The Norwegian company Navamedic, a specialty pharmaceutical company, has acquired the Swedish medtech company Observe Medical. The initial purchase price is NOK 35 million, with additional payments dependent on performance in the coming years.
Observe Medical has developed an automated, digital urine meter Sippi for use in intensive care wards. The product was launced in March 2015 in the German and Nordic markets and has been well received by initial users, and a strong sales growth is expected. Sippi saves time for health care personnel, while also improving accuracy and patient safety. Sippi® has been under development since 2009, and has received approval for hospital use in Europe and the United States. OM estimates that 20 million traditional urine monitoring kits are sold annually, representing a global market of approximately NOK 2 billion. Sippi represents a new patent pending technological solution to urine monitoring with improved user friendliness and accuracy.
“Navamedic’s strategy is to expand the product portfolio in areas where our commercialization capabilities in specialized healthcare adds value, building on our strong relationships with hospitals throughout the Nordic markets. The acquisition of Observe Medical is an important milestone in achieving this, while adding substantial market opportunities in other geographies, positioning our company for continued growth” said CEO Tom Rönnlund. “The acquisition of OM also creates a new business area for Navamedic where we are the product- and IPR-owner for a product with global reach”, CEO Rönnlund continued.
Navamedic aims at establishing OM’s product line as the global niche leader, through building a network of distributors in key markets. The global intensive care capacity is more than 360,000 hospital beds. Germany is the largest single market in Europe, with 24,000 intensive care beds,and Sippi was launched there earlier this year. Navamedic will continue the launch in other European markets and also eventually develop the business into other global markets.
Navamedic is acquiring 100% of the outstanding shares in Observe Medical AB, key investors are the Danish venture fund Seed Capital and the Company’s founders. Of the NOK 35 million initial payment, NOK 25 million is a cash consideration, while NOK 10 million will be paid through the issue of new Navamedic shares. According to the agreement, the share price for the new shares will be the volume-weighted average price in the 30 days period from 15 days prior to the announcement of the transaction until 15 days after the announcement. The number of new shares issued is expected to be within the Board of Director’s mandate to increase share capital.
Furthermore, a seven per cent sales royalty based on annual Sippi sales above NOK 7.5 million, increasing to 15 per cent on sales exceeding NOK 100 million per year, will be paid to the former shareholders of OM for the years 2016-2023.
Finally, six milestone payments based on set sales targets for the product. Sales targets need to be reached within end of 2026. Total possible milestone payment will over the next 11 years potentially reach a maximum of NOK 125 million, in addition to sales royalties.
Navamedic has secured bank financing of the initial cash consideration. Upon completion, Observe Medical will be a wholly owned subsidiary of Navamedic. OM’s founders and management will remain with the company. OM is expected to provide a positive cash flow from 2017. Until then, Navamedic’s cash flow and established credit lines will secure sufficient working capital for the development of OM.
Source: Navamedic and Observe Medical