01.06.16
NuVasive Inc. is purchasing Ellipse Technologies Inc., a privately held company focused on skeletal deformity solutions, for $380 million in cash upfront and a potential $30 million milestone payable in 2017 related to specific revenue targets.
NuVasive expects the acquisition to accelerate its revenue growth toward the high-single digit range and to be slightly accretive to the company's non-GAAP diluted earnings per share within the first 12 months and significantly accretive thereafter. NuVasive also expects the transaction to support its five-year, double-digit return on invested capital goal, consistent with the company's previously stated acquisition criteria.
The acquisition adds a disruptive technology platform to NuVasive's portfolio. Ellipse's magnetic growing rod technology is currently being adopted in the pediatric deformity and orthopedic markets, providing for new growth opportunities beyond NuVasive's current portfolio of winning solutions that address adult degenerative and deformity spinal conditions.
Ellipse is the developer and marketer of a platform of magnetically adjustable implant systems based on its MAGnetic External Control, or MAGEC, technology. Ellipse's proprietary implants are adjustable at the time of implantation and are distracted non-invasively over the course of treatment to accommodate the changing clinical needs of patients as they heal, grow or age. Ellipse's MAGEC technology enables physicians to customize therapy for patients in a non-invasive manner, reducing the need for further repeat surgical procedures, and providing meaningful improvements in patient clinical outcomes and quality of life while generating cost savings to the healthcare system.
"Ellipse's technology, which has been received by surgeons, has the potential to become the standard of care for spine and orthopedic patients. It is in NuVasive's sweet-spot of game-changing innovation, providing new growth opportunities in the U.S. and around the world," said Gregory T. Lucier, NuVasive's chairman and CEO. "NuVasive remains committed to adult deformity through our Integrated Global Alignment (iGA) platform, and the acquisition of Ellipse will insert NuVasive into early onset and idiopathic scoliosis, an important and attractive part of the spinal deformity market for NuVasive. Additionally, this investment expands NuVasive's footprint into new niche markets with highly differentiated technology that will be strategically applied in other spine and orthopedic applications, including degenerative spine disease, trauma and knee osteoarthritis. Ellipse's product pipeline also enhances internal development and licensing opportunities for NuVasive, including areas where we look to assemble with our iGA and neuromonitoring expertise. We are very excited to welcome Ellipse's team to NuVasive and look forward to realizing the many operational and financial benefits this transaction creates."
Founded in 2005, Ellipse has commercialized two highly differentiated and rapidly adopted product families: the MAGEC−EOS spinal bracing and distraction system for treatment of early onset scoliosis and the PRECICE limb lengthening system, or PRECICE LLD, for treatment of limb length discrepancy. These products have been used to treat more than 5,000 patients worldwide. The global addressable market opportunity for Ellipse's currently commercialized products was approximately $1.2 billion as of the end of 2014 based on data from Life Science Intelligence Inc.
In addition, Ellipse's product candidates that leverage the MAGEC technology platform addressed a significant global opportunity of more than 690,000 annual procedures based on this data. For 2015, Ellipse had revenues of approximately $40 million compared to approximately $26 million in 2014, representing 54 percent year-over-year growth. Ellipse's products are marketed and sold in the United States and 29 other countries. Revenues outside of the United States represented approximately 45 percent of Ellipse's revenues in 2014 and approximately 37 percent of revenues for 2015. For 2016, Ellipse's revenues are expected to be approximately $60 million on a pro forma basis as the company continues its exceptional growth trajectory.
"Ellipse has made enormous strides since our founding ten years ago. Joining forces with NuVasive not only validates the promise of our technology, but provides us with the scale and resources necessary to realize our full potential, to the benefit of our surgeon customers and their patients, faster than we could achieve on our own. Additionally, NuVasive's commitment to developing less invasive technological solutions represents a tremendous cultural fit. We look forward to joining with NuVasive to continue to help improve patient lives," Ellipse Technologies President/CEO Edmund J. Roschak said in a statement.
The deal is expected to close by the end of February, subject to customary closing conditions and regulatory approvals. NuVasive expects to fund the acquisition with existing cash on hand.
After the closing of the transaction, NuVasive will maintain a Design Center of Excellence in Aliso Viejo, Calif., where Ellipse is headquartered. Roschak will join NuVasive as a member of the NuVasive executive leadership team reporting directly to Lucier.
Headquartered in San Diego, Calif., NuVasive develops minimally disruptive surgical products and procedurally-integrated solutions for the spine. NuVasive offers a spine portfolio of more than 90 products developed to improve spine surgery and patient outcomes. The company's principal procedural solution is its Maximum Access Surgery, or MAS, platform for lateral spine fusion. MAS was designed to provide safe, reproducible, and clinically proven outcomes, and is a highly differentiated solution with fully integrated neuromonitoring, customizable exposure, and a broad offering of application-specific implants and fixation devices designed to address a variety of pathologies.
NuVasive expects the acquisition to accelerate its revenue growth toward the high-single digit range and to be slightly accretive to the company's non-GAAP diluted earnings per share within the first 12 months and significantly accretive thereafter. NuVasive also expects the transaction to support its five-year, double-digit return on invested capital goal, consistent with the company's previously stated acquisition criteria.
The acquisition adds a disruptive technology platform to NuVasive's portfolio. Ellipse's magnetic growing rod technology is currently being adopted in the pediatric deformity and orthopedic markets, providing for new growth opportunities beyond NuVasive's current portfolio of winning solutions that address adult degenerative and deformity spinal conditions.
Ellipse is the developer and marketer of a platform of magnetically adjustable implant systems based on its MAGnetic External Control, or MAGEC, technology. Ellipse's proprietary implants are adjustable at the time of implantation and are distracted non-invasively over the course of treatment to accommodate the changing clinical needs of patients as they heal, grow or age. Ellipse's MAGEC technology enables physicians to customize therapy for patients in a non-invasive manner, reducing the need for further repeat surgical procedures, and providing meaningful improvements in patient clinical outcomes and quality of life while generating cost savings to the healthcare system.
"Ellipse's technology, which has been received by surgeons, has the potential to become the standard of care for spine and orthopedic patients. It is in NuVasive's sweet-spot of game-changing innovation, providing new growth opportunities in the U.S. and around the world," said Gregory T. Lucier, NuVasive's chairman and CEO. "NuVasive remains committed to adult deformity through our Integrated Global Alignment (iGA) platform, and the acquisition of Ellipse will insert NuVasive into early onset and idiopathic scoliosis, an important and attractive part of the spinal deformity market for NuVasive. Additionally, this investment expands NuVasive's footprint into new niche markets with highly differentiated technology that will be strategically applied in other spine and orthopedic applications, including degenerative spine disease, trauma and knee osteoarthritis. Ellipse's product pipeline also enhances internal development and licensing opportunities for NuVasive, including areas where we look to assemble with our iGA and neuromonitoring expertise. We are very excited to welcome Ellipse's team to NuVasive and look forward to realizing the many operational and financial benefits this transaction creates."
Founded in 2005, Ellipse has commercialized two highly differentiated and rapidly adopted product families: the MAGEC−EOS spinal bracing and distraction system for treatment of early onset scoliosis and the PRECICE limb lengthening system, or PRECICE LLD, for treatment of limb length discrepancy. These products have been used to treat more than 5,000 patients worldwide. The global addressable market opportunity for Ellipse's currently commercialized products was approximately $1.2 billion as of the end of 2014 based on data from Life Science Intelligence Inc.
In addition, Ellipse's product candidates that leverage the MAGEC technology platform addressed a significant global opportunity of more than 690,000 annual procedures based on this data. For 2015, Ellipse had revenues of approximately $40 million compared to approximately $26 million in 2014, representing 54 percent year-over-year growth. Ellipse's products are marketed and sold in the United States and 29 other countries. Revenues outside of the United States represented approximately 45 percent of Ellipse's revenues in 2014 and approximately 37 percent of revenues for 2015. For 2016, Ellipse's revenues are expected to be approximately $60 million on a pro forma basis as the company continues its exceptional growth trajectory.
"Ellipse has made enormous strides since our founding ten years ago. Joining forces with NuVasive not only validates the promise of our technology, but provides us with the scale and resources necessary to realize our full potential, to the benefit of our surgeon customers and their patients, faster than we could achieve on our own. Additionally, NuVasive's commitment to developing less invasive technological solutions represents a tremendous cultural fit. We look forward to joining with NuVasive to continue to help improve patient lives," Ellipse Technologies President/CEO Edmund J. Roschak said in a statement.
The deal is expected to close by the end of February, subject to customary closing conditions and regulatory approvals. NuVasive expects to fund the acquisition with existing cash on hand.
After the closing of the transaction, NuVasive will maintain a Design Center of Excellence in Aliso Viejo, Calif., where Ellipse is headquartered. Roschak will join NuVasive as a member of the NuVasive executive leadership team reporting directly to Lucier.
Headquartered in San Diego, Calif., NuVasive develops minimally disruptive surgical products and procedurally-integrated solutions for the spine. NuVasive offers a spine portfolio of more than 90 products developed to improve spine surgery and patient outcomes. The company's principal procedural solution is its Maximum Access Surgery, or MAS, platform for lateral spine fusion. MAS was designed to provide safe, reproducible, and clinically proven outcomes, and is a highly differentiated solution with fully integrated neuromonitoring, customizable exposure, and a broad offering of application-specific implants and fixation devices designed to address a variety of pathologies.