SurgiQuest snapped up for $265M ahead of proposed IPO, rounding out Conmed surgical offerings

SurgiQuest's AirSeal--Courtesy of SurgiQuest

Laparoscopic surgery startup SurgiQuest has forced the hand of a potential acquirer. Last week, SurgiQuest filed to raise up to $75 million in an IPO. Now Conmed ($CNMD) has said it will buy the Milford, CT company instead for $265 million. The purchase is expected to close in the first quarter and is intended to round out its Advanced Surgical business that was formed last January.

SurgiQuest's AirSeal surgical access device is already FDA cleared. The company had $35 million in revenue during the first nine months of 2015. Conmed expects SurgiQuest will have about $46 million to $49 million in 2015 revenue; it anticipates $55 million to $60 million in 2016 revenue. That puts it on track for an annual growth rate of about 50%.

Early investor reaction to the deal was positive--they pushed the share price up about 5% in early trading on the news. Conmed was punished by the market on its latest earnings news in October, when it reported weaker than expected earnings.

Conmed President and CEO Curt Hartman summed up the rationale for the deal on a Nov. 16 conference call: "acquisitions will play an important role in the growth of Conmed and our turnaround. Already this year, we've completed two exciting product line acquisitions for our Orthopedics business."

"While more transformative for Conmed and our Advanced Surgical business from a customer, operating and financial perspective, this transaction also fits our desired profile of innovative technology that will allow us to drive leveraged earnings growth," he noted.

Conmed expects the acquisition will result in $15 million in annual synergies and that its integration will be almost accomplished within 6 months.

During laparoscopic surgeries, including robotic-assisted ones, AirSeal uses a gaseous barrier to offer real-time sensing of intra-abdominal pressure and also evacuates smoke during the surgery to improve the field of vision. The device results in a more stable and less rigid pneumoperitoneum with the result of roughly 50% lower intra-abdominal pressures during surgeries than use of conventional access devices.

Founded in 2006, SurgiQuest had a total loss of $84.9 million at Dec. 31; investors include Presidio Partners (27.9% pre-IPO stake), River Cities Capital (10.9%), Fletcher Spaght Ventures (10.5%) and California Technology Partners (10.5%).

- here is the announcement