The collapse last week of Silicon Valley Bank, a storied lender and financier of startups including some medtech companies, appears to have had a minimal effect on established firms in the sector, according to a survey by analysts at two banks that cover the device industry, and a review of filings with the U.S. Securities and Exchange Commission.
President Joe Biden assured depositors in SVB and another bank shuttered last week, Signature Bank in New York, that all their deposits would be made available.
“Overall, our covered companies appear to have minimal exposure, if at all to SVB,” wrote New York-based RBC Capital Markets analyst Shagun Singh.
That sentiment was echoed by Ryan Daniels, who leads a team of healthcare analysts at William Blair Equity Research in Chicago. While several healthcare and medtech companies the firm covers have credit lines with SVB, “we do not view that as a major issue,” Daniels wrote.
“Management teams with whom we spoke all indicated they have already been approached with offers for new lines of credit from a number of different banks – so we do not believe there is much risk here (other than financing costs to establish a new loan and/or potentially higher rates given the current rate environment),” he added.
In a filing with the SEC, iRhythm, the maker of the Zio cardiac monitors, said that while it has financial ties to the failed bank, it doesn't believe they will affect its operations, and noted that it has a $35 million term loan outstanding with SVB.
“Under the terms of the term loan agreement, this term loan is not callable by SVB outside of an event of default. The Company also has a further undrawn $40 million available under its term loan facility and $25 million under a revolving credit line upon which the Company is not reliant for daily operations,” iRhythm wrote in the filing.
“The Company affirms its expectation that its cash, cash equivalents, and short-term investments held outside of SVB will be sufficient to operate the Company’s business and meet its cash requirements for the foreseeable future,” iRhythm added.
William Blair’s Daniels noted there could still be knock-on effects from SVB’s failure in the next few weeks, including:
- Whether medtech firms have customers (and outstanding receivables) that will be impacted by SVB’s failure, including access to bridge loans and other operational financing.
- Whether startups that are still dependent on private equity or venture capital investors may have lost access to cash needed to keep their portfolio companies afloat, although this could open up some opportunities to acquire these startups.
Analysts Marie Thibault and Ryan Zimmerman at BTIG, an investment bank and research firm, offered a list of covered companies and their exposure to the failed California bank:
- iRhythm Technologies: Five-year loan agreement with SVB expiring March 2027. Includes a term loan of up to $75 million and revolving credit facility of up to $25 million. As of Dec. 31, 2022, iRhythm had $35 million in outstanding debt under the term loan, nothing outstanding under the revolving credit line. The company had cash equivalents and short-term investments of about $213 million.
- AtriCure: Five-year loan agreement with SVB expiring November 2026. Includes a term loan of $60 million with an option to make available an additional $30 million in term loan borrowings, and a $30 million revolving line of credit. According to management, most of the firm’s cash and investments are held in custody outside SVB.
- ViewRay: Five-year loan facility agreement with [Bethesda, Maryland-based lender] MidCap Financial and SVB expiring November 2027, that includes a term loan of up to $100 million and a revolving credit facility of up to $25 million.
- Treace Medical Concepts: In April 2022, Treace borrowed $50 million under a term loan with MidCap Financial and $4 million under a revolving loan facility. The term loan proceeds were used to repay a term loan obligation and an early termination fee to SVB amounting to $34 million, including principal of $30 million, interest of $0.4 million and fees of $3.7 million.
- Vericel: On Aug. 27, 2021, Vericel entered into an agreement where SVB Leerink would act as a placement agent to sell $200 million in common stock. SVB Leerink is not required to sell a specified number of shares and as of Dec. 31, 2022, Vericel has sold no shares in relation to this agreement. Vericel has $51.1 million in cash and cash equivalents on the balance sheet.
- Organogenesis has a term loan facility with SVB and other lenders of up to $75 million and a revolving credit facility of up to $125M, this agreement was finalized in August 2021. Organogenesis currently has $71.25 million in outstanding term loans owed.
- Humacyte: In March 2021, Humacyte entered into a $50 million term loan agreement with SVB with a maturity date of March 1, 2025. As of Feb. 28, 2022, Humacyte has borrowed $30 million of principal from the loan agreement and has issued SVB warrants to purchase 123,302 of Humacyte common stock as collateral for the loan agreement.
- Lensar: On April 8, 2021, SVB Leerink acted as sales agent for Lensar’s $35 million common stock issuance. Lensar has $19.3 million in cash and cash equivalents on the balance sheet.
