On October 9, 2024, Biolase, which occupies the top spot in the world's dental laser equipment, announced that it has signed an agreement to sell the majority of the company's assets to rival Sonendo for $14 million. Biolase Company of United States, the world's leading oral laser expert, has long been committed to the research and development and manufacturing of full-function lasers, with a global laser market share of 70%. However, due to long-term losses, the stock price continued to be depressed, and it was delisted from the Nasdaq in June this year and declared bankruptcy on October 1. The buyer of the acquisition, Sonendo, a dental giant dedicated to root canal treatment devices, sued Biolase in 2023 for a patent dispute, claiming no less than $59 million in damages. This acquisition not only marks the end of an era for the giant Biolase, but also announces the end of the above-mentioned patent dispute.

According to the announcement, Sonendo's acquisition includes not only the majority of the assets of Biolase and its subsidiaries, but also its operating liabilities, as well as the settlement value of the ongoing patent litigation between Sonendo's subsidiary, PIPStek, LLC, and Biolase. Founded in 1987, United States Biolase is one of the world's leading experts in oral lasers, with a focus on Waterlase (Whole Tissue) Systems and Diode (Soft Tissue) systems, as well as marketing, selling and distributing dental imaging equipment, including cone-beam digital X-rays and CAD/CAM intraoral scanners. Biolase developed the first Er YAG 2940nm laser therapy instrument for hard and soft tissues, but due to the excessive absorption of water into the wavelength, the clinical effect on soft tissues is not good, so in 1996 millions of dollars was invested in the development of a new 2780nm wavelength laser crystal Er, Cr: YSGG, which met and exceeded the clinical requirements for soft tissue cutting, which is the revolutionary technology in the field of dental technology - water laser "Waterlase". Its most important feature is that it is painless when cutting tissue. With water lasers, 80%-90% of dental procedures do not require anesthesia. Taking dental drilling as an example, water laser can completely replace traditional dental drills and drill teeth painlessly. In the treatment of soft tissues, because there is no need for injection, no anesthesia, less bleeding from the wound, and the contaminated layer is cleaned thoroughly, the chance of inflammation is greatly reduced, and the postoperative recovery is faster. The company also launched the Epic10 diode laser in 2012, which remains one of the most widely used diode laser therapy devices in the world. It is a cutting technique that can be used for surgery and treatment, and it is widely designed for oral soft tissue surgery and teeth whitening, as well as for temporary relief of minor pain. Despite holding more than 300 patents on laser technology and having the largest market share of dental laser products in the world, Biolase is still in the thick of the long term.

Biolase has been losing money for many years, and despite the growth of revenue in recent years, its net profit has still not been able to turn a profit. In June 2023, Biolase announced a 20% layoff to optimize operations and improve efficiency, with the layoffs expected to result in annual cost savings of approximately $4 million. The company's gross margin increased to 40% in the second quarter ended June 30, 2024 due to cost-cutting measures in the second quarter ended June 30, 2024, but earnings remain challenging. Net income for the second quarter was $11.6 million, compared to $14.3 million in the year-ago quarter. In terms of product segmentation, United States laser revenue was $3.6 million, compared to $6.3 million in the year-ago quarter. United States consumables and other revenue, including revenue from consumable products such as disposable tips, decreased 5% year-over-year. In the international market, international laser revenue was $2.4 million in the second quarter, compared to $2.5 million in the year-ago quarter. International consumables and other revenue, including revenue from consumables such as disposable tips, decreased 12% year-over-year. Gross margin was 40% in the second quarter, compared to 43% in the year-ago quarter. Total operating expenses for the quarter were $7.8 million, compared to $10.0 million in the year-ago quarter, a decrease of 22% year-over-year. Operating loss for the second quarter was $3.2 million, compared to a loss of $3.9 million in the year-ago quarter, a decrease of 17% year-over-year. As of June 30, 2024, the Company had cash and cash equivalents of approximately $5.3 million. The Company expects full-year 2024 revenue to be similar to 2023, reflecting the headwinds experienced by the Company in the first half of 2024 and a slight decline in the forecast for capital equipment revenue in the second half of 2024. The company also updated its full-year 2024 adjusted EBITDA guidance to a loss of $6.0 million to $8.0 million, based on its performance in the first half of 2024, an improvement from the full-year 2023 adjusted EBITDA loss of $12.8 million.

In this situation, the performance of the company's stock market is not optimistic. In June 2024, the Company announced that it had received notice from Nasdaq of its decision to delist its common stock from the Nasdaq Stock Market. as a result of the failure to meet the minimum bid price listing requirement of $1.00 under Nasdaq Listing Rule 5550(a)(2) and the failure to comply with the minimum shareholder equity requirement for continued listing of Nasdaq at $2,500,000 or any substitute requirement under Listing Rule 5550(b). The suspension of trading in the Company's common stock on the Nasdaq exchange will become effective when the market opens on June 20, 2024. On October 1, 2024, it was announced that the Company and its domestic direct subsidiaries have voluntarily commenced Chapter 11 proceedings (the "Bankruptcy Petition") in the United States Delaware Bankruptcy Court (the "Court"). As of June 30, 2024, Biolase had total assets of $30.6 million and total debt of $32.7 million, according to the bankruptcy filing. According to the company's bankruptcy filing, its largest creditors include lawyer and dental manufacturer Oratech and laser processing supplier Optek Systems.

According to reports, PIPStek LLC, a wholly owned subsidiary of Sonendo, the buyer of Biolase, has filed a patent infringement lawsuit against Biolase in the District Court of United States Delaware since January 2023, alleging that Biolase infringes certain of PIPStek's patents related to the use of laser systems and radial emission tips. On October 1, 2024, Sonendo filed a proof of claim with the bankruptcy court in the seller's Chapter 11 case and sought an aggregate amount of not less than $59,000,000 in current and ongoing damages related to the infringement of Biolase's patents. Founded in 2006 in San Diego, United States, Sonendo is a well-known manufacturer of dental root canal treatment systems dedicated to developing innovative technologies that transform endodontic treatment and improve the clinical and economic benefits of current dental root canal treatments. The company has developed the GentleWave system designed to treat tooth decay by cleaning and disinfecting the microscopic space within the tooth without removing the tooth structure. The GentleWave System is the first and only FDA-approved root canal treatment system (RCT) that uses a single-use instrument to preserve tooth structure by cleaning and disinfecting deep areas of the root canal system in a less invasive process. However, similar to Biolase, Sonendo has also continued to lose money in recent years, with no increase in revenue.

Commenting on the acquisition, Bjarne Bergheim, President and CEO of Sonendo, said: "Should the court accept our bid as the winning offer, Sonendo is committed to ensuring a smooth transition with ongoing support and services for all Biolase customers and their patients, as well as their suppliers and other suppliers. The Sonendo team is enthusiastic about the prospect of merging the two organizations together. We anticipate meaningful cross-selling and significant cost-reduction synergies opportunities for the combined company, and we will be a stronger organization that leverages a more comprehensive technology platform to help advance our mission of saving teeth and restoring health through an increasingly focused and specialized sales organization." The two industry-leading dental devices involved in this merger and acquisition are very complementary and have few overlapping businesses, and the two mergers and acquisitions will have obvious synergies, which means that both parties are expected to achieve large-scale business improvement and expansion. On the other hand, the development of two long-term loss-making enterprises is also facing uncertainty. So in the future, we will continue to pay attention to whether this alliance can bring a turnaround for the two giants.

https://mp.weixin.qq.com/