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Mazor Enters into Co-development and Equity Purchase Agreements with Medtronic BY ANDREW VAHRADIAN, MAY 19, 2016

Mazor Robotics entered into two strategic agreements with Medtronic. The first being a co-development and distribution agreement, and the second being an equity investment of up to $52 million, which could see Medtronic own up to a 15% stake in Mazor.

Under the commercial aspect of the accord, Mazor enters into a two-stage, multi-faceted, commercial agreement with Medtronic for the co-promotion, co-development of robotic-based spine systems and applications. The deal has an initial U.S.-based co-promotion phase, and if both parties achieve their respective milestones by the end of 2017, then the companies will enter the second phase of the agreement.

In the second stage, Medtronic will assume exclusive global sales and distribution rights for Mazor’s future spine products and incorporates annual quotas with a cumulative potential of hundreds of next-generation systems over a four-year period. At this point, Medtronic has placed a commitment to purchase 15 of these future systems during 2016.

Moreover, the accord stipulates that Mazor will be Medtronic’s only strategic partner for the development and commercialization of solutions. Both companies have already commenced on co-development activities of synergistic products and applications for spine.

Regarding the investment aspect of the agreement, Medtronic will make a three-step equity investment in Mazor.

In the first tranche, Medtronic will purchase newly issued securities representing 4% of Mazor's outstanding shares on a fully diluted basis, at the trailing 20-day volume weighted average price, which equates to approximately $11.9 million.

In the second tranche, Medtronic will purchase newly issued securities representing 6% of Mazor's outstanding securities on a fully diluted basis, however, this is conditional to Mazor achieving certain operational milestones. The cap of the second tranche is up to $20 million.

Lastly, in the potential third tranche, Mazor has the right to issue up to 5% (on a fully diluted basis) of primary shares to Medtronic. The third tranche is dependent of the consummation of the second tranche as well as the commencement of the Global Distribution Agreement, and, provided certain other conditions are met, will be solely at Mazor’s discretion. Medtronic may cap this tranche at $20 million as well.

The two agreements maintain that Mazor will remain an independent company that will continue to sell and fully support the Renaissance System through its own sales team and distribution partners.

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