Illinois med tech company Surgalign files for bankruptcy

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Deerfield medical technology company Surgalign Holdings filed for Chapter 11 bankruptcy after struggling to grow the business.

The company, which sells tools and technology for spinal surgeries in 40 countries, said today it has agreed to sell its hardware and biologics assets and equity interests to Xtant Medical Holdings for just $5 million through Chapter 11 proceedings. Montana-based Xtant manufactures and distributes medical devices and human tissues for transplants.

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Surgalign’s reported estimated assets and liabilities in the range of $50 million to $100 million in court documents filed in the U.S. District & Bankruptcy Court for the Southern District of Texas. Surgalign said in a press release that it is seeking to ensure the continuation of normal operations during the bankruptcy process, saying it has sufficient liquidity to continue doing business.

The company’s stock was down 76% Tuesday morning, trading at about 29 cents. Surgalign’s stock hit its peak price in 2003 at $503.

The bankruptcy comes months after Surgalign restructured itself under a plan intended to drive growth in the most valuable and profitable parts of the business. That included bringing new products to the market, discontinuing some of its lower-performing segments and doubling down on research and development.

The plan was expected to save $30 million to $35 million in 2023. Surgalign reported an operating loss of $1.1 million on revenues of $16 million in the first quarter of this year, according to a May filing.

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At the time of the restructuring last November, CEO Terry Rich said in a statement the plan would “enable (Surgalign) to generate growth in areas we are focused on, enhance gross margins and lower expenses, and over time improve our financial position by freeing up resources to invest in areas we believe hold the greatest promise. Implementation of these programs will be dependent on the outcome of financing initiatives currently underway.”

Surgalign also said at the time that it anticipated layoffs, and later said in March that it had reduced its workforce by 20%. It’s unclear exactly how many employees the company has today. A spokesman declined to comment.

Aside from its Deerfield headquarters, Surgalign has commercial, innovation and design centers in San Diego, Warsaw and Poznań, Poland, and Wurmlingen, Germany.

Shortly before the restructuring, the company and a pair of former executives were charged with accounting and disclosure fraud by the U.S. Securities & Exchange Commission and agreed to pay a $2 million fine. The SEC alleged the company and executives masked disappointing sales numbers by shipping future orders ahead of schedule in attempt to make revenue figures appear larger.

This story first appeared in Crain’s Chicago Business.

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