(MENAFN- ProactiveInvestors) (OTCMKTS:BONE) had its price target raised at HC Wainwright which said the X-spine acquisition is immediately accretive to the issue bank and medical device company.
On July 27 Bacterin announced the acquisition of X-spine Systems Inc. a private company marketing advåanced implants and accessories for use in spinal surgeries for approximately $90 million in cash and stock.
X-spine an established player in the $6.9 billion US spine hardware market reported sales of $42 million and a net income of $4 million in 2014.
Furthermore X-spine’s revenue has been growing at a CAGR of 23 percent since 2012.
Following the completion of the transaction expected on July 31 the combined entity would be renamed Xtant Medical Inc. and continue to trade under the symbol BONE.
“We believe this acquisition is immediately accretive and we project the company to achieve profitability in 2017 earlier than our previous estimate of 2018” analyst Swayampakula Ramakanth who reiterated its “buy” rating on the stock wrote in a research note to investors today.
HCW said it currently expects Xtant to achieve revenue of $61 million in 2015 growing to $197 million by 2025. It added that the company’s management has indicated that they would provide guidance on the combined company during the second-quarter financials conference call.
HCW had a meeting with the management of Bacterin and Dr. David Kirschman the President and CEO of X-spine. “We believe that the two companies’ commercial operations are highly complementary” Ramakanth wrote.
Both entities target the spinal orthopedic surgery market but X-spine is focused on the hardware segment while Bacterin’s product portfolio consists entirely of biologics Ramakanth added.
“While both companies share the same sales call-points of orthopedic surgeons hospital systems and group purchasing organizations (GPOs) there is little overlap between their distribution channels or current customers” Ramakanth wrote.
HCW believes that while Bacterin is more active in the Southwest and Northeast X-spine derives the majority of its revenues from the states in the South and Midwest. “Therefore we believe significant cross-selling could be achieved by leveraging the existing relationships with customers and distributors and that the Newco (Xtant Medical) could gain a competitive advantage by marketing a full suite of spinal surgery products.
“We also believe that the dual expertise in both hardware and biologics could allow Xtant to develop combination products that could simplify surgical procedures and/or improve patient outcomes” Ramakanth noted.
To finance the acquisition Bacterin issued $65 million in senior unsecured convertible notes paying a 6 percent coupon and restated a $42 million senior secured debt with OrbiMed paying an interest of 15 percent up from $24 million.
Previously the debt facility included a royalty payment of 1.75 percent of net sales and repayment of principle beginning in the fourth quarter 2016. Under the new terms the royalty payment has been extinguished a portion of interest payment is accrued and there is no repayment of principle prior to 2020.
HCW said it believes that while the higher debt burden poses an increased financial risk the new terms are more favorable for the growth of the company.
Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.