Endologix
(NSDQ:ELGX) announced today that it has filed for Chapter 11 bankruptcy protection and simultaneously agreed to be purchased by its largest creditor.
That creditor, Deerfield Partners, will take the Irvine, Calif.-based abdominal aortic aneurysm (AAA) stent graft developer private. The bankruptcy filing and sale “provide the best path to address the financial challenges resulting from COVID-19 and the related delays in elective medical procedures and to realize the full benefits of operational enhancements made over the past two years,” the company said in a statement.
Under the terms of the proposed plan of financial reorganization, Endologix will eliminate approximately $180 million of debt from its balance sheet on a net basis, including approximately $130 million of debt currently held by Deerfield that will convert to equity in the reorganized company. Endologix also expects to gain access to $110.8 million of new financing through this process, including $30.8 million in debtor-in-possession (DIP) financing from Deerfield, an additional $30 million in exit financing from Deerfield, and $50 million in rolled-over debt from the company’s current first lien debt.
Endologix said it expects to complete the process by end of the third quarter of 2020, emerging as a private company with the financial flexibility necessary to accelerate investment in new technologies. In the interim, Endologix intends to operate its business as usual.
“We are excited to begin a new chapter for our organization now characterized by financial stability,” CEO John Onopchenko said in the statement. “Although COVID-19 has presented a delay in many AAA procedures that, in turn, has negatively impacted our revenue, we remain confident we have taken the right steps to ensure we are consistently providing valued support to customers and the patients we serve with the highest quality products and the most talented and committed employees in the industry. The path we are now taking to strengthen our balance sheet and transition to private ownership will allow us to accelerate our progress with our strong patient-first business focus, an enduring spirit of innovation, and an unrelenting commitment to advancing our life-saving products supported by industry-leading evidence.”
The company plans to launch sales of its Alto abdominal stent graft system in the U.S. in the coming weeks, followed by a European launch later this year. Alto won FDA approval in March. Endologix also plans to begin enrolling patients in its ChEVAS ONE investigational device exemption trial in the third quarter of 2020 and in its Alto randomized controlled trial later this year. The company said it plans to submit a premarket approval application for its Nellix 3.5 endovascular aneurysm sealing system to the FDA.
Shares in ENDX were down 67% to 25¢ apiece in mid-morning trading.