MiMedx (NSDQ:MDXG) said today it inked a definitive agreement with the former shareholders of Stability Inc. to divest itself of Stability Biologics, which it acquired last January.
The Marietta, Ga.-based company said the divestiture is part of its plan to transition back into a biopharmaceutical-focused company.
“The transaction is expected to be completed in the 3rd quarter of 2017, and the consideration will include a promissory note issued by Stability Biologics in the principal amount of $3.5 million in favor of MiMedx and a waiver by the former stockholders of Stability, Inc. of all claims and rights to the earn-out consideration. The company expects to book a 1-time gain on this transaction of approximately $8 million to $10 million,” MiMedx CFO Mike Senken said in a press release.
“Our infrastructure has been carefully adjusted and assembled to pursue our biopharma strategy. With this new strategic focus, the long-term strategy of Stability Biologics is no longer a strategic fit for MiMedx. That said, through a new “private label” distribution agreement with Stability Biologics, we have retained their key sales relationships for the spine and orthopedics areas of our surgical business,” MiMedx prez & COO Bill Taylor said in a prepared release.
Formerly Nashville, Tenn.-based Stability Biologics produces tissue products for use in surgical, spinal and orthopedic sectors, including processed bioactive bone graft products, tissue allografts, demineralized bone matrix, burn and wound care products and its Physio bone grafting material.
“We have enjoyed our association with MiMedx and believe we have benefited a great deal during our time as part of the MiMedx organization. We believe this transaction is a very positive event for both companies,” Stability Biologics CEO Brian Martin said in prepared remarks.
“We remain very confident in our growth trajectory continuing and in our ability to meet or exceed the revenue projections we have previously set for 2017. In our press release of July 26, 2017, we raised our annual revenue guidance to the range of $309 million to $311 million. Assuming this transaction closes in the third quarter, we will maintain our full year revenue guidance. Even without the Stability Biologics revenue contribution in the 4th quarter, we are confident in our ability to meet our increased revenue guidance for the year. As such, we are also reaffirming all other guidance ranges for the third quarter and full year 2017 as communicated in our July 26 press release. We have determined that the Stability Biologics business is not a strategic fit with our new focus on becoming predominantly a biopharmaceutical company. While we believe the potential of Stability Biologics products continues to be significant, we expect to have better return on investment opportunities in biopharma compared to those in the cadaver tissue category. A major incentive for the MiMedx acquisition of Stability Biologics was its independent sales representative organization. As part of the transaction, MiMedx will retain access to this sales rep organization via a distributor agreement with Stability. This group of sales reps will continue to focus on certain areas of our surgical business. Our human placental tissue allografts are the source material for our primary asset base, which is a key technology differentiator in regenerative biologics. We are focusing our efforts on continuing down the Investigational new drug/biologics license application regulatory pathways for numerous new therapeutic applications of our placental-based technology. MiMedx will continue to demonstrate, through scientific and clinical studies and trials, the clinical and economic effectiveness of our regenerative biologics and therapies. After this divesture, MiMedx’s gross profit and operating profit margins are expected to improve,” MiMedx CEO Parker Petit said in a prepared statement.
