Lensar, the Orlando-based developer of surgical ultrafast laser systems for cataract treatment, has filed for Chapter 11 bankruptcy protection.
The company was acquired almost exactly a year ago by “social commerce” business Alphaeon, in a debt, cash and stock deal valued at around $59 million.
Lensar says that, coupled with a restructuring, the bankruptcy filing will allow it to cut its debt levels – and notes that PDL Biopharma, its senior secured creditor, supports the decision.
High-interest loan deal
PDL Biopharma agreed a loan deal worth up to $60 million with Lensar back in 2013, part of a wider investment at the time that included $27 million in new venture capital. However, the terms of the PDL loan had appeared punitive, with 15.5 per cent in annual interest charged on the initial $40 million tranche of the loan to Lensar.
The additional $20 million tranche was never loaned, and when Alphaeon acquired Lensar last year, the terms of the credit agreement were amended to give PDL a “first lien” security interest in Lensar’s equity and assets.
Unsurprisingly, by the end of September 2016 Lensar was deemed to be out of compliance with the interest payments, and in its latest quarterly filing PDL said it was “exploring its options” with Lensar and Alphaeon.
Now, Lensar says that it expects PDL to support converting a portion of the outstanding debt into more equity, and that its operations will continue as normal throughout the Chapter 11 reorganization.
“With financial support from PDL, [Lensar] intends to continue to pay all employee obligations, including employee wages, provide healthcare and other benefits, and all current operating expenses without interruption,” stated the company.
Corporate video: Lensar's femtosecond laser cataract procedure:
Tough competition
Lensar is one of a handful of heavily financed companies targeting what is expected to become a huge market for ultrashort-pulsed laser procedures in cataract surgery as the global population ages. However, early peers such as LensX Lasers, OptiMedica and Technolas Perfect Vision were able to attract more venture funding and subsequently secure high-value exits with sales to healthcare giants Alcon Laboratories, Abbott, and Bausch + Lomb respectively.
Lensar has always maintained that its system is the only one to have been designed specifically for refractive cataract surgery, providing customized treatment thanks to a fast 3D imager that reconstructs the anterior segment of each eye operated on. The latest “Streamline II” version of the technology provides surgeons with additional automation.
Despite the tough competition, Lensar’s CEO Nicholas Curtis insists that there is room for Lensar’s product in the market, saying in a statement that announced the bankruptcy filing: “Given the ageing population globally, with more than 22 million cataracts treated annually, I am very optimistic about the future of our refractive cataract surgery and the opportunity to work with PDL.”
With the Chapter 11 case expected to conclude in the second quarter of 2017, and PDL’s unmanageable loan deal at least partly converted into equity, Lensar says that its “reorganized, de-leveraged” setup will allow it to continue working with its vendors, suppliers and partners as normal during and after the bankruptcy process.
