Dive Brief:

• Exactech has filed for Chapter 11 bankruptcy protection and agreed to sell its assets to existing investors, the company said Tuesday. 
• The bankruptcy filing follows Exactech’s failure to reach an out-of-court settlement for product liability claims brought by around 2,600 patients in response to recalls of orthopedic devices, according to a court document.
• With no legal resolution and loan repayments coming up, Exactech has struck a deal with investors to secure $85 million to fund operations and a “stalking horse” bidder for its assets. The Chapter 11 plan was filed in the U.S. Bankruptcy Court for the District of Delaware.

Dive Insight:

Exactech recalled its Connexion GXL Hip Liners in 2021. The company later expanded the recall to all hip liners, knee and ankle implants. Early in 2024, Exactech recalled shoulder replacement devices and knee components, having initially declined to act. The recalls were triggered by defective packaging bags, which lacked an oxygen barrier layer to protect the devices from oxidation.

Some patients affected by the recalls filed lawsuits against the Florida-based company. The lawsuits created a second set of legal challenges for Exactech, which was already defending itself against allegations that the sale of certain knee devices violated the federal False Claims Act.

Jesse York, Exactech’s chief restructuring officer, discussed the impact of the lawsuits in the bankruptcy filing, explaining that “the costs of litigation became an overwhelming burden for the business, resulting in liquidity constraints in mid- to late-2023.” Over the last 12 months, the recalls and related litigation cost Exactech approximately $20 million, York said. 

Uncertainty about what the lawsuits could cost Exactech has deterred investors, York added, and led the company to prioritize the resolution of the legal cases. However, York said it became clear the product liability lawsuits could not be solved on an out-of-court basis, prompting Exactech to pause talks with the Department of Justice and pivot to trying to raise money and prepare for an in-court restructuring. 

That pivot led to an agreement with investors to provide $85 million to fund Exactech through the restructuring process and act as the “stalking horse” bidder. Unless another offer emerges, the investors will buy “substantially all” of the company’s assets as a going concern.

Exactech said it will continue to operate as normal throughout the bankruptcy process. The company stated in the announcement that the sale “is subject to higher and better bids, court approval and other customary closing conditions.”