425: Baird Medical and ExcelFin Acquisition Corp. Announce Proposed Business Combination

Baird Medical, a leading developer of minimally invasive Microwave Ablation (MWA) technology for tumor removal, is set to go public through a business combination with ExcelFin Acquisition Corp.

Summary

• Baird Medical Investment Holdings Limited and ExcelFin Acquisition Corp. have announced a proposed business combination.
• The presentation provides information about Baird Medical's MWA technology for tumor removal, particularly thyroid nodules.
• Baird Medical is a market leader in China for MWA treatment of thyroid nodules, with a significant recurring revenue model.
• The company has penetrated 431 hospitals in China, including 256 grade III hospitals.
• Baird Medical estimates a total addressable market of $4-$10 billion for benign thyroid nodules in China.
• The company projects $42 million in revenue for 2024, representing 34% year-over-year growth, and $20 million in adjusted EBITDA.
• The transaction implies a pre-money equity value of $210 million for Baird Medical and a pro-forma equity value of $279 million.
• Baird Medical shareholders will roll over 100% of their equity and are expected to own approximately 75% of the combined company.
• The company plans to expand into the US, EU, and Southeast Asia, with FDA approval already received for soft tissue microwave ablation.
• The presentation includes forward-looking statements and risk factors related to the business combination and Baird Medical's operations.

Sentiment

Score: 7

Explanation: The document presents a positive outlook for Baird Medical, highlighting its market leadership, growth potential, and expansion plans. However, it also includes cautionary statements and risk factors, indicating a balanced perspective.

Positives

• Baird Medical is a market leader in MWA treatment for thyroid nodules in China.
• The company has a large and growing addressable market.
• Baird Medical has a strong recurring revenue model.
• The company has a proven technology with clinical benefits.
• Baird Medical has a clear growth strategy, including expansion into new markets.
• The company has a strong management team and independent board directors.
• Baird Medical has a robust and visible revenue growth with tangible upside potential.
• The company has a three-tiered growth strategy focusing on market leadership in Tier 1 provinces before expanding to Tier 2 and 3 provinces.
• Baird Medical has a strong R&D team with 47 registered patents.
• The company has a medium to long-term global growth strategy including expansion into the US, EU, and Southeast Asia.

Negatives

• The company's forecasts and projections are based on assumptions that may prove to be incorrect.
• Baird Medical's business is largely focused on a single technology (MWA) in a single geographic region (China).
• The company may require additional capital to support its business plan and anticipated growth.
• The company's related party transactions present possible conflicts of interest.
• The company is subject to extensive safety regulations and requirements in China.
• The Chinese government has substantial influence over Baird Medical's activities and may intervene with its operations.
• The company may be unable to obtain, maintain or renew the regulatory filings, registration certificates, permits, licenses and other certifications and approvals from regulatory authorities needed to commercialize its microwave medical devices.

Risks

• Baird Medical's ability to maintain profitability depends on the commercial success of its microwave ablation (MWA) and related medical device products.
• Baird Medical's success depends on maintaining its relationships with hospitals, key opinion leaders, and distributors and to effectively market to hospitals through public tender processes.
• Potential quality defects in Baird Medical's products may cause safety issues, expose Baird Medical to potential product liability claims, government fines and reputational harm.
• If Baird Medical is unable to keep up the demand for its MWA and related medical device products, physicians may turn to alternative treatment methods.
• Baird Medical may require additional capital to support its business plan and anticipated growth, and such capital may not be available on acceptable terms, or at all.
• Baird Medical's forecasts and projections are based upon assumptions, analyses and estimates which may prove to be incorrect or inaccurate.
• Baird Medical may be unable to obtain, maintain or renew the regulatory filings, registration certificates, permits, licenses and other certifications and approvals from regulatory authorities.
• Baird Medical may be unable to develop or successfully market new or commercially viable products and technologies or improve its existing products and technologies.
• Future success depends on Baird Medical's ability to retain members of its management team and key personnel and to attract, retain and motivate qualified personnel at a cost-effective rate.
• Baird Medical's related party transactions present possible conflicts of interest.
• Negative publicity and allegations involving Baird Medical, its shareholders, directors, officers, employees and business partners may adversely affect Baird Medical's business.
• If Baird Medical becomes subject to legal or contractual disputes, governmental investigations or administrative proceedings, it may incur substantial costs and its management teams attention may be diverted.
• Insurance coverage maintained by Baird Medical may be inadequate to protect Baird Medical from the liabilities that it may incur.
• Unfavorable global economic conditions could materially and adversely affect Baird Medical's business, financial condition or results of operations.
• Betters may be required to repurchase its previously issued Series C convertible redeemable preference shares.
• Intellectual property litigation and infringement claims by or against Baird Medical could cause Baird Medical to incur significant expenses, distract Baird Medical's management, require Baird Medical to redesign or discontinue selling the affected product, invalidate Baird Medicals patents or trademarks, or harm Baird Medicals business prospects and financial position.
• Baird Medical may be unable to obtain and maintain effective or sufficiently broad patent and other intellectual property rights for its products and pipeline products.
• The planned expansion of Baird Medical's business to additional and emerging markets internationally is expected to lead to increased exposure to market, regulatory, political, operational, financial and economic risks, including risks relating to Chinas relationship with other countries.
• Baird Medical's business is largely focused on a single technology (MWA) in a single geographic region (China), which could magnify the adverse impact of certain risks.
• Medical device manufacturers in China are subject to extensive safety regulations and requirements, which can lead to increased compliance costs and heightened risks of inadvertent incidents of noncompliance.
• The Chinese government has substantial influence over Baird Medical's activities and may intervene with its operations.
• PRC regulation on loans to, and direct investment in, Baird Medical's PRC subsidiary by offshore holding companies and governmental control in currency conversion may delay or prevent Baird Medical from using the proceeds of the Business Combination to make loans to or make additional capital contributions to Baird Medical's PRC subsidiary.
• The China Securities Regulatory Commissions (CSRC) Trial Measures for China-based companies seeking to conduct overseas offering and listing in foreign markets could significantly limit or completely hinder Baird Medical's ability to offer or continue to offer its ordinary shares to investors and could cause the value of its ordinary shares to significantly decline or become worthless.
• If Baird Medical fails to comply with environmental, health and safety laws and regulations, Baird Medical could be subject to fines or penalties or incur costs that could have a material adverse effect on the success of its business.
• There are uncertainties under the EIT Law relating to withholding tax liabilities for PRC entities, and dividends payable by Baird Medical's PRC subsidiary may not qualify for certain treaty benefits.
• Baird Medical may rely on dividends and other equity distributions paid by its PRC subsidiary to fund its cash and financing requirements, and the PRC subsidiarys restrictions on paying dividends or making other payments could restrict Baird Medical's ability to satisfy liquidity requirements and have a material and adverse effect on Baird Medical's business.
• Following the closing of the potential Business Combination, an active trading market for PubCos shares may not be available on a consistent basis to provide shareholders with adequate liquidity and may lead to significant volatility in the PubCos share price.
• Concentration of ownership among existing executive officers, directors and their affiliates may prevent new investors from influencing significant corporate decisions.
• The Combined Company does not expect to declare any dividends in the foreseeable future.
• Substantial sales of PubCos stock in the public market by existing shareholders could cause the PubCos share price to decline.
• There can be no assurance that PubCo ordinary shares will be approved for listing on Nasdaq upon the Closing.
• PubCos lack of public company experience and a lack of research or reports about PubCo, its business, or its market may adversely affect PubCos business and the price and trading volume of its ordinary shares.
• PubCos issuance of additional capital stock in connection with financings, acquisitions, investments, stock incentive plans or otherwise will dilute all other stockholders
• The ability to execute ExcelFins strategic plan could be negatively impacted to the extent a significant number of stockholders choose to redeem their shares.
• There is no guarantee that an ExcelFin stockholders decision to redeem their shares for a pro rata portion of the Trust Account will economically benefit the stockholder.
• Failure to comply with redemption requirements could prevent an ExcelFin stockholder from redeeming their shares of ExcelFin Class A Common Stock.
• If ExcelFin stockholders fail to properly demand redemption rights, they cannot convert their ExcelFin Class A Common Stock into a pro rata portion of the Trust Account.
• Holders who redeem their public shares of ExcelFin Class A Common Stock may continue to hold or exercise any ExcelFin Public Warrants that they own in accordance with their terms, which may result in additional dilution.
• A new 1% U.S. federal excise tax could be imposed on ExcelFin in connection with redemptions by ExcelFin stockholders of Class A Common Stock in connection with the Business Combination.
• If ExcelFin does not consummate the Business Combination by the termination date of May 25, 2024, ExcelFin will have to cease all operations except to wind up, redeem all of its public shares and liquidate, or seek approval of its stockholders to extend the termination date.
• If the funds held outside of ExcelFins Trust Account are insufficient to allow ExcelFin to operate until at least May 25, 2024, ExcelFins ability to complete the Business Combination may be adversely affected.
• The working capital available to the Combined Company after the Business Combination will be reduced to the extent ExcelFins stockholders exercise their redemption rights in connection with the Business Combination.
• The only significant asset of the Combined Company will be ownership of 100% of the Company Shares, and the Combined Company does not currently intend to pay dividends on its common stock.
• ExcelFin will incur significant transaction and transition costs in connection with the Business Combination.
• ExcelFins independent registered public accounting firms report contains an explanatory paragraph that expresses substantial doubt about ExcelFins ability to continue as a going concern.
• U.S. regulatory authorities have recently enacted and proposed rules impacting special purpose acquisition companies that could increase ExcelFins costs.
• Recent increases in inflation and interest rates in the United States and elsewhere could make it more difficult for ExcelFin to consummate the Business Combination.
• ExcelFin and Baird Medical have no history operating as a combined company.
• The Business Combination remains subject to conditions that ExcelFin cannot control.
• The Business Combination may be completed even though material adverse effects may result from its announcement.
• The exercise of ExcelFins discretion in agreeing to changes to or waivers of terms of the Business Combination may result in a conflict of interest.
• The Sponsor, and ExcelFins directors and officers, have conflicts of interest in determining to pursue the Business Combination with Baird Medical.
• ExcelFins Sponsor and affiliates will lose their entire investment of privately placed shares in ExcelFin if the Business Combination is not completed.
• Since the Sponsor, and ExcelFins executive officers and directors will not be eligible for reimbursements of their out-of-pocket expenses if the Business Combination is not completed, a conflict of interest may arise.
• Deferred underwriting fees in connection with the IPO will not be adjusted to account for redemptions by ExcelFins public stockholders.
• ExcelFins ability to successfully effect the Business Combination and the Combined Companys ability to successfully operate the business will be largely dependent upon the key personnels efforts.
• The benefits of the potential Business Combination may not be realized to the extent currently anticipated by ExcelFin and Baird Medical.
• The Sponsor and ExcelFins directors and officers have agreed to vote in favor of its initial business combination, regardless of how ExcelFins public stockholders vote.
• The Sponsor, ExcelFins directors and officers and advisors and their respective affiliates may elect to purchase shares from holders of ExcelFins public shares in connection with the Business Combination.
• The PubCo ordinary shares to be received by ExcelFins stockholders due to the Business Combination have different rights from ExcelFin Class A Common Stock.
• ExcelFins stockholders will have a reduced ownership and voting interest and less influence over management after consummation of the Business Combination.
• Following the Business Combination, PubCo may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on its financial condition, results of operations and stock price.
• ExcelFins warrants and founder shares may have an adverse effect on the market price of ExcelFin Class A Common Stock and PubCo ordinary shares.
• If redemptions exceed the threshold allowable for ExcelFin to consummate the Business Combination, the ExcelFin Public Warrants will expire worthless.
• If PubCo is characterized as a passive foreign investment company for U.S. federal income tax purposes, its U.S. shareholders may suffer adverse tax consequences.
• There may be tax consequences of the Business Combination that adversely affect holders of ExcelFin Class A Common Stock or ExcelFin Public Warrants.
• The IRS may not agree that PubCo should be treated as a non-U.S. corporation or a surrogate foreign corporation for U.S. federal income tax purposes.
• Future resales of PubCo ordinary shares may cause their market price to drop significantly.
• Anti-takeover provisions in PubCos governing documents, by-laws and provisions of Cayman Islands Law could impair limit future share price and entrench management.
• ExcelFins governing documents limit its stockholders choice of judicial forum to the Court of Chancery of the State of Delaware for certain stockholder litigation matters against ExcelFin, and its directors, officers or stockholders.
• If third parties bring claims against ExcelFin, the Trust Account proceeds could be reduced and the per-share redemption amount may be less than $10.20 per share.
• ExcelFin directors may decide not to enforce indemnification obligations of ExcelFins Sponsor, reducing the funds in the Trust Account for distribution to ExcelFins public stockholders.
• ExcelFins stockholders may be held liable for claims by third parties against ExcelFin to the extent of distributions received by them.
• A securities class action and derivative lawsuits targeting ExcelFin could result in substantial costs and may delay or prevent completion of the Business Combination.
• The Sponsor and ExcelFins directors, officers, advisors or their affiliates may elect to purchase shares of ExcelFin Class A Common Stock from ExcelFins stockholders, which may influence a vote on a proposed business combination and reduce the public float of ExcelFins issued and outstanding capital stock.
• If a stockholder or a group of stockholders are deemed to hold in excess of 15% of ExcelFin Class A Common Stock, such stockholder or group will lose the ability to redeem all such shares in excess of 15% of ExcelFin Class A Common Stock.
• A voluntary or involuntary bankruptcy petition by or against ExcelFin prior to distributions may reduce the per share amount to be received by ExcelFins stockholders.
• In completing the Business Combination, managements focus and resources may be diverted from operational matters and other strategic opportunities.
• The Combined Company may incur successor liabilities due to conduct arising prior to the completion of the Business Combination.
• The restatement of previously issued audited consolidated financial statements may affect investor confidence and raise reputational issues and may subject us to additional risks and uncertainties, including increased professional costs and the increased possibility of legal proceedings and regulatory inquiries.

Future Outlook

Baird Medical plans to expand into the US, EU, and Southeast Asia markets following FDA approval. The company also expects to receive CFDA Class III certificates for breast lumps and pulmonary nodules.

Management Comments

• The success of this procedure with Baird Medicals ablation needle represents a leap forward in our ability to treat thyroid nodules effectively.
• I look forward to performing many more similar procedures in the near future.

Industry Context

The presentation notes that thyroid nodules are overtaking liver cancer to become the largest MWA segment market in China. The company is positioning itself to capitalize on the growing acceptance of thermal ablation for thyroid nodules in the US and EU.

Comparison to Industry Standards

• The document includes operational and valuation benchmarking against medical device and cancer-focused biotech companies.
• The document compares Baird Medical's revenue growth and adjusted EBITDA margin to the median values of peer companies.
• The document compares Baird Medical's EV/EBITDA and EV/EBITDA/G multiples to the median values of peer companies.

Stakeholder Impact

• Shareholders of ExcelFin will have a reduced ownership and voting interest and less influence over management after consummation of the Business Combination.
• The Business Combination may impact the market price of ExcelFins or PubCos securities.
• The Business Combination may impact the ability of the Baird Medical to retain customers and hire key personnel and maintain relationships with its customers and suppliers and on its operating results and business generally.

Next Steps

• ExcelFin stockholders are advised to read the preliminary proxy statement/prospectus and the amendments thereto and, when available, the definitive proxy statement/prospectus and other documents filed in connection with the proposed Business Combination.
• Baird Medical plans to secure FDA Approval for Soft Tissue Microwave Ablation.
• Baird Medical plans to grow in the European Union where Treatment Guideline Has Been Issued.
• Baird Medical plans to grow in Southeast Asia in Indonesia.

Key Dates