Dive Brief:
- Surgalign has filed for bankruptcy and agreed to sell its U.S. hardware and biomaterials assets to Xtant Medical Holdings for $5 million.
- After a 12-month period in which it has faced Securities and Exchange Commission charges and been threatened with delisting by Nasdaq, Surgalign has identified bankruptcy as the solution to its problems. Xtant will buy certain assets unless it is outbid in the bankruptcy proceedings.
- Surgalign disclosed the plan alongside news that it is laying off 25 employees and eliminating the position of chief commercial officer. Chief Commercial Officer William Durall will continue as a consultant.
Dive Insight:
Surgalign battled to stay afloat through 2022, when it slashed its operating costs and initiated further cuts by the end of the year to generate more savings. The medtech company found a way to bring cash into the business earlier this year, agreeing to sell two orthopedic product lines to Xtant for $17 million, and tried to reposition itself as a digital spine surgery business.
However, Surgalign has now decided to file for bankruptcy and try to sell off the remaining parts of its business. Representing Surgalign, Gregory Pesce, a partner at law firm White & Case, set out how the company reached its current predicament and how it wants to proceed.
“This company has effectively been for sale for a number of years and the most recent process that we’ve undertaken here resulted in a good victory so far with our bid from Xtant but we don’t have unlimited cash. We need to get a move on with the sale before we exhaust our liquidity so we can try to provide a plan to distribute those proceeds later this year,” Pesce said.
Through the bankruptcy proceedings, Surgalign wants to find out if any other companies are interested in purchasing its hardware unit, including international subsidiaries outside of the scope of the Chapter 11 process, and to source bids for its digital business, Pesce said. Surgalign has yet to find a buyer for the digital unit.
In the bankruptcy paperwork, Surgalign said it began an initial sale process for its assets in late 2021 and then ran a second process in December 2022 through May 2023. During the second process, four parties submitted non-binding indications of interest. A representative of one of the interested parties spoke at the bankruptcy hearing, stating, “We think that we were dealt with not in good faith, we were one of the stalking horse bidders up until last Friday.”