A Twin Cities company that makes equipment to speed up healing using low-frequency sound has agreed to be acquired by a larger wound-care company in Pennsylvania. The deal comes one month after Medicare bumped up its payment rates for the sound-wave therapy.
Celleration Inc. of Eden Prairie will be acquired in a $30.4 million cash-and-stock deal by Alliqua BioMedical, which is based just outside Philadelphia. Alliqua is borrowing $15.5 million to fund the cash portion of the deal, and issuing 3.2 million shares of stock for the remainder of the cost. The total purchase price may climb if the device hits sales milestones and gets regulatory approval in the United Kingdom.
Celleration, a privately held company, made $8.7 million last year selling its U.S.-approved Mist Therapy System, which uses no-contact ultrasound waves to stimulate healing in cells inside and under a wound. The company says clinical evidence shows low-frequency sound waves reduce bacteria and inflammation while stimulating blood flow and production of proteins that aid healing.
Alliqua is hoping the device will speed up its profitability as well. Last year, the Nasdaq-traded firm spent nearly $26 million and collected revenue of $5 million for its healing hydrogel and advanced wound-dressing products. By adding the Mist therapy and Celleration’s 19-member sales force, Alliqua will be on track to earn its first profit by 2017, rather than 2019, an analyst with H.C. Wainwright & Co. wrote in a note to investors.
News that Alliqua signed the acquisition paperwork Feb. 2 follows changes to Medicare payment policies for the Mist therapy that went into effect Jan. 1. In a hospital setting, Medicare will now pay $146 per procedure, up from $83. Medicare also started covering the treatment for outpatients this year, paying $123 for the procedure in a non-hospital setting, Celleration President and CEO Mark Wagner said.
“These increases were one of several important milestones that Celleration has achieved recently which has drawn considerable M&A interest,” Wagner said in an e-mail.
Wagner said Celleration’s research and development staff and equipment will remain in Eden Prairie, but it’s not clear what will happen to the company’s administrative staff.
The Wainwright analyst noted that Celleration’s expertise with Medicare could benefit sales of Alliqua’s wound dressing Biovance.
“We believe management could utilize Celleration’s expertise in seeking [Medicare] approval for Biovance, one of the company’s key growth products,” analyst Swayampakula Ramakanth wrote.