CryoLife (CRY)

TOP CONTRIBUTORS

Tom Park

www.zacks.com

Founded in 1984, CryoLife, Inc. preserves and distributes human tissues for cardiovascular, vascular, and orthopedic transplant applications, and develops and commercializes implantable medical devices, including its BioGlue Surgical Adhesive, the CryoLife-O'Brien aortic heart valve (a glutaraldehyde-fixed stentless porcine heart valve), and SynerGraft processed bovine vascular grafts. CryoLife seeks to expand the availability of human tissue through its established relationships with approximately 80 tissue banks and organ procurement agencies nationwide. CryoLife distributes BioGlue throughout the U.S. and more than 40 other countries for designated applications. BioGlue has been approved by the U.S. Food and Drug Administration (FDA), as an adjunct to sutures and staples for use in adult patients in open surgical repair of large vessels. In Europe, CryoLife distributes BioGlue under Conformit Europ ene (CE) Mark product certification for vascular applications, pulmonary indications (such as the repair of air leaks in lungs), and soft tissue repair procedures. CryoLife has also received approval for distributing BioGlue for vascular, pulmonary, and soft tissue repairs in Canada. Additional marketing approvals have been granted for specified applications in Australia, and in several countries in South America and Asia. CryoLife currently markets its CryoLife-O'Brien aortic heart valve in Europe and certain other territories outside the U.S. The company markets the SynerGraft processed bovine vascular graft in Europe and the Middle East.

The company has two operating segments: human tissue preservation services, and implantable medical devices (products). While the human tissue preservation services segment derives revenue from cryopreservation services of cardiovascular, vascular, and orthopedic human tissue, the implantable medical devices segment derives its revenue from sales of BioGlue Surgical Adhesive and bioprosthetic devices, including stentless porcine heart valves and SynerGraft treated bovine vascular grafts. In 2006, CRY derived 49% of its revenue from human tissue preservation services, and 51% from products. Cardiovascular, vascular, and orthopedic tissues contributed 40%, 42% and 18%, respectively, to the revenue from human tissue preservation services. BioGlue and bioprosthetic devices contributed 98% and 2%, respectively, to product revenue. Grant revenue contributed less than 1% to total revenue. Grant revenue is attributable to the funds received from the Department of Defense for the development of BioFoam.

Due to the RTI Agreement, orthopedic revenue is expected to be nominal beyond 2007. In December 2006, both CryoLife and Regeneration Technologies (RTI) announced that they entered into an exchange and service agreement respecting their orthopedic, cardiovascular, and vascular activities. According to the agreement, CryoLife ceased accepting donated human orthopedic tissues for processing on January 1, 2007 and will work to transition existing arrangements for recovery of human orthopedic tissue to RTI. Likewise on January 1, 2007, RTI ceased accepting donated human cardiovascular and vascular tissues for processing and will work to transition its arrangements for recovery of these tissues to CryoLife. Certain physical assets will also be transferred between the parties. No cash was exchanged in the transaction. RTI will continue to distribute its existing cardiovascular and vascular tissue inventory and CryoLife will continue to distribute its existing orthopedic tissue inventory through June 30, 2008. After that date, CryoLife will become entitled to distribute RTI's remaining cardiovascular and vascular tissue inventory and RTI will become entitled to distribute CryoLife's remaining orthopedic tissue inventory for a fee. Under the agreement, from July 1, 2008 through December 31, 2016, CryoLife has agreed not to market or solicit orders for certain human orthopedic tissues and RTI has agreed not to market or solicit orders for human cardiac and vascular tissues.

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