Global orthopedic implant giant Smith & Nephew plc is saying goodbye to its biologics division, at least in part.
The move forms a joint venture that will be majority owned by Essex Woodlands, a healthcare private equity firm. The spinoff comes as Smith & Nephew’s orthopedics business is being squeezed by tighter healthcare budgets and reimbursement challenges.
According to leadership at United Kingdom-based Smith & Nephew, the move will give the firm a much-needed infusion of cash to fund other new product research and development activities. The joint venture will result in a new company called Bioventus LLC, which will be 51 percent owned by Essex Woodlands and 49 percent owned by Smith & Nephew.
As part of the deal, Smith & Nephew will receive nearly $100 million in cash, which will be used to pay down debt, and a $160 million five-year note from Bioventus.
“In a single act we have given our existing biologics business the resources to address longer-term development projects, retained access to the exciting area of orthobiologics, realized value for reinvestment in nearer-term opportunities, and freed up management resources to focus on driving efficiencies in established markets,” said CEO Olivier Bohuon. “Essex Woodlands are strong partners and the joint venture will benefit from their significant expertise in developing healthcare businesses.”
The business will continue to be headquartered in Durham, N.C., and the existing management team, led by its current president, Mark Augusti, will transfer to Bioventus, according to a press release issued by Essex Woodlands. Smith & Nephew plans to keep its research facility in northern England.
“We are very excited about the formation of Bioventus and our strategic partnership with Smith & Nephew to advance innovation in orthobiologics,” said Marty Sutter, founding partner and managing director of Essex Woodlands. “We applaud Smith & Nephew for their forward thinking in working with Essex Woodlands and our partners in this groundbreaking venture. No one has created such a platform for innovation before.”
Essex Woodlands’ investors are no strangers to the orthopedic market. Past investments include Orthovita (acquired by Stryker in May 2011); St. Francis Medical (acquired by Kyphon in December 2006 and subsequently acquired by Medtronic in July 2007); Spinal Concepts (acquired by Abbott Laboratories in June 2003); Confluent Surgical (acquired by Covidien in July 2006); United Orthopedic Group and LifeCell (acquired by Kinetic Concepts in April 2008).
Last year, the biologics and clinical therapies business of Smith & Nephew generated a profit of $44 million on revenue of $223 million, of which $33 million came from sales outside the United States.
Essex Woodlands has offices in Palo Alto, Calif.; Houston, Texas; New York, N.Y.; and London, England.
HealthpointCapital Invests in Surgical Device Startup
New York, N.Y.-based HealthpointCapital LLC inked a deal in late 2011 for Blue Belt Technologies Inc., which develops “smart” surgical instruments for use initially in orthopedic procedures and then for other surgical specialties including neurosurgery and otolaryngology (the ear, nose and throat market).
Terms of the deal were not disclosed.
Blue Belt’s Navio PFS System incorporates patented technology “to provide precise control to surgeons via an intelligent, handheld, computer assisted bone cutting tool,” according to the company.
The Navio PFS System performs bone-shaping tasks through minimally invasive incisions.
“Blue Belt is HealthpointCapital’s first acquisition to create the worldwide leader in providing a continuum of care for patients suffering from orthopedic diseases,” said Mortimer Berkowitz III, president and managing director of HealthpointCapital. “Historically, patients with arthritic disorders have had limited treatment options. We will offer more treatments for patients throughout their disease—resulting in a broader continuum of care. Blue Belt’s Navio PFS system is a perfect flagship technology to lead our investment strategy because of its superiority to currently marketed robotic systems.”
HealthpointCapital also announced that Eric B. Timko will lead Pittsburgh, Pa.-headquartered Blue Belt as president and CEO. Timko has more than 20 years of experience in the medical device industry and has a proven track record in commercializing medical technologies as well as building effective and profitable sales and distribution organizations.
HealthpointCapital is a private equity firm that is focused exclusively on the orthopedic and dental device industries. The firm has $750 million of institutional capital under management.
Zimmer Buys Maker of Surgical Saw Blades
Zimmer Holdings Inc. has acquired privately held Synvasive Technology Inc., an instrument manufacturer based in Reno, Nev. The buy will enhance Warsaw, Ind.-based Zimmer’s product portfolio through the addition of Synvasive’s Stablecut line of surgical saw blades, as well as the eLibra Dynamic Knee Balancing System for soft-tissue balancing.
Terms of the deal were not disclosed.
“Zimmer is committed to developing the industry’s most innovative range of technologies to support personalized therapies, from improved surgical power equipment to patient specific instrumentation and other intelligent tools that support optimal surgical outcomes,” said Jeff McCaulley, president of Zimmer’s orthopedic reconstruction division, of which Synvasive will become part. “The acquisition of Synvasive Technology further strengthens our surgical resection and advanced instrumentation offerings.”
In the surgical resection market, Synvasive has been “well recognized” for surgical cutting tools, according to Zimmer leadership. Synvasive’s eLIBRA system isdesigned to provide patient-specific, soft-tissue balancing during knee replacement surgery, establishing the optimal position of the femoral implant to enable a less-invasive surgical approach as well as improved stability, range of motion and patella tracking.
RTI Snaps Up Remmele to Boost Medtech Presence
RTI International Metals Inc., a manufacturer of titanium products, announced plans on Jan. 10 to purchase privately held Remmele Engineering for $182.5 million, with approximately $164.5 million in cash and the assumption of approximately $18 million in debt.
The move, according to company executives, is part of a plan to increase focus on the medical device sector. Remmele also offers precision machining and manufacturing engineering services, as well as supply sourcing, assembly and integration.
New Brighton, Minn.-based Remmele’s medical device business, which makes up just under half of its revenue, will be combined with RTI’s fabrication division, RTI’s President and CEO Dawne Hickton said on a conference call. According to Hickton, augmenting Remmele’s medical device reach will boost RTI’s fabrication division’s total revenue contribution to between 40 and 50 percent from the current 31 percent.
In January 2011, Remmele organized its medical device business into a wholly owned subsidiary called REI Medical Inc.
Remmele, which was bought by private equity firm Goldner Hawn Johnson & Morrison in 2007, also caters to the aerospace and defense sectors, which also is in line with RTI’s current business. Some of its customers include aerospace giants such as Airbus, Boeing and Bombardier.
RTI raised its revenue forecast for the current fiscal year to $520-$535 million from its prior outlook of about $500 million. Analysts, on average, were expecting revenue of $525.9 million, according to Thomson Reuters.
Titanium is used in artificial joints, bone plates, surgical devices, dental implants and screws. Its wide use is a result of its high strength, light weight, corrosion resistance, biocompatibility and low modulus. Titanium also has unique characteristics that allow bone growth and is compatible with magnetic resonance imaging and computed tomography energy.
“I am pleased to have such a high-quality organization become part of RTI. Remmele has a strong reputation among many of our shared aerospace and defense customers and holds the same standing in the medical device market,” said Hickton. “Our aerospace and defense customers are increasingly looking for partners that can provide a broader, more complete offering of titanium products and services alongside best-in-class engineering design, and this acquisition directly addresses that need.
The addition of Remmele’s advanced manufacturing platform and expertise reinforces RTI’s position as the supplier of choice for advanced, high quality titanium fabricated products and precision machined components.”
Remmele’s key senior leadership will remain with and continue to lead the Remmele organization. The deal is expected to close during the first quarter of 2012, subject to customary closing conditions, including regulatory approvals.
RTI International Metals is headquartered in Pittsburgh, Pa., and has locations in the United States, Canada, Europe and Asia.
Symmetry Buys J&J Codman’s Instrument Biz
Symmetry Medical Inc. agreed to buy the surgical instruments business of Codman & Shurtleff Inc., a division of Johnson & Johnson.
Symmetry nabbed the surgical instruments product portfolio and other associated assets for $165 million in cash.
Codman’s line of surgical instruments will be integrated with Symmetry’s current hospital direct business, called Specialty Surgical Instrumentation (SSI), creating a new business segment with more than $100 million in combined annual sales in the $1 billion worldwide market for general surgical instruments, according to officials from Symmetry. The combined hospital direct general surgical instruments business will be renamed Symmetry Surgical and will be based in Nashville, Tenn.
The deal included Codman’s reusable stainless steel and titanium surgical hand-held instruments and retractor systems, sterile disposable surgical products (vein strippers, SECTO dissectors, tonsil sponges and surgical marker pens), and sterilization containers. These products typically are used in the surgical specialties of spine, general/OB-GYN, microsurgery/neurosurgery, orthopedics, laparoscopy, cardiovascular, thoracic and general surgery.
The purchase is a solid move for Symmetry, executives insisted. It diversifies the company’s revenue base with higher-margin, hospital-direct products that make up approximately 25 percent of total revenue. Pro-forma 2011 revenue for the acquired surgical instrument business was approximately $60 million.
The deal also adds strategic logistics and procurement capabilities in Tuttlingen, Germany, to serve Symmetry’s OEM and hospital customers. As a result of Codman’s broad reach, the purchase also gives Symmetry a global presence in more than 60 countries, creating additional market opportunities.
Thomas J. Sullivan, president and CEO of Symmetry, said the purchase achieves a number of “strategic objectives,” including including diversification of the company’s revenue base with higher margin, intellectual property-backed products that generate strong cash flow.
“We believe the additional presence in demanding surgical specialty procedures and relationships with key surgeon developers will enhance Symmetry’s ability to bring innovative, value-add new products to the market for the benefit of both our OEM and hospital customers,” he said.
Sullivan will serve as president of Symmetry Surgical in addition to his current responsibilities at Symmetry Medical. Chris Huntington, Symmetry Medical’s chief operating officer, Asia, will be appointed to the position of chief operating officer of Symmetry Surgical. Huntington will lead integration efforts and report directly to Sullivan. The executive team of Symmetry Surgical will include a combination of senior leaders from the surgical instruments business of Codman and SSI, as well as newly recruited senior industry executives.
Symmetry Medical is based in Warsaw, Ind., and Codman is headquartered in Raynham, Mass.
New Study Predicts U.S. Trauma Market Expansion
According to a recent report from Toronto, Canada-based Millennium Research Group (MRG), the trauma device market in the United States, will grow at a steady pace through 2016.
Pricing pressures from the increasing influence of group purchasing organizations (GPOs) will limit average selling prices to some degree, but an increase in the size of the elderly population and the related increase in the incidence of osteoporosis will drive an expansion of procedure volumes, leading to an increase in market size to $3.8 billion in 2016.
Though there will be significant downward pressure on average selling prices, the adoption of premium-priced devices, such as plates and screws and intramedullary nails, will support revenues, according to the report’s authors. Growth in anatomic locking plate systems will be particularly strong through the forecasted period. Anatomic plates are thinner than standard plates and provide greater fixation for fractures at the distal and proximal ends of bones, while locking plates offer greater stabilization and reduced plate compression of bone, which is beneficial for individuals with comminuted fractures or poor bone stock. The versatility and applicability of premium-priced anatomic locking plate and screw systems to the extremities will drive their adoption. Synthes (soon to be a Johnson & Johnson company) has a significant share of this market while the remaining share is split among DePuy (also owned by J&J), Stryker, Zimmer and Smith & Nephew, and niche specialty firms such as Acumed, Wright Medical and Tornier.
“Large companies wishing to increase market share are focusing on lateral expansion through the acquisition of smaller competitors in the U.S. trauma device market,” said Daniel Brown, an MRG analyst . “For example, Johnson & Johnson’s expected acquisition of Synthes in 2012 will reinforce the disparity between competitors in the market. Additionally, Zimmer recently acquired ExtraOrtho, a competitor specializing in external fixation devices. Smaller competitors in the market will face difficulties in increasing market share due in part to larger companies offering device discounts through bulk purchases and relationships with GPOs, preventing smaller competitors who operate on a less flexible profit margin from contesting on price.”
Millennium Research Group’sreport includes procedure, unit, average selling price and revenue information, along with market drivers and limiters and competitive landscape for plates and screws, intramedullary nails, cannulated screws, conventional hip screws, ancillary trauma devices, external fixation devices, and long-bone growth stimulation devices.
European Union OKs Mazor Robotics’ Patent
The European Patent Office has grantedIsrael-based Mazor Robotics Ltd. a patent for what the company calls a “miniature bone-mounted surgical robot.”
The newly granted patent includes claims for surgical robots, including the company’s flagship Renaissance product, to be mounted to a patient’s spine. According to the company, this ability maximizes the likelihood of accurate positioning of implants during surgical procedures even if
patient movement occurs. The companyalready has received patent approval for this product in the United States and Canada.
Renaissance is a surgical robotic guidance system that enables surgeons to conduct spine surgeries in an “accurate and secure manner,” according to the company. Mazor received U.S. Food and Drug Administration and CE Mark approval in Europe for the Renaissance system last summer.
“This patent is an important new addition to our global intellectual property portfolio and increases the value of our spine franchise,” said Ori Hadomi, president and CEO of Mazor Robotics.
Renaissance—compared to the company’s original SpineAssist system, has a new design and human interface, as well as updated hardware and software. It also serves as a platform that will support future clinical applications, such as robotic-guided cranial surgeries. The company reports that its systems have been successfully used in the placement of more than 12,000 implants worldwide.