A Medical Device Daily

Orthopedic device maker Exactech (Gainesville, Florida) said it intends to exercise its 2003 investment agreement option to acquire the stock and assets of Altiva (Charlotte, North Carolina), a company that makes spinal implant devices and related products (Medical Device Daily, Oct. 31, 2003). Altiva offers a spinal fusion product line with implants and instrumentation that address the major indicated spinal pathologies and focus areas of traditional spinal surgery.

The pre-determined $25 million purchase valuation of Altiva is based on Exactech’s sales multiple and Altiva’s trailing 12 months revenue. Exactech’s final payment of $7 million will consist of a combination of cash and Exactech common stock and is expected to be funded from its current financing facilities. Altiva’s annualized sales revenue is about $13 million, based on the results of the first nine months of 2007. Altiva is expected to break even in terms of operating profit in the first half of 2008. Exactech expects the transaction to be neutral to earnings in 2008 and accretive in 2009.

As a wholly owned subsidiary of Exactech, Altiva will continue to operate from its Charlotte, North Carolina, headquarters and will maintain separate sales, marketing, engineering and operational functions.

“Exactech invested in Altiva during October 2003, while Altiva was in its formative stage as a spinal products company. Since that time, with the investment and credit line secured by Exactech, Altiva has combined acquisitions of intellectual property with various distribution agreements to assemble a strong spinal products portfolio,” said Exactech CEO/chairman Bill Petty.

Altiva said it has multiple development projects underway, most notably a collaboration with a group of spinal surgeons focused on the rapidly emerging motion preservation market. It owns a number of patents and licensing arrangements, including those relating to pedicle screw technologies. Exactech expects to close the transaction in 1Q08 at which time it will update its 2008 revenue and earnings guidance.

Exactech develops orthopedic implant devices, related surgical instruments and biologic materials and services.

Volcano (San Diego), a provider of intravascular ultrasound (IVUS) and functional measurement (FM) products designed to enhance the diagnosis and treatment of vascular and structural heart disease, said it has reached a definitive agreement to acquire CardioSpectra (San Antonio), a privately-held company developing optical coherence tomography (OCT) technology, for $25 million in cash.

Volcano said CardioSpectra’s unique OCT imaging system is expected to complement its existing product offerings and will further enhance Volcano’s position as an imaging technology leader in the field of interventional medicine.

Volcano will pay $25 million in cash at closing, which is expected to occur by the end of the year. In addition, it may make additional payments based on the achievement of certain product development, regulatory and revenue milestones. Any future payments may be made in cash or stock or a combination of both at Volcano’s discretion.

Founded in 2005, CardioSpectra’s core product line is based on technology licensed from the University of Texas (Austin) and Thomas Milner, PhD, a co-founder of CardioSpectra.

“We believe CardioSpectra’s OCT technology and products will be an important addition to Volcano, as we expect that it will allow us to expand our reach into clinical situations where extremely high resolution imaging is paramount,” said Scott Huennekens, president/CEO of Volcano. “Our long term goal is to integrate this OCT functionality directly into our s5i integrated imaging suite of products - offering hospitals and physicians a complete, multi-functional capability that seamlessly provides IVUS, functional measurement and OCT all in one system.”

CardioSpectra’s offering consists of a console with advanced custom software, a pull-back device and disposable catheters. The system and accessories are not approved for human use at this time. The company expects to file for appropriate U.S. and international approvals during 2008. CardioSpectra holds a number of issued U.S. patents on its technology with many additional patents pending.

Volcano indicated that it will discuss the impact of this transaction on its expected fiscal 2008 results when it provides guidance for fiscal 2008 on its fourth quarter conference call in February.

Volcano offers devices designed to facilitate endovascular procedures, enhance the diagnosis of vascular and structural heart diseases and guide optimal therapies.

In other dealmaking news:

• Following a public comment period, the Federal Trade Commission (FTC) said it has approved the issuance of a final consent order in the matter concerning Kyphon’s (Sunnyvale, California) proposed acquisition of certain vertebral compression fracture repair system assets of Disc-O-Tech Medical Technologies (Herzlyia, Israel) and Discotech Orthopedic Technologies (Monroe Township, New Jersey). The commission vote approving the issuance of the final order was 3-0-2, with commissioners Pamela Jones Harbour and William Kovacic recused.

In October, the FTC agreed to allow Kyphon to buy Disc-O-Tech, subject to the sale of some assets to address antitrust concerns (MDD, Oct. 11, 2007).

The FTC said the approval was contingent on Kyphon selling Disc-O-Tech’s Confidence product lines, which are used to treat vertebral compression fractures often linked to osteoporosis.

A complaint by the FTC alleged that Confidence is Kyphon’s main competitive threat and, absent the acquisition, would make significant inroads into its near-monopoly position in this market.

Kyphon was acquired by Medtronic (Minneapolis) last month for $4.2 billion (MDD, Nov. 7, 2007).