Notes on NuVasive's Acquisition of NeoDisc™
BY JOHN MCCORMICK, AUGUST 11, 2005
Late last week, NuVasive, Inc. announced the acquisition of the NeoDisc™ (download product brochure) technology and assets from Pearsalls Limited, a UK medical product developer that has a core competence in surgical suture material. The transaction requires a closing payment by NuVasive of $12 million, including $5 million in cash and $7 million in stock. In addition, NuVasive stands to make additional payments with the achievement of certain product milestones (including FDA approval of the device) that could total up to an additional $31.5 million in cash and stock. NuVasive has also agreed to pay a royalty of 5% on sales of the Neodisc product.
This represents NuVasive's second acquisition of cervical motion preservation technology in just two months. Clearly NuVasive is making a bet on this marketplace which is estimated to be as high as $1 billion by the year 2011. What's interesting to the orthopedic community is that the Company looks like it is making and end run around the cervical disc arthroplasty paradigm. Or is something else going on? We think that the company is filling the blanks in niche areas in the cervical continuum of care such as dynamic stabilization and nucleus replacement. These are potentially complementary areas or interim steps to cervical disc arthroplasty and/or cervical fusion.
Neodisc is a revisable nucleus-like device encased in a mesh. It is designed to preserve motion in the cervical region of the spine is intended to treat patients earlier in the degenerative cascade. NuVasive will seek FDA approval for commercialization of the Neodisc and anticipates filing an Investigational Device Exemption (IDE) application in the fourth quarter of 2005. The Company believes the Neodisc could be commercially available in Europe as early as 2007 and commercialized in the U.S. in the 2010 timeframe.
