Moody's downgrades Artivion

Moody's Investors Service said it downgraded Artivion, Inc.'s ratings, including its corporate family rating to B3 from B2, its probability of default rating to B3-PD from B2-PD, the company's first-lien credit facilities to B2 from B1 and the speculative grade liquidity rating to SGL-3 from SGL-1.

“The ratings downgrade reflects Artivion's persistently high leverage (above 9x on Moody's adjusted basis) as a result of inflationary cost pressures on the company's earnings. While Artivion continues to generate good organic top-line growth in the high single-digits, supply chain headwinds and elevated R&D costs negatively impacted profitability and deleveraging progress in 2022.

“As a partial mitigant, Moody's forward-looking view incorporates lower R&D expense over the next 12-18 months on the heels of a suspended clinical trial (for Proact Xa), with further margin improvement vis-à-vis operating leverage,” the agency said in a press release.

The lower SGL rating indicates liquidity is adequate, supported by $38 million of cash as of Sept. 30. “Moody's expects the company to be approximately free cash flow breakeven over the next 12-18 months,” the agency said. In April of last year, the agency expected Artivion’s liquidity to remain very good over the next 12 to 18 months with $55 million of cash as of Dec. 31.

The outlook is stable.

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