Nuwellis, Inc., a Delaware-based medical device company, has terminated its exclusive distribution and supply agreements with SeaStar Medical Holding Corporation, according to a recent SEC filing. The termination, effective as of Monday, October 20, 2024, concludes the company's role as the sole distributor of SeaStar's QUELIMMUNE™ product.
The initial distribution agreement between Nuwellis and SeaStar was established on December 27, 2022, alongside a subsequent supplier and distributor quality agreement on March 5, 2024. However, on May 20, 2024, SeaStar accused Nuwellis of breaching the distribution agreement, a claim Nuwellis contended was baseless.
To resolve the dispute without admitting any fault or liability, the two companies reached a confidential settlement. Under the terms of the settlement, SeaStar has agreed to pay Nuwellis $900,000 in three payments, with the final installment due by December 31, 2024.
Nuwellis, previously known as CHF Solutions and Sunshine Heart, specializes in electromedical and electrotherapeutic apparatus. The company's termination of its agreements with SeaStar marks a significant shift in its business operations. The details of the distribution agreement were previously reported in Nuwellis's 8-K filing on December 29, 2022.
In other recent news, Nuwellis, Inc. reported a 6% increase in revenue for the second quarter of 2024, totaling $2.2 million, primarily due to a 30% rise in the utilization of heart failure and critical care consumables. This increase was announced alongside the company's first commercial sale of QUELIMMUNE to Cincinnati Children's Hospital, a development expected to enhance pediatric critical care standards. Nuwellis also expanded its pediatric market reach by adding a new account, bringing the total to 41 pediatric accounts.
In financing developments, Nuwellis secured funding through a registered direct offering and concurrent private placement, selling 496,901 shares of common stock to certain institutional investors, with Ladenburg Thalmann & Co. Inc. serving as the exclusive placement agent. However, Nuwellis terminated its Supply and Collaboration Agreement with DaVita (NYSE:DVA) Inc., leading to the cessation of a Common Stock Purchase Warrant and a Registration Rights Agreement.
On the clinical front, a study published in Current Problems in Cardiology showed that Aquadex ultrafiltration therapy significantly reduced hospital readmission rates for patients with acutely decompensated heart failure (ADHF) resistant to diuretics. Nuwellis is currently conducting the REVERSE-HF trial, which aims to evaluate the clinical outcomes and economic value of Aquadex compared to intravenous loop diuretics in treating fluid overload in patients with worsening heart failure. Roth/MKM analysts maintain a Buy rating on the stock, despite lowering the price target to $16.00 from $17.00 due to the impact of a recent equity raise.
InvestingPro Insights
Recent InvestingPro data and tips provide additional context to Nuwellis's current financial situation following the termination of its distribution agreement with SeaStar Medical. The company's market cap stands at a modest $3.3 million, reflecting its small-cap status. Despite a significant return of 34.08% over the last month and 24.29% in the past week, Nuwellis faces substantial challenges.
InvestingPro Tips indicate that the company is "quickly burning through cash" and is "not profitable over the last twelve months." This aligns with the reported operating income of -$13.83 million for the last twelve months as of Q2 2024. The termination of the SeaStar agreement and the resulting $900,000 settlement may provide some short-term cash relief, but it's unlikely to significantly alter the company's financial trajectory.
The company's revenue for the last twelve months was $9.01 million, with a growth rate of 8.54%. However, the negative operating income margin of -153.38% underscores the company's profitability challenges. These figures contextualize the importance of the terminated distribution agreement and the potential impact on Nuwellis's future revenue streams.
For investors seeking a more comprehensive analysis, InvestingPro offers 14 additional tips for Nuwellis, providing a deeper understanding of the company's financial health and market position.
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