Kyphon to acquire InnoSpine, may pay up to $30 million

By Angela McDaniels

Seattle, Jan. 4 - Kyphon Inc. said it will acquire InnoSpine Inc. for an initial payment of $2.5 million in cash and may pay up to an additional $27.5 million in cash for milestone payments and royalties.

The transaction is expected to close before the end of the month.

The company said a one-time charge related to research and development will affect earnings per share in its financial statements for the period ended Dec. 31. The exact amount of the charge will be known once the company completes an analysis of the allocation of the purchase price, Kyphon said.

InnoSpine has developed a novel diagnostic method known as Functional Anesthetic Discography, a unique, minimally invasive procedure that uses a catheter-based system anchored in the disc space to deliver mild anesthetic to a candidate disc while the patient loads his or her spine in positions that cause pain. If the pain sensations from normal loading are relieved by anesthetic delivery to the degenerated disc, the disc can be identified for further treatment, according to a company news release.

Kyphon estimates that 200,000 patients with persistent, severe back pain may be eligible for this diagnostic procedure each year in the United States alone, including the majority of patients undergoing spine fusion.

Kyphon will introduce the Functional Anesthetic Discography product to orthopaedic spine surgeons, neurosurgeons, interventional radiologists and interventional neuroradiologists in the United States during the second quarter of 2006 through its existing direct sales force

Based in Sunnyvale, Calif., Kyphon develops and markets medical devices designed to restore spinal function using minimally invasive technologies.

InnoSpine is a privately held company based in Palo Alto, Calif., that develops and markets the Functional Anesthetic Discography product.

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