CryoLife preserves lives by conserving the tissues that sustain them. The company takes human heart valves and blood vessels from deceased volunteer donors, processes them, and stores them in liquid nitrogen freezers (a process called cryopreservation). It then ships them to surgeons nationwide, who implant them during cardiac and vascular repair procedures. For some preserved tissue, the company uses its proprietary SynerGraft technology, which reduces the presence of donor cells and makes the tissue more compatible with the recipient. CryoLife also develops implantable biomaterials, including BioGlue, an adhesive used to seal internal surgical wounds.
At the center of the company's product development efforts is its SynerGraft decellularization technology, which not only disinfects donated tissue but also removes some donor cells and aims to reduce the risk that a recipient's body will reject the implanted tissue. CryoLife's CryoValve SG pulmonary heart valve is its first human heart valve using the SynerGraft process. A second SynerGraft product is the CryoPatch human cardiac patch material. CryoLife is also keeping an eye on President Obama's Patient Protection and Affordable Care Act. The legislation imposes significant new taxes on medical device makers starting in 2013 that would cost the industry about $20 billion in additional taxes over a 10-year span. Such taxes would result in a significant increase in the tax burden on CryoLife and could have an adverse impact on its financial position, profitability, and cash flows.
CryoLife posted modest revenue gains of 3% in 2011 as compared to 2010 due to its preservation services and products. What spurred the growth was an increase in vascular preservation services sales partially offset by a decrease in revenue from cardiac preservation services. To CryoLife's benefit, its acquisition of Cardiogenesis in early 2011 helped to boost sales growth in revascularization technologies.
In recent years, CryoLife has been focused on expanding its cardiovascular market offerings through physician education efforts, the expansion of its network of donating tissue and organ procurement organizations, and the development of new products and technologies. As part of its strategy to zero in on cardiovascular products, CryoLife completed the phase out of its orthopedic tissue operations. CryoLife is repositioning its products portfolio with higher growth, higher margin medical devices for cardiac and vascular surgery.
CryoLife is also focused on developing the market for BioGlue and creating similar products using its underlying Protein Hydrogel Technology. To that end, the company conducts clinical trials in the US on BioFoam as a treatment for severe bleeding of the liver and spleen following transplant surgery. It already sells the product in some markets in Europe. It expanded its BioGlue market in 2010 after receiving Japanese approval to sell the product there for use in the repair of aortic dissections. Century Medical is CryoLife's distribution partner in Japan. BioGlue revenues account for about 40% of CryoLife's income, making the company quite reliant on BioGlue's sales for success. CryoLife is also selling PerClot in Europe through distributors as part of an agreement with SMI. CryoLife is seeking FDA approval to distribute PerClot in the US.
Mergers and Acquisitions
Along with developing new products, CryoLife has taken advantage of the poor economic conditions to acquire businesses at attractive prices from buyers looking to offload products with less-than-stellar sales. Through such buys CryoLife has increased its holdings for cardiac reconstruction, cold storage of internal organs such as kidneys, and entered into an agreement with development firm Medafor to distribute Medafor's clotting agent HemoStase in the US, the UK, Germany, and Canada. After sales of the product proved successful, CryoLife in 2010 made an unsolicited proposal to acquire Medafor. Medafor's board was unimpressed with CryoLife's offer and rejected the proposal. This caused their relationship to sour and Medafor eventually -- after some painful back and forth -- terminated its distribution agreement with CryoLife in 2011 after failed attempts to repartner, making it even more important to get its new products to market in a timely manner.
CryoLife is back in expansion mode, purchasing Cardiogenesis, a maker of laser and fiber-optic systems for cardiovascular surgery procedures aiming to improve circulation, for $22 million in 2011. Cardiogenesis' PHOENIX system, approved in Europe, is compatible with the delivery of biologics. CryoLife wants to expand sales of Cardiogenesis' products by utilizing its existing sales force and global distribution network targeting cardiac surgeons. In 2012 the company acquired privately-held medical device company Hemosphere, Inc., in a $17 million deal that adds Hemosphere's proprietary HeRO (Hemodialysis Reliable Outflow) graft-based solution for end-stage renal disease hemodialysis patients to its portfolio.
Headquartered in Florida with operations outside the US, CryoLife generates 80% of its revenue through its US efforts. – less