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Orthofix to acquire manufacturer of artificial cervical, lumbar discs

Orthofix International NV agreed to acquire Spinal Kinetics Inc., a privately held developer and manufacturer of artificial cervical and lumbar discs, based in Sunnyvale, Calif.

Under the agreement, the company will pay $45 million in cash on closing and up to $60 million in contingent milestone payments.

The milestone payments are related to U.S. Food and Drug Administration approval of Spinal Kinetics' M6-C cervical disc and the achievement of trailing 12-month sales targets of $30 million and $50 million.

Spinal Kinetics manufactures and distributes M6-C cervical and M6-L lumbar artificial discs for patients suffering from degenerative disc disease of the spine. It has submitted a premarket approval to the FDA for market approval in the U.S. to treat single-level cervical degenerative disc disease.

The M6 artificial discs are approved for distribution in the EU and other international geographies.

Orthofix estimates the artificial disc market in 2017 to be over $325 million worldwide and $200 million in the U.S., with double-digit growth expected for many years.

The deal is expected to close in the second quarter of 2018, subject to customary closing conditions.

Orthofix expects the acquisition to add revenue in 2018 and increase the company's organic revenue growth rate in 2019 and beyond.

The company also expects the deal to be slightly accretive to its non-GAAP diluted earnings per share and adjusted EBITDA within 12 months of premarket approval in the U.S. and further accretive afterward.

Canaccord Genuity is acting as a financial adviser to Spinal Kinetics for the deal.