3D Systems (NYSE: DDD) announced the sale of its medical simulation business Simbionix to Surgical Science, a Swedish supplier of virtual reality simulators for medical training. The $305 million deal will complete 3D Systems’ initiative to divest non-core businesses to focus exclusively on 3D printing, developing capabilities exclusively for industrial-scale additive manufacturing. The proceeds from this sale, combined with previously announced divestitures, leave 3D Systems with no debt and a total cash balance of approximately $500 million, which the company can use to invest in more profitable parts of its business, such as its healthcare segment.
Since Jeffrey Graves joined the company in April 2020 as new CEO, his strategy has incorporated the sale of all businesses acquired in the last few years that are no longer considered central to the main additive manufacturing operations and revenues. The move is expected to accelerate the adoption of AM solutions for applications in growing markets that demand high-reliability products, like healthcare, aerospace, and defense.
Beginning with the divestiture of subtractive technology businesses Cimatron and GibbsCAM in November 2020, 3D Systems’ plans to refocus its core mission also resulted in the major sale of its On Demand manufacturing services for $82 million. According to Graves, these divestitures strengthened the balance sheet, enabling the company to pay off its debt and terminate much earlier than originally planned the at-the-market equity (ATM) program, which allowed the company to issue up to a total of $150 million of shares of common stock to the public from time to time.
Through this transaction, Simbionix will be integrated with Surgical Science to form a market-leading company to simulate medical procedures, including advanced robotic surgery. Under the leadership of Ran Bronstein, the company has secured a strong position in the medical simulation, training, and robotic surgery market and had reported sales of $40.8 million in 2020. Once the transaction is completed in August 2021, Simbionix is expected to complement and strengthen Surgical Science’s position with a broad portfolio of simulators in general surgery, endovascular procedures, endoscopy, urology, orthopedics, ultrasound, and robotic surgery. Simbionix also brings long-established collaborations with leading medical technology companies and academic institutions at the forefront of developing new robotic surgery technology and operating procedures.
Graves said that Simbionix will be the final asset divested under his reorganization and restructuring initiative, with priorities now targeting growth and margin expansion.
“As the Simbionix team now joins forces with Surgical Science, I believe their future will be even brighter, with increased scale and an ability to leverage the core strengths of both businesses in a growing medical simulation market,” described Graves.
Early in 2021, 3D Systems announced initial investments to bolster its standing in the bioprinting market with the acquisition of Allevi and Additive Works to build its bioprinting and software portfolios, respectively. It has also announced planned expansions of its facilities in Rock Hill, South Carolina, and Littleton, Colorado, to address rising customer demand for additive manufacturing technologies. Additionally, the company expanded its technology leadership team by welcoming Dr. David Leigh as its new Chief Technology Officer for Additive Manufacturing to expand and accelerate application development and product innovation, including all hardware, software, and materials development for production-scale additive manufacturing solutions. Leigh’s arrival has enabled 3D Systems’ co-founder, Chuck Hull, to increase his emphasis on biotechnology, leading the development of solutions that are creating exciting new opportunities in regenerative medicine…something Hull is looking forward to.
“Having reorganized the company into two business units – Healthcare and Industrial Solutions – and restructured to drive operational efficiencies over the last year, we now move forward expecting strong organic growth and profitability, at both a gross margin and EBITDA margin level, and positive operating cash flow capable of sustaining the investments needed to meet increasing customer demand for additive technology. With our scale, our industry-leading breadth of technology, which spans polymer and metal solutions, and an applications focus that is proving successful in accelerating customer adoption of additive manufacturing, we are very well positioned to remain a leader in the additive manufacturing industry,” suggested Graves.
After the company announced the sale of Simbionix on July 28, 2021, and the end of its divestment initiative, 3D Systems stock saw an uptick of 5.3%. According to multimedia financial services The Motley Fool, 3D Systems stock is leading the pack so far in 2021 (along with ExOne), up 275%. With the company’s second-quarter earnings results now slated to be released in August, investors will surely be eager to know Graves’s expectations about the company’s performance for the rest of the year.
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