NuVasive to Buy Osiris Unit for at Least $35 Million

Medical device company NuVasive Inc. said Thursday it will buy Osiris Therapeutics Inc.’s Osteocol unit, which includes a developing bone graft stem cell treatment.

The deal includes $35 million in cash plus additional future milestone payments to Osiris for up to $50 million in cash or a combination of cash and NuVasive stock. NuVasive said the deal will be funded with existing cash and is expected to close in the third quarter.

NuVasive said the deal gives it a developing stem cell technology and a way into the biotechnology market. It expects the deal to add $15 million in revenue in 2008 and $25 million in 2009, though it will cut into earnings in 2008.

“The time for commercial scale cell therapies has arrived,” said C. Randal Mills, Ph.D., President and Chief Executive Officer of Osiris Therapeutics. “We are very excited about this landmark transaction and believe it underscores the ability of Osiris to generate substantial value through our proprietary technology platform. Given NuVasive’s impressive growth in the spine market, we expect them to be very successful with Osteocel and look forward to working with their team.”

Mills continued, “With the continued positive developments in Prochymal(TM) and Chondrogen(TM), it is now time for Osiris to focus its efforts on the successful launch of our core products. This transaction provides Osiris with a substantial amount of non-dilutive capital over the near-term, and shapes the organization in a way that is optimal for both the Osteocel employees and the long term mission of Osiris.”

Alex Lukianov, Chairman and Chief Executive Officer of NuVasive, said, “This acquisition is synergistic for both of our companies. This proven stem cell technology directly supports our strategy of expanding our offering of innovative and proprietary products. Osteocel provides our exclusive sales force with a unique stem cell-based bone graft that is complementary to our Formagraft product and will add meaningful revenue in the short term. This transaction also includes an opportunity for our companies to collaborate together on the next generation, culture expanded version of Osteocel.”

As part of the transaction, Osiris retains the rights to culture expanded versions of the product, previously referred to as Osteocel-XC. However, included in the agreement is an option for NuVasive to acquire the rights to the expanded version of the product at predefined terms as well as a right of first negotiation if Osiris elects to partner the product with a third-party.

Completion of the transaction is subject to Hart-Scott-Rodino review, Osiris shareholder approval and other customary closing conditions.

Banc of America Securities LLC is acting as financial advisor to NuVasive and DLA Piper US LLP is legal counsel to NuVasive.

SOURCE: Houston Chronicle, Osiris news release