Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Bovie Scores Medovex Design And Manufacturing Agreement

|Includes: Bovie Medical Corporation (BVX)

Bovie Medical Corporation (NYSEMKT:BVX) has signed an OEM agreement with Medovex Corporation (NASDAQ:MDVX) in which Bovie will design and manufacture the DenerveX™ Pro-40 Power Generator.

Medovex is developing the DenerveX system for treating Facet Joint Syndrome (arthritis of the spine), a very common cause of back pain. The DenerveX system comprises the generator and the DenerveX handheld device the generator powers. This design is similar to Bovie's J-Plasma system in which a radiofrequency electrical generator supplies power to a handheld device used for patient procedures.

Some interesting points stand out:

(1) The Bovie - Medovex agreement was announced the morning of Monday, February 23. Bovie's non-compete agreement with Medtronic (that also involved Boston Scientific) concerning SEER and BOSS expired the day before, February 22.

(2) The core Medovex management team includes a fellow (Mr. Patrick Kullman) who has served in high level positions at Medtronic, Boston Scientific, Johnson and Johnson, and Baxter; another (Mr. Steve Gorlin) who has been responsible for a number of highly successful medical startups, including several companies that have achieved multi-billion dollar valuations; and other very impressive individuals.

(3) The global spine surgery devices market is around $11.5 billion annually. As Medovex's technology can be applied to a number of other areas as well besides the spine, it addresses a very large market size.

(4) Medovex recently hired a former Bovie sales and marketing executive as its Senior VP for Sales and Marketing.

(5) A recent investor presentation projected EU market launch in October of this year. Meanwhile, clinical data show positive outcomes averaging approximately 70% for procedures on nearly 200 patients spread across different sections of the back.

(6) In addition to establishing the generator development and manufacturing agreement with Bovie, Medovex also made a deal with Nortech Systems to provide the handheld devices. Resolving product manufacturing issues now via OEM agreements will assist Medovex in moving quickly into the market once the requisite regulatory approvals are obtained.

This agreement appears to be quite positive for Bovie. Particular reasons include (but are not limited to) the following:

(1) The Medovex generator business could become an important revenue source for Bovie. With product development going on now and market introduction anticipated for late this year (initially in the EU; the US is to come later), this is not something that will take many years to eventuate.

(2) Medtronic is highly interested in the treatment of spinal problems (witness the Medtronic INFUSE Bone Graft / Spine Journal scandal of several years ago). Although the DenerveX system belongs to Medovex, Bovie's major role in DenerveX product development and manufacturing should increase its appeal to Medtronic as a possible takeover target.

(3) Medovex's selection of Bovie as an OEM partner is another third party validation of Bovie's capabilities and value as a company. Mr. Jarrett Gorlin, CEO of Medovex, had this to say: "Bovie is a highly respected leader in this field. This relationship ensures that the power source to the DenerveX device, focused on treatment of patients with Facet Joint Pain, will be safely and effectively matched with the device itself."

(4) Medovex's links to Metronic, Boston Scientific, and other large medical device companies can be expected over time to further enhance Bovie's relationships with such firms, increasing prospects for a lucrative licensing deal or buyout offer. (Medtronic and Boston Scientific have both been identified as prospective Bovie licensees and / or buyers, as detailed in past Seeking Alpha articles on Bovie.)

It will be interesting to see how this all turns out.

Disclosure: The author is long BVX.