Article preview from IN VIVO - March, 2013
In a uniquely structured deal, TranS1 is merging with privately held Baxano to form a new minimally invasive spine company.
Article preview from IN VIVO - March, 2013
Meet the new TranS1 Inc., a lot different than the old one. The minimally invasive spine fusion maker has had a rough time these last five years. The company managed to go public in 2007, just as the IPO window slammed shut on venture-backed device companies. But the IPO clearly wasn’t a harbinger of good days to come. Since the IPO, the company has struggled to convince insurers and the American Medical Association to pay for its Axial Lumbar Interbody Fusion (AxiaLIF) procedure. The company obtained a CPT III code in 2009, but insurers still balked at paying, causing revenue to drop from a peak of nearly $30 million in 2009 to $14.5 million last year.
TranS1 management finally won the day, obtaining a coveted CPT 1 code from the AMA, which became effective at the start of this year. This gave TranS1 the evidence and validation necessary to win over insurers. Last year, the only insurers accepting TranS1 covered 15 million lives. This year, that number is up to 100 million and is growing. The new code also gave TranS1 the surety to place a significant bet in building out its spinal business. In a uniquely structured deal, TranS1 is merging with privately held Baxano Inc., maker of a system used in spinal decompression procedures. Together, they’ll form a new minimally invasive spine company, with a completely new name to be announced later this year.
The deal is being portrayed as an acquisition, but there is more to it. TranS1 paid for Baxano with 10.4 million shares and $550,000 in cash. Together, the stock and cash amounted to $25.3 million. In exchange, however, TranS1 will receive a $17 million cash infusion, mostly from Baxano’s private investors who agreed to put $15.3 million into the combined companies. Combined with the shares received for Baxano, the venture syndicate including Affinity Capital Management, CMEA Venture Partners, Kaiser Permanente Ventures, Kearny Venture Partners, Prospect Venture Partners and Three Arch Partners will own more than 30% of the new company. Other PIPE investors committed an additional $1.9 million into the company, which will give it $30 million in cash after the deal is done.
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