Merit Medical Systems to acquire
Cianna Medical
Cianna Medical
Merit Medical Systems to acquire Cianna Medical for $135 million
October 03, 2018
by John R. Fischer, Senior Reporter
Merit Medical Systems Inc. has agreed to acquire Cianna Medical Inc. for an upfront payment of $135 million.
The multi-specialty manufacturer is expected to complete its transaction for the California-based enterprise at the closing of the fourth quarter of 2018, providing its customer base with access to wire-free breast localization tools, including Cianna’s SCOUT and SAVI Brachy technologies.
"This transaction adds to Merit a technology leader in breast tumor localization that is precise, highly directional, and visible," said Merit's chairman and chief executive officer Fred P. Lampropoulos, in a statement. "With more than 350 initiations and 45,000 wire-free localizations to date, the SAVI SCOUT is complementary to Merit's strategic biopsy initiatives." Additionally, Merit intends to market the SAVI Brachy, which uses thin tubes to deliver radiation to lumpectomy sites.
A developer of the first nonradioactive, wire-free breast localization system, Cianna is the only manufacturer in the world of technology that utilizes RADAR in human tissue, according to Merit.
Launched in 2015, the SCOUT Radar Localization System enables clinicians to localize tumors a day prior to the surgery, shortening procedure time compared to conventional wired systems. Such a feature has enabled revenues for the device to grow from $1 million at its debut to a projected $29 million in 2018, with its current estimated market share at approximately 5 percent with no revenues currently outside of the U.S.
It also allows surgeons to target affected tissue within +/-1 millimeter of its location, and can be used both for lumpectomy localization and to mark biopsy sites without creating any significant artifacts on MR images.
The SAVI Brachy platform is designed for single-entry ease, with its catheters expanding to fit the size and shape of a tumor cavity, and delivering radiation in the form of interstitial brachytherapy combined with tissue-sparing dosimetry capabilities. Merit, however, will only market the catheter and is not involved in the development, sale or transport of radiation seeds.
The structure of the agreement also includes potential earn-out payments of $15 million for achievement of supply chain and scalability metrics as part of the initial $135 million payment, and up to $50 million more for the achievement of sales milestones.
In addition, Merit plans to maintain all commercial and R&D teams from the Cianna family and to enhance overall coverage as well as logistical and clinical support in areas that are currently underserved by Cianna Medical.
“Our companies share a rich history of developing technologies that put patients' needs first. Merit Medical brings exceptional resources to the Cianna Medical team that will intensify its growth and broaden its focus beyond breast cancer,” Cianna Medical president and CEO Jill Anderson said in a statement. “I am delighted that Mr. Lampropoulos will lead an efficient integration of our companies for the benefit of our employees, physicians, hospitals and the women we serve."
The transaction has been approved by the board of directors for both companies, and is subject to the satisfaction or waiver of certain closing conditions, including the approval of Cianna Medical stockholders, clearance under the Hart-Scott Rodino Antitrust Improvements Act, and other customary closing conditions.
If completed, the proposed transaction in 2019 will be non-accretive to Merit earnings per share on a GAAP basis in the range of $0.06-$0.10 per common share and accretive to Merit earnings per share on a non-GAAP basis in the range of $0.08-$0.13 per common share. Anticipated GAAP gross margins on Cianna Medical products are 55-65 percent, and for non-GAAP margins, 70-75 percent. They are accretive to both Merit’s GAAP gross margin and non-GAAP gross margin in the range of 55-130 basis points with add revenues in the range of $50-$56 million.
Financial advisors who oversaw the deal for Merit were Piper Jaffray & Co. and Raymond James & Associates. J.P. Morgan Securities LLC acted as financial adviser to Cianna Medical, while legal advisers included Parr Brown Gee & Loveless P.C. for Merit, and Wilson Sonsini Goodrich & Rosati, P.C. for Cianna Medical.
Both SCOUT and SAVI Brachy are FDA cleared. SAVI Brachy is also CE marked while SCOUT is expected to obtain the same accreditation in 2019.
Merit Medical Systems did not respond for comment.
The multi-specialty manufacturer is expected to complete its transaction for the California-based enterprise at the closing of the fourth quarter of 2018, providing its customer base with access to wire-free breast localization tools, including Cianna’s SCOUT and SAVI Brachy technologies.
"This transaction adds to Merit a technology leader in breast tumor localization that is precise, highly directional, and visible," said Merit's chairman and chief executive officer Fred P. Lampropoulos, in a statement. "With more than 350 initiations and 45,000 wire-free localizations to date, the SAVI SCOUT is complementary to Merit's strategic biopsy initiatives." Additionally, Merit intends to market the SAVI Brachy, which uses thin tubes to deliver radiation to lumpectomy sites.
A developer of the first nonradioactive, wire-free breast localization system, Cianna is the only manufacturer in the world of technology that utilizes RADAR in human tissue, according to Merit.
Launched in 2015, the SCOUT Radar Localization System enables clinicians to localize tumors a day prior to the surgery, shortening procedure time compared to conventional wired systems. Such a feature has enabled revenues for the device to grow from $1 million at its debut to a projected $29 million in 2018, with its current estimated market share at approximately 5 percent with no revenues currently outside of the U.S.
It also allows surgeons to target affected tissue within +/-1 millimeter of its location, and can be used both for lumpectomy localization and to mark biopsy sites without creating any significant artifacts on MR images.
The SAVI Brachy platform is designed for single-entry ease, with its catheters expanding to fit the size and shape of a tumor cavity, and delivering radiation in the form of interstitial brachytherapy combined with tissue-sparing dosimetry capabilities. Merit, however, will only market the catheter and is not involved in the development, sale or transport of radiation seeds.
The structure of the agreement also includes potential earn-out payments of $15 million for achievement of supply chain and scalability metrics as part of the initial $135 million payment, and up to $50 million more for the achievement of sales milestones.
In addition, Merit plans to maintain all commercial and R&D teams from the Cianna family and to enhance overall coverage as well as logistical and clinical support in areas that are currently underserved by Cianna Medical.
“Our companies share a rich history of developing technologies that put patients' needs first. Merit Medical brings exceptional resources to the Cianna Medical team that will intensify its growth and broaden its focus beyond breast cancer,” Cianna Medical president and CEO Jill Anderson said in a statement. “I am delighted that Mr. Lampropoulos will lead an efficient integration of our companies for the benefit of our employees, physicians, hospitals and the women we serve."
The transaction has been approved by the board of directors for both companies, and is subject to the satisfaction or waiver of certain closing conditions, including the approval of Cianna Medical stockholders, clearance under the Hart-Scott Rodino Antitrust Improvements Act, and other customary closing conditions.
If completed, the proposed transaction in 2019 will be non-accretive to Merit earnings per share on a GAAP basis in the range of $0.06-$0.10 per common share and accretive to Merit earnings per share on a non-GAAP basis in the range of $0.08-$0.13 per common share. Anticipated GAAP gross margins on Cianna Medical products are 55-65 percent, and for non-GAAP margins, 70-75 percent. They are accretive to both Merit’s GAAP gross margin and non-GAAP gross margin in the range of 55-130 basis points with add revenues in the range of $50-$56 million.
Financial advisors who oversaw the deal for Merit were Piper Jaffray & Co. and Raymond James & Associates. J.P. Morgan Securities LLC acted as financial adviser to Cianna Medical, while legal advisers included Parr Brown Gee & Loveless P.C. for Merit, and Wilson Sonsini Goodrich & Rosati, P.C. for Cianna Medical.
Both SCOUT and SAVI Brachy are FDA cleared. SAVI Brachy is also CE marked while SCOUT is expected to obtain the same accreditation in 2019.
Merit Medical Systems did not respond for comment.