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The terms of the agreement call for a stock-for-stock merger transactionresulting in Galil Medical becoming a wholly-owned subsidiary of Endocare, andwould provide current Endocare stockholders 52%, and current Galilstockholders 48%, of the outstanding stock of the combined company. Thecombination of Galil and Endocare will form a company with pro forma combinedrevenues and gross profit in the twelve months ended September 30, 2008 ofapproximately $55.6 million and $39.1 million (70.3% of revenues),respectively.
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The new management team will be composed of executives of both companiesand will be led by Martin J. Emerson, Galil Medical's President and ChiefExecutive Officer, and Michael R. Rodriguez, Endocare's Chief FinancialOfficer.
Emerson commented, "As a combined company, Endocare and Galil will bebetter positioned to advance the acceptance and growth of cryoablation as animportant treatment for cancerous and non-cancerous tumors including prostatecancer and kidney tumors. Data now available, using the latest generation oftechnologies, demonstrate that cryoablation, a non-surgical treatment thatoften requires no hospital stay, can be just as effective as more invasive,more costly, and more time-consuming options such as radiation and surgery."
The merger and related transactions are expected to create significantclinical and operational advantages for the combined company, allowing it toaccelerate technological innovation and promote the growing recognition ofcryoablation in the global healthcare marketplace. The combined company willbe able to more efficiently promote cryoablation as a safe and effectivetreatment for a variety of cancers including prostate cancer, the mostcommonly diagnosed cancer among men. In the U.S. alone, more than 186,000 menare diagnosed with prostate cancer annually according to American CancerSociety estimates.
Emerson continued, "This merger allows the two companies to come togetheras one to combine the very best in cryoablation technologies, and to jointlydemonstrate the clinical and economic advantages cryoablation has overradiation, radical prostatectomy and IMRT in the treatment of prostate canceras well as in other oncology treatments where cryoablation has application.The company will be much stronger financially following the combination and ina much better position to deliver the promise that cryoablation offers tophysicians and patients all over the world."
Rodriguez commented, "This combination has the potential to eliminatemillions of dollars in redundant costs and we believe that annualized costsavings of over $10 million could be realized by mid-2010. We expect thatthis transaction will result in positive adjusted EBITDA within 18 monthsafter the close of the transaction."
Terms of the Merger
The terms of the definitive merger agreement call for a stock-for-stockmerger transaction and a concurrent private placement of approximately16.25 million newly issued shares of Endocare common stock. Upon thecompletion of the merger and financing transactions, the pro forma number ofshares of common stock outstanding will be approximately 39.0 million. Theexchange ratio in the merger gives the current Endocare stockholders 52percent of the post-merger stock and Galil stockholders 48 percent, prior tothe financing transaction. The combined company is expected to have anine-member board of directors consisting of four current Endocare directors,four current Galil directors and one new independent director. Thetransaction is subject to a vote of the stockholders of Endocare and Galil, aswell as customary regulatory approvals. The transaction is expected to closein the first quarter of 2009.
Additional information regarding the merger terms are set forth in theCompany's current report on Form 8-K regarding the transactions that will befiled with the SEC, which should be reviewed carefully in conjunction withthis press release.
Financing Transaction
Endocare also announced that upon the closing of the merger it will sell$16.25 million of newly issued shares of its common stock in a privateplacement, priced at $1.00 per share, to certain current institutionalinvestors of Endocare and Galil.
Conference Call and Slides Information
The management teams of Endocare and Galil Medical will participate in ajoint conference call on November 11 at 1:30 p.m. Eastern Time to discuss thetransaction and answer related transactions. Slides will be used during thiscall. To listen to the conference call live via telephone, please dial1-877-356-3962 from the U.S. or, for international callers, please dial+1-706-634-5888, approximately 10 minutes before the start time. In order toaccess the slides that will be used on the call, click on the link provided onEndocare's website (http://ir.endocare.com/events.cfm) to listen to the event,register and select the "No Audio, Slides Only" option. To listen to theconference call live via the Internet, visit Endocare's website(http://ir.endocare.com/events.cfm). Please go to the website 15 minutesprior to the call to register, download and install the necessary audiosoftware. An audio archive of the webcast will be available for one year onthe Investors section of the Endocare website.
Third Quarter 2008 Financial Results
In addition, Endocare today issued an earnings release announcing ThirdQuarter 2008 financial results.
Use of Non-GAAP Financial Measures
The Company uses, this press release contains and the related conferencecall will include the non-GAAP metric of adjusted EBITDA. The calculation ofadjusted EBITDA (earnings before interest, taxes, depreciation andamortization, and also excluding FASB 123R non-cash stock compensationexpense, collectively "adjusted EBITDA") has no basis in GAAP. The Company'smanagement believes that this non-GAAP financial measure provides usefulinformation to investors, permitting a better evaluation of the Company'songoing and underlying business performance, including the evaluation of itsperformance against its competitors in the healthcare industry. Managementuses this non-GAAP financial measure for purposes of its internal projectionsand to evaluate the Company's financial performance.
Non-GAAP financial measures should not be considered in isolation from, oras a substitute for, financial information presented in conformity with GAAP,and non-GAAP financial measures as reported by the Company may not becomparable to similarly titled amounts reported by other companies.
About Endocare
Endocare, Inc. -- http://www.endocare.com -- is an innovative medicaldevice company focused on the development of minimally invasive technologiesfor tissue and tumor ablation. Endocare has initially concentrated ondeveloping technologies for the treatment of prostate cancer and believes thatits proprietary technologies have broad applications across a number ofmarkets, including the ablation of tumors in the kidney, lung and liver andpalliative intervention (treatment of pain associated with metastases).
About Galil Medical
Galil Medical is a global medical device company that develops,manufactures and markets innovative products utilizing a proprietarycryoablation platform that incorporates powerful freezing technology andrevolutionary 17-gauge cryoablation needle design. The company has offices inYokneam, Israel; Plymouth Meeting, Pennsylvania; and London. Shareholdersinclude Thomas, McNerney & Partners, The Vertical Group, Investor GrowthCapital, Elron Electronic Industries Ltd. (NASDAQ: ELRN) and RDC RafaelDevelopment Corporation, Ltd.
Oppenheimer & Co. Inc. is acting as Endocare's financial advisor inconnection with the merger and placement agent in connection with the privateplacement for Endocare. Piper Jaffray & Co. acted as financial advisor toGalil. Gibson, Dunn & Crutcher LLP acted as legal advisor to Endocare, andArnold & Porter LLP acted as legal advisor to Galil.
IMPORTANT DISCLAIMERS
The common stock offered in the private placement will not be and has notbeen registered under the Securities Act of 1933, as amended, and may not beoffered or sold in the United States absent registration or an applicableexemption from the registration requirements of the Securities Act. Thispress release shall not constitute an offer to sell or the solicitation of anoffer to buy, nor shall there be any sale of the common stock in any state inwhich such offer, solicitation or sale would be unlawful prior to registrationor qualification under the securities laws of any such state.
Certain matters set forth in this press release, including statementsrelating to the merger, such as efficiencies, cost savings, adjusted EBITDA,earnings, the timing of such cost savings adjusted EBITDA and earnings, growthpotential, market profile and financial strength, the anticipated amount ofthe proposed concurrent financing, the anticipated closing of thetransactions, and the competitive ability and position of the combinedcompany, and other statements identified by words such as "estimates,""expects," "projects," "plans," and similar expressions are forward-lookingstatements within the meaning of the safe harbor provisions of the PrivateSecurities Litigation Reform Act of 1995. These forward-looking statementsare subject to risks and uncertainties that may cause actual results to differmaterially, including failure to receive approval of the transaction byEndocare or Galil stockholders, the possibility that the anticipated benefitsfrom the merger cannot be fully realized, if at all, or may take longer torealize than expected, the possibility that costs or difficulties related tothe integration of Galil's operations into Endocare will be greater thanexpected, the ability of the combined company to retain and hire keypersonnel, the impact of regulatory, competitive and technological changes andother risk factors relating to our industry, including those detailed fromtime to time in Endocare's reports filed with the SEC. There can be noassurance that the proposed merger and financing will in fact be consummated.You should not place undue reliance on these forward-looking statements, whichspeak only as of the date of this presentation. Unless required by law,Endocare undertakes no obligation to update any forward-looking statements,whether as a result of new information, future events or otherwise.
IMPORTANT ADDITIONAL INFORMATION WILL BE FILED WITH THE SEC
In connection with the proposed merger with Galil Medical, Ltd. ("Galil"),Endocare, Inc. ("Endocare") intends to file a registration statement on FormS-4 (the "Registration Statement"), which will also include a proxy statementof Endocare, and other relevant documents concerning the transaction with theU.S. Securities and Exchange Commission (the "SEC"). STOCKHOLDERS OF ENDOCAREARE URGED TO READ THE REGISTRATION STATEMENT AND ANY OTHER RELEVANT DOCUMENTSFILED WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAINIMPORTANT INFORMATION ABOUT THE TRANSACTION.
Investors will be able to obtain free copies of the Registration Statementand other documents filed with the SEC by Endocare through the web sitemaintained by the SEC at http://www.sec.gov. Free copies of the RegistrationStatement, when available, and Endocare's other filings with the SEC may alsobe obtained from Endocare by making a request to Allen & Caron at(949) 474-4300. In addition, investors may access copies of the documentsfiled with the SEC by Endocare on Endocare's website athttp://www.endocare.com when they become available.
Endocare and its directors and executive officers may be deemed to beparticipants in the solicitation of proxies from Endocare's stockholders withrespect to the transactions contemplated by the definitive merger agreementbetween Galil and Endocare. Information regarding Endocare's directors andexecutive officers is contained in Endocare's definitive proxy statement filedwith the SEC on April 9, 2008 for its 2008 Annual Meeting of Stockholders. Asof October 31, 2008, Endocare's directors and executive officers beneficiallyowned (as calculated in accordance with Rule 13d-3 under the SecuritiesExchange Act of 1934, as amended) approximately 369,763 shares, or 3.1%, ofEndocare's common stock. You can obtain free copies of these documents fromEndocare using the contact information set forth above. Additionalinformation regarding interests of such participants will be included in theRegistration Statement when it is filed with the SEC and available free ofcharge as indicated above.Investor Contact: Media Contact: For Additional Information: Matt Clawson Len Hall Terrence A. Noonan, Interim CEO Allen & Caron, Inc. Allen & Caron, Inc. Michael R. Rodriguez, CFO (949) 474-4300 (949) 474-4300 Endocare, Inc. [email protected] [email protected] (949) 450-5400
SOURCE Endocare, Inc.
