After the markets closed yesterday afternoon, corneal modeling platform firm Avedro Inc. (AVDR:NASDAQ) and ophthalmic medical technology and pharmaceutical company Glaukos Corp. (GKOS:NASDAQ) announced that the firms had entered into a definitive merger agreement under which Glaukos will acquire Avedro in an all-stock transaction. The boards of directors of both companies have already approved the merger. The deal is expected to close in the fourth quarter of this year subject to approval by Avedro's shareholders and regulatory approval.
Under the terms of the merger agreement, for each share of Avedro common stock, Avedro shareholders will receive an exchange ratio equivalent of 0.365 shares of Glaukos stock. According to the agreed upon valuation calculation, "based on the parties' volume weighted average prices (VWAPs) for the last 60 trading days prior to August 6, 2019, the transaction represents a 42% premium for Avedro shareholders. Upon closing, Glaukos shareholders are expected to own approximately 85% of the combined company, with Avedro shareholders expected to own the remaining 15%."
The benefits of the transaction as highlighted in the report state that the deal "adds novel bio-activated pharmaceuticals to Glaukos' new Corneal Health franchise; provides potential revenue synergies from complementary product portfolios that leverage Glaukos' commercial scale, market-building experience and shared reimbursement expertise and customer relationships; allows for expanded pharmaceutical and device research, development and clinical capabilities that enhance ability to provide innovative hybrid ophthalmic therapies to patients; and that the acquisition is expected to accelerate Glaukos' revenue growth rate in 2020 and be accretive to operating results and cash flows by 2021."
Reza Zadno, Avedro's president and CEO commented, "Avedro is extremely pleased with the potential to become part of Glaukos, a highly respected ophthalmic organization with a successful track record forging new markets with disruptive technologies like our keratoconus pharmaceutical therapies...Glaukos already has deep customer relationships with the majority of our target accounts, and a large, seasoned field organization that can unite with our team to accelerate awareness, adoption and utilization of our novel platform."
Thomas Burns, Glaukos president and CEO stated in the release, "Avedro is an ideal fit for Glaukos' core strengths in creating and disrupting ophthalmic markets with novel therapies that address important unmet clinical needs of practitioners and patients...Avedro has in place many of the same strategic attributes Glaukos used to pioneer MIGS, including proprietary paradigm-changing solutions, extensive clinical validation, broad reimbursement and first-to-market status...Our combined organizations can possess the essential expertise, scale and reach to maximize these opportunities, drive further commercialization of Avedro's bio-activated pharmaceuticals and establish another synergistic and durable Glaukos franchise to fuel potential near- and long-term growth and shareholder value."
It was a busy news day for both Avedro and Glaukos since in addition to the merger news both companies also announced second quarter earnings and operational results.
Avedro, Inc. announced financial results for the second quarter ended June 30, 2019. In Q2/19 the company reported revenue of $10.3 million, a 63% increase over Q2/18. Gross margin increased to 73.0% for Q2/19 compared to 56.4% in Q2/18. Operating loss was $6.9 million in Q2/19 versus $5.7 million in Q2/18, and the company posted a net loss of $7.4 million in Q2/19 compared to $6.5 million in Q2/18.
Glaukos also announced financial results for the second quarter ended June 30, 2019. The company reported that in Q2/19 net sales rose 36% to $58.6 million, compared to $43.2 million in Q2/18, adding that the growth primarily reflected unit volume increases worldwide.
The firm reported a loss from operations in Q2/19 of $6.2 million, which includes the $2.2 million in-process R&D charge, compared to a loss of $4.2 million in Q2/18, and a net loss in Q2/19 of $6.3 million, or $0.17 per diluted share, compared to a net loss of $5.4 million, or $0.15 per diluted share, in Q2/18, and ended Q2/19 with $159.2 million in cash and cash equivalents, short-term investments and restricted cash.
The company updated its 2019 net sales guidance to $226–231 million, compared to $225–231 million previously. The companies advised that the updated guidance does not include the impact of the pending acquisition of Avedro.
Avedro states that it is a leading hybrid ophthalmic pharmaceutical and medical technology company focused on treating corneal disease and disorders and improving vision to reduce dependency on eyeglasses or contact lens. The company's proprietary bio-activated pharmaceuticals strengthen, stabilize and reshape the cornea to treat corneal ectatic disorders and correct refractive conditions.
Glaukos is an ophthalmic medical technology and pharmaceutical company that focuses on novel therapies for the treatment of glaucoma, corneal disorders and retinal diseases. The company states that it pioneered Micro-Invasive Glaucoma Surgery, or MIGS, and revolutionized the traditional glaucoma treatment and management paradigm. Glaukos states its strategy is to leverage its platform technology to build a comprehensive and proprietary portfolio of micro-scale surgical and pharmaceutical therapies in glaucoma, corneal health and retinal disease.
Avedro shares are trading much higher today on the merger news. The stock opened today at $21.50 (+$4.44, +26.03%) over yesterday's close of $17.06. So far today, the firm's shares have traded between $21.50 and $24.74 and at present are trading at $23.25 (+6.19, +36.28%).
Glaukos' shares opened lower today at $ 62.30 (-$10.80, -17.34%) from the prior day's close of $73.10. This morning the firm's shares have traded between $61.09-68.735 and are currently trading at $64.96 (-$8.14, -11.14%).
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