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IsoTis (Irvine, California) reported that it has expanded its existing private label agreement with AlloSource (Centennial, Colorado), its primary supply partner and a non-profit provider of bone and soft tissue allografts for use in surgical procedures.

The agreement took effect on May 18. Upon closing, IsoTis received a payment of $2.5 million. On the first anniversary of the expanded agreement, an additional earnout milestone payment may be due by AlloSource, based on and depending on first year sales by AlloSource.

Under the new agreement, AlloSource will receive an exclusive license to use the intellectual property required to manufacture products similar to IsoTis' first-generation demineralized bone matrix (DBM) products in North America, and a non-exclusive license to market them to and through AlloSource's own distribution or private label partners.

IsoTis retains all intellectual property and rights on global manufacturing and distribution, including the ability to enter into additional private label agreements. It will remain the sole manufacturer for its own first generation products, DynaGraft II & OrthoBlast II, for the first-generation DBM products it currently manufactures under private label agreements with parties other than AlloSource, as well as for private label products under potential new contracts IsoTis may enter into.

IsoTis' Accell family of products (Accell 100, Accell Connexus, Accell TBM and any new Accell products IsoTis may develop), are not related to nor affected by the expanded agreement with AlloSource, and IsoTis remains the sole and exclusive manufacturer and market supplier of Accell products.

"The agreement fits our increased focus on the further development of our proprietary Accell technology and the commercial rollout of the Accell products, which represented approximately 70% of our U.S. sales in the first quarter of 2007," said Pieter Wolters, president/CEO of IsoTis. "The $2.5 million upfront payment gives us additional room to consider the various financing alternatives for investments in our future growth and current operations."

IsoTis develops products for the treatment of musculoskeletal diseases and disorders. IsoTis' current orthobiologics products are bone graft substitutes that promote the regeneration of bone and are used to repair natural, trauma-related and surgically-created defects common in orthopedic procedures, including spinal fusions.

In other dealmaking news: Champions Biotechnology (Arlington, Virginia) said that it has entered into a plan of merger with Biomerk, a private biotechnology company. Champions will issue 4 million restricted shares of its common stock to acquire Biomerk.

Biomerk is focused on generating a preclinical platform of human cancer tumor immune-deficient mice xenografts (Biomerk Tumorgrafts).

The company, founded in 2006, is owned by David Sidransky, MD, a major company shareholder.

James Martell, president/CEO of Champions, has served as a consultant to Biomerk, providing advice regarding the management and administration of Biomerk.

Champions said it was interested in acquiring Biomerk since it believes that there are significant synergies between the know-how, expertise and proposed business of Biomerk and the biotechnology business embarked upon by Champions.

Biomerk provides Champions with access to a novel preclinical technology platform. It also provides interim financing to cover current operating costs until longer term capital is obtained to finance Champions Biotechnology's future development, since Biomerk has about $475,000 cash. In addition, it has certain business relationships that Champions believes will be helpful in achieving its business plan.

"This acquisition is Champions Biotechnology's second acquisition since our decision in January 2007 to focus on building a biotechnology company from the ground up as our new business approach," said Martell. We are actively engaged in pursuit of additional opportunities to grow and strengthen the company."

After the acquisition, Champions will have 31,624,658 issued and outstanding common shares. Of those, 23,573,000 will be restricted common shares.

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