On October 9, 2024, Biolase, which dominates the global dental laser equipment market, announced that it has signed an agreement to sell most of its assets to competitor Sonendo for $14 million.

Biolase, a leading dental laser expert in the world, has long been committed to the research and manufacturing of fully functional lasers, with a global laser market share of 70%. But due to long-term losses, the stock price remained low, and it was delisted from NASDAQ in June this year, and declared bankruptcy on October 1st.

The buyer of this acquisition case, Sonendo, is a dental giant dedicated to root canal treatment equipment. Its subsidiary sued Biolase in 2023 for a patent dispute and demanded compensation of no less than $59 million. This acquisition not only marks the end of an era for giant Biolase, but also declares the end of the aforementioned patent dispute.

01. The world's first long-term loss
According to the announcement, Sonendo's acquisition not only includes most of Biolase and its subsidiaries' assets, but also includes its operating liabilities, as well as the settlement value of the ongoing patent lawsuit between Sonendo's subsidiary PIPSdek, LLC and Biolase.

Biolase, founded in 1987, is a world leading expert in oral laser technology. The company's laser system products mainly include Waterlase (whole tissue) systems and Dior (soft tissue) systems. In addition, the company also markets, sells, and distributes dental imaging equipment, including cone beam digital X-rays and CAD/CAM intraoral scanners.

Biolase developed the first Er YAG 2940nm laser treatment device for hard and soft tissues. However, due to excessive absorption of this wavelength by water, the clinical effect on soft tissues was poor. Therefore, in 1996, they invested millions of dollars to develop a new laser crystal Er, Cr: YSGG with a wavelength of 2780nm, which met and exceeded the clinical requirements for soft tissue cutting. This is the revolutionary technology in the field of dental technology - the water laser "Waterlase".

Its biggest feature is that there is no pain when cutting tissues. With water laser, 80% -90% of dental surgeries 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 tissue, due to the lack of injection, anesthesia, minimal wound bleeding, and thorough cleaning of the contaminated layer, the chance of inflammation is greatly reduced, and postoperative recovery is faster.

The company also launched the Epic10 semiconductor laser therapy device in 2012, which is still one of the most widely used diode laser therapy devices in the world. This is a cutting technique that can be used for surgery and treatment, widely designed for oral soft tissue surgery and tooth whitening, and can also temporarily relieve mild pain. Despite holding over 300 patents related to laser technology and ranking first in the global market share for dental laser products, Biolase still suffers from long-term losses.

02. Declaration of delisting and bankruptcy
Biolase has been losing money for several consecutive years, and despite revenue growth in recent years, its net profit has not yet turned losses into profits. In June 2023, Biolase announced a layoff of approximately 20% to optimize operations and improve efficiency. The layoffs are expected to save approximately $4 million in costs annually.

The latest financial report shows that due to cost cutting measures, the company's gross profit margin increased from 33% in the first quarter of 2024 to 40% in the second quarter ending June 30, 2024, but revenue still faces ongoing challenges.

The company's net income for the second quarter was $11.6 million, compared to $14.3 million for the same period last year. In terms of segmented products, laser revenue in the United States was $3.6 million, compared to $6.3 million in the same period last year. The revenue from consumables and other sources in the United States (including disposable tip consumables products) decreased by 5% year-on-year.

In terms of the international market, the international laser revenue in the second quarter was 2.4 million US dollars, compared to 2.5 million US dollars in the same period last year. International consumables and other revenue (including revenue from disposable tip consumables products) decreased by 12% year-on-year.

The gross profit margin for the second quarter was 40%, compared to 43% for the same period last year. The total operating expenses for the quarter were 7.8 million US dollars, compared to 10 million US dollars in the same period last year, a year-on-year decrease of 22%. The operating loss for the second quarter was $3.2 million, compared to a loss of $3.9 million in the same period last year, a decrease of 17% year-on-year. As of June 30, 2024, the company's cash and cash equivalents amounted to approximately $5.3 million.

The company expects its full year revenue in 2024 to be similar to that of 2023, reflecting the unfavorable factors experienced by the company in the first half of 2024 and a slight decrease in the forecast for capital equipment revenue in the second half of 2024. The company has also updated its adjusted EBITDA forecast for the full year of 2024 to a loss of $6 million to $8 million based on its performance in the first half of 2024, which is an improvement from the adjusted EBITDA loss of $12.8 million for the full year of 2023.

In this situation, the company's stock market performance is not optimistic. In June 2024, the company announced that it had received notice from NASDAQ to delist its common stock from the NASDAQ stock market. Due to failure to meet the minimum purchase price listing requirement of $1.00 under NASDAQ Listing Rule 5550 (a) (2), as well as failure to comply with the minimum shareholder equity requirement of $2500000 for continued listing on NASDAQ or any alternative requirements under Listing Rule 5550 (b). The suspension of trading of the company's common stock on the NASDAQ exchange will take effect 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 initiated Chapter 11 proceedings (the "Bankruptcy Application") in the Delaware Bankruptcy Court (the "Court") in the United States.

According to the bankruptcy filing, as of June 30, 2024, Biolase's total assets were $30.6 million and its total debt was $32.7 million. According to the company's bankruptcy filing, its largest creditors include lawyers and dental manufacturer Oratech, as well as laser processing supplier Optek Systems.

03. Claiming $59 million, the buyer has suffered losses for consecutive years
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 Delaware District Court since January 2023, claiming that Biolase has infringed certain patents of PIPSTek, involving the use of laser systems and radial emission tips. On October 1, 2024, Sonendo filed a claim certificate with the bankruptcy court regarding the seller's Chapter 11 case, and demanded that the total amount of current and ongoing damages related to Biolase patent infringement not be less than $59 million.

Sonendo is a well-known manufacturer of dental root canal treatment systems, founded in San Diego, USA in 2006, dedicated to developing innovative technologies, changing pulp treatment methods, and improving the clinical effectiveness and economic benefits of current dental root canal treatments. The GentleWave system developed by the company aims to treat tooth decay by cleaning and disinfecting the microscopic space inside teeth without removing tooth structures. The GentleWave system is the first and only root canal treatment system (RCT) approved by the FDA, which uses disposable instruments to clean and disinfect deep areas of the root canal system with less invasive procedures, thereby protecting the tooth structure. However, similar to Biolase, Sonendo has also been experiencing continuous losses in recent years, with no increase in profits.

Regarding this acquisition, Bjarne Bergheim, President and CEO of Sonendo, stated: "If the court accepts our bid as the winning bid, Sonendo will be committed to ensuring a smooth transition and providing ongoing support and services to all Biolase customers and their patients, as well as their suppliers and other vendors. The Sonendo team is enthusiastic about the prospect of merging these two organizations together. We expect the merged company to have meaningful opportunities for cross selling and significant cost reduction synergies. We will become a stronger organization, leveraging increasingly focused professional sales organizations and a more comprehensive technology platform to help advance our mission of saving teeth and restoring health.

Source: http://qixieke.com/Font/index/detailPage.html?id=3213-142