NuVasive, Inc. is verticalizing its manufacturing model by buying one of its implant suppliers.
On May 6, 2013, the company announced it was acquiring ANC, LLC, a spine implant manufacturer based in Dayton, Ohio. NuVasive has been involved with ANC since ANC became a manufacturing partner with NuVasive three years ago. The company announcement said the relationship expanded over that time period to make ANC one of NuVasive’s “significant implant suppliers.”
Alex Lukianov, NuVasive’s chairman and CEO, welcomed ANC’s 65 member team into the NuVasive family. “Over the past three years, we have been very impressed with ANC’s progression as a quality manufacturer and their cultural fit with NuVasive. The facility will be designated NuVasive Manufacturing, LLC, and we look forward to expanding their capacity and systems as we grow together. Bringing portions of our manufacturing in house is a key element of our ongoing commitment to improve operating profitability as we grow toward $1 billion in revenue and beyond. The acquisition will reduce the time from the concept of a new idea to ultimate market introduction, enabling development and manufacturing to work seamlessly in launching our innovative solutions.”
In total consideration for ANC, NuVasive will reportedly pay approximately $4.5 million, around half of which will be in the form of loans forgiven to the company. No debt will be assumed in the deal. The company anticipates the transaction will be neutral to earnings in fiscal year 2013. Over the long term, however, the company expects vertical integration will provide opportunities to drive profitability improvements.
Piper Jaffray analyst Matt Miksic said NuVasive will continue to make modest investments in the facility throughout this year, which he estimates to be in the neighborhood of $1 million or less in capital expense related to IT systems.
He believes the facility, which currently represents around 10% of NuVasive’s manufacturing sourcing, could reach 20% without significant capital expansion, and is well-aligned with the company’s higher growth, higher margin CoRoent and Precept implant lines.
