Merit Medical Acquires the HeRO Graft From CryoLife

Merit Medical Systems Inc. has purchased the HeRO Graft device and related assets from CryoLife Inc. for $18.5 million. 

The HeRO Graft is a fully subcutaneous vascular access system that is intended for use in maintaining long-term vascular access for chronic hemodialysis patients who have exhausted peripheral venous access sites suitable for fistulas or grafts. The product has received 510(k) clearance from the U.S. Food and Drug Administration and has the CE marking.

“This is a product line we have had interest in for some time,” said Fred P. Lampropoulos, Merit’s chairman/CEO. “We believe the HeRO Graft will help enhance our existing presence with vascular surgeons as well as interventional radiologists. We believe other Merit product lines, such as our peritoneal dialysis catheters, which are most often implanted by vascular surgeons, and our line of chronic dialysis catheters, will be improved as well. We understand that 90 percent of the HeRO Graft sales have been in the United States with the balance mainly in Germany and the United Kingdom. We believe that a substantial opportunity exists in the international marketplace, especially with our global sales, marketing and clinical footprint. Additionally, we believe vascular surgery represents a substantial opportunity for existing product pull-through, including catheters, guide wires, access devices and a host of other products. We continue to see expansion by vascular surgeons to many imaging procedures as well as cooperation with nephrologists and interventional radiologists.”

Merit believes that during 2015, HeRO Graft revenues were approximately $7.5 million, and gross margins were approximately 55 percent. Merit purchased financed the purchase under existing banking agreements.

“We expect GAAP earnings attributable to the HeRO Graft for the first fiscal year ending Dec. 31, 2016, to be flat, due primarily to deal costs, inventory markup and manufacturing transfer,” said Bernard Birkett, Merit’s chief financial officer. “We expect non-GAAP earnings attributable to the HeRO Graft will be accretive by $0.02 the first fiscal year ending Dec. 31, 2016, and triple to $0.06 in the third fiscal year of production.”

In connection with this transaction, Canaccord Genuity provided financial advice to Merit.

Founded in 1987, Merit Medical Systems develops, manufactures and distributes proprietary disposable medical devices used in interventional and diagnostic procedures, particularly in cardiology, radiology and endoscopy. Merit serves client hospitals worldwide with a domestic and international sales force totaling approximately 200 individuals. Merit employs approximately 3,700 people worldwide with facilities in South Jordan, Utah (its headquarters); Pearland, Texas; Richmond, Va.; Malvern, Pa.; Maastricht and Venlo, The Netherlands; Paris, France; Galway, Ireland; Beijing, China; Tijuana, Mexico; and Rockland, Mass.