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28 percent share price premium

By Katie Pfaff

Staff Writer

Diagnostics, gastrointestinal and pelvic device company, Laborie Medical Technologies, has executed a definitive agreement to acquire Cogentix Medical Inc., developer of neurostimulation, endoscopy, and urology technology and devices. The deal was set at a cash purchase price of $3.85 per Cogentix share and enterprise value of $214 million. The share price is a 28 percent premium above the average closing price of Cogentix's common stock across the last 30 days. Under the deal, Laborie will acquire all outstanding shares of Cogentix for a total consideration of about $239 million.

Privately held and Mississauga, Ontario-based Laborie will obtain Cogentix's devices, which dovetail with its urology and other businesses.

"Clearly, the deal gives us portfolio and channel scale in urology," Michael Frazzette, president and CEO, Laborie, told BioWorld MedTech. "So an opportunity for more patients around the world to get access to our diagnostic and treatment options."

"The acquisition of Cogentix advances our strategy to invest in leading technologies that provide product and channel scale to Laborie's existing urology strategic business unit diagnostic and therapeutic portfolio, particularly in the areas of overactive bladder (OAB) and stress urinary incontinence," said Frazzette. "The addition of Cogentix's suite of technology will significantly expand Laborie's therapeutic offering, thereby providing customers and their patients with comprehensive, clinically relevant solutions along the disease treatment continuum."

"In terms of branding and divisional structures, much of this will be determined in the next 30 plus days as we work to close the deal," he said. "Other integration elements may take longer to determine but our short-, mid- and long-term goal is to stay focused on customers and to delight our customers whether they are legacy Laborie, Cogentix or both."

Endoscopy tools, neuromodulation devices

Cogentix's business includes its Primesight cystoscopy product line for streamlined visualization and its proprietary Endosheath sterile disposable microbial barrier, both of which aid in efficiency for endoscopic procedures. The company also offers an FDA-approved Urgent PC neuromodulation system for percutaneous tibial nerve stimulation for OAB, and Macroplastique minimally invasive injectable urethral bulking treatment for adult female stress urinary incontinence from intrinsic sphincter deficiency. OAB is estimated to affect 42 million Americans, and 38 million of them are not being treated or are undertreated for the disease.

"This transaction helps us achieve our vision of creating value for our investors, patients and physicians in the urology and gynecology markets," said Darin Hammers, president and CEO of Cogentix Medical. "Laborie has a track record of success in these markets, and we believe that the addition of our urology and gynecology assets to their existing product lines will ensure that our products are available to the many patients and physicians who may benefit from them. We believe that this transaction is also a compelling financial opportunity that delivers significant value to our investors who have supported our evolution to becoming a valued player in the urology market."

Shares increase on news

Cogentix shares were up 13.6 percent to $3.83 late Monday morning following news of the acquisition. Cogentix's scheduled conference call and 2017 financial results information was not released due to the acquisition, and the company will instead file annual report information with the SEC's Form 10-K by March 30.

An Accelmed Growth Partners LP portfolio company, Cogentix, will become a wholly owned subsidiary of Laborie through its wholly owned subsidiaries, LM US Parent Inc. and Camden Merger Sub Inc. The deal is expected to close early in the second quarter of this year. Minnetonka, Minn.-based Cognetix will be acquired in a two-step process. Accelmed and Lewis Pell, owners of about 60 percent of Cogentix's outstanding common stock, have entered tender and support agreements in favor of the sale, and will sell their shares to Merger Sub as part of the tender offer. After completion of that offer, outstanding Cogentix shares of common stock not tendered in the first "will be converted into the right to receive $3.85 per share of common stock, in cash."

Collaborative precedent

Laborie's recent investment and acquisitions activity includes a 2016 undisclosed investment in Israeli company Medi-tate Ltd., which provides urology and gastroenterology products. Medi-tate's minimally invasive Itind procedure treats enlarged prostate with a five-day implant to reshape the prostatic urethra thereby offering new urine flow channels. (See BioWorld MedTech, July 8, 2016.) Shortly after, Laborie became part of Patricia Industries, a vision of Investor AB, based in Stockholm, in mid-2016 following sale of the business from Audax Private Equity, of Boston to Patricia. (See BioWorld MedTech, Aug. 22, 2016.) Last year, Laborie entered an exclusive agreement with Edap Tms SA, based in France, to distribute urodynamic diagnostics in Japan, though details of the transaction were not disclosed. (See BioWorld MedTech, Jan. 24, 2017.) Laborie also closed an acquisition of Germany-based urodynamics company, Andromeda Medizinische Systems GmbH, in March 2017. The deal added to Laborie's European market reach and its urodynamic product lines. Laborie was founded in 1967.

Most recently, Cognetix was the beneficiary of Medicare administrative contractor, Palmetto GBA's amendment to its local coverage to add percutaneous tibial nerve stimulation treatment coverage for up to three years. The coverage determination applied to beneficiaries in Virginia, West Virginia, North Carolina and South Carolina. (See BioWorld MedTech, Dec. 7, 2017.)

Last summer, Cogentix acquired private company, Genesis Medical Ltd., of London, for purchase of Genesis's tangible assets at a price of up to £515,000 (US$672,105), based on milestones through March 2019. Incremental revenue was expected in 2017 and more than $2 million in 2018, as a result of the purchase. (See BioWorld MedTech, July 27, 2017.) Prior, shareholders voted to approve a $25 million securities purchase agreement with Accelmed, of New York. The deal also included a proposal to convert accrued interest and debt owed to a company director into common stock. The agreement amounted to about $28 million in cash, elimination of outstanding debt, and 60.4 million shares of common stock outstanding for Cogentix. (See BioWorld MedTech, Nov. 8, 2016.)

Published  March 13, 2018

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