Surgalign (Nasdaq:SRGA) announced today that it entered into an agreement to sell assets under a Chapter 11 bankruptcy.
The asset purchase agreement enables Surgalign to sell substantially all U.S. hardware and biomaterial assets. It also intends to sell the equity interests in non-debtor entities related to the debtors’ hardware business outside the U.S. — Xtant Medical. That sale totals $5 million. Surgalign sold two product lines to Xtant Medical earlier this year.
Deerfield, Illinois-based Surgalign said it plans to effectuate the sale through Chapter 11 proceedings. The company and certain subsidiaries elected voluntary petitions under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of Texas, Houston Division.
As part of the proceedings, the company filed a motion seeking authorization to pursue an auction and sale process. Under this, Surgalign designates Xtant as the stalking horse bidder. It also encompasses the company’s other assets that fall outside the asset purchase agreement.
Surgalign said in a news release that it filed motions to ensure the continuation of normal operations during this process. It feels it has sufficient liquidity to conduct its business in an uninterrupted manner and fund the Chapter 11 proceedings.
More the current situation at Surgalign
In November 2022, Surgalign announced a board-approved corporate restructuring plan that included an undisclosed amount of layoffs.
The company estimated savings around $30–35 million compared to 2022 as a result of its restructuring. Its board also gave management the green light to explore other cost-saving avenues. Future moves could include paring down, selling or exiting certain aspects of its business, both domestically and abroad.
That led to March, when Surgalign offloaded its Coflex and Cofix product lines to Xtant for $17 million. Later that month, the company reported a mixed-bag fourth quarter, attributing revenue dips to market and economic conditions in the U.S. and abroad. At the time, Surgalign said it believes it has the cash on hand to fund itself into the fourth quarter of 2023.
In April, Surgalign received notification that it no longer remains in compliance with the $10 million minimum stockholders’ equity requirement for continued listing on the Nasdaq market. This falls under Nasdaq Listing Rule 5450(b)(1)(A). The letter further indicated that Surgalign failed to meet alternative standards for continued listing.
Chapter 11 and asset sales continue to hit medtech
Surgalign’s decision to sell off some assets through Chapter 11 seems to fall into an industry trend at the moment.
Invacare only came out of Chapter 11 last month, having filed with two U.S.-based subsidiaries to enact a financial overhaul at the company.
Digital therapeutics developer Pear Therapeutics filed in April. The decade-old company sought to sell its assets, CEO Corey McCann said, while enacting a workforce reduction.
Other companies have recently been selling and licensing their IP as they reevaluate objectives including the likes of Titan Medical and Bigfoot Biomedical.
