Enhancing Spine Service Line Partnerships
The acquisition of Biotronic advances NuVasive's strategy to transform how spine procedures are approached, measured and valued from a clinical and economic perspective, by:
- Delivering Clinical Fulfillment: The acquisition enhances NuVasive's spine service line partnership offering for health system customers, by supporting clinical fulfillment through enhanced surgical monitoring and oversight capabilities.
- Doubling NuVasive's Service Footprint: With the acquisition of Biotronic, NuVasive will double the footprint of its service business across the U.S. and grow coverage and capabilities in key, complementary markets.
- Creating the Standard of Care: NuVasive will be able to further deliver a consistently high standard of care and increase the breadth of differentiated products and services offered to health systems as they seek to build out their spine service line, improving the clinical and economic value of the company's procedurally-integrated offerings.
Founded in 1982 and privately held, Biotronic is a patient-centric healthcare organization that provides intraoperative neurophysiological monitoring services to surgeons and healthcare facilities across the U.S. Biotronic helps surgeons reduce surgical variability and improve clinical outcomes by providing certified specialists to monitor patients' nervous system during surgery, while also offering remote physician oversight. Biotronic supports more than 45,000 surgeries annually in more than 650 hospitals, providing real-time remote monitoring through proprietary software and a secure, virtual private network. With more than $50 million in revenue in 2015, Biotronic is positioned as a premium provider in the intraoperative monitoring market.
"We are extremely excited about this combination, as it more than doubles NuVasive's neurophysiology footprint, creating an at-scale services business with improved growth and operational benefits. The addition of Biotronic enhances our service offerings and provides enormous potential to deliver greater integration across our procedurally-integrated portfolio, which uniquely differentiates NuVasive in the markets we serve," said Gregory T. Lucier, chairman and chief executive officer of NuVasive. "We believe NuVasive is better positioned than ever to build off the strong foundation established in early 2015 when we aligned our U.S. field personnel to form a combined sales and services organization, including the integration of the company's neurophysiology services offering. This pivotal integration, in combination with the greater operational discipline instilled into our services business over the last year, is now delivering strong results, including a nearly 25 percent year-over-year increase in our NVM5 disposables business in the first quarter of 2016. We remain evermore committed to growing our spine service line partnerships and infusing our expertise to help our hospital partners transform how spine procedures are approached, measured and valued from a clinical and economic perspective."
"For more than 35 years, the team at Biotronic has built a phenomenal business focused on providing the highest quality of intraoperative neural monitoring services designed to provide patient safety and deliver economic benefit for hospitals and surgeons," said William J. Gecsey, president and chief executive officer of Biotronic. "We look forward to joining forces with NuVasive to further build out service offerings that drive improvements in patient care."
NuVasive Clinical Services
NuVasive currently provides intraoperative neurophysiological monitoring services to surgeons and healthcare facilities through its subsidiary, Impulse Monitoring, Inc. (IMI). Following the close of the transaction, NuVasive plans to combine the service offerings of Biotronic with IMI to create NuVasive Clinical Services, which will be led by Doug Karczewski, who has led NuVasive's Eastern U.S. Commercial organization for the last three years. With limited geographic overlap between Biotronic and IMI, NuVasive Clinical Services is expected to support more than 75,000 cases annually in the U.S.
NuVasive expects the transaction to be immediately accretive to NuVasive's non-GAAP earnings per share (EPS) in 2016 and significantly accretive in 2017 and beyond. NuVasive also expects the transaction to support its previously issued 2016 non-GAAP operating margin guidance of 15.8 percent, as well as longer-term targets for revenue growth and expansion of both its non-GAAP operating and EBITDA margins. Additionally, the transaction is expected to meet the company's goals for return on invested capital, consistent with the company's previously stated acquisition criteria.
The transaction is expected to close in early July 2016, subject to customary closing conditions. NuVasive expects to fund the acquisition with existing cash on hand. The company plans to update its 2016 guidance, including the impact of the transaction, on its second quarter 2016 earnings call scheduled to be held on July 26 at 4:30 p.m. ET / 1:30 p.m. PT.