Osteopore acquires multiple medical distribution businesses, closing in on cash flow positive
Health & Biotech
Health & Biotech
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Osteopore will acquire multiple medical distribution businesses that are currently responsible for ~40%-45% of its total sales globally in a move to become cash flow positive and profitable faster.
Regenerative bone and tissue implant specialist Osteopore (ASX:OSX) announced it has entered into a binding asset purchase deed with Lim Jae Hoon to acquire 100% of the OSX distribution businesses.
The target businesses include Lomic Korea Co Ltd, 3D Aesthetic Solutions Pte Ltd, 3D Healthcare Solutions Co, Ltd and 3D Aesthetic Medical Equipment and Supplies Trading.
The acquisition consideration is part cash, no cash upfront due to the offsetting of debtor balances and performance rights, subject to achieving performance milestones.
The deal follows OSX’s strategy to supercharge revenue growth, become cash flow positive and profitable at a faster rate whilst maintaining steady organic growth.
The acquisition will transition OSX towards a vertically integrated business, controlling the entire process from manufacturing and marketing, through to direct retail sales.
OSX will acquire 100% of all business activities relating to the marketing, sales, and distribution of its products including the sales teams, office premises, distribution networks and business contracts.
OSX said a key benefit will be a dedicated sales team with localised knowledge and networks across key target markets, along with an internal business development team with deep expertise in the aesthetic segment to lead its strategy for deeper penetration into the global aesthetic market in 2023.
By selling direct to customers instead of via distributors, OSX expects to achieve greater revenue and increased margins, due to removing the distribution layer between the company and its end customers.
OSX said the target businesses have been top distributors and historically contributed 50%-60% of OSX’s total sales revenue until the Covid-19 pandemic, where its share dropped to ~40%-45% as countries closed their borders and elective surgeries were put on hold.
However, OSX believes that in conjunction with revenue growth and increased margins on current sales, there is encouraging potential to scale sales across the target businesses to levels beyond the pre-pandemic period.
Elective surgeries are returning, which has led OSX to achieve four consecutive quarters of revenue growth. Furthermore, OSX is seeing strong demand for rhinoplasty applications within South Korea.
OSX is working to capitalise on the lucrative market of rhinoplasty, a form of functional and cosmetic surgery to repair or reshape the nose.
OSX said Lim Jae Hoon will ensure business continuity following the acquisition, preserve current customer relationships and oversee the day-to-day operations of the target businesses moving forward.
He will also work towards growing revenue across the target businesses, with a particular focus on leading OSX’s global commercial strategy for the aesthetics markets.
Lim Jae Hoon has more than 30 years’ business experience in medical device sales and marketing.
A large portion of that time was with Johnson & Johnson Orthopaedic division followed by Edwards Lifesciences.
As a distributor for OSX he was instrumental in the company entering the rhinoplasty market in Asia, which has grown to become a significant revenue driver.
He also co-developed several OSX products for Asia and has built a growing network of surgeons in the region.
The sales are primarily related to the aesthetic market in South Korea, complemented by sales in Singapore, Thailand, Vietnam, and the Philippines.
OSX CEO, Goh Khoon Seng, said OSX will control the entire process from manufacturing, marketing, and direct retail sales.
“The potential benefits of this are highly encouraging, including the immediate creation of a proven direct sales team, direct access to an extensive network of hospitals and surgeons, along with the anticipated benefit of supercharging revenue and increasing margins,” he said.
OSX executive chairman Mark Leong said the transaction marks its first acquisition since listing on the ASX in 2019, adding complementary synergistic value and exciting inorganic growth to match the strong traction seen to date.
“This sets us on an accelerated path towards positive cash flows,” he said.
“This is the start of an exciting chapter, and we will continually seek more opportunities to further boost our trajectory.”
OSX is continuing to investigate the viability of additional potential acquisitions and partnership opportunities in the 20 countries which it is already selling products, including the US, Europe, and Asia.
This article was developed in collaboration with Osteopore, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.