RTI Surgical buys Zyga Tech and its SImmetry sacroiliac fusion device, updates 2018 outlook

RTI Surgical (NSDQ:RTIX) yesterday announced an agreement to purchase Zyga Technology and its SImmetry sacroiliac joint fusion system and today released updated guidance for 2018 and beyond.

The Alachua, Fla.-based RTI surgical said that Zyga Technology has approximately 30 employees and $4 million in annual revenue, and that it plans to fund the acquisition through a combination of cash and through borrowing under its existing credit facility.

Terms of the deal were not disclosed, and RTI Surgical it expects the deal to close when the Delaware Department of State re-opens as it is currently closed due to inclement weather.

“Acquiring Zyga Technology further advances our strategic transformation focused on reducing complexity, driving operational excellence and accelerating growth. We are increasing our focus on both internal development and external investment, and acquiring Zyga Technology’s innovative minimally invasive treatment both accentuates our robust spine portfolio and opens significant opportunities to accelerate growth. The acquisition provides access to a procedure that has been growing in excess of 20% in recent years and leverages the core competencies of our Spine franchise. We believe it is perfectly aligned with our Spine-focused expansion strategy to pursue niche differentiated products, to gain scale and customer retention and support portfolio pull-through along the way. As part of the RTI team, we believe Zyga has the potential to produce significant growth by gaining market share, growing procedure volume and driving increased adoption. SImmetry is a differentiated product designed to drive fusion and supported by clinical data and, with access to RTI’s larger, sophisticated sales force, we will introduce the system to a much wider surgeon audience,” prez & CEO Camille Farhat said in a prepared release.

The company today laid out its guidance and long term goals for 2018 and beyond, expecting to see revenues for 2018 between $280 million and $290 million, with full year EBITDA between $32 million and $38 million.

“We expect 2018 will be a year of continued progress with the accelerating implementation of our strategic transformation plans. Our guidance reflects the early results of our initiatives and the ongoing investments necessary to produce sustainable profitable growth and improved cash flow,” CEO Farhat said in a prepared statement.

Beyond 2018, the company said it is hopeful to achieve $500 million in revenue within 5 years, with doubled EBITDA margin moving up to more than 20%.

“We expect the initiatives we began to reduce complexity and drive operational excellence in 2017 to produce improving margins and cash flow in our tissue focused operations in the coming years. This expected improvement in financial performance will allow us to fund organic and acquisitive growth in our spine focused operations. We are committed to driving significant financial improvements and increasing long-term shareholder value,” CEO Farhat said in a press release.

Last November, RTI Surgical revealed a warning letter it received from the FDA related to processes used to manufacture its Map3 cellular allogeneic bone graft over issues with the regulatory classification of the product.

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