UTICA — ConMed Corp. (NASDAQ: CNMD) announced Aug. 14 it will acquire Westborough, Mass.–based Viking Systems, Inc. (OTCBB: VKNG) for about $22.5 million in a deal to broaden its surgical-video capabilities.
Viking, located between Worcester and Boston, develops and manufactures 3D and 2D visualization systems for minimally invasive surgery.
“The Viking line of 3D high-definition surgical video products represents a strategic addition to our general surgical imaging franchise,” ConMed President and CEO Joseph Corasanti said in a news release announcing the deal. “Viking is at the forefront of three-dimensional HD surgical imaging, and we believe that merging this technology with our established worldwide marketing and sales team will expand the use of superior surgical visualization benefiting both surgeons and their patients.” ConMed officials did not respond to interview requests before press time.
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For Viking Systems, the deal is a much-needed one financially, Viking CFO Robert Mathews says in an interview. “The company was getting very short on cash,” he says, adding that Viking has been seeking capital investments or strategic partnerships since early this year.
The bottom line, he says, is that as a small 30-employee company, Viking has the technology, but not the means to market it effectively.
“ConMed does have demonstrated access to the market,” Mathews says. “We just don’t have the clout and the name recognition.”
Following the merger news, Viking released its second-quarter earnings results, showing an 11 percent decline in sales from $2.5 million a year ago to $2.2 million this quarter. The company reported a net loss of $890,000, or 1 cent per share, for the second quarter, compared with a net loss of $860,000 or 1 cent, a year earlier. Viking has reported a net loss in each of its five most recent quarters. In addition to this year’s second-quarter loss, the company posted a net loss of $401,000 in the first quarter, preceded by a net loss of $1.05 million in the fourth quarter of 2011, a $569,000 loss in last year’s third quarter, and the $860,000 loss in last year’s second quarter, according to Yahoo Finance data.
In contrast, ConMed reported net income of $10.3 million, or 36 cents per diluted share, on sales of $189.7 million, in the second quarter, compared with net income of $8.7 million, or 30 cents a diluted share, on sales of $183.2 million in the year-earlier period.
ConMed agreed to acquire Viking Systems for 27 cents a share in cash, a 42 percent premium over its Aug. 13 closing price. The total expected value of the deal, including payments for in-the-money stock options and warrants, will be about $22.5 million, the companies said.
Video system
ConMed carries its own video system for use during surgery, but in recent years has reported sluggish sales of the $50,000-per-operating-room system as hospitals hold off on capital expenditures. More recently, ConMed has shifted its marketing focus to its single-use products and saw sales for those items grow 7.5 percent in the second quarter.
Viking has seen that same lag in sales, Mathews says, but doesn’t have the single-use or other products to fall back on to bolster its bottom line. However, when hospitals are once again ready to make capital investments, Viking and ConMed will be ready, he says.
Viking’s lead product is its 3D-HD Vision System, an advanced three-dimensional vision system that uses a flat-screen monitor and passive glasses. Surgeons use the system during minimally invasive laparoscopic urology, gynecologic, bariatric, cardiac, neurologic, and general surgery. The product is designed to fill the gap between conventional two-dimensional systems and three-dimensional systems available as part of robotic systems.
Viking’s three-dimensional imaging doesn’t require a surgeon to use a robot, Mathews says. It uses a traditional flat-panel monitor during the surgery, but the image is enhanced through 3D glasses that add depth perception to the images. The overall benefit, he says, is improved speed and increased accuracy during surgery.
“This is a significant milestone for Viking,” Jed Kennedy, the company’s president and CEO, said in the news release about the deal. “We are excited to join together with ConMed, which shares our vision for 3D-HD surgical imaging and has an established reputation for innovation and excellent customer service.”
ConMed expects its current two-dimensional surgical video research and marketing team in Santa Barbara, Calif. to consolidate into the Viking group in Massachusetts over the next year.
Headquartered at 525 French Rd., Utica, ConMed (www.conmed.com) manufactures surgical devices and equipment for minimally invasive procedures and patient monitoring. The company employs about 3,400 people worldwide.
Contact DeLore at tdelore@tmvbj.com
