Nuwellis Ends Partnership with DaVita
Nuwellis, Inc (NASDAQ: NUWE), a medical device company based in Eden Prairie, Minnesota, announced on Thursday the immediate termination of its Supply and Collaboration Agreement with DaVita Inc. (NYSE: DVA). The termination was disclosed in an 8-K filing with the Securities and Exchange Commission (SEC). Furthermore, In a strategic move to bolster its financial position, Nuwellis has announced today a definitive securities purchase agreement with certain institutional investors. Following the announcement of ending the partnership agreement with DaVita, the stock of Nuwellis is trading lower on Friday.
Nuwellis and DaVita Termination Details
The agreement between Nuwellis and DaVita , originally established on June 19, 2023, ended on Wednesday as part of a mutual Termination Agreement. Alongside the termination of the supply and collaboration agreement, the cessation of a Common Stock Purchase Warrant and a Registration Rights Agreement was also included. Both agreements were initially dated from the start of their collaboration.
According to the SEC filing, the termination was mutual. It was noted that the conditions required for the warrant to vest were never fulfilled. As a result, no stock warrants were vested. Additionally, approval for Ultrafiltration Services, a key component of the agreement, was not achieved, meaning registration rights were never activated. All rented and unused products are to be returned to Nuwellis under the terms of the termination.
Background on the Nuwellis and DaVita Agreements
The original agreements with DaVita were intended to facilitate the supply of products and collaborative services between the two companies. However, the SEC filing did not provide specific reasons for the termination. The details of the DaVita Agreements were previously disclosed in Nuwellis’s Form 8-K filings on June 20, 2023, and June 6, 2024.
Nuwellis, which specializes in electromedical and electrotherapeutic apparatus, was incorporated in Delaware and is listed on the Nasdaq Capital Market. The company’s President and CEO, Nestor Jaramillo, Jr., signed the termination filing on behalf of Nuwellis.
New Securities Purchase Agreement Announced
The definitive securities purchase agreement involves the sale of 496,901 shares of the Nuwellis’ common stock at a price of $1.8450 per share. This registered direct offering, priced at-the-market under Nasdaq rules, aims to raise approximately $916,000 in gross proceeds.
The offering also includes a concurrent private placement, where Nuwellis will issue warrants to purchase an additional 496,901 shares of common stock. These warrants are priced at an exercise price of $1.72 per share and will become exercisable immediately upon issuance. They carry a term of five years from the date when the registration statement becomes effective.
Details of the Offering and Financial Impact
Ladenburg Thalmann & Co. Inc. is serving as the exclusive placement agent for these offerings. The closing of both the registered direct offering and the concurrent private placement is anticipated to occur on or about August 26, 2024, contingent upon the fulfillment of customary closing conditions.
The gross proceeds from these offerings are expected to significantly aid Nuwellis’s financial standing. After accounting for placement agent fees and other associated expenses, the net proceeds will be allocated toward working capital and general corporate purposes. This injection of funds comes at a crucial time for the company as it navigates the recent termination of its agreement with DaVita.
Strategic Financial Maneuvering Amid Market Volatility
This new securities purchase agreement reflects Nuwellis’s proactive approach to strengthening its financial foundation amidst market volatility and strategic changes. The company’s decision to engage in this direct offering and private placement highlights its commitment to maintaining financial flexibility and supporting ongoing operations.
The timing of this capital raise is particularly noteworthy given the recent developments concerning the terminated collaboration with DaVita. By securing additional funding, Nuwellis positions itself to better manage its liquidity needs and invest in potential growth opportunities despite the setback from the terminated partnership.
Impact on Stock Performance
By Friday, shares of Nuwellis were trading lower, reflecting investor concerns about the abrupt end of the partnership.
The stock has seen significant volatility over the past year, with a 52-week decline of 97.49%. The company’s beta, a measure of volatility, stands at 0.43, indicating lower price volatility than the market average.
Recent Financial Performance
In other news, Nuwellis reported a 6% increase in revenue for the second quarter of 2024, totaling $2.2 million compared to the same period last year. This growth was primarily driven by a 30% rise in the utilization of heart failure and critical care consumables. Despite this positive financial development, the termination of the agreement with DaVita has raised concerns among investors about the company’s future growth prospects.
Stock and Share Statistics
Nuwellis has faced a challenging year, with its stock price down by 97.49% over the last 52 weeks. The stock’s 50-day moving average is $3.85, while the 200-day moving average is significantly higher at $12.68. The Relative Strength Index (RSI), a momentum indicator, is currently at 26.46, suggesting that the stock is in oversold territory.
The company has 1.38 million shares outstanding, a figure that has increased by 785.46% year-over-year. The share count has also risen by 128.10% quarter-over-quarter. Despite this significant increase in shares, only 0.01% is owned by insiders, and 3.03% is held by institutional investors. The company’s entire float is composed of 1.38 million shares.
Uncertain Outlook Following Partnership Termination
The termination of the partnership with DaVita marks a significant development for Nuwellis, casting uncertainty over its future. While the company has reported a modest increase in revenue for the second quarter of 2024, the abrupt end of the collaboration raises questions about its strategy moving forward.
Investors are likely to remain cautious as they assess the implications of the terminated agreement on Nuwellis’s business operations and financial performance.
Looking forward, Nuwellis must leverage this new capital effectively to drive growth and stabilize its market position. The funds raised through this agreement are expected to provide the necessary runway for the company to explore new initiatives, enhance product development, and potentially seek new partnerships to replace the terminated DaVita agreement.
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