Medical Device Daily
It was a pretty big day in the way of news for orthopedics firm Orthofix (Lewisville, Texas).
Not only did the med-tech company say that it had wrapped up a loose end that has plagued one of its most profitable products for a while now, but the firm also reported restructuring measures that will see it cut an unspecified number of its staff. The firm also said that it was leaving its longtime home in Boston and setting up shop in Lewisville Texas.
On the restructuring bid the firm plans to save up to $7 million per year with a plan that will is designed to streamline operations within its three Global Business Units: Spine, Orthopedics and Sports Medicine.
The company said that it expects to record a charge related to employee termination benefits of nearly $4 million ($2.4 million net of tax, or 13 cents per diluted share) in 4Q10 in connection with the reorganization.
“The global reorganization we announced today is another key step toward the achievement of our plan to improve our operating profit margin, and was facilitated in part by the recent consolidation of operations into our new facility in Lewisville, Texas. This initiative will result in substantial annual savings after the initial fourth quarter charge,“ said Alan Milinazzo president/CEO of Orthofix.
The move was only natural as the firm has had just a little more than a dozen people in its Boston office.
“Keep in mind we've never had a big presence Boston,“ Robert Vaters Executive VP and CFO said. “ We've only had 14 or 15 people [in the Boston office].“
But the biggest news from Orthofix comes from the fact that it and the Musculoskeletal Transplant Foundation (Edison, New Jersey) have executed a comprehensive settlement agreement with NuVasive (San Diego) and Osiris Therapeutics (Columbia, Maryland) concerning the Trinity Evolution tissue allograft.
The lawsuit was filed in April of this year in the U.S. District Court for the District of New Jersey alleging that Trinity Evolution infringes intellectual property owned by NuVasive and Osiris. As part of the comprehensive settlement the parties entered into a license agreement covering Trinity Evolution, the primary subject of which is U.S. Patent No. 6,355,239.
In connection with this settlement Orthofix will record a charge of $2 million, ($1.2 million net of tax, or 7 cents per diluted share) in 4Q10.
“The settlement is a good arrangement for the company“, said Michael Finegan VP, corporate development, and president of Biologics during a conference call. “We've got a valuable license going forward. The terms that we came to were very pleasing to all parties involved. We will pay a royalty to NuVasive. “
Company executives said that this finally shines a light on a “dark cloud“ that had been hovering over Trinity Evolution allograft, one of the firm's most “profitable products.“
It's been a busy year for Orthofix to say the least.
Back in March, the firm said it had sold the assets of its vascular business, including its AV-Impulse mechanical compression technology, to Covidien (Dublin) (Medical Device Daily, March 10, 2010).
As part of the sale, Orthofix agreed to provide transitional services to Covidien for a period of up to five months.
Additionally, under the terms of two supply agreements, Orthofix will provide Covidien with 2-years' worth of Impads used in conjunction with the compression therapy devices being sold, as well as with additional products relating to this business for a 90 day period.
And in September the company said that it had established a new $300 million five-year credit facility, including a $200 million senior secured revolving line of credit and a $100 million senior secured term loan. JP Morgan Chase Bank acted as sole bookrunner and joint lead arranger along with RBS Citizens (MDD, Sept. 1, 2010).
The new credit facility, which replaces the company's prior facility, includes a $50 million expansion feature and includes an interest rate of LIBOR plus 3.00% on both the revolving line of credit and the term loan. This compares with a rate of 6.75% the company had been paying on its prior facility.
Omar Ford; 404-262-5546;