A new $1B spine company: Inside the Orthofix, SeaSpine merger

Spinal Tech

SeaSpine and Orthofix entered an agreement to merge, with the deal expected to close in early 2023. Both companies boast emerging technologies in spine and orthopedics, and together they plan to rake in $1 billion in their early years.

Six details to know:

1. Orthofix CEO Jon Serbousek said on an Oct. 11 investor call that the merger could put them in "amongst the top tier" of spine and orthopedic devicemakers. In its first three years, the merged entity expects to hit $1 billion in revenue, he said. By 2025, he said he expects gross margins to exceed 70 percent and adjusted EBITDA margins to be in the midteens.

2. Both companies boast strong product portfolios. SeaSpine has the radiation-free Flash imaging system from its $110 million acquisition of 7D Surgical. Orthofix's M6-C artificial cervical disc replacement device will add to SeaSpine's NorthStar posterior cervical fixation system, SeaSpine CEO Keith Valentine said on the investor call.

3. The merged company has ambitions to form one of the industry's broadest biologics portfolio, Orthofix said in an Oct. 11 news release. The combined technologies include CervicalStim bone graft therapy device, the Virtuos Lyograft and the OsteoStrand Plus and OsteoSurge demineralized bone matrix products.

4. A key asset Orthofix brings to the table is its international infrastructure, Mr. Valentine said. Although SeaSpine conducts business primarily in the U.S., Orthofix sees 20 percent of its revenue from international channels.

5. Long before the merger was announced, SeaSpine had grown its foothold in the market, making it well positioned to support Orthofix's portfolio. SeaSpine rebounded from COVID-19 and saw continued year-over-year quarterly growth. In 2020, full-year revenue was $154.3 million, a 3 percent dip. The company recovered from that mild decline quickly in 2021 as it continually beat its year-over-year quarterly revenues. In the first half of 2022, SeaSpine has already surpassed its revenues compared to the same period in 2021.

6. The company will be based in Lewisville, Texas, with additional offices in Carlsbad, Calif., and Verona, Italy, Mr. Serbousek said.

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