A Medical Device Daily
Synovis Life Technologies (St. Paul, Minnesota) said it has agreed to acquire substantially all the assets of Pegasus Biologics (Irvine, California), a private medical device company focused on the development of advanced biological solutions for soft tissue repair.
The purchase price is $12.1 million in cash and resulted from a sealed bid auction process, Synovis said. The company expects to close the deal by July 15, using current cash reserves.
According to the company, roughly 10,000 patients had been treated with Pegasus' equine pericardial products in various orthopedic and complex wound applications from March 2006 to May 2009, when Pegasus effectively ceased operations after attempts to raise additional operating capital were unsuccessful due to the overall economic climate. Previously, Pegasus had obtained more than $38 million in venture equity and debt. In 2008, Pegasus generated $9.1 million in revenue and had about 75 employees at year-end. Synovis said it plans to maintain Pegasus' manufacturing operations in Irvine and will operate the acquired assets as a separate division.
"Growth through acquisition, in addition to organic growth, is a strategic priority for Synovis," said Richard Kramp, Synovis president/CEO. "We are very pleased to have the opportunity to combine the talent, technology and products of Pegasus with our own and to enter two additional high potential markets. Pegasus is an especially strong fit for Synovis; the company has complementary technologies and soft tissue repair products – already FDA cleared and CE marked – giving Synovis access to the large and growing orthopedic and wound care markets. Pegasus products are consistent with our mission of providing surgical solutions that minimize risks, improve patient outcomes and reduce healthcare costs."
Synovis said it plans to market the acquired products with a combination of direct sales people recruited from the recently disbanded Pegasus sales force, and independent sales distribution, and to focus this sales team solely on the acquired products. Synovis expects to regain Pegasus' 2008 revenue levels in fiscal 2010 and to make immediate and meaningful reductions in operating expenses from those historically incurred by Pegasus. However, Synovis also anticipates the new division will incur operating losses between $1 million and $2 million in the fourth quarter of fiscal 2009 and potentially $5 million in fiscal 2010, while reaching breakeven during fiscal 2011 and being accretive after that, the company noted. Kramp said, "As we move forward, we see opportunities to leverage our infrastructure and certain operating expenses to reduce costs, as well as the potential to achieve gross margins similar to our current gross margins. Given the compressed timeline of the auction process, these future estimates are preliminary and could change materially as we integrate the new business."
Kramp continued, "We have the knowledge and resources to drive the Pegasus technologies and products to a significant place in their respective markets, and this transaction is an important investment in our long-term growth. Our immediate priorities for this acquisition are to appoint leadership and rebuild the sales staff for our newest division while reconnecting with physician customers."
In other dealmaking activity:
• iMedX (Shelton, Connecticut), a healthcare software and services company, reported that it has acquired Medware (Orlando, Florida). With this acquisition, iMedX says it expands its reach into the hospital market and emerges as one of the largest medical transcription companies in the U.S.
• VeriChip (Delray Beach, Florida), a provider of radio frequency identification (RFID) systems for healthcare and patient-related needs, said it has sold the VeriTrace system, including 1,000 RFID microchips, for disaster preparedness and emergency management needs to Calvert Memorial Hospital (Prince Frederick, Maryland).
The VeriTrace system was created in the aftermath of Hurricane Katrina where it was used by the Federal Disaster Mortuary Operational Response Team to help identify, track and account for the remains of hurricane victims.
• NexMed (East Windsor, New Jersey), a developer of products based on the NexACT drug delivery technology, reported a mutual decision with Novartis (Basel, Switzerland) to terminate the licensing agreement for NM100060, a topically-applied treatment for nail fungus. The companies entered an agreement in September 2005, under which Novartis assumed all clinical development, regulatory, manufacturing and commercialization responsibilities for the product.
NexMed said that the results from the comparator study of NM100060 vs. Loceryl, a topical nail lacquer currently marketed in Europe, showed comparable safety and efficacy profiles for the two products in patients with mild to moderate toenail fungus. In the post hoc analysis of patients with mild fungus, NM100060 showed higher efficacy, which was consistent with the results from the two Phase III pivotal studies completed by Novartis in 2008. However, the study results were insufficient to support filing for marketing approval, the company noted.
"There were lessons learned from the studies which warrant further development of this product," said Vivian Liu, NexMed's CEO. "We decided that NexMed will proceed with potential new licensing discussions. We have already received inquiries from companies with a focus in dermatology who are interested in commencing discussions."