Cirtec Expands Manufacturing Muscle with Recent Investment

Los Gatos, Calif.-based Cirtec Medical Systems LLC has invested in Valencia, Calif.-based Core Manufacturing LLC, taking a significant equity and controlling board position. The investment will create a new entity called Core Manufacturing—A Cirtec Company, formed in cooperation with the Alfred Mann Foundation for Scientific Research. Core was the active implantable device manufacturing facility for Alfred Mann, and now will be controlled by Cirtec.

Active implantable devices typically are high-tech devices that work constantly, such as pacemakers, and usually are designated as Class III by the U.S. Food and Drug Administration, requiring the most stringent assessment procedures.

“As Cirtec continues to expand its business supporting the active implantable market the addition of Core’s volume manufacturing will enable our customers to grow seamlessly with Cirtec from concept to market success,” said Peter Howard, CEO of Cirtec Medical Systems.

Core Manufacturing provides manufacturing capabilities for active implantable devices. Its outsourcing capabilities include rapid-turn prototyping, full turn-key assembly and testing, and sterilization, inspection and metrology for active implantable devices. Cirtec hopes to provide OEMs and startups with a one-stop outsource solution for bringing their active implantable devices to market through Core’s assembly and testing capabilities and Cirtec’s active implant design, development and pilot manufacturing.

“Core Manufacturing is thrilled to partner with Cirtec and the Alfred Mann Foundation,” said Joel Hirsch, president of Core Manufacturing. “Core will offer a unique suite of outsourced service capabilities that currently does not exist in the marketplace. By combining Cirtec’s leading implantable device design and development capability with Core’s rapid-turn prototyping and volume assembly and test capability, we will now offer our clients and new customers a complete outsource solution for their active implantable device programs.”

“While the Alfred Mann Foundation’s investment in Core is passive, we are pleased to finally identify a reliable, consistent solution to high rate manufacturing of our implantable devices,” added Mark Chamberlain, chief operating officer of the Alfred Mann Foundation. “We believe that Core will be of great benefit to members of the medical device community that avail themselves of Core’s expertise in implantable device manufacturing.”

Stryker Locks Down its Purchaseof Chinese Orthopedic Firm
Stryker Corporation has completed its purchase of Jiangsu, China-based Trauson Holdings Company Ltd., a manufacturer of orthopedic medical devices in the trauma and spine segments.

“With the acquisition of Trauson, we are well positioned to broaden our presence in China and to expand into the fast-growing value segment of the emerging markets,” said Kevin A. Lobo, president and CEO. “We look forward to building on the company’s long history of success.”

Manufacturing in China for China (and the world) has become a very attractive proposition for medical device companies, but particularly those that make orthopedic devices. China is a large market base, with a middle class that numbers 350 million (approximately the entire population of the United States), and patients there often require orthopedic implants that are smaller than those optimized for the American or European markets.

Stryker maintained that the acquisition will remain neutral to the company’s 2013 earning per share, excluding acquisition and integration-related costs.

Stryker’s main business is orthopedics, particularly spine and neurotechnology. The company provides medical devices in a range of segments, and is headquartered in Kalamazoo, Mich.

Trans1 Broadens its Product Reach with Baxano Buyout
Following reports of a wider loss of revenue in the fourth quarter of 2012 ($12 million to last year’s $5 million), spine device company Trans1 Inc. has decided to invest in surgical instrumentation. Trans1 has inked a deal to buy San Jose, Calif.-based Baxano Inc., which designs and manufactures tools for the restoration of spine function and preservation of healthy tissue.

The loss taken in Q4 was attributable to operating costs that were almost double that of Q4 2011, and a large government settlement that cost the company $6.5 million, according to company filings. However, company President and CEO Ken Reali was positive about 2013.

“In the fourth quarter we made significant progress on our key operational goals, including further reimbursement progress, expanding clinical publications and driving adoption of the Veo direct lateral system,” he said. “In addition, we re-launched AxiaLIF in November at a large peer-to-peer training event in anticipation of the activation of our Category I code on January 1. We believe that the stabilization of our domestic business and the initial stocking order in China have created positive momentum for Trans1 as we enter 2013.”

The Baxano deal will cost Trans1 approximately $24 million, $23.6 million of which will be funded from stock and the remaining from cash reserves. The company also will refinance $3 million of Baxano’s existing debt in the transaction at closing. Current Trans1 shareholders will own roughly 72.4 percent of the combined company and the remainder will be owned by current Baxano shareholders. The final number of shares will be subject to certain adjustments at closing. The merger transaction currently is expected to close early in the second quarter of 2013 and is subject to Trans1 shareholder approval and customary conditions to closing.

According to Trans1, this acquisition will expand its focus on minimally invasive lumbar spine treatments, with a combined addressable market opportunity of $3.9 billion. Baxano will complement Trans1’s existing proprietary product portfolio with differentiated patented products, and the combined sales force of the two companies will provide significant cross-selling opportunities within the MIS (minimally invasive surgery) surgeon-customer focus, according to the company. Finally, and perhaps most importantly in Trans1’s current financial position, the buy is hoped to improve the company’s financial profile.

“We believe that Baxano is a complementary strategic fit for our product portfolio,” Reali said.
“Minimally invasive treatments are the fastest growing segment of the spine market. The combination of our AxiaLIF and Veo lumbar fusion products with Baxano’s iO-Flex and iO-Tome systems for lumbar direct decompression and facetectomy, respectively, will allow us to better meet the needs of our spine surgeon customers. This merger will create a unique company with the vision of being a leader in providing less invasive and minimally invasive solutions for spine disorders.”

“We are enthusiastic about the combination of Baxano with Trans1,” said Tony Recupero, president and CEO of Baxano. “We believe the combined company will have a compelling set of minimally invasive products to benefit patients, surgeons, hospitals and payors and will continue to build on the positive sales momentum we have built at Baxano over the past few years.”

Baxano had revenues of $3.9 million and $9.4 million for the fiscal years ending Dec. 31, 2011 and 2012, respectively. On a pro forma basis, the combined company’s revenues were approximately $24 million (unaudited) for the year ending Dec. 31, 2012.

Trans1 develops products to treat degenerative conditions of the spine affecting the lumbar region. The company is based in Wilmington, N.C.

Biomedical Structures and Modified Polymer Components Merge
Warwick, R.I.-based Biomedical Structures (BMS) and Sunnyvale, Calif.-based Modified Polymer Components (MPC) will go coast-to-coast with a merger. The former is a developer of biomedical textiles for medical devices and other advanced clinical applications. The latter specializes in the design, rapid prototyping and manufacture of polymer components for medical device OEMs.
Together, the companies hope to provide medical device customers with a full spectrum of value-added services across a wider range of applications. Ampersand Capital Partners, a Boston, Mass.-based private equity firm that focuses on middle-market growth equity investments in the healthcare sector, will be the majority shareholder of the combined company.

BMS’s experience in medical textiles includes knitting, braiding, weaving and non-woven technology. The company uses implantable-grade absorbable and non-absorbable biomaterials in orthopedic, general surgery, tissue engineering, cardiovascular, bariatric, cosmetic surgery and veterinary applications, including implantable devices and drug-delivery technologies. Working with medical device developers, BMS delivers purpose-built biomedical textile solutions from concept design through full-scale production and post-manufacturing. The company also provides advanced medical device applications such as bifurcated stent grafts, tapered tendon and ligament repair structures, and heart valve solutions.

MPC uses its proprietary heating system for molding and modifying plastics to manufacture medical device components. The company’s capabilities include tipping, flaring, hole drilling, marker band placement, reinforced tubing, printing, electrode assembly, and component level assemblies.

According to the newly combined company, MPC’s production specialists can perform modifications of any complexity to custom and off-the-shelf plastic components including flaring, flanging, joining, tipping, coating, cutting, drilling, skiving and gluing.

“We look forward to embracing our relationship with BMS and using our collective expertise to better serve medical device OEMs,” said Mike Taylor, CEO of MPC. “With our joint capabilities, we will be a more robust organization that will bring greater value to customers with a wider variety of needs, both related to custom plastics components and medical textiles.”

“MPC’s unique bonding technologies are enabling exciting developments with custom plastic components for medical devices and other related industries, and we are pleased to be joining the companies to expand both our offerings and theirs,” said Dean Tulumaris, CEO of BMS. “By merging BMS and MPC, both companies will benefit from a bicoastal presence and extensive combined resources, without affecting our existing commitments or the established level of superior quality and seamless operational efficiency our valued customers and employees have come to expect.”

Tulumaris will lead the combined company and Taylor will transition into his new role of chief technical officer, where he will focus on working with the company’s engineers to develop new technologies and solutions for customers.