Surgalign (Nasdaq:SRGA) shares are down today on the news of its second-quarter financial results and a global settlement agreement.
Shares of SRGA were down 8.3% at $5.50 apiece before the market opened this morning. They sank even further after the market opened, with shares trading down 20.5% at $4.77 in the early hours. (MassDevice‘s MedTech 100 Index, which includes stocks of the world’s largest medical device companies, was mostly unchanged.)
Effective Aug. 5, Surgalign entered into a global settlement agreement with Pioneer Surgical Technology, Resolve Surgical Technologies and RTI Surgical relating to the sale of its OEM business in 2020 and the continued relationship it has had with RTI since then.
Under the settlement agreement, the parties have amended various agreements, including distribution agreements for spinal implants and biologics. All parties have settled the litigation and released each other from potential claims, as well, according to a news release.
Surgalign was released from the obligation to cure a purchase shortfall for the current year and reduced the minimum annual purchase requirements. The sole-source relationship was also extended for an additional two years, with updated supply chain provisions reflecting the separation of Surgalign and Resolve/RTI.
“We are pleased to settle the dispute with Resolve and RTI and look forward to the future business our companies can do together,” Surgalign President and CEO Terry Rich said in the news release. “The negotiations gave us the opportunity to work through post-split issues that we identified over the past two years, following separation. The newly amended contracts are a better fit for our ongoing relationship and our current business.”
Surgalign and Resolve/RTI separated in July 2020 through the sale of the OEM business. Resolve/RTI still provides products distributed by Surgalign in the U.S. and in approximately 50 countries worldwide. Surgalign also recently settled with the SEC over alleged misreported revenues from when it was operating under the RTI name between 2015 and 2019.
For the three months ended June 30, 2022, the Deerfield, Illinois-based company posted losses of $5.7 million, or 86¢ per share, on sales of $20.6 million, representing a more than $10 million bottom-line gain while the company remained in the red on a sales decline of nearly 17%.
Adjusted to exclude one-time items, losses per share were $1.91, 34¢ behind Wall Street, where analysts were looking for sales of $21.1 million.
“We’ve made significant progress in bringing new products to market while building a strong foundation for the future,” Rich said in a separate release. “We expanded the reach of our HOLO Portal Surgical Guidance System, with successful cases performed in Indiana and Ohio, and we are close to securing additional sites throughout the United States.
“The new products we have launched are gaining traction, and there is a lot of excitement building at Surgalign. We believe we are well positioned for growth in the second half of the year, particularly in the fourth quarter, with significantly greater prospects in the future.”
Surgalign reaffirmed its sales guidance for revenues between $86 million and $90 million.