Integra LifeSciences Holding Corporation has announced a definitive agreement to acquire Surgical Innovation Associates (SIA), doubling down on cosmetic reconstruction in a deal worth up to $140 million.
The transaction is expected to close by the year’s end, subject to the satisfactions of customary closing conditions. Integra will pay $50 million at closing and may pay up to an additional $90 million upon achieving certain revenue and regulatory milestones.
According to Integra, “the transaction is expected to be dilutive to adjusted earnings per share by approximately $0.06 in Year 1 and accretive to earnings in Year 3, with a return on invested capital greater than 10% by Year 5.” To offset deal dilution Integra “is planning a $150 million share repurchase as a part of a previous approval by the board of directors.”
The acquisition aligns with Integra’s focus on expanding in the cosmetic reconstruction market in the United States with FDA-approved devices. Currently, there are no FDA-approved surgical matrices for use specifically cosmetic reconstruction.
SIA is the creator of DuraSorb®, a fully resorbable synthetic matrix for use in reconstructive and aesthetic surgery. Currently, SIA is “conducting an investigational device exemption study in the U.S. evaluating the safety and effectiveness of DuraSorb with the goal of obtaining a PMA [a pre-market approval] in IBBR [implant-based breast reconstruction].”
Integra’s plastic and reconstructive surgery portfolio includes SurgiMend® PRS. SurgiMend is a xenograft surgical matrix and, according to the company, will be the first surgical matrix for use as soft tissue support in IBBR submitted under the pre-market approval (PMA) process.
Integra LifeSciences’ Executive Vice President and President, Tissue Technologies Robert T. Davis, Jr. commented, “By offering two distinct product solutions, SurgiMend and DuraSorb, to plastic and reconstructive surgeons, we aim to address various clinical, contracting, and economic needs across different sites of care. We look forward to welcoming the SIA leadership and colleagues who will continue to drive the team’s success.”
According to the press release, “2022 revenue for DuraSorb is expected to be approximately $5 million.” According to Wells Fargo Securities, LLC analysts, Integra “expects that revenues could double in 2023.”
Wells Fargo analysts also stated that Integra “expects a first-mover advantage in IBBR as SurgiMend will likely be the first product with a PMA (sub-pectoral), and DuraSorb is likely to be the second product with a PMA (sub-pectoral and pre-pectoral) as no other companies have submitted a PMA for IBBR to date.” Additionally, “both xenograft ADMs [acellular dermal matrices] (SurgiMend) and resorbable synthetic meshes (DuraSorb) are lower priced than human ADMs, and the company believes that the market will shift away from higher priced human ADMs over time.”
