British medical technology firm Smith & Nephew Plc (SNN, SN.L) announced Wednesday that it has agreed to form a joint venture to further develop its Biologics and Clinical Therapies division with specialist healthcare growth equity and venture capital firm Essex Woodlands. The company expects the transaction to complete in the next few months and to be modestly earnings dilutive.
The new entity would be called Bioventus LLC, and will be 51 percent owned by Essex Woodlands and 49 percent by Smith & Nephew. In addition, Smith & Nephew will receive approximately $98 million cash, which will be used to pay down debt, and a $160 million 5-year note from Bioventus.
The transaction is subject to obtaining required regulatory approvals and satisfaction of other customary conditions.
Smith & Nephew will transfer the vast majority of its US Biologics team and Clinical Therapies business to the new entity. For the time being, the company will also continue to distribute Clinical Therapies products outside of the US. In 2010, Smith & Nephew's Biologics and Clinical Therapies business generated a trading profit of $44 million on revenues of $223 million.
The business will continue to be headquartered in Durham, North Carolina and the existing management team, led by its current President, Mark Augusti, will transfer to Bioventus. Smith & Nephew will retain its research facility at York, UK.
The company added that the new JV will continue to market its current portfolio of products, including the EXOGEN Ultrasound Bone Healing System and joint fluid therapy, and will seek to add further offerings.
Both Smith & Nephew and Essex Woodlands are committed to investing a significant proportion of Bioventus' cash flow into R&D over the next five years, the company said.
Smith & Nephew Chief Executive Officer Olivier Bohuon said, "In a single act we have given our existing Biologics business the resources to address longer-term development projects, retained access to the exciting area of orthobiologics, realised value for reinvestment in nearer-term opportunities, and freed up management resource to focus on driving efficiencies in established markets."
Essex Woodlands Founding Partner and Managing Director Marty Sutter stated that the company sees tremendous growth potential with this new venture as more patients discover how active products can help heal and treat joint and bone ailments without invasive surgery.
For the deal, Ondra Partners is serving as financial advisor, and Davis Polk & Wardwell LLP is serving as legal advisor, to Smith & Nephew.
Smith & Nephew shares closed Tuesday's trading at 623.25 pence, down 2.75 pence or 0.44 percent in London.
In the U.S., Smith & Nephew shares settled on Tuesday at $48.89, up $0.74 or 1.54 percent.
by RTT Staff Writer
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