Regeneration Technologies and Tutogen Medical (both Alachua, Florida) yesterday reported a plan to merge in a tax free, stock-for-stock deal worth about $263 million.
Regeneration processes human (allograft) and animal (xenograft) tissue into shaped implants for use in orthopedic and other surgeries with a commitment to science, safety and innovation.
Tutogen makes sterile biological implant products made from human and animal tissue.
The deal is expected to close in 1Q08.
Tutogen shareholders will receive 1.22 shares of newly issued Regeneration common stock in exchange for each share of Tutogen common stock they own. Based on Regeneration’s closing stock price of $10.54 a share on Nov. 12, this represents a value of $12.86 per Tutogen share, or an aggregate equity value of about $263 million. Regeneration stockholders will own about 55% of the combined company and Tutogen stockholders will own 45% of the company, on a diluted basis.
According to the two firms, their combination will provide sterile biologic solutions for patients around the world, with a mix of implants and distributors. The merged company will also see cost synergies and enhanced opportunities for revenue growth, the companies said.
“It is easy to see how these two companies fit together to become a global leader in providing sterile biological solutions to patients around the world,” Brian Hutchinson, Regeneration’s president/CEO and chairman told conference call listeners yesterday. “Both companies have a strong commitment to safety and sterilization of biologic implants and a strong sense of responsibility to honor donor families and help recipients and a culture of investments to innovate and meet growing needs of the medical community.”
Guy Mayer, president/CEO of Tutogen, said during the call that the companies have little or no overlap in the markets they serve.
“The opportunity to significantly increase key tissue availability for the sports medicine, hernia repair, and breast reconstruction markets will certainly continue to fuel our strong, established growth rates,” Mayer said.
The combined company expects to have 56 million shares outstanding upon the closing, 31 million currently outstanding shares of Regeneration common stock, 25 million shares of Regeneration common stock to be issued to Tutogen shareholders.
The company will be headquartered in Alachua, with Hutchison serving as CEO and chairman. Tom Rose, currently VP, CFO and secretary of Regeneration, will serve in the same capacity of the combined entity. Mayer will become president of the combined company, with a focus on international activities and sales and marketing. He will also join the board of directors. L. Robert Johnston, currently VP and CFO of Tutogen, will serve as VP of finance.
Hutchinson said the company would have about 750 employees with facilities in the U.S., Germany, and France. The new board will include all seven directors from Regeneration’s board and five directors from Tutogen’s board.
Specific benefits of the merger, Hutchinson said, include: diversification of markets, enabling the company to help more patients with sterile, biological solutions; balanced distribution model with reduced concentration risk; accelerated growth of xenograft products; combination of strong recovery networks; and expansion of distribution and marketing teams.
Also, Rose said during the call that available synergies include about $5 million to $6 million of cost savings, and potential revenue enhancement opportunities. “We expect substantial savings to come from reduction of public company costs, duplicate facility and laboratory testing fees, redundant insurance costs and reduced advisory, legal and accounting fees,” he said.
The combined company is expected to have in excess of $30 million in cash at Dec. 31 and be generating positive operating cash flow.
Lehman Brothers is financial advisor to Regeneration and Fulbright & Jaworski is legal counsel. Cowen and Co. is financial advisor to Tutogen and Mintz, Levin, Cohn, Ferris, Glovsky and Popeo is legal counsel.
In other dealmaking activity:
• Prescient Medical (Doylestown, Pennsylvania) said it has acquired a new technology designed to identify and quantify metabolic activity and inflammation in human artery tissue by measuring the time it takes for light to dissipate after the tissue has been excited with ultra-short light pulses. Terms were not disclosed.
The technique, called Time Resolved Light Induced Fluroescence Spectroscopy (TR-LIFS), exploits the phenomenon that bi-products of metabolic activity behave differently than surrounding tissue. In TR-LIFS, a short light pulse (picoseconds) is used to excite the tissue, and then the resulting light that emanates from the tissue is monitored over a brief time span (several nanoseconds). According to the company, the technology accurately detects inflammation in human tissue in vitro and in vivo.
• Aperio Technologies (Vista, California) said it has secured an exclusive worldwide license from Los Alamos National Laboratory (LANL; Los Alamos, New Mexico) for the use of its Genetic Imagery Exploration (Genie Pro) image pattern recognition technology in the digital pathology market. Terms were not disclosed.
Aperio said it would incorporate Genie Pro into its Spectrum digital pathology information management software, enabling it to be used as a pre-processing engine for various tissue scoring algorithms, such as finding tumor regions in digital immunohistochemistry (IHC) slides. Genie Pro also will be offered as a general pattern recognition tool for applications that include rare event detection, content-based image retrieval, and tissue classification, the company said.
• Roche Holdings (Basel, Switzerland) said it has signed licensing and settlement agreements with Ortho-Clinical Diagnostic (Raritan, New Jersey) and Novartis Vaccines & Diagnostics (Basel, Switzerland) in the field of Hepatitis C virus diagnostics. Financial terms of were not disclosed.
Ortho and Novartis have granted Roche Diagnostics (Indianapolis, Indiana) a worldwide royalty-bearing license under its portfolio for Hepatitis C virus in the field of immuno-diagnostics. The agreement also includes cross licensing of patents owned by Roche, the companies said.