Israeli innovative bone mounted surgical robotic guidance systems developer Mazor Robotics Ltd. (TASE:MZOR) has entered into two strategic agreements with Medtronic plc (NYSE: MDT). One agreement is a two-stage, multi-faceted, commercial agreement for co-promotion, co-development and, upon meeting certain milestones, potential global distribution of certain Mazor products. The second agreement is for an equity investment by Medtronic in Mazor.
After the agreements were announced, Mazor's share price rose 23% on the Tel Aviv Stock Exchange (TASE) in early afternoon trading to NIS 25.24.
Commercial Agreement
The commercial agreement has an initial US-based co-promotion phase. If both organizations achieve their respective milestones by the end of 2017, then the companies will enter the second phase of the agreement, in which Medtronic will assume exclusive global sales and distribution rights for Mazor’s future spine products. The second phase includes annual quotas with a cumulative potential of hundreds of next-generation systems over a four-year period. The commercial agreement is for Mazor’s future systems and applications, and Medtronic has placed a commitment to purchase 15 of these future systems during 2016. The agreement also stipulates Mazor will be Medtronic’s sole strategic partner for development and commercialization of robotic-based spine systems and applications. The two companies have already begun co-development activities of synergistic products and applications for spine, and will begin working closely together to meet designated sales targets through a defined methodology for cooperation.
Mazor CEO Ori Hadomi said, “The structure of the commercial agreement features some very important points for our customers as well as our shareholders. Developments, such as synergistic implants, could generate new revenue streams for Mazor, beyond the anticipated growth in our current revenue streams from capital equipment, service agreements and disposables. The synergy between the organizations' teams will potentially yield operational efficiency benefits for Mazor."
Equity Investment
The investment agreement provides for a three-step equity investment in Mazor. In the first tranche, Medtronic will purchase from Mazor newly issued securities representing four percent of Mazor's issued and outstanding share capital on a fully diluted basis, at a price per share equal to the trailing 20-day volume weighted average price of the shares, or a total of $11.9 million. In the second tranche, Medtronic will purchase newly issued securities representing six percent of Mazor's issued and outstanding securities, subject to the achievement by Mazor of certain operational milestones, bringing Medtronic to a total holding of ten percent of Mazor’s issued and outstanding securities on a fully diluted basis. The share price will be determined by the average price per share during the 20 trading days following the occurrence of such milestones.
In a potential third tranche, Mazor will have the right to consummate the issuance to Medtronic of securities representing up to five percent of Mazor's outstanding ordinary shares on a fully diluted basis. Consummation of this tranche is subject to consummation of the second tranche as well as the commencement of the Global Distribution Agreement, and, provided certain other conditions are met, will be solely at Mazor’s discretion, at a per-share price equal to the trailing 20-day volume weighted average price prior to Mazor's exercise of the option. Medtronic, at its sole discretion, may cap each of the second and third tranches at $20 million each.
Mazor remains an independent company, which will continue to innovate in spine as well as in other markets, and will continue to sell and fully support the Renaissance System through its own sales team and distribution partners. Throughout the agreement, current and jointly developed Mazor systems will continue to maintain universal implant compatibility, allowing complete hospital and surgeon freedom in surgical tool, implant and procedure selection.
Published by Globes [online], Israel business news - www.globes-online.com - on May 18, 2016
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