Bioventus Inc.BVS
Bioventus Inc. Commitments Disclosure
Commitments and contingencies
Leases
The Company determines if an arrangement is a lease at inception. The Company leases its office facilities as well as other property, vehicles and equipment under operating leases. The Company also leases certain office equipment under nominal finance leases. The remaining lease terms range from 1 month to 8.3 years. Lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Lease assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company’s incremental borrowing rate is used as a discount rate, based on the information available at the commencement date, in determining the present value of lease payments. Lease assets also include the impact of any prepayments made and are reduced by impact of any lease incentives.
The Company does not recognize lease liabilities or lease assets on the balance sheet for short-term (leases with a lease term of twelve months or less as of the commencement date). Rather, any short-term lease payments are recognized as an expense on a straight-line basis over the lease term. The current period short-term lease expense reasonably reflects short-term lease commitments.
For all classifications of leases, the Company combines lease and nonlease components in order to record the combination as a single lease component. Variable lease payments are excluded from the lease liability and recognized in the period in which the obligation is incurred. Additionally, lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise the option.
The components of lease cost were as follows for the years ended December 31:
| 2024 | 2023 | 2022 | |||||||||||||||
| Operating lease cost | $ | 3,404 | $ | 3,921 | $ | 4,557 | |||||||||||
Short-term lease cost(a) | 883 | 840 | 691 | ||||||||||||||
| Financing lease cost: | |||||||||||||||||
| Amortization of finance lease assets | 602 | 1,175 | 36 | ||||||||||||||
| Interest on lease liabilities | 866 | 823 | 4 | ||||||||||||||
| Total lease cost | $ | 5,755 | $ | 6,759 | $ | 5,288 | |||||||||||
(a)Includes variable lease cost and sublease income, which are immaterial.
Supplemental cash flow information and non-cash activity related to operating leases were as follows for the years ended December 31:
| 2024 | 2023 | 2022 | |||||||||||||||
| Cash paid for amounts included in measurement of lease liabilities: | |||||||||||||||||
| Operating cash flows from operating leases | $ | 4,619 | $ | 4,516 | $ | 4,374 | |||||||||||
| Operating cash flows from financing leases | $ | 866 | $ | 793 | $ | 5 | |||||||||||
| Financing cash flows from finance leases | $ | 758 | $ | 506 | $ | 53 | |||||||||||
| Right-of-use assets obtained in exchange for lease obligations: | |||||||||||||||||
| Operating lease obligations | $ | 761 | $ | 344 | $ | 4,792 | |||||||||||
| Finance lease obligations | $ | — | $ | 15,567 | $ | — | |||||||||||
Supplemental balance sheet and other information related to operating leases were as follows for the years ended December 31:
| 2024 | 2023 | ||||||||||
Operating lease assets(a) | $ | 6,506 | $ | 13,353 | |||||||
| $ | 3,102 | $ | 4,057 | ||||||||
| 6,940 | 10,573 | ||||||||||
| Total operating lease liabilities | $ | 10,042 | $ | 14,630 | |||||||
| Financing leases | |||||||||||
| $ | 12,703 | $ | 14,279 | ||||||||
| $ | 815 | $ | 759 | ||||||||
| 9,571 | 10,386 | ||||||||||
| Total financing lease liabilities | $ | 10,386 | $ | 11,145 | |||||||
| Weighted average remaining lease term (years): | |||||||||||
| Operating leases | 3.1 | 3.8 | |||||||||
| Finance leases | 8.3 | 9.3 | |||||||||
| Weighted average discount rate: | |||||||||||
| Operating leases | 5.1 | % | 4.7 | % | |||||||
| Finance leases | 8.1 | % | 8.1 | % | |||||||
(a) As previously discussed in Note 2. Significant accounting policies, the Company incurred an impairment of right-of-use assets totaling $2,456 during the year ended December 31, 2024.
Future maturities of operating and finance lease liabilities are as follows:
| Operating leases | Finance Leases | ||||||||||
| 2025 | $ | 3,487 | $ | 1,617 | |||||||
| 2026 | 3,329 | 1,630 | |||||||||
| 2027 | 2,659 | 1,662 | |||||||||
| 2028 | 1,367 | 1,696 | |||||||||
| 2029 | 10 | 1,730 | |||||||||
| Thereafter | — | 6,021 | |||||||||
| Total undiscounted cash flows | 10,852 | 14,356 | |||||||||
| Less imputed interest | (810) | (3,970) | |||||||||
| Present value of future lease payments | $ | 10,042 | $ | 10,386 | |||||||
Governmental and legal contingencies
In the normal course of business, the Company periodically becomes involved in various claims and lawsuits, and governmental proceedings and investigations that are incidental to its business. The Company accrues a liability when a loss is considered probable and the amount can be reasonably estimated. When a material loss contingency is reasonably possible but not probable, the Company does not record a liability, but instead discloses the nature and amount of the claim, and an estimate of the possible loss or range of loss, if such an estimate can be made. Legal fees are expensed as incurred. With respect to governmental proceedings and investigations, like other companies in the industry, the Company is subject to extensive regulation by national, state and local governmental agencies in the United States and in other jurisdictions in which the Company and its affiliates operate. As a result, interaction with governmental agencies is ongoing. The Company’s standard practice is to cooperate with regulators and investigators in responding to inquiries.
The Company is presently unable to predict the duration, scope, or result of these matters. As such, the Company is presently unable to develop a reasonable estimate of a possible loss or range of losses, if any, related to these matters. While the Company intends to defend these matters vigorously, the outcome of such litigation or any other litigation is necessarily uncertain, is not within the Company’s complete control and might not be known for extended periods of time. In the opinion of management, the outcome of any existing claims and legal or regulatory proceedings, other than the specific matters described below, if decided adversely, is not expected to have a material adverse effect on the Company’s business, financial condition, results of operations, or cash flows.
Bioventus shareholder litigation
On January 12, 2023, the Company and certain of its current and former directors and officers were named as defendants in a putative class action lawsuit filed in the Middle District of North Carolina (the “Court”), Ciarciello v. Bioventus Inc., No. 1:23– CV – 00032-CCE-JEP (M.D.N.C. 2023). The complaint asserted violations of Sections 10(b) and 20(a) of the Exchange Act and of Sections 11 and 15 of the Securities Act and generally alleges that the Company failed to disclose certain information regarding rebate practices, its business and financial prospects, and the sufficiency of internal controls regarding financial reporting. The complaint seeks damages in an unspecified amount. On April 12, 2023, the Court appointed Wayne County Employees’ Retirement System as lead plaintiff. The plaintiff’s amended consolidated complaint was filed with the Court on June 12, 2023. On July 17, 2023, the defendants filed a motion to dismiss the complaint raising a number of legal and factual deficiencies with the amended consolidated complaint. In response to the defendants’ motion to dismiss, the lead plaintiff filed a second amended complaint on July 31, 2023. The defendants moved to dismiss the second amended complaint on August 21, 2023, which the Court granted in part and denied in part on November 6, 2023. The Court dismissed the plaintiff’s Securities Act claims, but allowed the plaintiff’s Exchange Act claims to proceed into discovery.
On July 15, 2024, a Stipulation and Agreement of Settlement (the “Settlement Agreement”) by and between the lead plaintiff and the defendants was filed with the Court, and the Court preliminarily approved the Settlement Agreement on August 13, 2024. The Court entered judgment on December 18, 2024, granting final approval of the terms of the Settlement Agreement and dismissing all claims against the defendants, including the Company. The parties settled without any admission of liability or wrongdoing by any party. The settlement amount of $15,250, together with interest earned thereon, has been paid by the defendants and/or the defendant’s insurers. The Company incurred $13,802 of net shareholder litigation costs (including estimated settlement and reimbursement) during the year ended December 31, 2024 under the Settlement Agreement, which were recorded in selling, general and administrative expense within the consolidated condensed statements of operations and comprehensive loss.
On October 4, 2023, certain of the Company’s current and former directors and officers were named as defendants in a derivative shareholder lawsuit (in which the Company is a nominal defendant) filed in the United States District Court for the District of Delaware, Grogan, on behalf of Bioventus Inc., v. Reali, et al., No. 1:23-CV-01099-RGA (D. Del. 2023). The complaint asserts violations of Section 14(a) of the Exchange Act, breaches of fiduciary duties and related state law claims, and a claim for contribution, and generally alleges the same purported misconduct as alleged in the Ciarciello case. On January 12, 2024, the Court agreed to stay this case pending resolution of the Ciarciello case.
On February 9, 2024, another plaintiff filed a derivative shareholder lawsuit against certain of the Company’s current and former directors and officers (in which the Company is a nominal defendant) filed in the United States District Court for the District of Delaware, Sanderson, on behalf of Bioventus Inc., v. Reali, et. al., No. 1:24-cv-00180-RGA (D. Del. 2024). Like the Grogan case, this case asserts violations of Section 10(b) of the Exchange Act, breaches of fiduciary duties and related state law claims, and a claim for contribution, and generally alleges the same purported misconduct as alleged in the Ciarciello case. On May 1, 2024, the parties filed a stipulation to consolidate the two derivative matters and stay them on terms similar to those entered in the Grogan case. On May 2, 2024, the United States District Court for the District of Delaware granted the stipulation and ordered the consolidation of the Sanderson and Grogan cases, captioned In re Bioventus Inc. Derivative Litigation, Case No.: 1:23-cv-01099-RGA. The Court also stayed the consolidated case. Following resolution of the Ciarciello case, on December 30, 2024, the plaintiffs in the consolidated case filed an amended complaint asserting the same claims as in the Grogan case against certain of the Company’s current and former directors and officers. On January 6, 2025, the Court entered a scheduling order, under which the defendants had until March 3, 2025 to file a motion to dismiss the amended complaint. On February 21, 2025, the parties submitted a joint stipulation to stay the proceedings to allow the parties time to negotiate a settlement, which the company expects to be in the form of governance reforms.
On July 31, 2024, another plaintiff filed a derivative complaint against certain of the Company’s current and former officers and directors, in which Bioventus is a nominal defendant only, in the United States District Court for the Middle District of North Carolina, captioned Vince v. Reali, No. 1:24-cv-006390CCEJEP (M.D.N.C. 2024). Like the Gorgan case, the Vince case asserts violations of Section 14(a) of the Exchange Act, breaches of fiduciary duties, unjust enrichment, contribution, and waste, and generally alleges the same purported misconduct as alleged in the Ciarciello case. On November 11, 2024, the defendants filed a motion to transfer the Vince case to the United States District Court for the District of Delaware, pursuant to the forum selection clause in Bioventus’s certificate of incorporation. On January 14, 2025, the Court granted the motion and transferred the Vince case to the District of Delaware. On February 14, 2025, the plaintiff requested voluntary dismissal of the Vince case without prejudice and the Court granted the request that same day.
On February 20, 2025, plaintiff Jeffrey Vince refiled a Verified Stockholder Derivative Complaint against certain of Bioventus’ current and former officers and directors, naming Bioventus as a nominal defendant only, in Delaware Chancery Court, captioned Jeffrey Vince v. Kenneth M. Reali et al., C.A. No. 2025-0192-LWW (Del. Ch.). Like his prior complaint, which he voluntarily dismissed, Vince asserts breaches of fiduciary duties, unjust enrichment, contribution, and waste, and generally alleges the same purported misconduct as alleged in the Ciarciello case. The Defendants have not yet been served.
On February 26, 2025, plaintiff James Bouchereau filed a Verified Stockholder Derivative Complaint against certain of Bioventus’s current and former officers and directors, naming Bioventus as a nominal defendant only, in Delaware Chancery Court, captioned James Bouchereau v. Kenneth M. Reali et al., C.A. No. 2025-___-___ (Del. Ch.). The complaint is identical to the Vince complaint and asserts breaches of fiduciary duties, unjust enrichment, contribution, and waste, and generally alleges the same purported misconduct as alleged in the Ciarciello case. The Defendants have not yet been served.
On February 6, 2025, purported stockholder Jae Hyung Jung served a litigation demand, requesting that the Board take action against certain directors and officers for alleged breaches of fiduciary duties, gross mismanagement, unjust enrichment, waste, aiding and abetting in connection with the same conduct at issue in the litigations. On February 7, 2025, the same purported stockholder, Jung, served a settlement demand, requesting that the Company adopt certain corporate governance reforms and agree to certain monetary payments. The Company has not yet responded to either demand.
The Company believes the claims alleged in the above derivative matters lack merit and intends to defend itself vigorously. Except as described above, the outcomes of these matters are not presently determinable, and any loss is neither probable nor reasonably estimable.
Other matters
On November 10, 2021, the Company entered into an asset purchase agreement for an HA product and made an upfront payment of $853. An additional payment of $853 was made in 2022 upon the transfer of certain seller customer data. If the Company is able to obtain a Medical Device Regulation Certification (“MDR Certification”) for the product, $1,707 (the “Milestone Payment”) will be paid to the seller within five days. On March 8, 2023, the parties amended the agreement under which the Milestone Payment was reduced to $1,418, of which $709 was recorded as an intellectual property intangible asset during 2023 and was paid on January 31, 2024. The remainder was due upon receipt of the MDR Certification for the product provided that it was obtained prior to December 31, 2024, which was not achieved. The asset purchase agreement was further amended in 2024 acknowledging the expectation that the MDR Certification would not be obtained. Pursuant to the amendment in 2024, the MDR Certification achievement criteria under the asset purchase agreement was extended for two years.
On December 9, 2016, the Company entered into an amended and restated license agreement for the exclusive U.S. distribution and commercialization rights of a single injection osteoarthritis (“OA”) product with the supplier of the Company’s single injection OA product for the non-U.S. market. The agreement requires the Company to meet annual minimum purchase requirements and pay royalties on net sales. Royalties related to this agreement during the years ended December 31, 2024, 2023 and 2022 totaled $18,764, $14,035 and $14,712, respectively. These royalties are included in cost of sales within the consolidated statements of operations and .
As part of a supply agreement entered on February 9, 2016 and subsequently amended for the Company’s three-injection OA product, the Company is subject to annual minimum purchase requirements for 10 years. After the initial 10 years, the agreement will automatically renew for an additional 5 years unless terminated by the Company or the seller in accordance with the agreement.
As part of a supply agreement for the Company’s five-injection OA product that was amended and restated on December 22, 2020, the Company is subject to annual minimum purchase requirements for 8 years.
From time to time, the Company causes letters of credit (“LOCs”) to be issued to provide credit support for guarantees, contractual commitments and insurance policies. The fair values of the LOCs reflect the amount of the underlying obligation and are subject to fees payable to the issuers, competitively determined in the marketplace. As of December 31, 2024 the Company had three LOCs outstanding for $2,200 and as of December 31, 2023, the Company had three LOC outstanding for $2,200.
The Company currently maintains insurance for risks associated with the operation of its business, provision of professional services and ownership of property. These policies provide coverage for a variety of potential losses, including loss or damage to property, bodily injury, general commercial liability, professional errors and omissions and medical malpractice. The Company is self-insured for health insurance covering most of its employees located in the United States. The Company maintains stop-loss insurance on a “claims made” basis for expenses in excess of $250 per member per year.
About Commitments Disclosures
Commitments and contingencies disclosures catalog a company's off-balance-sheet obligations and legal exposures — purchase commitments, guarantee arrangements, pending litigation, and regulatory proceedings. These items represent potential future cash outflows that may not appear as liabilities on the balance sheet until they become probable and estimable.
Key signals: litigation reserves and disclosed loss ranges quantify management's estimate of legal exposure, but unquantified "reasonably possible" losses often represent the larger risk. Watch for changes in language around pending cases — shifts from "remote" to "reasonably possible" or increases in estimated loss ranges signal deteriorating outcomes. Unconditional purchase obligations and take-or-pay contracts create fixed cost structures that reduce operational flexibility. Guarantee arrangements for subsidiaries or joint ventures can create cascading obligations. Compare the total commitment schedule against projected free cash flow to assess whether the company can meet its obligations without additional financing.