Israel’s CartiHeal, a developer of implants for the treatment of cartilage and osteochondral defects in the knee, has inked an agreement to be acquired by British medical device maker Smith & Nephew, in a deal worth up to $330 million.
Under the terms of the deal, Smith & Nephew will pay CartiHeal shareholders an initial $180 million, and up to another $150 million contingent on the sales performance of the company’s knee cartilage repair implant. The transaction is expected to close in the first quarter of 2024.
The deal comes after Bioventus, a leading US orthobiologics firm, in April pulled out of an offer to buy CartiHeal for up to $500 million based on sales milestones. The timing is also sensitive as Israel is at war with the Hamas terror group, making it more difficult for local startups and enterprises in general and biotech companies in particular to attract investment and close acquisitions.
Founded in 2009 by Nir Altshuler as a spin-out from the Ben-Gurion University of the Negev, CartiHeal has developed what it believes is a solution for the regeneration of damaged knee cartilage with or without mild to moderate knee osteoarthritis.
Its Agili-C implant, made of a form of calcium carbonite called aragonite, received breakthrough device designation by the US Food and Drug Administration in 2020 and then was approved in 2022 for surface lesions in both arthritic and non-arthritic knee joints. In July, CartiHeal announced its first commercial implantation of Agili-C in the US.
Knee pain is a common complaint that affects people of all ages. It can result from an injury, such as a torn ligament or cartilage, or from medical conditions. Osteoarthritis is one of the most common degenerative joint diseases, affecting one in five women aged 50 and over and almost one in 20 men aged 50 and over, according to the Centers for Disease Control and Prevention. Treatments for knee pain include physical therapy and knee braces, but surgical procedures may also be required.
For CartiHeal’s Agili-C, surgeons drill out the affected area of both cartilage and bone in a minimally invasive procedure, making sure to get to the bone marrow and the stem cells within the treated area. They then insert a cylindrical scaffold that fits into the opening like a plug.
Made of aragonite, the implant is modified by CartiHeal’s patented technology so that it can interact with the implantation site. Cartilage and bone cells adhere to the implant, while at the same time gradually degrading the calcium from the scaffold. Eventually, the implant is almost fully degraded as bone and cartilage regrow.
“The acquisition of this disruptive technology supports our strategy to invest behind our successful Sports Medicine business,” said Smith & Nephew CEO Deepak Nath. “Agili-C’s superior clinical performance makes it highly complementary to our existing knee repair portfolio and with our proven commercial expertise in high-growth biologics, we are confident that we will drive further success with this compelling treatment option.”
Smith & Nephew, which generated annual sales of $5.2 billion in 2022, said that the implant solution can treat a “wide patient population, including those with lesions in knees with mild to moderate osteoarthritis, a currently unaddressed condition, as well as the approximate 700,000 patients that receive cartilage repair annually in the US.”
CartiHeal operates from Kfar Saba, and has a sales office in New Jersey, US. Its investors include Elron Electronic Industries, the Accelmed investment firm, Access Medical Ventures, Peregrine Ventures, and the aMoon Fund of Marius Nacht and Dr. Yair Schindel.
“Smith & Nephew, as a leader in sports medicine and with a deep knowledge of biologics, is the ideal new home for Agili-C,” said CartiHeal CEO Altschuler. “We are excited at the prospect of our technology helping many more patients overcome knee pain.”