Healthcare Industry News:  allograft 

Regenerative Medicine Wound Care Mergers & Acquisitions

 News Release - July 28, 2016

Derma Sciences to Acquire BioD, Solidify Its Leadership Position in Advanced Wound Care and Regenerative Products

PRINCETON, N.J.--(Healthcare Sales & Marketing Network)--Derma Sciences, Inc. (DSCI), a tissue regeneration company focused on advanced wound and burn care, announces the signing of a definitive agreement to acquire BioD, LLC for an immediate transaction value of $21.3 million and a potential total transaction value of an estimated $77.8 million. This includes an upfront payment of cash and common stock of $21.3 million, as well as potential product regulatory milestone payments in aggregate estimated to be up to $30.0 million and earn outs based on incremental net sales growth of up to $26.5 million.

BioD is a privately held company engaged in the development and commercialization of novel proprietary regenerative medicine products derived from placental/birth tissues for use in a broad range of clinical applications, including orthopedic, spine and ophthalmic channels. This proposed transaction, which has been approved by the Boards of Directors of both companies, is expected to close next week.

Financial and strategic highlights of the transaction include the following:

  • Immediately accretive to Derma Sciences’ revenues, margins, EBITDA and earnings.
  • Upfront consideration of $21.3 million includes $13.8 million in cash and 1.8 million shares of Derma Sciences common stock, valued at $7.5 million utilizing a 10-day volume-weighted average price (VWAP) as of July 26, 2016 of $4.1692.
  • Potential product regulatory milestone payments in 2016 and/or 2017 in aggregate up to $30.0 million, payable in up to 35% common stock at Derma Sciences’ discretion.
  • Potential net sales growth earn outs in 2017 and 2018 of up to $13.25 million each year, based on a multiple of incremental net sales and payable in cash.
  • Brings four proprietary placental/birth tissue allograft product families with revenue of $18.6 million for 2015 and $22.2 million for the trailing 12 months ended June 30, 2016.
  • 2015 gross margin of 87.2%, net income margin of 15.6% and double-digit revenue growth.
  • Adds 235 independent sales representatives and seven direct sales representatives to Derma Sciences’ 80-person sales organization, which includes 38 direct sales representatives and 25 independent sales representatives, and expands customers to include inpatient, orthopedic, spine, neurology and ophthalmic channels.

Following the transaction, BioD will operate as a wholly owned subsidiary of Derma Sciences and will continue to be led by BioD’s President and Chief Executive Officer Russell Olsen. Additionally, BioD will receive a Board observer seat on the Derma Sciences Board of Directors.

“The acquisition of BioD is a powerful strategic business fit with Derma Sciences and furthers our commitment to being a leading provider of advanced wound care and regenerative medicine products. Combining BioD with Derma Sciences enhances our scale, and provides for a diversified and growing revenue base of complementary, high-margin advanced wound care and tissue regeneration products,” commented Stephen T. Wills, Executive Chairman and Interim Principal Executive Officer of Derma Sciences. “We know BioD well, having licensed two of their products in January 2014, and we are very excited to add their full portfolio of innovative products as well as 51 talented personnel, including R&D scientists, manufacturing and processing experts, clinical support and customer service staff and direct sales representatives, as well as an expansive independent sales rep infrastructure.”

Mr. Wills added, “BioD is a prime example of the kind of acquisition we look for to advance our growth strategy. In addition to bringing high-margin revenue of $22 million for the last 12 months, BioD will transform our P&L while also providing significant opportunities for cross-selling and G&A expense synergy. On a pro forma basis including the BioD business in our 2015 results and eliminating our First Aid Division (FAD), the sale of which we announced earlier, our 2015 gross margin increases from approximately 39% to approximately 52%, and the percentage of total revenues represented by our Advanced Wound Care business increases from approximately 49% to approximately 70%.”

In January 2014 Derma Sciences licensed two of BioD’s products: AMNIOEXCEL®, an amniotic extracellular membrane product that is a sterile, room-temperature stable, resorbable tissue allograft derived from human amnion that provides a natural scaffold for tissue repair and regeneration; and AMNIOMATRIX®, a cryopreserved allograft derived from human placental tissues that is used as a wound covering in the treatment of localized tissue defects, which Derma Sciences sells to wound care centers for treatment of chronic or non-healing wounds.

The four BioD product families gained through this acquisition are:

  • BioDFactor® Viable Tissue Matrix, a cryopreserved allograft derived from the human placental tissues developed for use as a wound covering in the treatment of localized tissue defects or areas of inflammation.
  • BioDRestore™ Elemental Tissue Matrix, a morselized, flowable tissue allograft derived from amniotic tissues. Amniotic tissues have been shown to support soft tissue repair, reduce inflammation and minimize scar tissue formation.
  • BioDFence® Resorbable Adhesion Barrier, a sterile, resorbable adhesion barrier allograft derived from the human amnion that provides a structural barrier to reduce scar tissue formation. The allograft comes hydrated and in saline solution and has a five-year shelf life.
  • BioDOptix® Amniotic Extracellular Matrix, a dehydrated, extracellular membrane allograft derived from human amniotic tissue for use as a scaffold for ocular tissue repair and regeneration.

“Derma Sciences is a recognized leader in advanced wound care and has been a wonderful partner over the past several years,” said Russell Olsen, President and Chief Executive Officer of BioD. “In particular, we are very pleased with the progress they have made in conducting clinical studies to support positive coverage determinations from Medicare Administrative Contractors (MACs) for AMNIOEXCEL®.

“We view this combination as a positive for all parties, in particular as we leverage the capabilities inherent in both companies to achieve greater growth than either of us could alone,” Mr. Olsen continued. “The 38 Derma Sciences sales reps and 25 independent sales reps, and the 235 BioD independent sales reps and seven direct sales reps have virtually no overlap in their call-points and customer bases. As such, we look forward to sales synergies and greater efficiencies as all members of the combined organization sell a larger number of clinically differentiated, high-margin products. I know we are excited to be introducing certain Derma Sciences products to BioD’s hospital and office-based customers.”

Source: Derma Sciences

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