Acutus Medical is planning to cut a majority of its jobs as it narrows its focus to only the most potentially profitable pursuits.
For the cardiac device maker, that means shifting away from production of its electrophysiology mapping and ablation tools to direct all its energy toward an ongoing deal with Medtronic.
“In light of the current financing environment and the capital investments required to achieve leadership in the electrophysiology market, we have concluded that the optimal use of the company’s resources is to reallocate capital from our mapping and ablation business to the manufacturing of left-heart access products for Medtronic, which we believe will maximize the potential for future earnouts and cash flow,” Acutus Chairman Scott Huennekens said in a Wednesday announcement.
As Acutus winds down its other businesses, it’ll continue to support procedures using its AcQMap cardiac mapping system through the end of this month.
Acutus linked up with Medtronic in early 2022—following another round of cost-cutting layoffs—when the medtech giant agreed to take charge of Acutus’ portfolio of catheters and related accessories that are used in procedures centering on the left side of the heart. Medtronic paid $50 million upfront for the acquisition, with another $37 million set to be doled out as Acutus hits predetermined manufacturing and regulatory milestones.
Plus, as of Jan. 30 this year, Acutus is eligible to rake in additional payouts based on sales of the left-heart access products, earning 100% of total net end-user sales in the first year, 75% in the second and 50% in the third and fourth years of the deal.
As Acutus narrows its portfolio to focus only on manufacturing and distributing those products for Medtronic, with an aim of collecting all possible earnout payments, a broad swath of roles associated with the phased-out departments are now on the chopping block.
All together, approximately 65% of Acutus’ employees will be let go, according to the announcement. As of the end of 2022, per the company’s most recent annual report, it employed 225 full-time workers, meaning the layoffs could impact around 150 people.
“The realignment of resources and corporate restructuring unfortunately impacts our team. It is undoubtedly difficult to part with our valued and highly talented colleagues who have made substantial contributions to our company. I want to thank each one of them for their dedication to Acutus and our mission,” said CEO David Roman.
The restructuring is expected to be completed in the first quarter of 2024, at which time Acutus will emerge as a contract manufacturing business, with all revenues stemming from the Medtronic deal. The company said the changes will “meaningfully reduce cash burn as well as ongoing operating expenses.”
In third-quarter financial results also released Wednesday, Acutus reported total operating expenses of more than $38.6 million for the first nine months of the year, up from the about $32 million it had racked up by the same point last year. Its year-to-date net loss clocked in at just under $47.9 million, an improvement on the prior year’s $54.7 million, thanks to a 29% year-over-year increase in revenue during the nine-month period.
By the end of September, Acutus held about $31.1 million in cash and cash equivalents, a slight decrease from the $32.2 million it had on hand the year before. Its total assets, meanwhile, weighed in at $84.7 million, about a 36% drop from the $133.4 million it held in assets at the end of 2022.