Merit Medical Systems’ $200 Million Acquisition of Cianna Medical

Piper Jaffray & Co. and Raymond James & Associates acted as financial advisors to Merit, and J.P. Morgan Securities LLC acted as financial advisor to Cianna Medical. Parr Brown Gee & Loveless P.C. served as the legal advisor to Merit. Wilson Sonsini Goodrich & Rosati, P.C. served as legal advisor to Cianna Medical.

Merit Medical Systems, Inc. (NASDAQ: MMSI), a leading manufacturer and marketer of proprietary disposable devices used in interventional, diagnostic and therapeutic procedures, particularly in cardiology, radiology, oncology, critical care and endoscopy, has signed a definitive merger agreement to acquire Cianna Medical, Inc., headquartered in Aliso Viejo, California. The transaction has been approved by the board of directors of both companies, and is subject to the satisfaction or waiver of certain closing conditions, including the approval of Cianna Medical stockholders, clearance under the Hart-Scott-Rodino Antitrust Improvements Act and other customary closing conditions. It is anticipated that the transaction will close during the fourth quarter of 2018.

The deal structure includes an upfront payment of $135 million with potential earn-out payments of an additional $15 million for achievement of supply chain and scalability metrics, and up to an additional $50 million for achievement of sales milestones.

Based on management’s current estimates, in 2019 the proposed transaction, if consummated, would be non-accretive to Merit earnings per share on a GAAP basis in the range of ($0.06-$0.10) per common share and accretive to Merit earnings per share on a non-GAAP basis in the range of $0.08–$0.13 per common share, with anticipated GAAP gross margins of 55-65% and non-GAAP gross margins of 70-75% on the Cianna Medical products, accretive to both Merit’s GAAP gross margin and non-GAAP gross margin in the range of 55-130 basis points, and add revenues in the range of $50-$56 million. NOTE: Non-GAAP earnings per share accretion and non-GAAP gross margin are non-GAAP financial measures. Information about how Merit uses non-GAAP measures in its business, and an explanation of how these measures relate to their most directly comparable GAAP financial measures, is included under the heading “Non-GAAP Financial Measures” below.

Cianna Medical is a leader in wire-free breast localization and has been focused on breast conservation for 11 years. Cianna Medical develops, manufactures and markets innovative medical products designed to reduce costs, improve quality and reduce the anxiety and stress breast cancer treatments place on women and their families. Its research, development and commercialization teams developed the first non-radioactive, wire-free breast localization system and the world’s only technology that utilizes RADAR in human tissue. Its SCOUT® and SAVI® Brachy technologies are FDA-cleared and address unmet needs in the delivery of radiation therapy, tumor localization and surgical guidance.

The SCOUT® device has grown from $1 million in revenues in its 2015 debut to a projected $29 million in revenues in 2018. Current estimated market share is approximately 5% with no revenues currently outside the United States.

The WSGR team advising Cianna Medical in the transaction includes partners Martin Waters (Picture) and Jason Skolnik, associates Meg Burton, Taylor Denson, Tanner Konold, and venture counsel Tim Conroy.

Involved fees earner: Martin Waters – Wilson Sonsini Goodrich & Rosati; Jason Skolnik – Wilson Sonsini Goodrich & Rosati; Meghan Burton – Wilson Sonsini Goodrich & Rosati; Taylor Denson – Wilson Sonsini Goodrich & Rosati; Tanner Konold – Wilson Sonsini Goodrich & Rosati; Tim Conroy – Wilson Sonsini Goodrich & Rosati;

Law Firms: Wilson Sonsini Goodrich & Rosati;

Clients: Cianna Medical Inc;

Author: Ambrogio Visconti