A Medical Device Daily
Alphatec Holdings (Carlsbad, California) has priced its initial public offering (IPO) of 9.3 million shares of common stock at $9 per share and has also granted the underwriters an option to purchase up to an additional 1,395,000 shares at the IPO price to cover any over-allotments. The common stock will trade on the Nasdaq National Market under the symbol ATEC.
Net proceeds from the offering are expected to be about $71.4 million, or $83.1 million if the underwriters exercise their over-allotment option in full, after deducting the underwriting discounts and commissions and the estimated offering expenses. This number is significantly under the SEC filing ceiling in which the company said it was seeking to raise up to $149.5 million (Medical Device Daily, Feb. 15, 2005).
Alphatec said it expects to use about $35.7 million of the net proceeds from the offering to expand its sales and marketing activities, to support its research and development efforts, to fund the clearance or approval and subsequent commercialization of its near-term product candidates, to acquire complementary businesses, products, or technologies, or to obtain the right to use such complementary technologies, to pay down debt; and for general corporate purposes. The remaining net proceeds from the offering will be used to satisfy redemption and dividend obligations to Alphatec's existing stockholders, it said.
Deutsche Bank Securities and First Albany Capital acted as joint book-running managers and RBC Capital Markets acted as co-manager for the offering.
The company makes a variety of products primarily for the spine fusion market in the U.S., and it participates in the Japanese spine fusion and orthopedic trauma markets through its subsidiary, Alphatec Pacific.
Alpahatec's FDA-approved product line consists of spine screws, spinal spacers and plates and other components. Its target market is about 15,000 U.S. surgeons, selling through a network of independent distributors as well as a direct sales force. It reports that in 2005 its products were used in about 4,500 surgical procedures.
About 38% of its sales came from its line of Zodiac polyaxial pedicle screws, and it says that loss of licensing rights (the '555 license) related to this product line from Biomet (Warsaw, Indiana) is a significant risk factor. Additionally, it noted that the validity of the U.S. patents covered by the '555 license “is being challenged by Medtronic [Minneapolis] in an infringement action brought by Biomet in the U.S.”
It added that the European patent covered by the '555 license agreement “has recently been revoked by the European Patent Office after it was successfully challenged in an opposition proceeding in Europe initiated by Stryker [Kalamazoo, Michigan] and Synthes [Oberdorf, Switzerland].” Biomet, it said, can appeal this decision.
Alphatek acquired Cortek (Dedham, Massachusetts) late last year (MDD, Sept. 15, 2005) and is in the process of integrating the operations of the two companies. Cortek gives its complementary offerings in precision-milled allograft spacers for interbody fusion. With the purchase, Alphatec said that it would expand Cortek's line of allograft products within existing markets, using its own distribution and sales network.
The company was founded in 1990 by Shunshiro “Roy” Yoshimi, the current president, CEO and chairman of its Alphatec Pacific subsidiary. The company initially focused on being a contract manufacturer of medical devices, and it then moved into the spine fusion market in 2003-2004.
Luna Innovations (Roanoke, Virginia), which develops molecular and sensing technologies, has amended its previously disclosed initial public offering (IPO) reducing the deals value by about 27% to $32 million (Medical Device Daily, Feb. 15, 2006).
The IPO will now consist of 4 million shares offered at $6 to $8 apiece, down from $11 to $13, previously, the company said in a filing with the Securities and Exchange Commission. The $32 million figure assumes that the offering prices out at the high end of the new range.
Managers of the offering have received an option to sell up to 600,000 additional shares to cover any over-allotments.
The company said that proceeds from the offering will be used to pay for further development and expansion of Luna's products and product candidates, and for general working-capital purposes.
Among the risks listed by Luna is its plan to develop and commercialize “multiple products . . . across many industries, technologies and markets” and the possibility that it cannot manage this “simultaneously.” It said that as of Dec. 31, 2005, it had “68 research contracts covering a broad range of technologies . . .” and that “expanding our operations into new geographic areas and relying on multiple facilities to develop and manufacture different products concurrently pose additional challenges.”
The shares are expected to trade on the Nasdaq Stock Market under the symbol LUNA.
Luna's technologies have a range of uses, including MRI testing, solar cells, protective coatings, and wireless and fiber-optic monitoring systems.
In other financings news:
• Bioject Medical Technologies (Tualatin, Oregon), a developer of needle-free drug delivery systems, reported the completion of a $5.75 million financing with certain affiliates of Sanders Morris Harris (SMH) and shareholder approval of the equity conversion feature of its March 2006 term loan with Partners For Growth (PFG).
The company said it also entered into a development and supply agreement with Merial (Duluth, Georgia) for the Vitajet 3 needle-free device.
At the annual shareholder meeting, held May 24, the shareholders approved the issuance of about $4.5 million of Series E preferred stock to affiliates of SMH. Under the terms of the agreement with the SMH affiliates, upon shareholder approval and satisfaction of other closing conditions, the company received proceeds of $3 million from the issuance of shares of Series E preferred stock at a price of $1.37 per share. In addition, $1.5 million of convertible notes issued to certain SMH affiliates in March 2006, plus accrued interest, converted into shares of Series E preferred stock, also at a price of $1.37 per share.
The shareholders also approved the conversion feature included in the debt financing of $1.25 million entered into with PFG in March. The debt is convertible by PFG at any time into Bioject's common stock at a price of $1.37 per share.
“We believe with the additional funds, the signing of the additional agreement with Merial and future anticipated agreements, we are positioned to continue to execute our strategy and achieve operating profitability within the next 15 to 18 months,” said Jim O'Shea, chairman, president and CEO of Bioject.
• Nephros (New York) reported that the company has entered into subscription agreements with several investors for the sale of an aggregate of $5 million principal amount of 6% secured convertible notes due 2012, for the face value.
Principal and accrued interest on these notes will be convertible at any time at each holder's option into shares of Nephros common stock at an initial conversion price of $2.10.
“In keeping with our mission, the funds will support product development and marketing, and provide working capital as we continue to pursue regulatory approvals, bring our ESRD therapy products to market, and embark on commercializing our water filtration technology,” said Norman Barta, Nephros's CEO.
Nephros is developing products designed to improve the quality of life for the end-stage renal disease (ESRD) patient, while addressing the critical financial and clinical needs of the care provider. The company also markets filtration products complimentary to its core ESRD therapy business. Nephros has also developed a new water filtration device that is designed to remove a broad range of bacteria, viral agents and toxic substances, including salmonella, hepatitis, HIV, Ebola virus, ricin toxin, legionella, fungi and e-coli.