Orthofix acquired Spinal Kinetics, a privately held company focused on artificial discs, for up to $105 million.
"This acquisition is very well aligned with our value creation strategy of accelerating topline growth by investing in faster growing market segments in our core business," said Orthofix President and CEO Brad Mason. "In addition, we expect this news will energize our sales force and be attractive to potential new sales talent."
Here are six things to know:
1. Orthofix will acquire the company, which developed and manufactures the M6 artificial discs, for $45 million in cash closing considerations as well as up to $60 million contingent on milestone payments.
2. The milestone payments hinge on M6-C achieving FDA approval and the company hitting training 12-month sales targets of $30 million and $50 million.
3. The artificial discs, M6-C and M6-L, are designed for patients with degenerative disc disease. The discs mimic the anatomic structures of a natural disc and have an artificial visco-elastic nucleus and fiber annulus. M6 discs have six degrees of motion, which is similar to a natural disc.
4. Orthofix estimates the artificial disc market exceeded $325 million worldwide and $200 million in the U.S. in 2017, and expects double-digit growth in the future. The company also anticipates momentum from the acquisition will generate pull-through revenue of Orthofix's other products and position the company to gain additional market share in the U.S. spine hardware market.
5. The acquisition is expected to add revenue to Orthofix in 2018 and increase its organic growth rate in 2019 and beyond. Orthofix also predicts the deal will be slightly accretive to the company's non-GAAP diluted earnings per share and adjusted EBITDA for 12 months after approval in the U.S.
6. Canaccord Genuity is the acting financial advisor to Spinal Kinetics for the transaction.