Ormco Joins Hands With Align

Ormco Corp., a subsidiary of Danaher Corp. (DHR - Analyst Report), announced yesterday that it has agreed to enter into an exclusive collaboration arrangement with Align Technology, Inc. (ALGN - Analyst Report) to jointly develop and market an orthodontic product offering. This offering would provide orthodontic patients a treatment solution that involves a combination of Align's Invisalign system and Ormco's Insignia custom orthodontic bracket and arch wire system.
 
According to the agreement, Ormco will acquire an ownership of approximately 10% valued at approximately $77 million, based on Align's 7.6 million common stock closing price on Aug 14, 2009. The share issuance to Ormco is subject to clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
 
Under the agreement the companies also decided to settle the patent infringement case brought by Ormco against Align. Under the terms of the settlement, Align has agreed to make a cash payment of $13 million to Ormco.
 
The agreement will help the companies to form a new relationship, which in turn will provide innovative products and excellent service to orthodontic customers. It will enable Ormco, to accelerate its long-term plan for a combination product as the company’s growth is highly dependent on the timely development and commercialization of new products and product enhancements.
 
Further, the company is undertaking cost-cutting measures, which will help it to emerge stronger with the recovery in its end markets. Thus, we maintain our Neutral recommendation on the stock.