progress with the FDA and good progress in product development and marketing
Last September, the company laid off 105 workers from its 384-person work force, but Schepers said that CryoLife has rehired many of those former employees as well as new employees, pushing its head count back to more than 300.
Additionally, CryoLife is putting into place the use of pathogen-inactivation technology from Clearant Inc., of Los Angeles, initially used in supporting the safety of its orthopedic tissue products. The development agreement was signed last December, and Schepers said the company is working with Clearant to put in place the technology, which uses ionizing radiation.
"Our objective would be to potentially have a sterile claim for our orthopedic tissues," Schepers said, with "possible expansion" of the Clearant system to other CryoLife tissues.
On the legal front, Schepers repeated the company's statement that it has resolved 20 liability claims against it and that only five claims remain outstanding.
"The significant cases have been resolved," Schepers said. He added that the company hopes to resolve the remaining claims, which would help the company "move forward with our business operations."
On the regulatory front, Schepers said that the company is working with the FDA to move forward on its quality-control processes. "We're continuing to implement new processing improvements, and we've initiated our own in-house pathology lab and hired a board-certified pathologist," he said.
Additionally, it is expecting a response from the agency on its submission of a 510(k) application for its decellularized SynerGraft-processed heart valves. Since that application was filed Nov. 3 and there is a 90-day deadline for an agency response, the agency's answer to that application should be coming soon.
The company has not yet issued its profit and earnings report for 2003, but Schepers said that is expected by the end of February.
Especially strong were 2003 revenues for the company's Bioglue product - $27.8 million, a 33 percent increase over BioGlue revenues in 2002. And expectations by the company are for BioGlue revenues of between $32 million and $34 million for the current year. The company's BioGlue Surgical Adhesive is FDA approved as an adjunct to sutures and staples for use in adult patients in open surgical repair of large vessels. It is CE marked and approved in Canada for use in soft-tissue repair, and it is approved in Australia for use in vascular and pulmonary sealing and repair.
"We have a very innovative pipeline of products that we're developing, plus new formulations and indications for BioGlue," Schepers added.
Finally, he noted that the company is awaiting certification by the American Association of Tissue Banks in McLean, Va., with an application filed in October. He said that the certification is expected by this spring or summer and "is important for our customers; it's very important when they're looking at [tissue-processing] companies."