Medical Device Daily

Iridex (Mountain View, California) said it has completed the acquisition of the aesthetics business of Laserscope.

The company entered into an agreement with Laserscope (San Jose, California) and American Medical Systems Holdings (AMS; Minneapolis) on Nov. 30, 2006.

Iridex has acquired certain assets and liabilities of Laserscope, including four patents, a license to an additional nine Laserscope patents, and a license under Palomar hair removal patents, for $26 million in cash and roughly 214,000 unregistered shares of Iridex common stock.

Iridex has also acquired between $7.3 million and $9.5 million in net assets in the transaction, including accounts receivable from Laserscope. The cash payment and net assets are subject to post closing adjustments. The company used a combination of existing cash and bank financing, provided by Mid Peninsula Bank, to close the deal.

AMS and Iridex reported signing the agreement late last year (Medical Device Daily, Dec. 4, 2006), and AMS reported completion of the deal earlier this week (MDD, Jan. 18, 2007). AMS bought Laserscope in July for $715 million (MDD, July 21, 2006).

Laserscope makes minimally invasive medical products, including medical laser systems and related energy delivery devices.

“We are very excited about the potential for shareholder returns generated by combining the Laserscope team of employees and technology with the current capabilities at Iridex,” said Barry Caldwell, president/CEO. “We have already begun the integration process and will begin cross-training sessions with the U.S. sales, service and clinical teams next week.”

Based on the company’s assessments of its opportunities in 2007, Caldwell said Iridex revenue, on a combined basis for the full year 2007, should be about $75 million. That would compare with preliminary full year 2006 revenue of roughly $36 million, he said.

The preliminary 2006 revenue result is below the company’s original forecast, due to a combination of orders falling short of expectations for dermatology and international ophthalmic equipment and to manufacturing capacity constraints that impacted the shipping of one of its recently introduced laser products, Caldwell said. As a result, he said the company expects its fourth quarter revenue to be about $9 million with nearly $600,000 in backlog.

“With the acquisition closed, we are now focused on refining our 2007 plan. We do expect that for the year, not including any one-time charges associated with the acquisition, we will generate solid profitability on a GAAP basis and have approximately 8.8 million shares outstanding as of today. We currently plan to provide further detail on our 2007 outlook when we report our final fourth quarter and 2006 results in early March,” Caldwell said.

Iridex is a provider of therapeutic-based laser systems, disposable laser probes and delivery devices to treat eye diseases in ophthalmology and skin diseases in dermatology markets (also referred to as aesthetics). Its products are sold in the U.S. through a direct sales force and internationally through a network of 77 independent distributors into 107 countries.

In other dealmaking news:

Southern Home Medical Equipment (Spartanburg, South Carolina) reported closing of the purchase of Apnea RX (Clemson, South Carolina), a durable medical equipment (DME) company focused on the sleep market with a secondary focus on respiratory. Terms of the purchase were not disclosed.

Based on current revenues, Apnea RX is projected to finish 2007 with about $600,000 in revenues.

“Apnea RX is on the fast track for explosive growth in the sleep and respiratory segments of the market,” said Greg Tucker, president of Southern Home Medical. “As we have stated before, 80% to 90% of adults with clinically significant sleep disordered breathing remain undiagnosed and we feel that the Apnea RX team is poised to play a significant role in helping those with sleep related issues.”

Southern Home Medical is a holding company with a focus of operations in the southeastern U.S. Formed in January 2005, it said it will expand operations through acquisition of existing DME companies and through the start up of additional sites in strategic locations throughout the Southeast.

The company provides in-home and nursing home patients with medical equipment including oxygen concentrators, semi-electric beds, wheelchairs, CPAPs, BiPAPs, and enteral tube feeding. In addition, Southern Home has the capability of diversifying into other health and wellness- related businesses through its “Encore” Division, the company said.

“As we close on other durable medical equipment transactions, we plan to introduce the sleep related expertise of the Apnea RX team into each location and we fully expect that the sleep segment will add additional revenue possibilities in all of our future locations,” Tucker said.