Alphatec Holdings, Inc. (“Alphatec” or the “Company”)
(Nasdaq:ATEC), a provider of innovative spine surgery solutions
with a mission to improve patient lives through the relentless
pursuit of superior outcomes, announced today that it has acquired
SafeOp Surgical, Inc. (“SafeOp”). SafeOp is a privately-held
provider of advanced neuromonitoring technology designed to prevent
the intraoperative risk of nerve injury with automated assessment
that obviates the need for a technician or other neuromonitoring
professional in most surgeries. The Company also announced a
$50 million capital raise, the proceeds of which were used, in
part, to fund the acquisition.
Additionally, the Company announced several
leadership updates. Pat Miles has assumed the role of Chief
Executive Officer. Terry Rich has been appointed President and
Chief Operating Officer. Both will retain their existing
Board positions. Dr. Luiz Pimenta has been appointed Chief
Medical Officer.
SafeOp Acquisition
SafeOp has developed patented technology that
automates SSEP’s (Somatosensory Evoked Potentials), designed to
provide surgeons with unprecedented, objective feedback during
surgery.
“This strategic acquisition of SafeOp marks a
transformational moment for the new ATEC,” said Pat Miles. “Our
answer to the need for better neuromonitoring is investing in
technology that automates information to enable objective clinical
decision making and eradicate non-critical operating room
personnel. The integration of this key technology into our spine
procedures will address unmet clinical needs and improve surgical
outcomes in spine. We expect the combination to accelerate
our business by increasing procedural revenue and driving
pull-through across our entire portfolio.”
In consideration for SafeOp, Alphatec will pay
$15 million in up-front cash, a $3 million convertible note, and
the issuance of 3.3 million shares of common stock and
warrants to purchase 2.2 million shares of common stock at an
exercise price of $3.50 per share. SafeOp will be eligible to
receive an additional 1.3 million shares of common stock, subject
to the achievement of performance milestones. The issuance of
the shares of common stock in the merger, including at closing,
upon achievement of milestones, conversion of the notes and
exercise of the warrants is subject to limitations until required
stockholder approval is obtained in accordance with the NASDAQ
Global Select Market rules.
Leadership and Board
Appointments
The Company also announced the following
leadership and board appointments.
Dr. Luiz Pimenta will advise Alphatec as Chief
Medical Officer. Pimenta is a world-renowned spine surgeon
with over 30 years of expertise, and is widely credited with
pioneering innovative surgical techniques and developing new
technologies to improve spine surgery. His broad
contributions have been commercialized via numerous industry
partners. Dr. Pimenta will enhance the ATEC strategy by
focusing on spine innovation and medical education.
Miles continued, “I am honored and thrilled to
work again with Dr. Pimenta. His decision to assume a key role in
our mission is pivotal. It speaks volumes of the surgical
community’s perception of ATEC’s visceral dedication to improved
outcomes through eXtreme innovation.”
Richard O’Brien, M.D., and Robert Snow, the
scientific principals of SafeOp, with over 50 years of combined
neurophysiology expertise will join Alphatec as executives. Prior
to serving as Vice President of Development and Chief Medical
Officer of SafeOp, Dr. O’Brien, a renowned inventor and
neurologist, was Medical Director of Impulse Monitoring, Inc., a
neuromonitoring provider. Before joining Impulse Monitoring,
O’Brien spent over two decades in the neurophysiology field, as
both a physician and consultant. Mr. Snow, a neurophysiologist, was
SafeOp’s Vice President, Marketing for 5 years, following an
11-year tenure as co-founder and Senior Vice President of Marketing
at Impulse Monitoring.
“I could not be more excited to join the ATEC
family and to engage in the creation of automated tools that
provide objective information for better clinical decision making,”
said O’Brien.
The SafeOp development and integration effort
will be led by Jim Gharib, an electrical engineer with more than 20
years of experience in the field of neurophysiology. Gharib was the
technical lead of NuVasive’s neurophysiology platform from the
company’s inception to its achievement of billion-dollar revenue
levels. Gharib is a named inventor on more than 20 patents in the
fields of neuromonitoring, spine surgery, IV infusion, and blood
chemistry.
“I am exceptionally pleased to work again with
Rob, Richard, and Jim, the new leaders of our adjunctive technology
team,” said Terry Rich, President and Chief Operating Officer of
Alphatec. “They each have a proven history of successfully
creating value in the neurophysiologic and spine marketplace. I
look forward to working with each of these new leaders as we evolve
into a leading spine market player.”
Three new members have joined the Alphatec Board
of Directors, in connection with the above transactions:
- James Tullis, the founder and Chief Executive Officer of Tullis
Health Investors, a healthcare investment firm, has over 40 years
of experience in healthcare-focused investments. Prior to
establishing his firm in 1986, Tullis served as an award-winning
healthcare investment research analyst and Principal at Morgan
Stanley, focusing on pharmaceuticals and medical
devices.
- Jason Hochberg a partner with L-5 Healthcare Partners, and the
Founder and CEO of SJS Beacon, an investment company, has over 20
years of business and legal experience. Prior to founding SJS
Beacon, Hochberg held various leadership roles throughout a 15-year
tenure at LS Power, an energy investment and innovation company,
serving most recently as Chief Operating Officer and as a Principal
in LS Power’s private equity fund advisor. He started his
professional career at the law firm of Latham & Watkins in
1996.
- Evan Bakst, a partner with L-5 Healthcare Partners, and the
Founder of and Portfolio Manager at Treetop Capital, a healthcare
investment firm. He has over 25 years of experience in
healthcare-focused investments. Prior to founding Treetop
Capital, Bakst was a partner for 7 years at Tremblant Capital, an
equity hedge-fund manager, where he led the global healthcare group
and held various other leadership roles.
Equity Financing
Transactions
The Company announced that it has entered into
financing transactions to raise an aggregate of $50 million,
through a private placement of Series B Convertible Preferred Stock
and warrants exercisable for common stock, and a warrant exchange
agreement with a holder of an existing warrant for an aggregate
consideration of $4.8 million. The private placement was led by L-5
Healthcare Partners, LLC, a healthcare-dedicated institutional
investor, and included certain directors and executive officers of
Alphatec, as well as other new and existing institutional and
independent investors. The Company used a portion of the net
proceeds from the private placement and warrant exercise to fund
the $15 million cash purchase price for SafeOp, and expects to use
the remainder for general corporate purposes.
Raymond James & Associates, Inc., is acting
as placement agent in connection with the private placement and
financing advisor in connection with the SafeOp acquisition.
Additional information and legal disclosures
about the transaction are contained in the Company’s Current Report
on Form 8-K to be filed with the Securities and Exchange
Commission.
The securities to be sold in the private
placement will not have been registered under the Securities Act of
1933, as amended, or state securities laws as of the time of
issuance and may not be offered or sold in the United States absent
registration with the Securities and Exchange Commission (SEC) or
an applicable exemption from such registration requirements.
Alphatec has agreed to file one or more registration statements
with the SEC registering the resale of the shares of common stock
purchased in the private placement and the shares of common stock
underlying the warrants and issuable upon conversion of the Series
B Convertible Preferred Stock.
This press release shall not constitute an offer
to sell or the solicitation of an offer to buy these securities,
nor shall there be any sale of these securities in any state or
other jurisdiction in which such offer, solicitation or sale would
be unlawful.
Inducement Award
As an inducement to accepting employment with
the Company, and in accordance with applicable NASDAQ listing
requirements, the Board of Directors has also approved an award,
collectively, to these new additions of 45,000 restricted stock
units (RSUs) and 45,000 stock options (Options).
The RSUs and options will be granted following registration of
the common stock underlying the RSUs and Options. The RSUs
will vest in equal annual installments on each of the first four
anniversaries of date of employment, and the options will vest 25
percent on the first anniversary and in equal monthly installments
of 1/36th of the balance of the Options, provided the recipient
remains continuously employed by Alphatec as of such vesting date.
In addition, the RSUs and Options will fully vest upon a change in
control of Alphatec.
The Board approved an amendment to Alphatec's 2016 Employment
Inducement Award Plan to increase the shares reserved for issuance
thereunder by 600,000 shares, effective March 6, 2018.
Investor Conference Call
Alphatec will hold a conference today at 1:30
p.m. PT / 4:30 p.m. ET to discuss the strategic acquisition, in
conjunction with fourth quarter and full year 2017 results. The
dial-in numbers are (877) 556-5251 for domestic callers and (720)
545-0036 for international callers. The conference ID number is
7887979. A live webcast of the conference call will be available
online from the investor relations page of the Company's corporate
website at www.atecspine.com.
About Alphatec Holdings,
Inc.
Alphatec Holdings, Inc., through its wholly
owned subsidiary Alphatec Spine, Inc., is a medical device company
that designs, develops, and markets spinal fusion technology
products and solutions for the treatment of spinal disorders
associated with disease and degeneration, congenital deformities,
and trauma. The Company's mission is to improve lives by providing
innovative spine surgery solutions through the relentless pursuit
of superior outcomes. The Company markets its products in the U.S.
via independent sales agents and a direct sales force.
Additional information can be found at
www.atecspine.com.
About Safe-Op Surgical
SafeOp is a privately-held provider of automated
neuromonitoring technology. The Company’s EPAD device was
approved by the FDA in January 2014, intended for use in monitoring
neurological status by automating & recording somatosensory
evoked potentials (SSEP) or assessing the neuromuscular junction
(NMJ). Functionality, including free run EMG and triggered
EMG will be added later this year.
Forward Looking Statements This
press release contains "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.
The Company 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 the references to the Company’s strategy in
significantly repositioning the Alphatec brand and turning the
Company into a growth organization. The important factors
that could cause actual operating results to differ significantly
from those expressed or implied by such forward-looking statements
include, but are not limited to: the uncertainties regarding
the Company’s ability to recognize the expected synergies and other
benefits of the SafeOp acquisition; the difficulties in the
integration of SafeOp post-closing; the diversion of management
time to address transaction-related issues; the uncertainties
related to litigation involving the acquisition of SafeOp or the
private placement or limitations or restrictions imposed by
regulatory authorities; the uncertainties related to unanticipated
integration costs or undisclosed liabilities assumed; the
uncertainties related to the acceptance of the SafeOp acquisition
and its products by third parties; the uncertainty of success in
developing new products or products currently in the Company’s
pipeline; the uncertainties in the Company’s ability to execute
upon its strategic operating plan; the uncertainties regarding the
ability to successfully license or acquire new products, and the
commercial success of such products; failure to achieve acceptance
of the Company’s products by the surgeon community, including
Battalion and Arsenal Deformity; failure to obtain FDA or other
regulatory clearance or approval for new products, or unexpected or
prolonged delays in the process; continuation of favorable fourth
party reimbursement for procedures performed using the Company’s
products; unanticipated expenses or liabilities or other adverse
events affecting cash flow or the Company’s ability to successfully
control its costs or achieve profitability; uncertainty of
additional funding; the Company’s ability to compete with other
competing products and with emerging new technologies; product
liability exposure; an unsuccessful outcome in any litigation in
which the Company is a defendant; patent infringement claims;
claims related to the Company’s intellectual property and the
Company’s ability to meet its financial obligations under its
credit agreements and the Orthotec settlement agreement. The words
“believe,” “will,” “should,” “expect,” “intend,” “estimate” and
“anticipate,” variations of such words and similar expressions
identify forward-looking statements, but their absence does not
mean that a statement is not a forward-looking statement. A
further list and description of these and other factors, risks and
uncertainties can be found in the Company's most recent annual
report, and any subsequent quarterly and current reports, filed
with the Securities and Exchange Commission. Alphatec
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.
Investor/Media Contact:
Carol RuthThe Ruth Group(646)
536-7000alphatec@theruthgroup.com
Company Contact:
Jeff BlackExecutive Vice President and Chief Financial
OfficerAlphatec Holdings, Inc.ir@atecspine.com
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