Interpore to Sell Dental Division
Interpore International said Monday it will sell its sluggish dental products division to a German company, less than four months after a distribution deal between the two companies collapsed.
The Irvine company, which makes bone grafting material from coral, said it signed a letter of intent to sell the division to Friatec AG, which also makes dental implants. No terms were disclosed.
David C. Mercer, Interpore’s chief executive, said the company will focus on the larger, more profitable market for orthopedic uses of its grafting material--a move that Wall Street analysts consider long overdue. “We’ll be a pure play in orthopedics,” he said in an interview.
Shares of Interpore closed at $4.75 a share Monday, up 25 cents for the day on the Nasdaq market. Analysts said performances of both the company’s dental and orthopedic businesses have disappointed investors since it went public at $7 a share in late 1993.
“Investors are probably relieved that the company is focusing exclusively on orthopedics,” said Anthony G. Viscogliosi, an analyst at Rodman & Renshaw in New York.
Mercer said Interpore had an agreement last year to distribute a dental implant made by Friatec, based in Mannheim, Germany, but the deal had fallen apart this year over patent questions.
In June, the Irvine company announced that plans to sell the implants domestically had been delayed.
Mercer said that eight employees now involved in marketing and related jobs in the dental division probably will be hired by Friatec. There are eight other dental employees in such areas as shipping and regulatory affairs, but he said their status is uncertain.
“When we complete the deal, there may be some people who’ll be in excess. We won’t know until we get into that,” he said.
Like other research-based companies, Interpore’s first sales were generated by products that first received regulatory approval. The company, founded in 1975, received approval in the mid-1980s to market dental implants using its coral-based technology. After that, the company began distributing other dental products.
It wasn’t until 1992 that the company’s technology won approval as a grafting material for orthopedic uses, such as replacement of bone tissue in damaged joints. Eventually, sales of these products overtook sales of dental implants and related products.
Last year, dental product sales accounted for about $8.1 million of the company’s total of $17.1 million. Analysts expected dental sales to fall below $8 million this year.
Overall, the company last year posted earnings of $2 million, or 27 cents a share, but a tax benefit accounted for $1.5 million of the total.
Still, Wall Street hasn’t been pleased with the performance of the orthopedics business, either.
“I thought the orthopedic business sales would be close to $20 million [by now] and that’s not happening,” said Bob Dunne, an analyst at Wasserstein Perella Securities in New York.
Officials attributed the anemic results to expenses involved in hiring direct salespeople for its orthopedics products--a costly step analysts say eventually should help improve sales. Previously, the company relied solely on independent distributors.
Final terms of Interpore’s transaction with Friatec have yet to be worked out. If boards of both companies approve, the deal is expected to be completed this year.
