A 70-year-old man in 2019 had to have his right leg amputated and then a short time later, his left foot also developed gangrene.
“Facing a second amputation, he was desperate for a better option,” recalled Drew Hykes, chief executive at Irvine-based Inari Medical Inc. (Nasdaq: NARI).
The patient underwent a new minimally invasive procedure known as LimFlow that bypassed permanently blocked arteries in the leg and foot and delivered oxygenated blood back into the foot via the veins, Hykes said on a Nov. 1 conference call with analysts.
“Thanks to LimFlow, he was able to keep his leg and avoid the extremely dire prognosis associated with being wheelchair bound,” Hykes said.
“LimFlow quite possibly saved this patient’s life.”
Inari was so impressed with the technology that it’s paying as much as $415 million to acquire Paris-based LimFlow S.A., marking the nearly $3 billion-valued medical device company’s largest acquisition to date.
CEO Statement
The deal marks the biggest corporate move for Inari under the leadership of Hykes, who took over as CEO from prior Chief Executive Bill Hoffman on Jan. 1.
Hoffman took Inari public in 2020, and had turned the company into one of Orange County’s fastest-growing medical device makers, with a local workforce topping 600 and a office presence that now tops 120,000 square feet.
Inari said the LimFlow acquisition would provide “significant growth” with a total addressable market topping $4 billion.
The deal adds a different type of vein-related product to the toolkit of Inari, whose existing devices treat blood clots in the veins.
Inari, spun out of medical device incubator Inceptus Medical in 2013, focuses on catheter-based technologies to remove large blood clots from patients with venous thromboembolism (VTE), a condition that can lead to disability or death.
“We are thrilled to join forces with Inari Medical, expanding the reach of our remarkable technology to bring renewed hope to patients who are currently suffering,” LimFlow CEO Dan Rose said in a statement.
Amputation Reduction
Chronic limb-threatening ischemia (CLTI) occurs in patients suffering from diabetes, coronary artery disease, obesity, high cholesterol, and/or high blood pressure.
These patients experience chronic pain and develop festering wounds or infections that lead to major limb amputation, which could also increase mortality risks.
To relieve the symptoms of CLTI, patients today are treated primarily with angioplasty or open bypass surgery. In many late-stage patients, however, neither option is feasible due to extensive disease in the target arteries or other anatomical constraints.
CLTI affects more than 1.5 million patients each year globally, approximately 560,000 of which patients are in the U.S. The illness causes more than 150,000 major amputations per year in the U.S.
“We are in a fight against unnecessary amputations,” Rose said in a video on the company’s website.
“Clinicians specializing in the treatment of these diseases are often faced with having to tell patients there are no further options and they have to undergo a major amputation. We can do better.”
LimFlow was co-founded in 2012 by Dr. Martin Rothman, a world-renowned interventional cardiologist, Tim Lenihan, founder and CEO of Contract Medical International GmbH, and MD Start, a European incubator dedicated to healthcare. It won European approval in 2016.
Rose, who joined LimFlow in 2016, has more than 23 years of experience, including starting his own medical device company and working eight years in leadership roles at Medtronic in the cardiovascular and cardiac surgery groups.
In 2018, LimFlow raised $33.5 million in an oversubscribed Series C financing.
Inari made a minority investment in LimFlow, which has its U.S. base in San Jose, and became a board observer in early 2022.
“As a minority investor and board observer in LimFlow since early 2022, we have seen firsthand the life-changing impact this technology has on patients, as well as how complementary our two businesses are,” Inari said in a statement when it acquired LimFlow.
Besides Inari, other LimFlow investors include Sofinnova Partners, Bpifrance, Balestier, Longitude Capital and Soleus Capital.
$250M Cash
Under the terms of the agreement, LimFlow will receive $250 million in cash at closing, which is expected in the current quarter, and be eligible to receive up to $165 million in additional payments based on certain commercial and reimbursement milestones.
In September, the Food and Drug Administration granted approval for the LimFlow System for Transcatheter Arterialization of Deep Veins (TADV), based on successful outcomes seen in a trial that was recently published in The New England Journal of Medicine, and from positive clinical results seen in earlier studies.
In the most recent study, 76% of the patients were able to keep their legs and experienced progressive wound healing, with many having significant pain relief during the time following LimFlow treatment, Inari said.
Q3 Results
Inari’s sales have exploded almost tenfold in the past five years after developing new devices to remove clots from veins. Sales are expected to climb 27% this year to $487.9 million, according to the average estimate of analysts.
The acquisition of LimFlow is a “a significant milestone” for Inari, Hykes said.
“Most importantly, the acquisition aligns with Inari’s mission of addressing large unmet patient needs,” Hykes said.
“LimFlow is a natural fit with our specific commercial expertise, clinical capabilities, market development playbook and ability to iterate new products. We believe that leveraging Inari’s core competencies will make a meaningful impact on LimFlow’s trajectory and ultimately allow us to treat more patients faster.”
Inari announced the acquisition during its third-quarter report where it said sales climbed 31% to $126.4 million.
“Our business is thriving and our relentless focus on execution allowed us to deliver robust revenue growth in Q3,” Hykes said on the conference call.
Stock Hit
Inari’s shares fell 21% in the two trading sessions after the acquisition announcement, when they hit a 52-week low.
Inari said the acquisition caused an 18-month delay in its previous forecast to reach “sustained operating income” by the first half of 2024; it now forecasts profitability in the second half of 2025.
Analysts also questioned whether Inari’s sales are “decelerating,” saying its annual forecast implies the fourth quarter will grow 22%, below the company’s prior growth of 30% per quarter this year.
The forecast is “just wanting to feel comfortable with the numbers we provide to the Street,” Chief Financial Officer Mitchell Hill told analysts.
Inari said it can use the same competencies that helped its revenue boom to ramp up LimFlow’s sales.
“I think in many ways, 2024 will be a year of foundation building. It’ll be a year of training, a year of establishing back approvals of getting the foundation established for the broader launch,” Hykes said.
