What happened
Shares of Bioventus (BVS -4.24%) were sinking 11% as of 10:46 a.m. ET on Monday. The decline came after the company announced that it exercised a call option to acquire CartiHeal. Bioventus previously made a $15 million equity investment in CartiHeal in 2020 and acquired an option at that time to purchase the rest of the privately held company.
So what
Why didn't investors like this deal? Probably because of the financial terms.
Bioventus is paying $315 million to buy CartiHeal. The price tag will increase by another $135 million, though, if and when CartiHeal achieves $100 million in trailing-12-month sales. Bioventus intends to take on additional debt to fund the purchase.
This added debt is likely concerning to some investors. Bioventus' long-term debt totaled nearly $340 million at the end of 2021. That's a hefty debt load for a company that generated less than $10 million in profits last year.
However, the CartiHeal acquisition does appear to be a pretty good fit for Bioventus. CartiHeal recently won U.S. Food and Drug Administration (FDA) premarket approval for its Agili-C implant for treating knee-joint surface lesions. The product should be complementary to Bioventus' lineup of joint therapies.
Image source: Getty Images.
Now what
With today's drop, Bioventus' share price is down more than 30% from the highs set last summer. What could turn things around for the healthcare stock? A successful launch of Agili-C could help. Bioventus hopes to conduct a limited market release of CartiHeal's product in the U.S. in the third quarter of this year.
