3D Systems announced the acquisition of Volumetric Biotechnologies, solidifying their healthcare strategy.
Volumetric Biotechnologies is a Houston-based bio startup that’s developing methods of 3D bioprinting functioning human organs. The company apparently has made significant breakthroughs, although they have not yet to date 3D printed actual organs.
To be clear, Volumetric Biotechnologies is a small operation with a big goal. Formed only in 2018 by Drs. Jordan Miller and Bagrat Grigoryan, they have developed methods of 3D printing vasculature, a critical step towards the 3D printing of entire organs.
Vasculature carries blood and nutrients to tissues, and without a vasculature system, any 3D printed tissue block would not survive. Typically bioprinted tissue is quite thin to allow nutrients to soak through the surface, and thus thicker objects, such as organs, are impossible to bioprint.
Volumetric Biotechnologies Acquisition
The deal with 3D Systems is for an enormous US$400M, which seems to be a rather large valuation for a small startup company. However, the structure of the deal is quite unique.
The closing payment is a mere US$45M, and the remaining US$355M is to be paid out over time as the acquired team hits specific milestones for the development of their advanced bioprinting technology.
Even then, the US$355M is to be paid as a split between 3D Systems stock and cash. This makes the deal quite attractive for 3D Systems, who don’t have that much cash to lay out, and leverages their stock value, which has risen significantly this year due to the aggressive strategies of their new CEO.
3D Systems Future
This acquisition may seem like a stretch technologically, as the notion of bioprinting human organs is thought by many as “science fiction”.
But as challenging as it may be, it is just a technical problem that could be overcome, and that is precisely what Volumetric Biotechnologies has been doing.
3D Systems is making a bet here on their ability to create feasible organ printing technologies. If they succeed, then that opens up a massive revenue stream for 3D Systems: there will always be a need for replacement organs, and patients (and their insurance plans) will pay high prices to get them.
On the other hand, if the new acquisition does not succeed, then they won’t hit those milestones and 3D Systems won’t pay out the full amount. This is a masterful way to mitigate the unknown by 3D Systems and at the same time take a risk on huge future value.