Vertical integration critical next step in advancing Sientra’s strategic objectives
Insourcing of breast implant supply chain provides numerous operational and financial advantages
SANTA BARBARA, Calif., Nov. 07, 2019 (GLOBE NEWSWIRE) -- Sientra, Inc. (NASDAQ: SIEN), a medical aesthetics company (“Sientra” or the “Company”), announced today the acquisition of the dedicated FDA-approved silicone breast implant manufacturing operation in Franklin, Wisconsin, from Lubrizol Life Science.
Lubrizol Life Science will turn over to Sientra a turnkey, fully operational Class 3 breast implant manufacturing operation that is now 19 months into commercial scale-up with established capacity that continues a steady ramp to position the Company to meet its near-term and long-term commercial objectives. Importantly, this transaction culminates a win-win commercial relationship between Sientra and Lubrizol Life Science that began in 2016 with co-development to achieve the validated manufacturing processes and specifications necessary to gain FDA PMA supplement approval in April 2018.
Jeff Nugent, Chairman and Chief Executive Officer of Sientra, said, “This acquisition advances our strategic goal of becoming the leading provider of breast products in the worldwide breast augmentation and reconstruction market. Over the years we have considered several options to achieve vertical integration for our breast implants and we believe that acquiring this already established operation in a turnkey transaction is the most intelligent way to achieve this goal with the best mix of risk, reward, investment and speed.”
Mr. Nugent continued, “We want to thank Lubrizol Life Science for their strong relationship these past four years and for their steady efforts in building a world-class breast implant operation that could be transferred over to us so seamlessly. We are confident in the significant manufacturing expertise within the Sientra organization and our ability to successfully integrate the breast implant operation.”
“Lubrizol Life Science and Sientra have had a long-standing relationship in design, development and scale-up of several cosmetic implant products,” said Uwe Winzen, General Manager of Lubrizol Life Science. “Sientra’s acquisition of this product line helps it achieve its long-term strategic goal and allows the Health business of Lubrizol Life Science to focus our efforts on becoming the preferred design, development and manufacturing partner for the medical device industry. I would like to thank the entire Lubrizol team in Franklin, whose hard work and dedication has made this co-development successful. Given Sientra’s team, I am confident that the employees who transition to Sientra will be excited to be part of its next stages of growth. We look forward to working with Sientra to ensure a smooth and successful transition for everyone involved, as well as our continued relationship in this space. Lubrizol Life Science will continue to manufacture Sientra’s tissue expanders in Victor, Montana and both companies will continue to collaborate on bringing innovative new products to the aesthetic market."
Mr. Nugent concluded, “With this acquisition, Sientra is now positioned to pursue the attractive breast implant market opportunity with direct control of its destiny, leveraging our unique brand, safety advantages, physician relationships, and strong product portfolio. We expect our newly acquired manufacturing capability in Franklin to be a platform for product supply as well as a valuable extension to our ongoing product development and innovation initiatives at our R&D center of excellence in Carpinteria. In sum, this important strategic transaction furthers our ability to continue to achieve our market share growth objectives while delivering significant value to plastic surgeons, patients, and shareholders.”
Strategic Rationale
- Direct control of breast implant manufacturing and product development. Provides Sientra strategic oversight to optimize manufacturing processes and invest where appropriate. Sientra’s Franklin Operation will be a dedicated Class 3 facility with no shared resources or competing priorities.
- Speed to market. Provides Sientra faster speed to market with improved and innovative product offerings that address unmet market needs. The acquisition complements Sientra’s on-going innovation efforts at its R&D lab in Carpinteria and aims to reduce time from concept feasibility to new product introductions, seamlessly integrating development and manufacturing.
- Gross margin opportunity. Allows Sientra to realize the economic benefits of scale as production ramps. As yields continue to improve and scale efficiencies take hold, insourcing manufacturing allows the financial benefits of higher fixed cost absorption and lower COGS to accrue directly to Sientra.
- Expands international market opportunity. Sientra is strategically evaluating international markets across a number of factors related to growth, competitive dynamics, profitability, regulatory environment and time-to-market. The long-term pricing and margin advantages of this transaction increase the number of international markets that Sientra can profitably enter.
Transaction Details
The parties have agreed to total transaction consideration of $20 million in cash and up to 607,442 shares of Sientra stock for assets comprised of dedicated manufacturing equipment, building improvements, in-process inventory, raw materials and supplies and the transfer of the intellectual property rights, processes and know-how necessary for Sientra to manufacture its breast implants.
- $14 million is payable in cash at closing.
- The balance of the cash consideration will be paid in a $3 million cash payment in 2021 and a $3 million cash payment in 2023.
- Sientra will also issue up to 607,442 shares of stock to Lubrizol Corporation if certain Sientra share price milestones are achieved over a 48-month period.
Sientra will employ the majority of Lubrizol Life Science’s employees that are currently dedicated to the Sientra implant manufacturing operation in Franklin. The parties have also agreed to a transition services agreement and a long-term lease agreement of existing and expansion space in Lubrizol’s Franklin facility. Sientra’s tissue expanders will continue to be manufactured by Lubrizol Life Science in Victor, Montana and both companies will continue to collaborate on bringing innovative new products to the aesthetic market.
Conference Call
Sientra will hold a conference call today, November 7, 2019 at 5:00 p.m. ET to discuss third quarter 2019 financial results and the acquisition. The dial-in numbers are 844-464-3933 for domestic callers and 765-507-2612 for international callers. The conference ID is 9194103. A live webcast of the conference call will be available on the Investor Relations section of the Company's website at www.sientra.com. The webcast will be archived on the website following the completion of the call.
About Sientra
Headquartered in Santa Barbara, California, Sientra is a diversified global medical aesthetics company and a leading partner to aesthetic physicians. The Company offers a suite of products designed to make a difference in patients' lives by enhancing their body image, growing their self-esteem, and restoring their confidence. Sientra has developed a broad portfolio of products with technologically differentiated characteristics, supported by independent laboratory testing and strong clinical trial outcomes. The Company’s Breast Products Segment includes its OPUS® breast implants, the first fifth generation breast implants approved by the FDA for sale in the United States, its ground-breaking Allox2® breast tissue expander with patented dual-port and integral drain technology, and BIOCORNEUM® the #1 performing, preferred and recommended scar gel of plastic surgeons(*). The Company’s miraDry Segment, comprises its miraDry® system, which is approved for sale in over 40 international markets, and is the only non-surgical FDA-cleared device for the permanent reduction of underarm sweat, odor and hair of all colors.
(*) Data on file
About The Lubrizol Corporation
The Lubrizol Corporation, a Berkshire Hathaway company, is a market-driven global company that combines complex, specialty chemicals to optimize the quality, performance and value of customers' products while reducing their environmental impact. It is a leader at combining market insights with chemistry and application capabilities to deliver valuable solutions to customers in the global transportation, industrial and consumer markets. Lubrizol improves lives by acting as an essential partner in our customers' success, delivering efficiency, reliability or wellness to their end users. Technologies include lubricant additives for engine oils, driveline and other transportation-related fluids, industrial lubricants, as well as additives for gasoline and diesel fuel. In addition, Lubrizol makes ingredients and additives for home care, personal care and skin care products and specialty materials encompassing polymer and coatings technologies, along with polymer-based pharmaceutical and medical device solutions.
With headquarters in Wickliffe, Ohio, Lubrizol owns and operates manufacturing facilities in 17 countries, as well as sales and technical offices around the world. Founded in 1928, Lubrizol has approximately 8,700 employees worldwide. Revenues for 2018 were $6.8 billion. For more information, visit Lubrizol.com.
Forward-Looking Statements
This press release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, based on management’s current assumptions and expectations of future events and trends, which affect or may affect the Company’s business, strategy, operations or financial performance, and actual results may differ materially from those expressed or implied in such statements due to numerous risks and uncertainties. Forward-looking statements include, but are not limited to, statements regarding the Company’s ability to meet is near-term and long-term objectives, the Company’s ability to successfully integrate the breast implant operation, the Company’s ability to leverage the breast implant operations to support product development, innovation initiatives and market share growth, the Company’s ability to optimize manufacturing processes and improve results, the Company’s ability to obtain faster speed to market with improved and innovative product offerings, the Company’s ability to realize the economic benefits of vertical integration, and the Company’s ability to expand into international markets. Such statements are subject to risks and uncertainties, including the Company’s ability to successfully integrate the breast implant operations, the Company’s ability to leverage the breast implant operations for product development and innovation efforts, and the Company’s ability to obtain economic benefits from the breast implant operations. Additional factors that could cause actual results to differ materially from those contemplated in this press release can be found in the Risk Factors section of Sientra’s public filings with the Securities and Exchange Commission. All statements other than statements of historical fact are forward-looking statements. The words ‘‘believe,’’ ‘‘may,’’ ‘‘might,’’ ‘‘could,’’ ‘‘will,’’ ‘‘aim,’’ ‘‘estimate,’’ ‘‘continue, ‘‘anticipate,’’ ‘‘intend,’’ ‘‘expect,’’ ‘‘plan,’’ ‘‘position,” or the negative of those terms, and similar expressions that convey uncertainty of future events or outcomes are intended to identify estimates, projections and other forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, and such estimates, projections and other forward-looking statements speak only as of the date they were made, and, except to the extent required by law, the Company undertakes no obligation to update or review any estimate, projection or forward-looking statement. Actual results may differ from those set forth in this press release due to the risks and uncertainties inherent in the Company’s business.