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Merit Medical Signs Agreement to Acquire Cianna Medical, Inc.
SOUTH JORDAN, UTAH: Merit Medical Systems, Inc. (NASDAQ: MMSI), a leading manufacturer and marketer of proprietary disposable devices used in interventional, diagnostic and therapeutic procedures, particularly in cardiology, radiology, oncology, critical care and endoscopy, today announced that it has signed a definitive merger agreement to acquire Cianna Medical, Inc., headquartered in Aliso Viejo, California. The transaction has been approved by the board of directors of both companies, and is subject to the satisfaction or waiver (in accordance with the provisions of the merger agreement) of certain closing conditions, including the approval of Cianna Medical stockholders, clearance under the Hart-Scott-Rodino Antitrust Improvements Act and other customary closing conditions. It is anticipated that the transaction will close during the fourth quarter of 2018.
The deal structure includes an upfront payment of $135 million with potential earn-out payments of an additional $15 million for achievement of supply chain and scalability metrics, and up to an additional $50 million for achievement of sales milestones.
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Based on managements current estimates, in 2019 the proposed transaction, if consummated, would be non-accretive to Merit earnings per share on a GAAP basis in the range of ($0.06-$0.10) per common share and accretive to Merit earnings per share on a non-GAAP basis in the range of $0.08“$0.13 per common share, with anticipated GAAP gross margins of 55-65% and non-GAAP gross margins of 70-75% on the Cianna Medical products, accretive to both Merits GAAP gross margin and non-GAAP gross margin in the range of 55-130 basis points, and add revenues in the range of $50-$56 million. NOTE: Non-GAAP earnings per share accretion and non-GAAP gross margin are non-GAAP financial measures. Information about how Merit uses non-GAAP measures in its business, and an explanation of how these measures relate to their most directly comparable GAAP financial measures, is included under the heading Non-GAAP Financial Measures below.
Cianna Medical is a leader in wire-free breast localization and has been focused on breast conservation for 11 years. Cianna Medical develops, manufactures and markets innovative medical products designed to reduce costs, improve quality and reduce the anxiety and stress breast cancer treatments place on women and their families. Its research, development and commercialization teams developed the first non-radioactive, wire-free breast localization system and the worlds only technology that utilizes RADAR in human tissue. Its SCOUT® and SAVI® Brachy technologies are FDA-cleared and address unmet needs in the delivery of radiation therapy, tumor localization and surgical guidance.
The SCOUT® device has grown from $1 million in revenues in its 2015 debut to a projected $29 million in revenues in 2018. Current estimated market share is approximately 5% with no revenues currently outside the United States.
This transaction adds to Merit a technology leader in breast tumor localization that is precise, highly directional, and visible, said Merits Chairman and Chief Executive Officer Fred P. Lampropoulos. With more than 350 initiations and 45,000 wire-free localizations to date, the SAVI SCOUT® is complementary to Merits strategic biopsy initiatives. The product has FDA clearance and is the subject of a pending application for CE mark approval. We believe there are substantial global growth opportunities for the Cianna Medical products, especially considering Merits expansive global footprint.
Merit plans to keep substantially all of Cianna Medicals commercial and R&D teams in place and to enhance overall coverage in areas currently underserved by Cianna Medical, Lampropoulos said. We want to maintain the momentum of the Cianna Medical team while adding enhanced logistical and clinical support.
Additionally, Merit intends to market the SAVI® BRACHY, which uses thin tubes to deliver radiation to lumpectomy sites, Lampropoulos said. Merit only markets the catheter and is not involved in radiation seeds or the transport thereof. The product has both FDA clearance and CE mark approval. Merits medical advisors believe this is an underutilized technology.
Cianna Medical President & CEO Jill Anderson said, The planned merger is a fusion of shared values focused on addressing real healthcare needs that improve lives. Our companies share a rich history of developing technologies that put patients needs first. Merit Medical brings exceptional resources to the Cianna Medical team that will intensify its growth and broaden its focus beyond breast cancer. I am delighted that Mr. Lampropoulos will lead an efficient integration of our companies for the benefit of our employees, physicians, hospitals and the women we serve.
Piper Jaffray & Co. and Raymond James & Associates acted as financial advisors to Merit, and J.P. Morgan Securities LLC acted as financial advisor to Cianna Medical. Parr Brown Gee & Loveless P.C. served as the legal advisor to Merit. Wilson Sonsini Goodrich & Rosati, P.C. served as legal advisor to Cianna Medical.
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