Misonix (Farmingdale, New York) said last week that has set its sights on spinning off its Laboratory and Sci-entific Division in order to focus entirely on the development of medical devices.

In unveiling the spin-off plan, the company said it has retained ThinkEquity Partners (San Francisco) to assist it in identifying "strategic opportunities" for the Laboratory and Scientific Division.

Michael McManus Jr., president and CEO of Misonix, said, that the lab/scientific division has been "very important for a number of years to generate cash flow," but that the company is now turning total focus to medical devices, which thus far has been driven by its high-intensity focused ultrasound (HIFU) technology for cancer treatment.

McManus told Diagnostics & Imaging Week that the plan to emphasize its medical device operations and capacity has been in the company's game plan for at least five years because of a close fit between med-tech opportunities and "our peoples' abilities."

As to why the possible spin-off comes at this particular moment in time, he said that the company has experienced "a confluence of things coming together." Those things, he said, consisted of sufficient time to focus on this sector, enough cash to support the effort, and the engineering and R&D capacity to pursue the goal of medical device emphasis.

Without giving a precise figure, McManus estimated that Misonix currently is directing about 7% of sales to medical device R&D but that this figure will fluctuate, going forward, according to regulatory demands and, thus, varied developmental needs.

"I think there may be different buyers," McManus said, when asked to speculate as to which companies might purchase the Laboratory and Scientific Division.

One such suitor he described as "a large, growing company selling beakers or tabletop items into schools and laboratories and research centers," along with other "incremental products." Such a buyer, he said, would not have to add "additional infrastructure" to incorporate the lab/science unit. And Misonix competitors in the same areas "wanting to pick up more market share" should be interested, he said.

McManus noted that the company would be willing to sell off one or more of the lab/science unit's different division, or all units as a package.

The division comprises four businesses: the Ultrason-ics line, consisting of ultrasonic devices used by research laboratories to process samples in biotech, pharmaceutical, chemical and industrial applications; the Fume Enclosures line, containing ductless fume enclosures that control hazardous vapors and noxious odors in research and forensic labs; the Mystaire industrial scrubbing line, an abatement system that removes airborne contaminants; and Labcaire (North Somerset, England), manufacturing automatic endoscope disinfection systems to UK hospitals.

"This is not a fire sale," McManus said. "[T]he value of each or together is something we're going to look at."

For FY3Q, ended March 31, the lab/science unit had revenues of $5.2 million, representing 48% of Misonix revenues. The division has the only long-term debt on Mison-ix's balance sheet, a mortgage on the Labcaire facility.

McManus credited the lab/science unit with being "a steady and reliable contributor" to company success and that spin-off represents "the best interests of Misonix, our shareholders and the businesses within the division."

Comparatively, the company's Medical Device unit "represents more than 50% of sales," McManus reported. "The number of commercialized medical devices has grown from one in 1999 to nine in 2005. These include products for laparoscopic surgery, neurological applications, lithotripsy and cosmetic surgery.

"An important application to drive our Medical Devices segment is the use of [HIFU] for the treatment of cancerous tissue. The acceptance and use of the Sonablate 500 for prostate cancer treatment continues worldwide outside the U.S. and is increasingly being viewed as a 'better alternative' to other prostate cancer modalities." He added: "We are working on developments to this HIFU technology platform that will allow for more in-depth treatment planning and for a reduction in procedure time."

The system is not yet approved in the U.S., but McManus predicted "accelerated" Phase II and Phase III clinical trials to support an FDA application for HIFU treatment of prostate cancer.

"A lot of men are going to Mexico or Europe," he said, where the system is approved for prostate cancer treatment "to have a procedure done that appears to have the same or better results" as other treatments. And he pointed specifically to lower rates of incontinence and impotence than other procedures.

Misonix also is developing HIFU products to treat other cancers, such as kidney, liver, and breast cancer. The company's ultrasonic platform is the basis for several medical technologies.

Other med-tech opportunities await, McManus said: "Using other forms of ultrasound technology, we expect to gain traction in the near future with products for wound debridement and bone cutting. We are also excited about some of our new projects in research and development, which include expanding the uses of therapy ultrasound on fibroids of the uterus, among other possibilities. In the cardiac market we are reviewing the use of our existing ultrasonic wire technology for application in veins and arteries."

Misonix has a minority equity position in Focus Sur-gery (Indianapolis), which uses HIFU technology to des-troy deep-seated cancerous tissues without effecting surrounding healthy tissue.

He also pointed to Misonix's Hearing Innovations (Tucson, Arizona) unit as offering growth opportunities. "We continue to believe in [Hearing Innovations'] technology and are encouraged by recent studies and articles on the benefits of ultrasonic bone conduction for hearing loss. We will proceed with limited expense to conduct additional clinical work on the application for this technology."

McManus said that with proceeds from the Laboratory and Scientific Division unit sale Misonix "will be well positioned to capitalize on our ultrasound platform by developing internally or acquiring dynamic new products and applications and enhancing our marketing efforts to drive the commercial success of our unique line of medical devices ... [I]t is clear to us that we should focus more on the potential for high growth in our Medical Devices business as a way to enhance shareholder value."

He added: "This is the right thing to do at the right time."

ThinkEquity Partners is an institutional investment firm that describes itself as focused on the growth sectors of the "knowledge economy."

No Comments