ORTHOPEDIATRICS CORP Ltd IPO Filings,Withdrawn,Pricings, Calendar, Market Details-2017

Company Description-We are the only medical device company focused exclusively on providing a
comprehensive product offering to the pediatric orthopedic market in order to improve the lives of children with orthopedic conditions. We design, develop and commercialize innovative orthopedic implants and instruments to meet the specialized needs of pediatric surgeons and their patients, who we believe have
been largely neglected by the orthopedic industry. We currently serve three of the largest categories in this market. We estimate that the portion of this market that we currently serve represents a $2.5 billion opportunity globally, including over $1.1 billion in the United States.
Squadron Capital LLC, or Squadron, has been an investor in our company since 2011.We were formed as a Delaware corporation in November 2007. Our principal executive offices are located at 2850 Frontier Drive, Warsaw, IN 46582, and our
telephone number is (574) 268-6379. Our website address is
www.orthopediatrics.com.

Proposed Symbols: KIDS

Market: NASDAQ Global

CIK: 0001425450

Address: 210 NORTH BUFFALO STREET

City, State, Zip: WARSAW ,IN 46580

Telephone: 574-268-6379

CEO: Mark C. Throdahl

Employee Count: 62

Fiscal Year:

URL: www.orthopediatrics.com

 

Deal Data
Status: Filed

Share Price: 12.00-14.00

Shares Offered: 4,000,000

Offer Amount:

Total Expenses: $2,149,013.25

Shares Over Alloted: 600,000

Shareholder Shares Offered:

Shares Outstanding: 12,044,435

Lockup Period / Expiration:

Quiet Period Expiration:
 Financials
Revenue: $21,564,000.00

Net Income: ($2,551,000.00)

Total Assets: $40,027,000.00

Total Liabilities: $35,785,000.00

Stockholders’ Equity: ($69,941,000.00)
 Advisors

Lead Underwriter(s): 
Piper Jaffray & Co.
Stifel Nicolaus & Company, Incorporated

Underwriter(s) :
BTIG, LLC
William Blair and Co., L.L.C.
Company Counsel :
Latham & Watkins LLP
Underwriter Counsel :
Cooley LLP
Auditor :
Deloitte & Touche LLP
Transfer Agent :
Computershare Trust Company, N.A

Description of Business-

Children are not just small adults. Their skeletal anatomy and physiology
differs significantly from that of adults, which affects the way in which
children with orthopedic conditions are managed surgically. Historically, there
have been a limited number of implants and instruments specifically designed for
the unique needs of children. As a result, pediatric orthopedic surgeons often
improvise with adult implants repurposed for use in children, resort to freehand
techniques with adult instruments and use implants that can be difficult to
remove after being temporarily implanted. These improvisations may lead to undue
surgical trauma and morbidity.

We address this unmet market need and sell the broadest product offering
specifically designed for children with orthopedic conditions. We currently
market 21 surgical systems that serve three of the largest categories within the
pediatric orthopedic market: (i) trauma and deformity, (ii) complex spine and
(iii) anterior cruciate ligament, or ACL, reconstruction procedures. We expect
to expand our product offering to address additional categories of the pediatric
the orthopedic market, such as active growing implants for early-onset scoliosis and
limb length discrepancies, other sports-related injuries, patient-specific
templates for spine surgical procedures and other orthopedic trauma and
deformity applications.

Our products have proprietary features designed to:

• protect a child’s growth plates;

• fit a wide range of pediatric anatomy;

• enable earlier surgical intervention;

• enable precise and reproducible surgical techniques; and

• ease implant removal.

Our products are used by pediatric orthopedic surgeons, who, unlike orthopedic
surgeons focused on treating adults, are, for the most part, generalists
treating a wide range of congenital, developmental and traumatic orthopedic
conditions. As a result, these surgeons generally represent a single call point
for our broad range of products. We believe our products complement one another
because they are often used by the same surgeons, and the successful use of one
system may create demand for the others. In 2016, there were more than 1,200
members of the Pediatric Orthopedic Society of North America, or POSNA, and we
estimate that 62% of U.S. pediatric trauma and deformity and complex spine
surgeries in 2015 were performed in only 268 hospitals. Based on our experience,
we believe that pediatric orthopedic procedures outside of the United States are
also highly concentrated. ACL reconstruction procedures are less concentrated,
and the vast majority are performed in ambulatory surgery centers.

We have the only global sales organization focused exclusively on pediatric
orthopedics. Our organization has a deep understanding of the unique nature of
children’s clinical conditions and surgical procedures, as well as an appreciation of the tremendous sense of responsibility pediatric orthopedic surgeons,

feel for the children whom parents have entrusted to their care. We
provide these surgeons with dedicated support, both in and out of the operating
room. As of June 30, 2017, our U.S. sales organization consisted of 33
independent sales agencies employing more than 110 sales representatives, 69 of
whom were full-time equivalents devoted to OrthoPediatrics sales activities.
Increasingly, these sales agencies are making us the anchor line in their
businesses or representing us exclusively. Sales from such sales agencies
represented 77% of our U.S. revenue in 2016. Outside of the United States, our
sales organization consisted of 31 independent distributors in 35 countries. In
April 2017, we began to supplement our use of independent distributors with
direct sales programs in the United Kingdom, Ireland, Australia and New Zealand.
In these markets, we work through sales agencies that are paid a commission.
These new arrangements are expected to generate an increase in our international
revenue and gross margin. We plan to continue to make similar transitions in
select international markets that we believe would benefit from a sales agency
model.

We collaborate with pediatric orthopedic surgeons in developing new surgical
systems that improve the quality of care. We have an efficient product
development process that relies upon teams of engineers, commercial personnel
and surgeon advisors. Since inception, our average clearance time with the U.S.
Food and Drug Administration, or the FDA, has been 74 days, which we believe is
less than half of the average approval time for all medical devices over the
past five years. This is due in part to the impact of the Pediatric Medical
Device Safety and Improvement Act of 2007, which encourages pediatric medical
device research and development and aids the FDA in tracking the number and
types of medical devices approved specifically for children. We believe our
products are characterized by stable pricing, few reimbursement issues and
attractive gross margins.

We believe clinical education is critical to advancing the field of pediatric
orthopedics. Cumulatively, we are the largest financial contributor to the five
primary orthopedic surgical societies that conduct pediatric clinical education
and research. We are a major sponsor of continuing medical education, or CME,
courses in pediatric spine and pediatric orthopedics, which are focused on
fellows and young surgeons. In 2016, we conducted over 200 training workshops.
We believe these workshops help surgeons recognize our commitment to their
field. We believe our commitment to clinical education has helped to increase
our account presence while promoting familiarity with our products and loyalty
among fellows and young surgeons.

We have established a corporate culture built on the cause of improving the
lives of children with orthopedic conditions. We believe our higher corporate
purpose captures the hearts and minds of our employees and makes them committed
to doing everything better, faster and at lower cost. This culture allows us to
attract and retain talented, high-performing individuals.

We believe we have a history of efficient capital utilization, and we intend to
scale our business model by continuing to implement the successful strategy that
has sustained our growth. Due to the high concentration of pediatric orthopedic
surgeons in comparatively few hospitals, we believe we can accelerate the
penetration of our addressable market in a capital-efficient manner and further
strengthen our position as the category leader in pediatric orthopedics. The
primary challenges to maintaining our growth in a market that has not
historically relied on age-specific implants and instruments have been
overcoming older surgeons’ familiarity with repurposing adult implants for use
in children and our current lack of published long-term data supporting superior
clinical outcomes by our products. We believe our efforts in surgeon training,
collaboration and marketing address this inertia, particularly with younger
surgeons.

Use of Proceeds-

We estimate that our net proceeds from our sale of 4,000,000 shares of common
stock in this offering will be $46.2 million, or $53.5 million if the
underwriters exercise their option to purchase additional shares in full, based
on an assumed initial public offering price of $13.00 per share, the midpoint of
the price range set forth on the cover page of this prospectus, and after
deducting the estimated underwriting discounts and commissions and estimated
offering expenses payable by us.

Each $1.00 increase (decrease) in the assumed initial public offering price of
$13.00 per share, the midpoint of the price range set forth on the cover page of
this prospectus would increase (decrease) the net proceeds to us from this
offering by $3.7 million, assuming the number of shares offered by us, as set
forth on the cover page of this prospectus, remains the same and after deducting
the estimated underwriting discounts and commissions and estimated offering
expenses payable by us. We may also increase or decrease the number of shares we
are offering. Each increase (decrease) of 1.0 million in the number of shares we
are offering would increase (decrease) the net proceeds to us from this
the offering, after deducting the estimated underwriting discounts and commissions
and estimated offering expenses payable by us, by $12.1 million, assuming the
assumed initial public offering price stays the same.

We currently intend to use the net proceeds from this offering as follows:

• approximately $5.9 million to pay accumulated and unpaid dividends on our
Series B Preferred Stock (as of September 30, 2017);

• approximately $19.5 million to invest in implant and instrument sets for
consignment to our customers;

• approximately $6.7 million to fund research and development activities;

• approximately $4.1 million to expand our sales and marketing programs; and

• the remainder for working capital and general corporate purposes.

We may also use a portion of the net proceeds from this offering to acquire or
invest in complementary products, technologies or businesses, although we have
no present agreements or commitments to do so.

We have approximately $5.9 million of accumulated and unpaid dividends on our
Series B Preferred Stock (as of September 30, 2017), which we intend to pay out
of the net proceeds from this offering. Shares of our Series B Preferred Stock
are held by certain of our affiliates and, in connection with the payment of
these dividends as described above, such affiliates will receive a portion of
the net proceeds from this offering.

The amounts and timing of our actual expenditures will depend on numerous
factors, including the rate of adoption of our products, the expenses we incur
in selling and marketing efforts, the scope of research and development efforts
and other factors described in this prospectus, as well as the amount of cash
used in our operations. We, therefore, cannot estimate the number of net proceeds
to be used for all of the purposes described above. We may find it necessary or
advisable to use the net proceeds for other purposes, and we will have broad
discretion in the application of the net proceeds. Pending the uses described
above, we intend to invest the net proceeds from this offering in short- and
intermediate-term, interest-bearing obligations, investment-grade instruments,
certificates of deposit or direct or guaranteed obligations of the U.S.
government.

Competition / Competitors-

The orthopedic industry is competitive, subject to rapid technological change
and significantly affected by new product introductions and market activities of
other participants. Our currently marketed products are, and any future products
we commercialize will be, subject to competition. We believe the principal
competitive factors in our markets include:

• improved outcomes for medical conditions;

• acceptance by orthopedic surgeons;

• ease of use and reliability;

• acceptance by the patient community;

• product price;

• availability of implant-specific instrument sets;

• effective marketing and distribution; and

• speed to market.

We have competitors in each of our three product categories, including the DePuy
Synthes Companies (a subsidiary of Johnson & Johnson), Medtronic plc and Smith &
Nephew plc. We believe we have the broadest product offering across these
categories relative to these competitors. Our ability to compete successfully
will depend on our ability to develop proprietary products that reach the market
in a timely manner, are cost effective and are safe and effective.

 

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