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Orthopedic and Dental Industry News Complete Archive »

NuVasive Enters into an Agreement to Acquire Ellipse Technologies BY ANDREW VAHRADIAN, JANUARY 6, 2016

NuVasive entered into a definitive agreement to acquire Ellipse Technologies, Inc., a medical device company focused on progressing procedural solutions for complex skeletal deformity with magnetically adjustable implant systems, for an enterprise value of up to $465 million, or 11.6x LTM revenues of $40.2 million.

Under the terms of the agreement, NuVasive will pay $380 million in cash upfront, and there will be milestone payable in 2017 of up to $30 million that is tied to the achievement of specific revenue targets. Ellipse had filed to raise up to $75 million through an initial public offering (IPO) of common shares in October.

Ellipse develops magnetically adjustable orthopedic implant systems based on the company's proprietary MAGnetic External Control (MAGEC) technology platform. Ellipse's systems are differentiated from conventional orthopedic implant systems because they are adjusted at the time of implantation and non-invasively over the course of treatment in order to accommodate a sub-optimal implantation or the changing clinical needs of patients as they heal, grow or age. Surgeries to adjust traditional implants are highly invasive and associated with significant complications, such as soft tissue disruption, high rates of wound infection, post-operative pain and lengthy recovery times.

The company has commercialized two product families: MAGEC-EOS spinal bracing and distraction system for treatment of early onset scoliosis and PRECICE limb lengthening system, or PRECICE LLD, for treatment of limb length discrepancy. To date, these systems have been used to treat over 4,000 patients worldwide. The company's product pipeline consists of products incorporating its MAGEC technology for a wide range of orthopedic markets, including trauma, knee osteoarthritis and degenerative spine disease.

The transaction provides NuVasive with a highly regarded, disruptive technology platform that will expand the company's footprint and growth opportunities into new niche markets like early onset and idiopathic scoliosis, which is beyond NuVasive's current product portfolio. Moreover, Ellipse's product pipeline should enhance NuVasive's internal development and licensing opportunities. Lastly, management 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. Ellipse is projected to have revenues of approximately $60 million on a pro forma basis in FY2016.

NuVasive plans to maintain a Design Center of Excellence in Aliso Viejo, CA, where Ellipse is presently headquartered, and Ellipse's current President & CEO, Edmund Roschak, will join NuVasive as a member of its executive leadership team reporting directly to the company's CEO, Gregory Lucier. The transaction is anticipated to close by the end of February 2016.

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