Medtronic on Tuesday announced a new partnership with CathWorks, establishing the framework for a $585 million acquisition of the digital health company.
Medtronic invests in Israel-based company as precursor to acquisition
The medtech giant, operationally based in Minnesota, sets up a potential half-a-billion purchase of CathWorks, a digital health company.
July 12, 2022 at 8:28PM
The structure of the partnership is unique, with Medtronic agreeing to invest up to $75 million in the Israel-based company while the company works to achieve certain milestones outlined by Medtronic.
Medtronic will then have the option, for five years, to buy CathWorks — an acquisition the companies estimate would top out at $585 million.
But, if Medtronic has not exercised its option by July 2027, CathWorks has "the right to compel Medtronic to acquire the company."
Under the news partnership, Medtronic will co-promote CathWorks' technology in the U.S., Europe and Japan where it is commercially available.
Medtronic spokesperson Lauren Mueller acknowledged the uncommon structure of the deal, but said that Medtronic has "confidence in the technology" and the deal offers "value-creating milestones."
Medtronic can't buy CathWorks until it meets these undisclosed milestones.
"The deal is structured with milestone-based call and put options rather than an acquisition upfront. This structure allows Medtronic to call the acquisition option first, aligns our interest with the current owners, and allows the technology to continue to be developed by the highly motivated team at CathWorks," Mueller said.
CathWorks is developing technology for the diagnosis and treatment of coronary artery disease. Its FFRangio system uses a diagnostic technique called fractional flow reserve to apply artificial intelligence to routine angiograms. The purpose is to monitor for coronary artery stenosis, which is the obstruction of blood flow through the arteries.
The FFRangio system received FDA clearance in December 2018.
Medtronic has owned a 4.5% minority stake in CathWorks since 2018.
CathWorks is based in Kefar Sava, Israel. In January 2021, CathWorks announced raising $30 million in its Series D financing round. CathWorks has approximately 75 fulltime employees.
"CathWorks has been looking for the right partner to help us expand the reach of the FFRangio system globally," Ramin Mousavi, chief executive of CathWorks, said in a statement. "I am excited about the possibilities ahead as we partner with Medtronic to expand the use of our technology to the U.S., Japan and Europe."
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