The development and license agreement provides for the development of robotic assisted surgical technologies for use by both Titan and Medtronic in their respective businesses. Titan will receive a series of payments totaling up to $31 million for Medtronic’s license to such technologies, as technology milestones are completed and verified. A steering committee comprised of representatives from Titan and Medtronic will be established to provide oversight regarding the work toward achievement of the milestones. One of the milestones of the agreement is for Titan to raise an additional U.S. $18 million of capital within four months of the development start date, which is expected to occur in June 2020.
To support development, Titan has received a senior secured loan of $1.5 million from Medtronic which was announced on April 29. The loan, which will be increased by an amount equal to certain legal, transaction and intellectual property related expenses pursuant to the definitive agreements, will be evidenced by an amended and restated promissory note, and will bear interest at the rate of 8 percent per annum. The loan is repayable on June 4, 2023, or upon the earlier completion of the last milestone under the development and license agreement or a Change of Control of Titan (as defined in the note). Until repayment of the loan, Medtronic may have one non-voting observer attend meetings of Titan’s Board of Directors. The loan will be secured by way of a security agreement entered into by Titan and pursuant to which Titan has granted a security interest in favor of Medtronic in all of Titan’s present and future property including all personal property, inventory, equipment and intellectual property.
Under the terms of the separate license agreement, Medtronic has licensed certain robotic assisted surgical technologies from Titan for an upfront payment of $10 million. Titan retains the rights to continue to develop and commercialize those technologies for its own business.
“These agreements with Medtronic will allow Titan to continue to develop its single-port robotic surgical technologies while sharing our expertise and technologies with Medtronic,” said David McNally, President and CEO of Titan Medical. “We are very excited about the opportunity to continue Titan’s pioneering work to bring new single-port surgical options to the market.”
Following unanimous approval by Titan’s Board of Directors of the agreements with Medtronic, Charles Federico, who has served as Titan’s Chairman since May 2019, and John Schellhorn, who has served as a Director since June 2017, have decided to retire from Titan’s board in order to dedicate more time for their respective personal and professional endeavors. David McNally, Titan’s president and CEO, has been appointed Chairman of the Board of Directors. McNally said “I would like to thank Charlie and John for their many contributions to our Board, and for their guidance in securing this important strategic relationship. We wish them continued success.” The Board will consist of three members, including, in addition to David McNally, John Barker, an independent director, and Stephen Randall, Titan’s CFO, while a search for additional independent directors is conducted.
For clarity, these agreements are between Medtronic and Titan Medical Inc. Titan Medical is not affiliated with Titan Spine, which Medtronic acquired in 2019.