Alphatec Holdings and OrthoTec, LLC Mutually Agree to Settle Ongoing Litigation
17 März 2014 - 9:05PM
Alphatec Holdings, Inc. (Nasdaq:ATEC), the parent company of
Alphatec Spine, Inc., a medical device company that provides
physician-inspired solutions for patients with spinal disorders,
announced that it has entered into a binding term sheet to settle
the OrthoTec, LLC vs. Surgiview S.A.S. legal matter.
This settlement will result in mutual releases of all claims and
the dismissal of the case in the Superior Court of California, Los
Angeles County and all other related litigation matters involving
the Company, its directors and affiliates.
Under the terms of the settlement, Alphatec has agreed to pay
OrthoTec $49 million over the next 7 years in cash, with an initial
cash payment of $17.5 million. The remaining $31.5 million will be
paid to OrthoTec in installments of $1.1 million paid quarterly,
beginning in the fourth quarter of 2014. In addition, a 7% simple
interest rate will accrue on the unpaid portion of the $31.5
million. All accrued interest is not payable until the $49 million
is paid, and such accrued interest shall be paid in $1.1 million
installments each quarter.
The parties anticipate entering into a long-form agreement that
complies with the term sheet.
The Company also announced today that it has entered into a
secured loan facility with affiliates of Deerfield Management
Company to provide the Company with up to $50 million in financing,
at the Company's option. The financing can be used to satisfy
certain obligations arising out of the OrthoTec settlement and,
upon the achievement of disbursement conditions, to provide growth
capital to the Company. This facility is subordinate to the
Company's existing credit facility with MidCap Financial.
"While we continue to believe strongly in our position with
respect to this litigation, this settlement removes a future
uncertainty in our business and eliminates further distraction and
extensive investment of human and financial resources associated
with continuing with a lengthy legal process," said Les Cross,
Chairman and CEO of Alphatec Spine. "We are confident in our
ability to meet this obligation given the structure of the
settlement and our future cash flow projections, supplemented with
additional funding from Deerfield. With this behind us we are
able to focus our full attention on strengthening and growing our
business based on the strong foundation and momentum we have
established," added Mr. Cross.
Under the terms of the new Deerfield facility, the Company has
the option to draw up to $50 million in one or more increments
prior to January 30th, 2015. The initial draw on the facility
must be used in connection with the OrthoTec settlement. The
secured loan facility matures in five years and accrues interest at
a rate of 8.75% per annum, payable quarterly. In
connection with the execution of the facility, the Company issued
Deerfield 6.25 million warrants that have an exercise price of
$1.39 per share. In addition, the Company will issue an
additional 10 million warrants on a pro rata basis as the facility
is drawn down. With each disbursement, Deerfield will receive
a transaction fee equal to 2.5% of the amount disbursed.
"Deerfield has demonstrated its commitment to Alphatec's future
potential and we value the continued support that they are
providing through this additional financial investment," said Les
Cross. "We also want to acknowledge and appreciate the strong
ongoing partnership with MidCap Financial and their endorsement of
this additional loan facility. Their continued support as we
assume this additional financial obligation demonstrates their
commitment to our current and future business objectives."
"Deerfield has been a long-term investor in Alphatec and is
supportive of the Company's growth plan. Our goal with this
facility is to help Alphatec move beyond this legal matter and to
provide additional capital for managing its growth," stated Steve
Hochberg, a partner at Deerfield Management.
About Alphatec Spine
Alphatec Spine, Inc., a wholly owned subsidiary of Alphatec
Holdings, Inc., is a medical device company that designs, develops,
manufactures and markets physician-inspired products and solutions
for the treatment of spinal disorders associated with trauma,
congenital deformities, disease and degeneration. The Company's
mission is to combine innovative surgical solutions with
world-class customer service to improve outcomes and patient
quality of life. The Company and its affiliates market products in
the U.S. and in over 50 countries internationally via a direct
sales force and independent distributors.
Additional information can be found at
www.alphatecspine.com.
About Deerfield Management Company
Deerfield is an investment management firm, committed to
advancing healthcare through investment, information and
philanthropy. For more information about Deerfield, please visit
www.deerfield.com.
Forward Looking Statements
This press release may contain "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act
of 1995 that involve risks and uncertainty. Such statements are
based on management's current expectations and are subject to a
number of risks and uncertainties that could cause actual results
to differ materially from those described in the forward looking
statements. Alphatec Spine cautions investors that there can be no
assurance that actual results or business conditions will not
differ materially from those projected or suggested in such
forward-looking statements as a result of various factors. Forward
looking statements include references to Alphatec Spine's 2013
growth, revenue, and adjusted EBITDA projections; the Company's
ability to take advantage of the maximum amount of its new credit
facility, the Company's ability to meet its financial obligations
in connection with the OrthoTec Settlement while still funding its
ongoing operational and commercial activities. Please refer to the
risks detailed from time to time in Alphatec Spine's SEC reports,
including its Annual Report Form 10-K for the year ended December
31, 2012, filed on March 4, 2013 with the Securities and Exchange
Commission, as well as other filings on Form 10-Q and periodic
filings on Form 8-K. Alphatec Spine disclaims any intention or
obligation to update or revise any forward-looking statements,
whether as a result of new information, future events, or
otherwise, unless required by law.
CONTACT: Investor/Media Contact:
Christine Zedelmayer
Investor Relations
Alphatec Spine, Inc.
(760) 494-6610
czedelmayer@alphatecspine.com
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