ICU MEDICAL, INC. The following information should be read in conjunction with the condensed consolidated financial statements and accompanying notes in this Form 10-Q, as well as the audited consolidated financial statements and related notes for the fiscal year endedDecember 31, 2020 included in our Annual Report on Form 10-K.
When used in this report, the terms "we," "us," and "our" refer to
Business Overview
We are one of the world's leading pure-play infusion therapy companies with global operations and a wide-ranging product portfolio that includes IV solutions, IV smart pumps with pain management and safety software technology, dedicated and non-dedicated IV sets and needlefree connectors designed to help meet clinical, safety and workflow goals. In addition, we manufacture automated pharmacy IV compounding systems with workflow technology, closed systems transfer devices for preparing and administering hazardous IV drugs, and cardiac monitoring systems for critically ill patients. Our primary customers are acute care hospitals, wholesalers, ambulatory clinics and alternate site facilities, such as clinics, home health care providers and long-term care facilities. We sell our products in more than 90 countries throughout the world.
We categorize our products into four main product lines: Infusion Consumables, Infusion Systems, IV Solutions and Critical Care. We have presented our financial results in accordance with these product lines, with our primary products in each line listed below.
Definitive Agreement to Purchase Smiths Medical 2020 Limited
InSeptember 2021 , we entered into a Share Sale and Purchase Agreement (the "Purchase Agreement") withSmiths Medical 2020 Limited ("Smiths"), the holding company of Smiths Group plc's global medical device business. We will purchase the entire issued share capital ofSmiths Medical 2020 Limited for approximately$1.9 billion in cash, a potential contingent earn-out of$100.0 million and the issuance of 2.5 million fully paid and non-assessable shares of our common stock, par value$0.10 per share. In connection with entering into the Purchase Agreement, inSeptember 2021 , we entered into a debt commitment letter withWells Fargo Bank, National Association ,Wells Fargo Securities, LLC and Barclays Bank PLC (the "Committed Parties"), pursuant to which, among other things, the Committed Parties will provide to us, at or near closing of the transaction, with senior secured credit facilities of up to$2.0 billion consisting of a term loan A facility of$850.0 million , a term loan B facility of$850.0 million and a revolving credit facility of$300.0 million . InOctober 2021 , the debt commitment related to the term loan A and revolving credit facility was syndicated to a broader group of Committed Parties. As part of the syndication process, the size of the revolving credit facility was increased from$300.0 million to$500.0 million . Operations Overview COVID-19 The novel coronavirus and its variants ("COVID-19") continues to have an impact on our business operations. Our manufacturing, distribution and pump service facilities continue to operate under our business continuity plan and our precautionary safety measures implemented to maximize the safety of our employees and mitigate disruption of our business are still in effect. For greater detail on the above mentioned safety measures and a discussion of how future results may potentially be impacted by COVID-19 see Part II, Item 7, of our 2020 Annual Report on Form 10-K. While we continually monitor the ongoing and evolving impact of the effect of the COVID-19 pandemic on our operations the overall impact will not be fully reflected in our results of operations until future periods. The duration and extent of the impact from the COVID-19 pandemic depends on future developments that cannot be fully predicted at this time, as such, the impact of the pandemic on our overall financial performance remain uncertain and cannot as yet be quantified. Infusion Consumables 29
-------------------------------------------------------------------------------- Table of Contents Infusion therapy sets, used in hospitals and ambulatory clinics, consist of a tube running from a bottle or plastic bag containing a solution to a catheter inserted in a patient's vein, that may or may not be used with an IV pump. Our primary Infusion Consumable products are: •Clave™ needlefree products, including the MicroClave, MicroClave Clear, and NanoClave™ brand of connectors, accessories, extension and administration sets used for the administration of IV fluids and medications and the Neutron catheter patency device, used to help maintain patency of central venous catheters;
•SwabCap disinfecting cap, used to protect and disinfect any needlefree connector, including competitive brands of connectors;
•ClearGuard HD antimicrobial barrier caps for hemodialysis catheters; and
•TegoTM hemodialysis connector used to cap and protect hemodialysis central venous catheter hubs;
Closed System Transfer Devices ("CSTD") and hazardous drug compounding systems
are used to prepare and deliver hazardous IV medications such as those used in
chemotherapy, which, if released, can have harmful effects on the healthcare
worker and environment. Our products are:
•ChemoLockTM CSTD which utilizes a proprietary needlefree connection method, is
used for the preparation and administration of hazardous drugs. ChemoLock is
used to limit the escape of hazardous drug or vapor concentrations, block the
transfer of environmental contaminants into the system, and eliminates the risk
of needlestick injury;
•ChemoClaveTM, an ISO Connection standard and universally compatible CSTD used
for the preparation and administration of hazardous drugs. ChemoClave utilizes
standard ISO luer locking connections, making it compatible with all brands of
needlefree connectors and pump delivery systems. ChemoClave also is used to
limit the escape of hazardous drug or vapor concentrations, block the transfer
of environmental contaminants into the system, and eliminate the risk of
needlestick injury; and
•DianaTM hazardous drug compounding system, an automated sterile compounding
system that incorporates ChemoClave and ChemoLock CSTD consumables and IV
workflow technology for the accurate, safe, and efficient preparation of
hazardous drugs. It is a user-controlled automated system that provides
repeatable accuracy of drug mixes and minimizes clinician exposure to hazardous
drugs while helping to maintain the sterility of the drugs being mixed.
The preparation of hazardous drugs typically takes place in a pharmacy where
drugs are removed from vials and prepared for delivery to a patient. Those
prepared drugs are then transferred to a nursing unit where the chemotherapy is
administered via an infusion pump set to a patient. Components of the ChemoClave
and ChemoLock product lines are used both in pharmacies and on the nursing
floors for the preparation and administration of hazardous drugs.
Infusion Systems
We offer a wide range of infusion pumps, dedicated IV sets and software. Our primary Infusion System products are dedicated IV sets and the following:
Infusion Pump Hardware:
•Plum 360™: The Plum 360™ infusion pump is an ICU Medical MedNet™ ready large volume infusion pump with an extensive drug library and wireless capability. Plum 360 was named the 2018, 2019 and 2020 Best in KLAS winner as top-performing IV smart pump and is the first medical device to be awarded UL Cybersecurity Assurance Program Certification. Also, in 2021, the Plum360 won the first ever award as the top-performing Smart Pump EMR-Integrated; and
•LifeCare PCA™: The LifeCare PCA infusion pump is an ICU Medical MedNet™ ready patient-controlled analgesia pump ("PCA"), providing complete IV-EHR interoperability since 2016.
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Table of Contents
•ICU Medical MedNet™: ICU Medical MedNet is an enterprise-class medication
management platform for any sized healthcare system that can help reduce
medication errors, improve quality of care, streamline workflows and maximize
revenue capture. ICU Medical MedNet connects our industry-leading smart pumps to
a hospital's Electronic Health Records ("EHR"), asset tracking systems, and
alarm notification platforms with the largest array of integration partners.
Professional Services:
•In addition to the products above, our teams of clinical, information technology, and professional services experts work with customers to develop and deliver safe and efficient infusion systems, providing customized and personalized configuration, implementation, and data analytics services to complement our infusion hardware and software.
IV Solutions
We provide a broad portfolio of IV solutions to meet our customers' clinical needs, providing a consistent supply of IV solutions, irrigation, and nutritionals to help provide safe and effective patient care. Our primary IV Solutions products are: IV Therapy and Diluents:
•Including Sodium Chloride, Dextrose, Balanced Electrolyte Solutions, Lactated Ringer's, Ringer's, Mannitol, Sodium Chloride/Dextrose and Sterile Water.
Irrigation:
•Including Sodium Chloride Irrigation, Sterile Water Irrigation, Physiologic Solutions, Ringer's Irrigation, Acetic Acid Irrigation, Glycine Irrigation, Sorbitol-Mannitol Irrigation, Flexible Containers and Pour Bottle Options.
Critical Care
Our Critical Care products help clinicians get accurate real-time access to patients' hemodynamic and cardiac status with an extensive portfolio of monitoring systems and advanced sensors & catheters. Measurements provided by our systems help clinicians determine how well the heart is pumping blood and how efficiently oxygen from the blood is being used by the tissues. Our primary Critical Care products are: •Cogent™ 2-in-1 hemodynamic monitoring system; •CardioFlo™ hemodynamic monitoring system; •TDQ™ and OptiQ™ cardiac output monitoring catheters; •TriOxTM venous oximetry catheters; •Transpac™ blood pressure transducers; and •SafeSet™ closed blood sampling and conservation system.
The following table summarizes our total worldwide revenue by domestic and international markets by amount and as a percentage of total revenue (in millions, except percentages):
Three months ended Nine months ended
September 30, September 30,
2021 2020 2021 2020
$ % of Revenue $ % of Revenue $ % of Revenue
$ % of Revenue
Domestic $ 245.3 73 % $ 237.4 75 % $ 697.3 71 % $ 675.8 71 %
International 90.8 27 % 81.2 25 % 278.5 29 % 274.8 29 %
Total Revenue $ 336.1 100 % $ 318.6 100 % $ 975.8 100 % $ 950.6 100 %
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Table of Contents The following table sets forth, for the periods indicated, total revenue by product line as a percentage of total revenue:
Three months ended Nine months ended
September 30, September 30,
Product line 2021 2020 2021 2020
Infusion Consumables 43 % 36 % 42 % 37 %
Infusion Systems 27 % 28 % 27 % 28 %
IV Solutions 27 % 32 % 28 % 31 %
Critical Care 3 % 4 % 3 % 4 %
100 % 100 % 100 % 100 %
We manage our product distribution in the U.S. through a network of two owned
and one leased distribution facilities in combination with independent
distributors and third-party fulfillment and logistics providers. Our end
customers, which include healthcare providers and original equipment
manufacturer suppliers, may order and receive our products directly from us or
through an independent full-line distributor. Internationally, we manage
distribution utilizing international regional hubs and through independent
distributors.
In the U.S. a substantial amount of our products are sold to group purchasing
organization member hospitals. We believe that as healthcare providers continue
to either consolidate or join major buying organizations, the success of our
products will depend, in part, on our ability, either independently or through
strategic relationships to secure long-term contracts with large healthcare
providers and major buying organizations. Although we believe that we are not
dependent on any single distributor, large healthcare provider or major buying
organization for distribution of our products, the loss of a strategic
relationship with any one of these organizations or a decline in the demand for
our products could have a material adverse effect on our operating results.
We believe that achievement of our growth objectives worldwide will require
increased efforts by us in sales and marketing and product acquisition and
development; however, there is no assurance that we will be successful in
implementing our growth strategy. Product development or acquisition efforts may
not succeed, and even if we do develop or acquire additional products, there is
no assurance that we will achieve profitable sales of such products. Increased
expenditures for sales and marketing and product acquisition and development may
not yield desired results when expected, or at all. While we have taken steps to
control these risks, there are certain risks that may be outside of our control,
and there is no assurance that steps we have taken will succeed.
Seasonality/Quarterly Results
There are no significant seasonal aspects to our business. We may experience fluctuations in net sales as a result of variations in the ordering patterns of our largest customers, which may be driven more by production scheduling and their inventory levels, rather than by seasonality. Our expenses often do not fluctuate in the same manner as net sales, which may cause fluctuations in operating income that are disproportionate to fluctuations in our revenue.
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