The deal between Princeton, N.J.-based Derma Sciences and Cordova, Tenn.-based BioD includes regulatory milestone payments up to $30 million and earn outs based on net sales growth of up to $26.5 million.
“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. We know BioD well, having licensed 2 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,” Derma Sciences interim principal exec Stephen Wills said in a press release.
Derma Sciences picked up BioD’s BioDFactor viable tissue matrix wound covering, BioDRestore elemental tissue matrix for soft tissue repair, BioDFence resorbable adhesion barrier designed to prevent scar tissue formation and the BioDOptix amniotic extracellular matrix designed as a scaffold for ocular tissue repair.
“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, 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%,” Wills said.
Post-transaction, BioD will operate as a wholly owned subsidiary of Derma Sciences, with BioD CEO Russel Olsen still at the head. BioD will also gain an observer seat on Derma Sciences’ board.
“Derma Sciences is a recognized leader in advanced wound care and has been a wonderful partner over the past several years. 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 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,” BioD CEO Olsen said in prepared remarks.
The deal added a significant amount to Derma Science’s 80-person sales org, with 235 independent sales reps and 7 direct sales reps coming onboard from BioD. The acquisition is expected to close within the next week, Derma Sciences said.
“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,” Olsen said.
Last November, Derma Sciences was evaluating all options, including a sale, after scrapping a trial of its aclerastide drug for diabetic foot ulcers.
DSCI shares plunged as much as 31%, dropping under their 6-year low today. The company makes wound care and regenerative medicine products. Aclerastide was its only drug candidate.
Derma Sciences said an independent futility analysis concluded that the trial would not meet its primary endpoint of confirmed complete wound closure of the target ulcer within 12 weeks of the start of treatment.