Medical Device Link.

Originally Published MX November/December 2004

BUSINESS NEWS

At the end of October, Abbott Laboratories (Abbott Park, IL) announced that it had acquired Spine Next SA (Bordeaux, France), a privately owned manufacturer of orthopedic spinal implant devices. Spine Next's products include a dynamic stabilization device that treats early degenerative disk disease without fusion of the vertebrae, helping patients preserve motion.

Richard A. Gonzalez

Jeffrey Binder

According to Richard A. Gonzalez, president and chief operating officer of Abbott's medical products group, the acquisition is "consistent with our overall strategy of focusing on high-growth, financially attractive, technology-driven areas where significant unmet medical need exists."

Abbott made its first foray into the field in June 2003, when it acquired Spinal Concepts, a manufacturer of spinal fixation products used during spinal fusion surgery. Jeffrey Binder, president of Spinal Concepts, now a division of Abbott, commented that the acquisition of Spine Next "enhances our spinal product line with an exciting nonfusion technology and expands the established global distribution network for our existing spinal products business."

Under terms of the agreement, Abbott acquired all of the equity of Spine Next for approximately $60 million in cash plus additional milestone payments upon achievement of future targets. One-time charges are expected in the fourth quarter of 2004, primarily for in-process research and development. The transaction will not have an impact on Abbott's ongoing 2004 earnings per share.

Anticipation of the next generation of dynamic spine products has led to an increase in mergers and acquisitions among companies in the spine market, which has tallied five acquisitions totaling more than $1.5 billion since 2002. Among the financial firms at the forefront of this orthopedics M&A activity is Viscogliosi Bros. LLC (New York City), a venture capital, private equity, and merchant banking firm dedicated to the musculoskeletal and orthopedics sector. Viscogliosi Bros. ushered in the current wave of acquisitions in April 2003, when it acted as founders, financiers, and executive management of Spine Solutions Inc., directing the company's $350 million merger agreement with Synthes-Stratec Inc. (now Synthes Inc.; Paoli, PA).

Viscogliosi Bros. also invested in the final two financing rounds of Spine Next. In November 2003, the firm led Spine Next's fourth equity financing round, which raised approximately $2 million to support commercialization of the Wallis system by collecting historical clinical data. In April 2004, the firm participated in a $4.7 million debt round of financing to further support the clinical effort behind the Wallis technology.

Anthony G. Viscogliosi

Anthony G.Viscogliosi, principal at Viscogliosi Bros. and a former member of the Spine Next board of directors, says that his firm is "extremely pleased to be at the forefront of the spine nonfusion wave in the musculoskeletal industry.

Spine Next's Wallis system is approved for sale throughout Europe and other parts of the world, and has been used to treat more than 5000 patients worldwide. In early 2005, Abbott expects to begin a clinical trial to collect data to support U.S. regulatory approval of the Wallis system.

Abbott may have a long way to go to catch sector leaders DePuy Spine, Medtronic Sofamor Danek, Stratec, Stryker, and Zimmer, which together control about four-fifths of the estimated $2.7 billion market for spine products.

But in the meantime, company leaders at Spine Next have good cause to celebrate the merger.

"We're delighted to become part of Abbott," said Erick Cloix, president of Spine Next. "This move will allow us to take advantage of Abbott's sophisticated research and development capabilities, which in turn will help us to grow the business more quickly and bring innovative solutions to patients everywhere even faster."

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