Baxano Surgical, Inc. has filed for Chapter 11 Bankruptcy and its assets are going up for auction, according to a company announcement on November 13, 2014.
The company was unable to secure ongoing financing, so a decision was made to facilitate a going concern sale of the company’s minimally invasive products under Section 363 of the U.S. Bankruptcy Code.
Company’s president and CEO Ken Reali said, “We believe this is the best course of action for the company at this point in time and is in the best interests of all of our stakeholders. As we move through this transaction process we will continue to focus on supporting our commercial business and the surgeons and hospitals that use our products.”
In conjunction with the bankruptcy filing, Hercules Technology Growth Capital, Inc., Baxano’s pre-petition secured lender, has agreed to “debtor in possession” (DIP) financing. That means that anyone purchasing any of Baxano’s assets gets them unencumbered from claims by Hercules. Any sale will be subject to Bankruptcy Court approval to support Baxano’s continued operations during the pendency of the sale process.
Company Assets
The company’s major assets include over 100 patents:
- AxiaLIF family of products for single and two level lower lumbar fusion,
- VEO lateral access and interbody fusion system featuring the REVEAL retractor
- iO-Flex system, a proprietary set of flexible instruments used by surgeons during spinal decompression procedures
- iO-Tome instrument, which rapidly and precisely removes bone, specifically the facet joints, which is commonly performed in spinal fusion procedures
- Avance, an MIS pedicle screw system used in lumbar fusion procedures.
AxiaLIF, VEO, REVEAL, iO-Tome and iO-Flex are all registered trademarks of Baxano Surgical.
End of TranS1/Baxano Experiment
This brings to an end the effort to join Baxano with TranS1, Inc. Raleigh, North Carolina-based TranS1 acquired Baxano in 2013 in a stock transaction valued at about $23.6 million.
TranS1’s, primary revenue driver was its AxiaLIF device, which received FDA clearance in 2004 and was launched in 2005. Revenue reached $29.8 million in 2009, but has steadily declined each year since. Company executives attributed the sales slide to declines in surgeries because physicians had problems getting insurance reimbursements.
Reimbursement Challenges
AxiaLIF is a unique presacral lumbar interbody fusion procedure which was difficult to fit into existing CPT (Current Procedural Terminology) codes. On March 5, 2012, TranS1 announced that the American Medical Association’s CPT Editorial Panel voted to approve an application for a new Category I CPT code, 225XX1, for L5-S1 spinal fusion. The CPT Panel also voted to establish a new Category III CPT code and elected to adopt minor revisions to the company’s two current Category III codes. The new CPT codes, and the revisions to the existing CPT codes, became effective on January 1, 2013.
But that wasn’t sufficient to convince enough payers to cover the procedure.
After combining the companies, second quarter 2014 revenue was $4.6 million, up 20% compared to the same period the previous year. The company’s net loss in the quarter was $5.6 million, a 31% improvement compared to a year ago. But the company was running out of cash and had just $3.8 million in cash and equivalents as of June 30, 2014.
The company reported that an independent auditor concluded that the company’s recurring losses and negative cash flow raised doubts about the company’s ability to continue operating. In its last quarterly report, management said that if it was unable to raise additional financing, it would “need to implement further expense reduction measures, including workforce reductions, the consolidation of operations and/or the delay or cancellation of certain operational programs, pursue a plan to license or sell our assets, or to cease operations.”
Reali told us the auction will likely take place before the end of the year and will be government controlled.
