Alphatec Holdings Inc. 09.02.16
Alphatec Holdings Inc., parent company of Alphatec Spine Inc., a provider of spinal fusion technologies, has completed the sale of its international operations and distribution channel to Globus Medical.
With the closing of the transaction, the company is now focused solely on the U.S. market, which Alphatec believes constitutes nearly 65 percent of the world's spinal fusion market.
Over the past several years, the company has focused its R&D programs and invested in the development of a leading, robust suite of products that are available to surgeons in the United States today—including Arsenal Degenerative, Arsenal Deformity, and Battalion Universal Interbody. In addition, Alphatec has recently obtained U.S. clearance for its new XYcor Expandable Spinal Spacer System, which the company plans to launch later this year. The company also made significant progress through its initiative to outsource its manufacturing operations—reducing capital investment in equipment, partnering with valued suppliers to provide flexible capacity, while achieving unit level cost reductions and margin improvements. As a result, Alphatec executives believes the firm is now better positioned to compete more effectively in the marketplace, accelerate growth and continue to improve profitability.
“Today marks the beginning of a new chapter for Alphatec,” said Jim Corbett, president and CEO of Alphatec Spine. “I am excited about the long-term prospects for the company as we pursue the U.S. spinal market with the resources we need to support continued investment in the commercialization of our robust product line. We have the right products and a newly streamlined balance sheet to support our growth across the country, and we look forward to executing on our vision.”
Globus acquired Alphatec's international operations and distribution channel for $80 million in cash. Globus will also provide Alphatec a five-year senior secured credit facility of up to $30 million. In addition, Alphatec has entered into a supply agreement through which Alphatec will supply its products to Globus for up to five years.
With the closing of this transaction, Alphatec can now establish a new capital structure that appropriately reflects the capital needs of its U.S.-focused business and positions the Carlsbad, Calif.-based company for achieving future profitability. As part of the closing, Alphatec implemented the following related to this new capital structure:
With this, Alphatec expects to have paid down approximately $66 million of existing debt and debt-related expenses.
Concurrent with this transaction, Deerfield Management Company, L.P. has utilized its cashless exercise provision under its warrant agreements, converting its warrants to purchase up to 11.45 million shares of common stock to approximately 3.2 million shares on a pre-reverse split basis. This will constitute approximately 269 thousand shares on a post-reverse split basis.
“As a result of this transaction, we are able to improve Alphatec’s forward-looking balance sheet by reducing our overall debt while providing the liquidity and reserves needed to invest in commercializing our product portfolio,” said Mike O’Neill, Alphatec’s chief financial officer. “The new term loan from Globus, in conjunction with a planned revolving line of credit from MidCap Financial, provides the company with credit facilities of up to $57.5 million, which will offer sufficient liquidity and appropriate financing to successfully support Alphatec's transition to a U.S. market based company. Upon closing, we estimate our total debt drawn will be approximately $45 million. I am pleased that MidCap will remain as a lender and provide funding for the company going forward. I want to thank them for their continued commitment and support to Alphatec.”
The company expects that its stronger financial foundation coupled with its product portfolio will support future investments in its capital instrument base each year. These investments will be used to drive the commercial expansion of its new product lines, which are expected to contribute substantially to its planned growth profile. In addition, Alphatec has already made substantial headway towards its goal of reducing its operating expenses by $20 million. The company expects this to continue for the remainder of 2016 and into 2017, translating to positive cash flow and profitability in the back half of 2017.
Alphatec Spine Inc., a wholly owned subsidiary of Alphatec Holdings Inc., designs, develops, manufactures and markets spinal fusion technology products and solutions for the treatment of spinal disorders associated with disease and degeneration, congenital deformities and trauma.
Globus Medical Inc. is a musculoskeletal implant company based in Audubon, Pa. The company was founded in 2003.
With the closing of the transaction, the company is now focused solely on the U.S. market, which Alphatec believes constitutes nearly 65 percent of the world's spinal fusion market.
Over the past several years, the company has focused its R&D programs and invested in the development of a leading, robust suite of products that are available to surgeons in the United States today—including Arsenal Degenerative, Arsenal Deformity, and Battalion Universal Interbody. In addition, Alphatec has recently obtained U.S. clearance for its new XYcor Expandable Spinal Spacer System, which the company plans to launch later this year. The company also made significant progress through its initiative to outsource its manufacturing operations—reducing capital investment in equipment, partnering with valued suppliers to provide flexible capacity, while achieving unit level cost reductions and margin improvements. As a result, Alphatec executives believes the firm is now better positioned to compete more effectively in the marketplace, accelerate growth and continue to improve profitability.
“Today marks the beginning of a new chapter for Alphatec,” said Jim Corbett, president and CEO of Alphatec Spine. “I am excited about the long-term prospects for the company as we pursue the U.S. spinal market with the resources we need to support continued investment in the commercialization of our robust product line. We have the right products and a newly streamlined balance sheet to support our growth across the country, and we look forward to executing on our vision.”
Globus acquired Alphatec's international operations and distribution channel for $80 million in cash. Globus will also provide Alphatec a five-year senior secured credit facility of up to $30 million. In addition, Alphatec has entered into a supply agreement through which Alphatec will supply its products to Globus for up to five years.
With the closing of this transaction, Alphatec can now establish a new capital structure that appropriately reflects the capital needs of its U.S.-focused business and positions the Carlsbad, Calif.-based company for achieving future profitability. As part of the closing, Alphatec implemented the following related to this new capital structure:
- Drew down $25 million of the $30 million credit facility from Globus upon closing;
- Paid off the existing Deerfield credit facility balance and retired the credit facility;
- Reduced the MidCap Financial term loan to a $5 million balance; and
- Reduced the MidCap Financial revolver commitment to $22.5 million.
With this, Alphatec expects to have paid down approximately $66 million of existing debt and debt-related expenses.
Concurrent with this transaction, Deerfield Management Company, L.P. has utilized its cashless exercise provision under its warrant agreements, converting its warrants to purchase up to 11.45 million shares of common stock to approximately 3.2 million shares on a pre-reverse split basis. This will constitute approximately 269 thousand shares on a post-reverse split basis.
“As a result of this transaction, we are able to improve Alphatec’s forward-looking balance sheet by reducing our overall debt while providing the liquidity and reserves needed to invest in commercializing our product portfolio,” said Mike O’Neill, Alphatec’s chief financial officer. “The new term loan from Globus, in conjunction with a planned revolving line of credit from MidCap Financial, provides the company with credit facilities of up to $57.5 million, which will offer sufficient liquidity and appropriate financing to successfully support Alphatec's transition to a U.S. market based company. Upon closing, we estimate our total debt drawn will be approximately $45 million. I am pleased that MidCap will remain as a lender and provide funding for the company going forward. I want to thank them for their continued commitment and support to Alphatec.”
The company expects that its stronger financial foundation coupled with its product portfolio will support future investments in its capital instrument base each year. These investments will be used to drive the commercial expansion of its new product lines, which are expected to contribute substantially to its planned growth profile. In addition, Alphatec has already made substantial headway towards its goal of reducing its operating expenses by $20 million. The company expects this to continue for the remainder of 2016 and into 2017, translating to positive cash flow and profitability in the back half of 2017.
Alphatec Spine Inc., a wholly owned subsidiary of Alphatec Holdings Inc., designs, develops, manufactures and markets spinal fusion technology products and solutions for the treatment of spinal disorders associated with disease and degeneration, congenital deformities and trauma.
Globus Medical Inc. is a musculoskeletal implant company based in Audubon, Pa. The company was founded in 2003.