Conformis Chooses a Buyer

And in the nick of time, too.

See Can Conformis Survive..

restor3d, Inc., a five (almost six) year old company based in Research Triangle, Durham, North Carolina, has agreed to pay $2.27 per share for all of Conformis’s outstanding stock, which is about $17 million.

restor3d is paying a 96% premium to the closing price of Conformis stock on June 22, 2023.

What is restore3d getting for its $17 million? About $50 million in annual sales, $20 million (or 40% of sales) in gross profit, a bunch of cash and a surprisingly loyal customer base.

Despite Conformis’s many years of struggle, there remains among surgeons and former employees an enduring enthusiasm for personalized large joint implants and instruments.

“This combination will create a leading personalized 3D-printed medical device company. Together, we share a common belief in the power of personalization, said restore3d’s Chief Executive Officer Kurt Jacobus.

“By leveraging the strengths in our respective portfolios around artificial-intelligence-driven implant design, digital automation, and 3D printed osseointegrative biomaterials, we see tremendous opportunity to offer clinically differentiated and cost-effective solutions across the orthopedic landscape, including shoulder, foot & ankle, spine, and large joints,” added Jacobus.

restor3d

restore3d is a leading-edge additive manufacturing company with a notably strong technology and orthopedic company pedigree. Its core Duke University derived technology improves medical device mechanical and biological performance by way of high-end 3d printing and software.

The company’s vertically integrated workflow and design work is all in-house. Its r3^id Personalized Surgery Platform delivers patient-specific planning software to surgeons which allows them to create and track cases while also collaborating upstream with restor3d’s Design Engineering Team for patient specific devices.

restor3d may well be Conformis’s ideal buyer.

“Our work in due diligence revealed Conformis to be a true diamond in the rough. Its portfolio of patient-specific products that have been successfully implanted in over 250,000 patients,” explained Kurt Jacobus.

“Across over 50+ clinical studies and 30+ peer reviewed publications, these implants have clearly demonstrated their superiority over ‘8-sizes-fit-all’ off the shelf implants that cannot address the desire for kinematic alignment that the market is currently thirsting for.”

Jacobus, is an engineering Ph.D. from the University of Illinois, adjunct professor at Georgia Institute of Technology, former CEO and chairman of MedShape, which he sold to DJO, former founder and chairman of Vertera, which he sold to NuVasive, and a former McKinsey consultant.

The other three members of the six-person executive staff include four more Ph.D.s, another professor (Duke University) and a former project engineer from Globus Medical and former VP of Product Development from Flower Orthopedics.

What’s the future of Conformis under restor3d?

Business as usual, it would seem—although profitably, this time.

“We believe the main challenge facing Conformis is weak gross margin generation,” explained CEO Jacobus to OTW.

“This is primarily due to the high cost of goods resulting from traditional manufacturing processes and high SKU count coupled with exposure to the more price sensitive market subsegments. At restor3d we have built a world class facility and expertise in 3D printing and finishing of both CoCr and Ti6Al4V metal implants.”

“Every day we leverage that facility and expertise to cost effectively and rapidly deliver complex implants in every part of orthopedics outside of knee and hip. Our facility and expertise will move Conformis cost of goods into a strong position.”

The final point restor3d’s CEO made to OTW was that Conformis, he found, had excellent talent across all the key functional areas. Furthermore, his due diligence team discovered what many of Conformis’s surgeons already knew, that the Conformis software tools that they have constructed to route and automate patient specific and patient matched design are excellent.

That, we suspect, pretty much sealed the deal. Conformis plus restor3d’s own systems set the stage for a re-launch of Conformis products at lower SKU and associated costs, streamlined surgical procedures, and the ability to move into more market subsegments.

Conformis’s board of directors has unanimously approved the transaction. “After nearly 20 years of revolutionizing the orthopedic industry with personalized treatment and patient choice, this transaction is a testament to the value of our portfolio and the strength of our core technology and intellectual property,” said Conformis Chief Executive Officer Mark Augusti.

The closing of this transaction is expected by the end of Q3 2023 and is subject to approval by Conformis’ stockholders and other customary closing conditions.