Agreements with Endospan

12 Months Ended

Dec. 31, 2024

Variable Interest Entity, Primary Beneficiary, Does Not Hold Majority Voting Interest, Disclosures [Abstract]

Agreements with Endospan

Agreements with Endospan

On September 11, 2019 Artivion’s wholly owned subsidiary, JOTEC, entered into an exclusive distribution agreement (“Endospan Distribution Agreement”) with Endospan Ltd. (“Endospan”), an Israeli corporation, pursuant to which JOTEC obtained exclusive distribution rights for NEXUS ONE, and under subsequent amendments, the NEXUS DUO and NEXUS TRE (collectively the “NEXUS family of products”) and accessories in certain countries in Europe in exchange for a fixed distribution fee of $9.0 million paid in September 2019 which has been reflected in “Other intangibles, net” in our Consolidated Balance Sheets. We also entered into a loan agreement to provide Endospan a secured loan of up to $15.0 million (“Endospan Loan”).

We also entered into a securities purchase option agreement (“Endospan Option”) with Endospan for $1.0 million paid in September 2019. The Endospan Option Agreement prior to amendment described below provided Artivion the option to purchase all the outstanding securities of Endospan from Endospan’s securityholders at the time of acquisition, or the option to acquire all of Endospan’s assets, in each case, for a price between $350.0 and $450.0 million before, or within a certain period of time after FDA approval of NEXUS, with such option expiring if not exercised within 90 days after receiving notice that Endospan has received approval from the FDA for NEXUS.

On July 1, 2024 Artivion and Endospan entered into an amendment to the Endospan Option (“Endospan Option Amendment”) which amended the terms of the previously existing Endospan Option. Under the terms of the Endospan Option Amendment, the price to acquire all of Endospan’s outstanding securities from Endospan’s securityholders at the time of acquisition, or the option to acquire all of Endospan’s assets under the Endospan Option was reduced from $250.0 million to $175.0 million, resulting in an upfront acquisition purchase price of $135.0 million, inclusive of the loan off-set. There is no longer a minimum earnout payment of $100.0 million and the maximum earnout payment of $200.0 million remains the same. We also agreed to fund Endospan additional secured loans of up to $25.0 million (“Additional Endospan Loan” and together with the Endospan Loan, the “Endospan Loans”).

Variable Interest Entity Assessment

We consolidate the results of a variable interest entity (“VIE”) when it is determined that we are the primary beneficiary. Based on our initial evaluation of Endospan and the related agreements with Endospan, we determined that Endospan is a VIE. Although the arrangement with Endospan resulted in our holding a variable interest, it did not empower us to direct those activities of Endospan that most significantly impact the VIE economic performance. Therefore, we are not the primary beneficiary, and we have not consolidated Endospan into our financial results. We evaluated Endospan for VIE classification as of December 31, 2024, 2023 and 2022 and determined that Endospan meets the criteria of a non-consolidating VIE.

Valuation

The agreements with Endospan were entered into concurrently and had certain terms that are interrelated. In our evaluation of the initial relative fair value of each of the Endospan agreements to determine the amount to record, we utilized discounted cash flows to estimate the fair market value for the Endospan Loan and for the Endospan Distribution Agreement. We estimated the fair value of the Endospan Option utilizing a Monte Carlo simulation model. Inputs in our valuation of the Endospan agreements included cash payments and anticipated payments based on the executed agreements with Endospan, projected discounted cash flows in connection with the Endospan transaction, our expected internal rate of return and discount rates, and our assessed probability and timing of receipt of certification of certain approvals and milestones in obtaining FDA approval.

Endospan Option

Utilizing a Monte Carlo simulation model, we determined that the fair value of the Endospan Option in 2019 was $4.9 million. As a result of a decrease in forecasted operating results, we fully impaired the value of the Endospan Option primarily during the fourth quarter of December 31, 2021.

Due to the revised terms in the Endospan Option Amendment in July 2024, we performed another fair value measurement utilizing a Monte Carlo simulation model and revalued the Endospan Option. We determined that the fair value of the Endospan Option was $3.1 million which is reflected in Other long-term assets in our Consolidated Balance Sheet as of December 31, 2024.

Endospan Loans

Artivion and Endospan entered into the Endospan Loan, dated September 11, 2019, in which Artivion agreed to provide Endospan a secured loan of up to $15.0 million to be funded in three tranches of $5.0 million each in 2019, 2020 and 2023, respectively.

We elected the fair value option for recording the Endospan Loan. We assess the fair value of the Endospan Loan based on quantitative and qualitative characteristics, and adjust the amount recorded to its current fair market value at each reporting period. We performed an assessment of the fair value of the Endospan Loan and determined that the fair value of the first two tranches decreased and had no value as of December 31, 2021. In 2023 we funded the $5.0 million third tranche payment and determined that the loan continued to have no fair value. Consequently, we recorded an expense of $5.0 million during the year ended December 31, 2023. After entering into an amendment to the Endospan Loan in July 2024 (the “Endospan Loan Amendment”), we determined that the Endospan Loan had a fair value of $0.3 million as of December 31, 2024.

As a part of the Endospan Loan Amendment, Artivion agreed to fund the Additional Endospan Loan up to $25.0 million. The Additional Endospan Loan is contracted to be funded in three tranches of $7.0 million, $10.0 million and $8.0 million, subject to Endospan’s achievement of milestones related to its pursuit of regulatory approval for NEXUS ONE that are specified in the Endospan Loan Amendment. The first two tranches totaling $17.0 million were funded during the year ended December 31, 2024. We performed a fair value assessment of the Additional Endospan Loan and determined that the fair value was $9.2 million as of December 31, 2024 which is reflected in Other long-term assets in the Consolidated Balance Sheets as of December 31, 2024.

Distribution Agreement

The Endospan Distribution Agreement, reflected in Other intangibles, net in the Consolidated Balance Sheets and amortized on a straight-line basis, was $1.8 million as of December 31, 2023 and was fully amortized as of December 31, 2024.