Disco-Tech sells spine products for $220m [p.16]

Privately owned Israeli start-up company Disc-O-Tech Medical Technologies has agreed to sell its spine-related product assets and intellectual property rights to California-based Kyphon Inc. for $220 million. "We are pleased to be able to couple our unique technology platforms with Kyphon's strong sales channel resources to provide spine specialists with less invasive treatment options for their patients," Motti Beyar, president and chief executive officer of Disc-O-Tech said in the press statement about the deal. The companies signed two contracts for Disc-O-Tech's non-invasive spine procedures, the first for its B-Twin Expandable Spinal System used in lumbar spinal fusion procedures, and its SKy Bone Expander System for the treatment of vertebral compression fractures (VCFs). The second transaction was for Disc-O-Tech's Confidence Cement System, a putty-like, radio-opaque acrylic bone cement used in the treatment of VCFs. Under the agreement, Kyphon will pay an initial $60m. to Disc-O-Tech and another $40m. no later than February 1, on the closing of the first transaction for the acquisition of either B-Twin and SKy Bone. The remaining $120m. will be paid in three equal annual installments beginning in January 2008 for Disc-O-Tech's Confidence System assets. An additional $20m. in contingent payments may also be paid based on the development of further technologies. Kyphon said it expects the acquisitions to "significantly" hurt 2007 earnings. The transactions, excluding some items, will reduce profit by 12 to 17 cents a share but were expected to add to earnings starting in 2009. The deals are expected to close in 2007. Founded in 1998 by Lewis Pell, Motti Beyar, and Oren Globerman, Herzliya-based Disc-O-Tech offers other products in its spinal line along with its products for trauma and arthoplasty treatments. It was named the most promising Israeli Life Science startup for 2005 at last year's Israeli Technology and Life Sciences Conference hosted by Tamir Fishman & RBC Capital Markets. Disc-O-Tech declined to comment to The Jerusalem Post about the deal. Kyphon said the technologies would further extend its minimally invasive spine franchise beyond its present technologies for the treatment of vertebral compression fractures and to diagnose the source of low back pain. "Disc-O-Tech's innovative B-Twin Expandable Spinal System and related intellectual property assets will permit Kyphon to further serve the fast- growing industry segment focused on minimally invasive treatment of degenerative disc disease," said Richard Mott, president and CEO of Kyphon. "The acquired VCF products also promise to expand our capabilities to offer clinicians a broad suite of fracture management and repair options both in our established markets as well as providing opportunities to access more cost-sensitive emerging markets."