British orthopedic titan Smith & Nephew (NYSE:SNN) shuffled its business deck yet again with the spinout of its biologics and clinical therapies division in a joint venture with venture capital firm Essex Woodlands.
Essex will own 51% of the new business, named Bioventus LLC, with Smith & Nephew holding the remainder.
SNN will also get $98 million in cash, which it plans to use to pay down debt, and a $160 million, 5-year note from Bioventus, according to a press release.
The SNN division generated $44 million in profit on $223 million in sales in 2010, $33 million of which came from sales outside the U.S., according to the release.
“In a single act we have given our existing biologics business the resources to address longer-term development projects, retained access to the exciting area of orthobiologics, realized value for reinvestment in nearer-term opportunities, and freed up management resource to focus on driving efficiencies in established markets,” SNN CEO Olivier Bohuon said inprepared remarks. “Essex Woodlands are strong partners and the joint venture will benefit from their significant expertise in developing health care businesses.”
Essex has long had its tendrils in orthopedics and regenerative medicine, buying stakes in Orthovita, which was acquired by Stryker Corp. (NYSE:SYK) in May 2011; Francis Medical, acquired by Kyphon in December 2006 and then by Medtronic Inc. (NYSE:MDT) in July 2007; and Confluent Surgical, which was acquired by Covidien (NYSE:COV) in July 2006.
The health care-focused VC shop will invest a minimum of $60 million toward an initial valuation of $118 million in return for a controlling stake in Bioventus, according to the release.
The new venture’s products will include the Exogen ultrasound bone healing system and joint fluid therapy developed under SNN. Bioventus’ parent firms plan to reinvest a significant portion of their new child’s cash into R&D over the next 5 years, according to the release.
No word yet on potential layoffs. The Bioventus team will retain its existing management, led by president Mark Augusti, and its headquarters will remain in Durham, N.C.
SNN recently shuffled two other business divisions, merging its Andover, Mass.-based endoscopy unit and its Memphis, Tenn.-based orthopedic reconstruction arm in July. Those moves resulted in80 positions terminated in Tennessee, another 24 in Massachusetts and up to 46 more worldwide. Smith & Nephew employs about 10,000 people globally.