Yet another defunct orthopedic device developer is acquired. Where does that leave the rest of the field?
First it was Integra picking up IST’s IP for a cool $9 million. Then Synovis bought out Pegasus Biologics for horse feed ($12.1 million). And Cardo Medical did the same with Vertebron, for a bargain-basement price of $1.3 million.
Now a similar deal has gone through, with Facet Solutions buying Archus Orthopedics’ IP.
Here we have several venture-funded spine companies with early success and investor interest, several spectacular craterings and, finally, several opportunistic acquisitions. One spine blogger dubbed the carnage “The Spine Industries Roadkill Tour of ’09.”
Much has been written about the mis-steps that led these spine companies to their downfalls, but it’s much more interesting to look at why other companies are snatching up the IP and remaining assets from the busts. Is it merely a case of the acquiring companies shopping for bargains, or are there meaningful strategic reasons for these acquisitions? Is there a lesson here for us? Being somewhat familiar with the situation at FSI, I’d like to share my thoughts.
Starting off with a quick breakdown of the finances (using VentureSource data) to bring things into a sharp focus:
* IST raised $74.2 million and had $2.2 million in sales in 2008, but reaped only $9.25 million after filing for bankruptcy.
* Pegasus Biologics raised $33.65 million and had 2008 sales of $9.1 million, before Synovis Life Sciences acquired them for $12.1 million in cash.
* For Vertebron, the numbers are $29.5 million in and $1.3 million out, with 2008 sales of $11 million.
* For Archus, the amount in is $72.3 million, but the amount paid by FSI has not been publicly disclosed. But using the aforementioned fire sales as a barometer, we can guess it was cents on the dollar. I think FSI scored big.