10-Q: Monogram Technologies to Merge with Zimmer Biomet

Monogram Technologies Inc. announced a definitive merger agreement with Zimmer Biomet Holdings, Inc., offering shareholders $4.04 cash plus contingent value rights per common share.

Summary

• A definitive merger agreement was entered into with Zimmer Biomet Holdings, Inc. on July 11, 2025, under which Monogram Technologies will become a wholly-owned subsidiary of Zimmer Biomet.
• Common stockholders will receive $4.04 per share in cash plus one contractual contingent value right (CVR), with CVRs offering potential additional payments up to $12.37 per CVR across five milestones.
• Series D Preferred Stock holders will receive $2.25 per share in cash, and Series E Preferred Stock holders will receive $100.00 per share in cash.
• The U.S. Food and Drug Administration (FDA) granted 510(k) clearance for the Monogram mBs TKA System on March 17, 2025.
• Regulatory approval was obtained from India's CDSCO on April 29, 2025, to conduct a 102-patient clinical investigation for the Monogram TKA System, with the first autonomous saw-based robotic knee replacement on a live patient completed on July 26, 2025.
• Net loss for the three months ended June 30, 2025, increased to $5.4 million from $3.5 million in the prior year period, and for the six months ended June 30, 2025, increased to $8.6 million from $7.0 million.
• The increase in net loss was primarily driven by a $2.5 million charge related to the termination of a license agreement with Mount Sinai, resulting in a total settlement obligation of $4.0 million.
• Total operating expenses decreased by 15% for the three months and 12% for the six months ended June 30, 2025, primarily due to the completion of the verification and validation phase of the mBs TKA System development in 2024 and reduced marketing/administrative costs.
• Cash and cash equivalents decreased to $12.8 million as of June 30, 2025, from $15.7 million at December 31, 2024.
• All outstanding Series D Preferred Stock mandatorily converted into common stock on July 14, 2025, and all outstanding warrants from the 2024 Series D Preferred Stock offering expired on July 9, 2025.
• A delayed draw loan agreement for up to $15 million was entered into with Zimmer, Inc., available if the merger is not consummated by December 1, 2025.

Sentiment

Score: 8

Explanation: The definitive merger agreement with Zimmer Biomet, including a cash premium and CVRs, significantly de-risks the investment and provides a clear path to liquidity and potential upside. This positive strategic development outweighs the continued operational losses and cash burn, which are typical for a pre-revenue development-stage company in this industry. Regulatory clearances and clinical trial initiation further validate the technology.

Positives

• The definitive merger agreement with Zimmer Biomet provides a clear path to liquidity and potential significant upside for shareholders through a cash payment and contingent value rights.
• FDA 510(k) clearance for the Monogram mBs TKA System validates the company's core technology and opens significant market opportunities.
• Successful initiation of a 102-patient clinical trial in India, including the first fully autonomous saw-based robotic knee replacement on a live patient, marks a critical step towards commercialization.
• Overall operating expenses decreased by 12% for the six months ended June 30, 2025, reflecting efficiencies from the completion of key R&D phases.
• A former investor lawsuit against the company was successfully dismissed on June 16, 2025, removing a potential legal burden.
• The $15 million delayed draw loan agreement with Zimmer, Inc. provides a financial safety net, ensuring liquidity if the merger is not consummated as expected.

Negatives

• Net loss increased by 54% for the three months ended June 30, 2025, and by 23% for the six months ended June 30, 2025, primarily due to a $2.5 million increase in settlement liability related to the Mount Sinai agreement.
• The company continues to report no product revenue, indicating it remains in a pre-commercialization stage.
• Accumulated deficit reached $77.0 million as of June 30, 2025, reflecting ongoing operational losses.
• Cash and cash equivalents decreased by $2.8 million during the six months ended June 30, 2025.
• Monogram Technologies is subject to an approximately $11 million termination fee payable to Zimmer Biomet under specified circumstances if the merger agreement is not completed.

Risks

• Consummation of the merger is subject to various conditions, including stockholder approval, antitrust clearance (Hart-Scott-Rodino Act), and the absence of legal restraints, with no assurance that these will be satisfied.
• A Material Adverse Effect on the company could prevent Zimmer Biomet from completing the merger.
• The announcement or failure to consummate the merger could negatively impact the company's business, financial condition, results of operations, or stock price.
• Significant costs related to the merger (legal, accounting, financial advisors) will be incurred even if the merger is not completed.
• Restrictions on the company's business conduct prior to merger completion could adversely affect its ability to pursue certain business strategies or opportunities.
• Management's attention may be diverted from day-to-day operations due to the merger, potentially impacting other business activities.
• The company may face difficulties retaining existing key employees or hiring new capable employees due to uncertainty regarding its future.
• Relationships with collaborators, vendors, and other business partners may be difficult to maintain, and third parties may attempt to terminate or renegotiate agreements due to the merger.
• The company could be subject to litigation related to any failure to complete the merger.
• Executive officers and directors have interests in the merger that may differ from, or be in addition to, those of general stockholders.
• Provisions in the Merger Agreement could make it difficult for a third party to acquire the company prior to the completion of the merger.
• If the merger is not consummated by the End Date (January 11, 2026, extendable to April 11, 2026), either party may terminate the agreement, leading to incurred costs and diverted resources without realizing anticipated benefits.
• Macroeconomic and geopolitical factors, including new tariffs, economic slowdowns, market volatility, inflation, and geopolitical tensions (e.g., in South Asia), could impact future operations, costs, demand, and supply chains.
• The success of products and product candidates requires significant capital resources and years of development efforts.
• There is a risk of limited market acceptance of the company's products due to a limited number of deployments.
• The company's ability to protect its intellectual property and develop, maintain, and enhance a strong brand is crucial.
• The company has a limited operating history, making performance difficult to gauge.
• The ability to operate and collect digital information is dependent on privacy laws and client corporate policies, which may limit technology deployment.
• The ability to raise capital, including through rolling closes of equity infusions, and the availability of future financing are critical for continued operations.
• Unpredictable events, such as the COVID-19 pandemic, and associated business disruptions could seriously harm future revenues and financial condition, delay operations, increase costs, and impact capital raising.
• The company's ability to manage its research, development, expansion, growth, and operating expenses is a key challenge.
• Adverse economic conditions, intense competition (especially from competitors with greater resources), unexpected costs, potential Nasdaq de-listing, and the loss of key employees and executives could materially affect results.

Future Outlook

The company's future outlook is primarily tied to the successful consummation of the merger with Zimmer Biomet, which is expected to provide a clear exit and potential upside through CVRs. If the merger does not close, the company anticipates relying on a $15 million loan facility from Zimmer, Inc. and previously established financing agreements to fund operations. The company also plans to integrate recent upgrades into its FDA-cleared mBs TKA System and strategically place it with key surgeon opinion leaders, while continuing the clinical trial for the next-generation Monogram TKA System in India.

Management Comments

• Management believes its current cash balances, plus the additional capital available under the Common Stock Purchase Agreement, the At the Market Common Stock Offering, and the Loan Agreement will be sufficient for the Company to satisfy its near-term capital needs and to continue as a going concern for a reasonable period.
• Now that the Monogram mBs TKA System has received FDA clearance, it opens significant opportunities for the Company both domestically and internationally.
• Monogram remains committed to a disciplined, long-term commercialization strategy and will take a measured and strategic approach to market adoption.
• The Company continues to see a significant and growing market opportunity for an active cutting robotic system that does not utilize haptic controls.
• Monogram is not aware of any widely accepted products where the robot efficiently resects bone with a saw on the market today other than the Mako system.

Industry Context

The merger with Zimmer Biomet, a major player in the orthopedic industry, positions Monogram Technologies within a larger, more established entity, potentially accelerating the commercialization and adoption of its AI-driven robotic surgical systems. Monogram's focus on active cutting robotic systems without haptic controls aims to differentiate it from existing market leaders like Stryker's Mako system, which utilizes haptic controls. The FDA clearance and initiation of clinical trials in India indicate progress in a competitive and evolving medical robotics market, where innovation in precision surgery and AI integration are key trends.

Comparison to Industry Standards

• Monogram's mBs TKA System, with its FDA 510(k) clearance, directly competes with established robotic-assisted surgery systems in the orthopedic market, notably Stryker Corporation's Mako Robotic-Arm Assisted Surgery System.
• Monogram's strategy to develop an active cutting robotic system that does not utilize haptic controls aims to carve out a unique market position, contrasting with the widely adopted haptic-controlled systems like Mako.
• The clinical trial in India for the Monogram TKA System, in collaboration with Shalby Limited (one of the world's largest orthopedic hospital groups), represents a significant step towards real-world validation and market entry, comparable to the rigorous testing and adoption pathways undertaken by other medical device innovators.
• The acquisition by Zimmer Biomet, a global leader in musculoskeletal healthcare, provides Monogram with substantial resources and market access, a common strategy for smaller, innovative companies in the medical technology sector to scale their solutions.

Management Changes

Corporate Governance

Legal Proceedings

• A lawsuit filed by a former investor against the company and its Transfer Agent in July 2023 was successfully dismissed on June 16, 2025.

Related Party Transactions

• Pro-Dex, Inc., whose Chief Executive Officer is a member of Monogram's Board of Directors, exercised warrants to purchase Series D Preferred Stock and Common Stock, resulting in $900,000 in proceeds to Monogram.
• Benjamin Sexson, the company's Chief Executive Officer, agreed to forfeit his pre-emptive rights as a condition of the Merger Agreement.
• Dr. Unis, a consultant, is entitled to a portion of shares of company common stock owed to Icahn School of Medicine at Mount Sinai under the Sinai Termination Agreement, and a portion of the termination payment, though his share of stock has not yet been allocated.

Stakeholder Impact

• Shareholders: Common shareholders will receive a cash premium and potential CVR upside, while preferred shareholders receive fixed cash amounts, providing a clear liquidity event and potential for significant returns.
• Employees: The merger introduces uncertainty regarding future employment, though executive officers have specific interests and potential offer letters with Zimmer Biomet.
• Customers/Partners: Potential for enhanced product development and market reach through integration with Zimmer Biomet's resources and distribution network, but third-party relationships may be subject to renegotiation or termination.
• Creditors: The company's liabilities, including the Mount Sinai settlement, are being addressed, and the loan agreement with Zimmer, Inc. provides financial stability.
• Regulatory Bodies: Continued compliance with FDA and CDSCO regulations is critical for product commercialization and ongoing clinical trials.

Next Steps

• Obtain stockholder approval for the merger agreement.
• Await expiration or termination of waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act.
• Integrate recent upgrades and system enhancements into the FDA-cleared mBs TKA System.
• Focus on initial placements of the mBs TKA System with key surgeon opinion leaders in strategic geographies.
• Continue the 102-patient, multi-center clinical investigation in India for the Monogram TKA System, with a three-month clinical follow-up.
• If the merger is not consummated, potentially draw on the $15 million loan facility from Zimmer, Inc.
• If the merger is not consummated, potentially utilize remaining capacity under the Common Stock Purchase Agreement and At Market Issuance Sales Agreement.

Key Dates

Recommendation

The definitive merger agreement with Zimmer Biomet represents a highly favorable outcome for Monogram Technologies shareholders, offering a significant cash premium and substantial potential upside through Contingent Value Rights (CVRs). The CVRs, with a potential value of up to $12.37 per share, provide a unique opportunity for investors to benefit from future product milestones. This acquisition by a major industry player de-risks the investment significantly, providing a clear exit strategy for a pre-revenue company that has historically incurred substantial losses. The recent FDA clearance and successful initiation of a clinical trial in India further validate the company's technology and enhance the likelihood of achieving CVR milestones. While the company continues to incur losses, the merger effectively addresses its going concern issues and provides a strong financial foundation under Zimmer Biomet's umbrella. The $15 million loan facility also acts as a robust safety net should the merger face unforeseen delays or termination. This transaction offers a compelling combination of immediate value and long-term growth potential tied to the successful integration and commercialization of Monogram's innovative robotic technology within a leading orthopedic company.

Keywords

Monogram Technologies, Zimmer Biomet, Merger, Orthopedic Surgery, Robotics, AI, Surgical Robot, Medical Devices, FDA Clearance, Clinical Trial, TKA System, MGRM, Healthcare Technology, Acquisition