Senzime has entered into an agreement to acquire the US company Respiratory Motion
Senzime AB (publ) (”Senzime” or the ”Company”) has today signed an agreement to acquire 100 percent of the shares in the US company Respiratory Motion, Inc. (“Respiratory Motion”) for an initial consideration of USD 19 million on a cash- and debt-free basis (the “Initial Consideration”) with an additional potential earn-out payment of up to USD 25 million, paid out earliest in 2024 (the “Transaction”). The sellers consist of a larger group of individuals and companies, some of whom are employees of the company and others are professional investors (the “Sellers”). Through the acquisition, Senzime expands its product portfolio within the market for monitoring of vital signs and extends the Company’s capability to capture a larger share of the patient journey outside of the operating room as well. To finance the Initial Consideration, Senzime’s Board of Directors has resolved to summon an Extraordinary General Meeting to authorize the Board of Directors to resolve on an issue through set-off of preliminary 8,655,238 shares (the “Consideration Shares”). In addition, Senzime will conduct a new share issue of approximately SEK 100 million to finance working capital needs in Respiratory Motion and accelerate the growth journey, directed to Swedish and international institutional investors through an accelerated book-building procedure, which is expected to commence today (the “Directed Share Issue”).
Press release: Uppsala, 1 June 2022
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The Transaction in brief
The rationale of the acquisition of Respiratory Motion is to expand Senzime’s product portfolio with a unique, complementary technology to monitor patients’ respiratory function outside of the operating room. The acquisition also aims to accelerate the market penetration of the TetraGraph system with evident sales and margin synergies. The Transaction contributes to Senzime's overall mission of becoming a global market leader in patient monitoring of vital signs with a vision to eliminate complications related to anesthesia and analgesia.
The Initial Consideration for 100 percent of the shares in Respiratory Motion on a cash and debt free basis amounts to USD 19 million.
A preliminary amount of 8,655,238 shares will be issued in Senzime in order to finance the Initial Consideration, following customary adjustments for net debt and normalized working capital, based on a Volume Weighted Average Price (“VWAP”) on Nasdaq Stockholm for the twenty (20) consecutive trading days.
The Sellers will, following the issuance of the Consideration Shares and completion of the Directed Share Issue, become the second largest shareholder block in Senzime with a joint holding of approximately 11 percent of the capital and votes, excluding a potential earn-out.
The additional potential earn-out payment amounts to up to USD 25 million (the “Earn-Out”). The Earn-Out is based on Respiratory Motion’s sales budget for 2023 and shall consist of either or both cash and shares in Senzime. Senzime will, in its sole discretion, decide on the split of cash and shares to be issued.
The total consideration, assuming full earn-out payment of USD 25 million, is equivalent of approximately 4.7x Respiratory Motion’s revenue budget for 2023.
The Consideration Shares and potential issue of shares to finance the Earn-Out are subject to a one-year lock-up from the date of receipt of the shares.
Senzime will in connection with the closing of the Transaction provide a working capital contribution of at most USD 5.5 million to Respiratory Motion.
To close the Transaction, the Board of Directors of the Company has today resolved to summon an extraordinary general meeting of the shareholders to authorize the Board of Directors to issue the Consideration shares. The Company will shortly publish a separate notice to the extraordinary general meeting.
Closing of the Transaction is expected to take place during end of June 2022.
Background and the transaction Respiratory Motion is a Boston-based medtech company that develops and commercializes systems for the monitoring of respiratory function and other vital signs. The company's solution – ExSpiron – is the only non-invasive system on the market that monitors patients' breathing volume and real-time breathing frequency. ExSpiron is based on many years of research by physicians in the United States, and is protected by 14 patent families and proprietary algorithms. The system is CE and FDA approved and validated on over 6,000 patients in more than 30 scientific publications.
Monitoring of patients' respiratory function is a critical function that is closely monitored during surgery according to standardized protocols. However, a significant proportion of patients need continued monitoring of breathing volume and frequency in real time even after surgery when they come to a ward. There is often a lack of adequate equipment that can provide an early warning of respiratory depression and prevent complications in patients who are not intubated.
Respiratory depression affects up to 30 percent of patients who are undergoing various types of pain treatment (analgesia) in postoperative care. This leads to complications, extended care time and increased cost for healthcare providers.
Similar to Senzime's TetraGraph, ExSpiron is based on a "razor and razorblade" sales model powered by an installed base of monitors and disposable sensors. The estimated total addressable market in the United States alone amounts to more than USD 4 billion, which, combined with Respiratory Motions' access to approximately 5,500 hospitals, enables rapid growth of the installed base of monitors. Respiratory Motion currently has a number of strategic agreements with some of the larger purchasing organizations in the USA through Group Purchasing Organizations.
The acquisition of Respiratory Motion is in line with Senzime's vision of a world free of anesthesia-related complications. Respiratory Motion's product portfolio is complementary to Senzime, which increases Senzime's ability to take a larger share of the patient journey outside of the operating room as well and enables cross-selling synergies – both through its own sales force and distributor channels. The companies also have clear operational synergies in manufacturing, product development, regulatory affairs and administration. The acquisition broadens Senzime's product portfolio and is expected to accelerate the market penetration of both TetraGraph and ExSpiron. The Transaction also enables Senzime to accelerate its overall mission of becoming a global market leader in patient monitoring of vital functions and thereby contribute to reduced complications related to anesthesia and analgesics.
Senzime today has a rapidly growing business and well-functioning infrastructure for direct sales in the US and Germany, which together with Respiratory Motions' existing agreements can further accelerate sales of disposable sensors, while considered tripling Senzime's total addressable market.
”This is an acquisition with perfect logic. Respiratory Motion gives us the conditions to further accelerate the rollout of TetraGraph while expanding our business of monitoring patients' respiratory function outside the operating room. With Respiratory Motion's unique system, we reach three times as large patient volume and lay the next building block in our journey to be the market leader in precision-based monitoring of vital signs with the overarching mission of eliminating anesthesia and sedation-related complications.” – Pia Renaudin, CEO, Senzime
”As a cardiothoracic surgeon, I was always acutely aware of the failure of previous monitors to adequately monitor and assess patient breathing. Compelled by the incidence of preventable respiratory failure, Respiratory Motion was founded to develop ExSpiron, the first and only non-invasive system of patients' breathing volume and real-time breathing frequency. COVID-19 has furthermore brought a new general awareness to the importance of respiratory function, thus creating an increased focus in the hospital on early identification of respiratory failure and its causes.
In Senzime we have found the perfect partner. Our ExSpiron system is the market's only solution for real-time monitoring of the respiratory function of patients who breathe on their own, typically after surgery and in wards. Our complementary solutions provide healthcare providers with unique high-precision medical tools for early identification and prevention of respiratory complications. By adding ExSpiron to its product portfolio, which already includes the commercially successful neuromuscular monitor TetraGraph, Senzime is now able to provide health care professionals and hospitals with an overarching solution for ensuring adequate monitoring of respiratory status and other vital signs and thus optimize care of critically ill patients. Becoming a part of Senzime enables an acceleration of our growth journey and we look forward to becoming the leading player in monitoring of vital signs together” – Jenny Freeman, cardiothoracic surgeon and co-founder of Respiratory Motion.
The Initial Consideration for 100 percent of the shares in Respiratory Motion on a cash and debt free basis amounts to USD 19 million. A preliminary amount of 8,655,238 shares will be issued in Senzime, in order to finance the Initial Consideration following customary adjustments for net debt and normalized working capital.
The potential earn-out payment amounts to up to USD 25 million. The Earn-Out is based on Respiratory Montion’s sales budged for 2023 and shall consist of either or both cash and shares in Senzime. At most 10 million shares in Senzime will be issued to finance the Earn-Out, with a subscription price equal to the VWAP on Nasdaq Stockholm during twenty (20) consecutive trading days preceding payment of the Earn-Out. Senzime will, in its sole discretion decide on the split of cash and shares to be issued.
The total consideration, assuming full earn-out payment of USD 25 million, is equivalent of approximately 4.7x Respiratory Motion’s revenue budget for 2023.
Financials and synergies Respiratory Motion has sales in Europe, China and US, where the turnover amounted to approximately USD 1.1 million with a gross margin of approximately 48 percent in 2021. Respiratory Motion is not profitable on an EBITDA-level. Respiratory Motion has been negatively affected by the Coronavirus as it has limited access to hospitals and hence complicated the sales process. Today, Respiratory Motion has 9 FTEs and its headquarter is based in Watertown, Massachusetts, US.
Senzime and Respiratory Motion have no overlapping businesses, only complementary, which implies that Senzime foresees both top-line synergies and cost synergies. As Respiratory Motion has no direct sales force in the US today, Senzime sees great opportunities to utilize its infrastructure for direct sales in the US and thus accelerate the commercialization of Respiratory Motion's "razor- and razor-blade" business model.
Senzime’s current financial targets of reaching at least SEK 200 million in revenue and achieve profitability in 2023 will be revised and presented once the review is complete and the integration of Respiratory Motion has begun.
Financing and conditions Completion of the acquisition is expected to take place during end of June 2022 and is conditional upon that an extraordinary general meeting authorize the Board of Directors to issue the Consideration Shares.
Senzime has engaged Carnegie Investment Bank AB (“Carnegie”) to explore the conditions to carry out a directed share issue of approximately SEK 100 million based on the authorization granted by the annual general meeting on 18 May 2022. The price of any new shares issued in the directed share issue will be determined through an accelerated book building procedure administered by Carnegie. Further information about the directed share issue and the accelerated book building procedure, which is expected to commence today, will be disclosed through a separate press release.
Extraordinary general meeting and voting commitments An extraordinary general meeting in Senzime is planned to be held on or around 27 June 2022 to authorize the Board of Directors to issue the Consideration Shares. The Company will shortly publish a separate notice to the extraordinary general meeting.
Conference call In connection to this announcement Senzime invites investors, analysts, and media to a webcast (in Swedish) with a Q&A-session. The presentation will be held by Senzime's CEO Pia Renaudin, Philip Siberg, Chairman of the Board, Jonathan Ekman, Head of M&A and Professor Lars I Eriksson from the section for Anesthesiology and Intensive Care at the Department of Physiology and Pharmacology at Karolinska University Hospital. The webcast will conclude with a Q&A session. No preregistration is required.
The webcast will also be available on demand on Senzime’s corporate website after the event.
Advisers Carnegie is acting as financial advisor in relation to the Transaction and Sole Global Coordinator and Sole Bookrunner with respect to the Directed Share Issue. Eversheds Sutherland (Stockholm and Chicago) is acting as legal advisor to Senzime in connection with the Transaction. Advokatbyrån Lindahl is acting as legal advisor to Senzime in connection with the Directed Share Issue.
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Information to distributors Solely for the purposes of the product governance requirements contained within: (a) EU Directive 2014/65/EU on markets in financial instruments, as amended ("MiFID II"); (b) Articles 9 and 10 of Commission Delegated Directive (EU) 2017/593 supplementing MiFID II; and (c) local implementing measures (together, the "MiFID II Product Governance Requirements"), and disclaiming all and any liability, whether arising in tort, contract or otherwise, which any "manufacturer" (for the purposes of the MiFID II Product Governance Requirements) may otherwise have with respect thereto, the shares in Senzime have been subject to a product approval process, which has determined that the shares are: (i) compatible with an end target market of retail investors and investors who meet the criteria of professional clients and eligible counterparties, each as defined in MiFID II; and (ii) eligible for distribution through all distribution channels as are permitted by MiFID II (the "Target Market Assessment"). Notwithstanding the Target Market Assessment, distributors should note that: the price of the shares may decline and investors could lose all or part of their investment; the shares offer no guaranteed income and no capital protection; and an investment in the shares is compatible only with investors who do not need a guaranteed income or capital protection, who (either alone or in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom. The Target Market Assessment is without prejudice to the requirements of any contractual, legal or regulatory selling restrictions in relation to the Offer. Furthermore, it is noted that, notwithstanding the Target Market Assessment, the Sole Bookrunner will only procure investors who meet the criteria of professional clients and eligible counterparties.
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Senzime is a Swedish medical device company that develops and markets CE- and FDA-cleared monitoring systems for patients undergoing anesthesia. Senzime’s employees worldwide are committed to the vision of a world without anesthesia related complications. Six out of ten patients that wake up after surgery are not fully muscle recovered and therefor at risk having critical respiratory complications. The TetraGraph system helps anesthesia providers improve patient care and reduce healthcare costs by digitally and continuously measure the degree of neuromuscular blockade under and after surgery. Senzime operates in the worlds leading markets targeting a market opportunity valued in excess of SEK 15 billion per year. The company’s shares are listed on Nasdaq Stockholms main market (ticker SEZI). www.senzime.com
This information is information that Senzime is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out above, at 2022-06-01 17:30 CEST.